As Filed with the Securities and
Exchange Commission on April 30, 1999
Registration Statement No. 2-77712
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 25 X
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 25 X
(Check appropriate box or boxes).
SEPARATE ACCOUNT I
(Exact Name of Registrant)
Investors Life Insurance Company of North America
(Name of Depositor)
701 Brazos Street, Austin, Texas 78701
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: 512-404-5040
Roy F. Mitte, President
Investors Life Insurance Company of North America
701 Brazos Street, Austin, Texas 78701
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective April 30, 1999, pursuant
to paragraph (b) of Rule 485.
The Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933 pursuant to Rule 24f-2. The Rule 24f-2 Notice for the
most recent fiscal year was filed on
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February 22, 1999.
The combined prospectuses contained herein also relate to Registration Statement
No. 2-84850, pursuant to Rule 429.
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CROSS REFERENCE SHEET
Cross Reference sheet pursuant to Rule 495(a) showing location in Prospectus
(Part A) and Statement of Additional Information (Part B) of information
required by Form N-4.
PART A
Form N-4 Item Prospectus Caption
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis or Highlights Introduction
4. Condensed Financial
Information Financial Information
5. General Description of Description of the
Registrant, Depositor Insurance Company, the
and Portfolio Companies Separate Account and
the Fund
6. Deductions and Expenses Deductions and Expenses
7. General Description of General Description of
Variable Annuity Contracts Variable Annuity Contracts
8. Annuity Period The Annuity Period
9. Death Benefit Death Benefits
10. Purchases and Contract Purchases and Contract
Values Values
11. Redemptions Redemptions
12. Taxes Federal Tax Status
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Table of Contents of the
Statement of Additional Statement of Additional
Information Information
PART B
Statement of Additional
Form N-4 Item Information Caption
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information General Information
and History and History
18. Services Services
19. Purchase of Securities Purchase of Securities
Being Offered Being Offered
20. Underwriters Principal Underwriter
21. Calculations of Yield Yield Quotations of
Quotations of Money Money Market Division
Market Sub-Accounts
22. Annuity Payments Annuity Payments
23. Financial Statements Financial Statements
.Separate Account
.Insurance Company
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PROSPECTUS
SEPARATE ACCOUNT I
INDIVIDUAL FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
ISSUED BY
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
The Individual Flexible Payment Deferred Variable Annuity Contracts (the
"Contracts") described in this Prospectus are designed to be used to provide
retirement programs for individual purchasers. The Contracts may be issued in
connection with retirement plans which qualify for tax benefits under the
Internal Revenue Code ("tax qualified Contracts"), as well as retirement plans
which do not qualify for tax benefits under the Code ("non-tax qualified
Contracts").
This Prospectus sets forth information about Separate Account I and the
Contracts that a prospective purchaser ought to know before investing.
Additional information about the Separate Account, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission. A copy of the Statement is available upon request and without charge
by writing to Investors Life Insurance Company of North America (the "Insurance
Company" or "Investors Life"), 701 Brazos Street, Austin, Texas 78701 (a reply
form has been included with this Prospectus), or by calling 512-404-5346. The
Statement of Additional Information has the same date as the date of this
Prospectus, and is incorporated by reference into this Prospectus. A table of
contents for the Statement of Additional Information appears on page 46 of this
Prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUS OF PUTNAM VARIABLE TRUST. BOTH PROSPECTUSES SHOULD BE
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
April 30, 1999
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TABLE OF CONTENT
ITEM PAGE
Definitions 3
Introduction 5
Expense Table 7
Financial Information 11
Description of the Insurance Company, the
Separate Account and the Fund 20
Deductions and Expenses 24
General Description of Variable Annuity
Contracts 27
The Annuity Period 30
Death Benefits 33
Purchases and Contract Values 35
Redemptions 39
Federal Tax Status 41
Legal Proceedings 45
Table of Contents of the Statement of
Additional Information 46
Appendix - Examples of Deferred Sales 47
Charge Calculations
The Contracts are not available in all states.
NO PERSON IS AUTHORIZED BY THE INSURANCE COMPANY TO GIVE INFORMATION OR TO MAKE
ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF, OR SOLICITATION OF AN OFFER TO
ACQUIRE, ANY INTEREST OR PARTICIPATION IN THE VARIABLE ANNUITY CONTRACTS OFFERED
BY THIS PROSPECTUS TO ANYONE IN ANY STATE OR JURISDICTION IN WHICH SUCH
SOLICITATION OR OFFER MAY NOT BE MADE LAWFULLY.
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DEFINITIONS
The following terms as used in this Prospectus have the indicated meanings:
Accumulation Period: The period between the commencement of the first Contract
Year and the annuity commencement date.
Accumulation Unit: A unit of measurement used to determine the value of a
person's interest under the Contract before Annuity payments begin.
Adjusted Age: The age of the Annuitant which is used to determine the applicable
annuity purchase rate. The age is adjusted by either adding or subtracting
a specified number of years in order to reflect predicted longevity. The
number of years to be added or subtracted depends upon the year of birth of
the Annuitant.
Annuity: A contract providing for Annuity Payments varying in amount in
accordance with the investment experience of the applicable subdivision of
the Separate Account Division selected by the Contract Owner.
Annuitant: The person designated under the Contract as the measuring life for
annuity payout options involving life contingencies; normally, the
recipient of Annuity Payments.
Annuity Payments: Periodic amounts payable by the Insurance Company on and at
regular intervals after the annuity commencement date preselected under the
Contract.
Annuity Unit: A unit of measurement used to determine the amount of the variable
Annuity Payments.
Contract Year: A twelve month period between anniversaries of the Date of Issue
of a Contract. The first Contract Year begins on the Date of Issue.
Contribution Year: A Contract Year in which at least one Purchase Payment is
made.
Fund:A series of Putnam Variable Trust. Prior to January 1, 1997, the Putnam
Variable Trust was known as Putnam Capital Manager Trust.
Owner: The person (or other entity) to whom a Contract is issued by the
Insurance Company.
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Purchase Payment: The dollar amount paid to the Insurance Company by or on
behalf of a Contract Owner. The "Net Purchase Payment" is the Purchase
Payment reduced by any applicable state premium taxes.
Separate Account: The segregated investment account entitled "Separate Account
I" established by the Insurance Company pursuant to Pennsylvania law and
registered as a unit investment trust under the Investment Company Act of
1940, as amended. Prior to April 18, 1995, the Separate Account was known
as the "CIGNA Separate Account". As a result of the substitution of shares
of the Putnam Capital Manager Trust (now known as Putnam Variable Trust) as
the underlying investment vehicle, the name of the Separate Account was
changed to Separate Account I, effective April 18, 1995.
Separate Account Division: A Division of the Separate Account, the assets of
which consist of shares of a specified class of shares of the Fund. Each of
the Separate Account Divisions contains two subdivisions, one for funding
Contracts issued under tax qualified retirement plans and the other for
non-tax qualified Contracts. Each of the subdivisions has its own
identified assets and value. References to a Division in this Prospectus
include, where the context requires, the appropriate subdivision for a
Contract.
Contract Withdrawal Value: The amount payable to the Owner or other payee upon
termination of the Contract during the Accumulation Period, other than by
reason of the Annuitant's or Owner's death.
Valuation Date: A day on which the net asset value of each share of the Fund is
determined.
Valuation Period: Each business day on which the New York Stock Exchange is open
for general business, together with any consecutive non-business days
immediately preceding such business day and irrespective of whether such
exchange is open for general business on each business day, together with
any consecutive non-business day, immediately preceding such business day
when the Fund values its portfolio securities based upon its determination
that there is a sufficient degree of trading in such securities that the
net asset value of its shares might be materially affected.
NOTE:All masculine references in this Prospectus are intended to include the
feminine gender. The singular context also includes the plural and vice
versa where appropriate.
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<PAGE>
INTRODUCTION
The Contracts described in this Prospectus are designed to provide Annuity
Payments based on the life expectancy of the Annuitant. Such benefits will begin
on a future date which has been preselected under a Contract. Alternative
annuity payout options are available, but may be limited by a retirement plan
under which a Contract is issued. See "The Annuity Period - Annuity Payout
Options", page 31, and "Limitation on Contract Rights", page 28.
The Contracts offer Accumulation Units in up to five Separate Account Divisions.
The value of an Accumulation Unit is based on the investment results of the
underlying shares of the Fund allocated to applicable subdivisions of the
Separate Account Division(s) selected. Similarly, the amount of Annuity Payments
will vary based on such underlying investment results. See "The Annuity Period
Annuity Payments", page 30.
The following is a synopsis of certain features of the Contracts, together with
a cross-reference to the page in this Prospectus where the purchaser may find a
more complete description:
o The Contracts provide for allocation of Net Purchase Payments to several
underlying investment mediums, each with a different investment objective.
See "Description of the Fund", page 20.
o The Contracts provide that, in the event of death of the Annuitant or Owner
before Annuity Payments begin, the Insurance Company will pay death
proceeds to a named beneficiary. See "Death Benefits", page 33.
o The Contracts provide that the owner may surrender (redeem) a contract in
whole or in part for cash before the annuity commencement date (unless
restricted by the retirement plan or applicable Federal tax law) subject to
a sales charge. See "Redemptions", page 39 and "Contract Charges", page 24.
o A penalty tax may be assessed under the Internal Revenue Code in the event
of certain early withdrawals. See "Federal Tax Status", page 41.
o The Contracts provide that the annuity rates and contract charges generally
may not be changed adversely to a Contract Owner for the duration of his
Contract. See "Contract Charges", page 24.
o The Contracts provide for transfer of Contract values among Separate
Account Divisions, unless restricted by a retirement plan. See "Description
of Contract Rights", page 27.
o The Contracts include a limited right of cancellation. See "Redemption -
Right to Cancel", page 40.
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The objective of the Contracts, which may or may not be realized, is to provide
relatively level Annuity Payments during periods when the economy is relatively
stable and to provide increased Annuity Payments during inflationary and growth
periods. The Insurance Company seeks to assist the Contract Owner in
accomplishing this objective by making several classes of shares of the Fund
available from which the Owner may select underlying investment mediums. Each
such class is based upon a portfolio of Fund investments with a different
investment objective. No assurance can be given that the value of a Contract
before Annuity Payments begin, or the aggregate amount of Annuity Payments made
under a Contract, will equal or exceed the Purchase Payment for a Contract.
Thus, the investment risk under a Contract is borne by the Contract Owner.
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<PAGE>
EXPENSE TABLE
The following Expense Table lists the transaction expenses, annual Contract fee,
Separate Account annual expenses, as well as the approximate annual expenses of
each Fund of Putnam Variable Trust, related to an investment in each Division of
the Separate Account. Following the Expense Table is an Example which
illustrates the cumulative amount of fees and expenses on a hypothetical,
one-time investment of $1,000, assuming a 5% rate of return for the stated time
periods.
<TABLE>
<S> <C> <C> <C> <C>
Growth
Money and
Market Income Income II Voyager
Division Division (5) Division Division
A. Contract owner
Transaction Expenses
Deferred Sales
Charge (maximum, as
a percentage of amount
Surrendered (1) 7% 7% 7% 7%
Exchange Fee (2) $ 5.00 $ 5.00 $ 5.00 $ 5.00
B. Annual Contract Fee(3) $30.00 $30.00 $30.00 $30.00
C. Separate Account
Annual Expenses (as
a percentage of average
account value)
Mortality Risk Fee 0.8% 0.8% 0.8% 0.8%
Expense Risk Fee 0.4% 0.4% 0.4% 0.4%
Total Separate
Account
Annual Expenses 1.2% 1.2% 1.2% 1.2%
D. Annual Fund Expenses
(as a percentage of
Fund average net
assets) (4)
Management Fees 0.45% 0.60% 0.46% 0.54%
All Other Expenses 0.08% 0.07% 0.04% 0.04%
Total Annual Fund
Expenses 0.53% 0.67% 0.50% 0.58%
</TABLE>
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<PAGE>
Notes to Expense Table:
(1) Represents maximum deferred sales charge. The percentage is based on the
number of full Contract years between the date of a Purchase Payment and
the date of withdrawal or first Annuity Payment and ranges from 7% for
periods of less than two Contract years to 0% for periods of eight or more
Contract years. For additional information, please refer to the section
entitled "Contract Charges-Deferred Sales Charge."
(2) The Insurance Company reserves the right to impose this fee for the second
and subsequent transfer of Accumulation Units or Annuity Units among
Divisions during a Contract year. However, the fee is not currently imposed
by the Insurance Company.
(3) The Annual Contract fee is deducted from the value of a Contract on each
anniversary of the issue date, during the Accumulation Period. If a
Contract Owner participates in more than one Fund under a Contract, only
one such fee is deducted annually.
(4) Based on amounts incurred by the applicable Fund of Putnam Variable Trust
during calendar year 1998. The inclusion of the 1998 Total Annual Fund
Expenses of the applicable Fund of Putnam Variable Trust has been included
in this prospectus solely for the purposes of the hypothetical illustration
set forth in the Expense Table. (5) On April 9, 1999, Putnam U.S.
Government and High Quality Bond Fund changed its name to name to Putnam
Income Fund. In addition, the Fund's investment policy changed. Prior to
April, 9, 1999, the Fund's policies required it to invest at least 25% of
its assets in U.S. Government securities and limited the amount of assets
invested in securities rated below "A". Consequently, the historic
information listed in this Expenses Table with respect to the Income
Division does not reflect the performance of Putnam Income Fund under the
Fund's current investment policies or its current distribution policies.
-8-
<PAGE>
EXAMPLES
<TABLE>
<S> <C> <C> <C> <C>
Growth
Money and
Market Income Income II Voyager
Division Division
If you surrender your
contract at the end of the
applicable time period:
You would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on asset
1 year $ 91.52 $ 92.89 $ 91.23 $ 92.01
3 years 114.67 118.88 113.76 116.17
5 years 137.89 145.13 136.33 140.48
10 years 222.78 238.06 219.47 228.26
If you annuitize at the end
of the applicable time
period:
You would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on assets
1 year $ 91.72 $ 93.08 $ 91.62 $ 92.50
3 years 115.27 119.49 114.97 117.68
5 years 138.93 146.16 138.41 143.07
10 years 224.97 240.23 223.88 233.72
If you do not surrender your contract:
You would pay the following
expenses on a $1,000
investment assuming 5% annual
return on assets
1 year $ 19.38 $ 20.85 $ 19.06 $ 19.90
3 years 59.93 64.38 58.97 61.52
5 years 103.01 110.49 101.39 105.68
10 years 222.78 238.06 219.47 228.26
</TABLE>
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<PAGE>
The purpose of the Expense Table is to assist a prospective purchaser in
understanding the various costs and expenses that a Contract Owner will bear
directly or indirectly. For further information concerning the Separate Account
fees and expenses, please refer to the section of this prospectus entitled
"Deductions and Expenses". Additional information pertaining to Fund Annual
Expenses is contained in the prospectus of Putnam Variable Trust. In addition to
the costs and expenses described above, the Contract may be subject to state
premium taxes. For a discussion of premium taxes please refer to the section
entitled "Contract Charges-Premium Taxes."
The example is not intended as, and should not be considered, a representation
of past or future expenses. Actual expenses may be greater or lesser than those
shown.
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<PAGE>
FINANCIAL INFORMATION
1. Accumulation Unit Values (for an Accumulation Unit outstanding throughout the
period):
The following information should be read in conjunction with the financial
statements of the Separate Account , which are available with the Statement of
Additional Information. This historical data for Accumulation Unit Values is not
indicative of future performance.
MONEY MARKET DIVISION
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE UNIT VALUE AT ACCUMULATION
AT BEGINNING END OF PERIOD UNITS OUTSTANDING
OF PERIOD AT END OF PERIOD
1998 $ 2.1487 $ 2.2336 593,464
1997 $ 2.0665 $ 2.1483 684,786
1996 $ 1.9898 $ 2.0660 847,412
1995 $ 1.9080 $ 1.9894 1,096,192
1994 $ 1.8661 $ 1.9074 1,488,534
1993 $ 1.8446 $ 1.8659 1,778,411
1992 $ 1.8062 $ 1.8444 2,620,375
1991 $ 1.7286 $ 1.8059 4,203,167
1990 $ 1.6223 $ 1.7281 7,114,568
1989 $ 1.5065 $ 1.6218 8,331,835
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<PAGE>
MONEY MARKET DIVISION
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 2.1336 $ 2.2177 968,809
1997 $ 2.0518 $ 2.1332 1,065,062
1996 $ 1.9756 $ 2.0514 1,288,780
1995 $ 1.8944 $ 1.9753 1,334,785
1994 $ 1.8548 $ 1.8935 1,660,811
1993 $ 1.8335 $ 1.8546 2,525,627
1992 $ 1.7954 $ 1.8332 3,196,702
1991 $ 1.7181 $ 1.7951 3,868,744
1990 $ 1.6124 $ 1.7175 5,103,872
1989 $ 1.4973 $ 1.6119 5,870,485
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<PAGE>
GROWTH AND INCOME II DIVISION *
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 7.6501 $ 8.6752 2,497,011
1997 $ 6.1814 $ 7.6183 2,818,975
1996 $ 5.1880 $ 6.2071 3,277,019
1995 $ 3.8659 $ 5.1527 3,699,687
1994 $ 3.8800 $ 3.8384 3,672,031
1993 $ 4.1195 $ 3.8802 5,709,891
1992 $ 3.7959 $ 4.1409 6,907,180
1991 $ 2.7828 $ 3.7798 8,510,262
1990 $ 3.0137 $ 2.7991 10,978,705
1989 $ 2.3164 $ 2.9680 12,887,382
* = As of April 18, 1995, the former Growth and Income Division was merged into
the Equity Division and the name of the Equity Division was changed to Growth
and Income II Division.
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<PAGE>
GROWTH AND INCOME II DIVISION *
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 6.5538 $ 7.4431 1,557,788
1997 $ 5.2962 $ 6.5265 1,753,068
1996 $ 4.4442 $ 5.3182 2,002,962
1995 $ 3.3094 $ 4.4140 2,104,990
1994 $ 3.3224 $ 3.2870 1,733,131
1993 $ 3.5222 $ 3.3225 2,180,991
1992 $ 3.2453 $ 3.5405 2,447,435
1991 $ 2.3781 $ 3.2315 2,668,712
1990 $ 2.5758 $ 2.3921 3,515,922
1989 $ 1.9798 $ 2.5367 4,363,345
* = As of April 18, 1995, the former Growth and Income Division was merged into
the Equity Division and the name of the Equity Division was changed to Growth
and Income II Division.
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<PAGE>
INCOME DIVISION
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.4216 $ 3.6429 772,236
1997 $ 3.1564 $ 3.4066 920,186
1996 $ 3.1355 $ 3.1734 1,313,122
1995 $ 2.6495 $ 3.1359 1,580,611
1994 $ 2.7613 $ 2.6484 2,006,254
1993 $ 2.4922 $ 2.7602 2,372,918
1992 $ 2.3148 $ 2.4665 3,146,768
1991 $ 2.0194 $ 2.3365 3,898,682
1990 $ 1.9064 $ 1.9976 4,611,938
1989 $ 1.6895 $ 1.9058 5,842,385
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<PAGE>
INCOME DIVISION
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD OUTSTANDING AT
PERIOD END OF PERIOD
1998 $ 3.3804 $ 3.6001 1,781,007
1997 $ 3.1183 $ 3.3656 1,981,587
1996 $ 3.0972 $ 3.1351 2,394,183
1995 $ 2.6168 $ 3.0976 2,678,698
1994 $ 2.7274 $ 2.6157 3,034,007
1993 $ 2.4620 $ 2.7263 3,998,875
1992 $ 2.2868 $ 2.4366 4,270,125
1991 $ 1.9950 $ 2.3082 4,705,841
1990 $ 1.8835 $ 1.9735 6,081,726
1989 $ 1.6693 $ 1.8830 7,317,320
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<PAGE>
VOYAGER DIVISION *
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.1133 $ 3.8346 714,343
1997 $ 2.4606 $ 3.1215 738,882
1996 $ 2.2334 $ 2.4937 751,632
1995 $ 1.6061 $ 2.2337 781,624
1994 $ 1.6303 $ 1.6261 798,724
1993 $ 1.4965 $ 1.6546 825,839
1992 $ 1.3365 $ 1.5166 972,470
1991 $ 0.8190 $ 1.3366 978,329
1990 $ 0.9012 $ 0.8289 1,022,612
1989 $ 0.7563 $ 0.8914 992,682
* = Prior to April 18, 1995, the Voyager Division was named the Aggressive
Equity Division.
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<PAGE>
VOYAGER DIVISION *
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.1078 $ 3.8299 679,382
1997 $ 2.4563 $ 3.1160 653,214
1996 $ 2.2298 $ 2.4894 633,799
1995 $ 1.6031 $ 2.2301 645,524
1994 $ 1.6302 $ 1.6231 649,408
1993 $ 1.4965 $ 1.6545 767,780
1992 $ 1.3363 $ 1.5164 761,087
1991 $ 0.8188 $ 1.3364 757,114
1990 $ 0.9011 $ 0.8287 781,471
1989 $ 0.7562 $ 0.8913 750,969
* = Prior to April 18, 1995, the Voyager Division was named the Aggressive
Equity Division.
2. Money Market Division - Yield Information:
The Separate Account provides "current yield" and "effective yield"
quotations with respect to the Money Market Division. Both yield figures
are based on historical earnings and are not intended to indicate future
performance. A description of the method used to compute such yield
quotations is included in the Statement of Additional Information.
The "current yield" of the Money Market Division refers to the income
generated by an investment in such Division over a particular seven-day
period; the particular seven-day period will be stated in the quotation.
This income is then "annualized" - that is, the amount of
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<PAGE>
income generated by the investment during the seven-day period is assumed
to be earned each week over a 52-week period and is shown as a percentage
of the investment. The "effective yield" is calculated in a similar manner;
however, when annualized, the income earned by an investment in the Money
Market Division is assumed to be reinvested. Due to the compounding effect
of this assumed reinvestment, the "effective yield" will be slightly higher
than the "current yield".
3. Financial Statements:
The financial statements of the Separate Account and Investors Life
Insurance Company of North America are included in the Statement of
Additional Information.
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<PAGE>
DESCRIPTION OF THE INSURANCE COMPANY,
THE SEPARATE ACCOUNT AND THE FUND
THE INSURANCE COMPANY
Investors Life Insurance Company of North America ("Investors Life") is a stock
life insurance company, organized in 1963 under the laws of the Commonwealth of
Pennsylvania. In December, 1992, the Insurance Company changed its state of
domicile to the State of Washington and merged with its immediate parent company
(Investors Life Insurance Company of California). As a result of the merger,
Investors Life Insurance Company of North America assumed all of the assets and
obligations of Investors Life Insurance Company of California, and Investors
Life Insurance Company of North America was the surviving company. In June,
1993, Investors Life merged with its immediate parent company, Standard Life
Insurance Company. Investors Life was the surviving entity. As a result,
Investors Life became a direct subsidiary of InterContinental Life Corporation,
a insurance and financial service holding company. The administrative offices of
Investors Life are located at 701 Brazos Street, Austin, Texas 78701. The
statutory home office of Investors Life is 2101 4th Ave., Seattle, Washington
98121-2371. Prior to December 28, 1988 the Insurance Company was an indirect
wholly-owned subsidiary of CIGNA Corporation.
THE SEPARATE ACCOUNT
The Insurance Company established the Separate Account pursuant to the
provisions of the Pennsylvania Insurance Code and has registered it as a unit
investment trust under the Investment Company Act of 1940. The Separate Account
commenced operations on September 15, 1982.
The Separate Account currently contains four Divisions, one for each Fund. Prior
to the substitution of shares of certain series of Putnam Variable Trust for
shares of CIGNA Annuity Funds group as the underlying funding vehicle for the
Separate Account, the Separate Account contained five divisions. In connection
with the substitution, the Growth and Income Division was merged into the Equity
Division, and the name of that division was changed to Growth and Income II
Division. See also, the discussion of the substitution under the caption "Putnam
Variable Trust" (page 22). Each Division reflects the investment performance of
the specific class of Fund shares allocated to it, and is divided into
subdivisions for tax qualified and non-tax qualified contracts, respectively.
The Voyager Division (formerly the Aggressive Equity Division) was initially
made available under the Separate Account on March 31, 1987.
Each Separate Account Division is administered and accounted for as part of the
general business of the Insurance Company; however, the income, capital gains or
capital losses of each Division's subdivision are credited to or charged against
the assets allocated to that subdivision without regard to other income, capital
gains or capital losses of any other subdivision or arising out of any other
business the Insurance Company may conduct.
The contractual obligations under the Contracts funded by the Separate Account
are assumed by the Insurance Company; however, the investment risk under a
Contract is borne by the Contract Owner.
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PUTNAM VARIABLE TRUST
Putnam Variable Trust, formerly known as Putnam Capital Manager Trust, was
established to fund variable annuity contracts offered by various insurance
companies. Putnam Variable Trust is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. Putnam Variable Trust offers a number of separate portfolios of
investments having a variety of investment objectives. Currently, only the
following portfolios of Putnam Variable Trust are available under variable
annuity contracts offered by this Prospectus:
Putnam VT Income Fund, formerly Putnam VT U.S. Government and High
Quality Bond Fund (which serves as the underlying funding vehicle for the
Income Division) - seeks current income consistent with preservation of
capital through investing in U.S government securities and corporate debt
securities. The corporate securities range in credit quality from
investment grade to potentially higher-yielding, higher risk bonds,
commonly known as "junk bonds." The fund also invests significantly in
mortgage-backed securities.
Putnam VT Growth and Income Fund (which serves as the underlying funding
vehicle for the Growth and Income II Division, formerly known as the
Equity Division) - seeks capital growth and current income by investing
primarily in common stocks that offer potential for capital growth,
current income or both.
Putnam VT Money Market Fund (which serves as the underlying funding
vehicle for the Money Market Division) - seeks as high a rate of current
income as Putnam Management believes is consistent with preservation of
capital and maintenance of liquidity by investing in high quality money
market instruments.
Putnam VT Voyager Fund (which serves as the underlying funding vehicle
for the Voyager Division, formerly known as the Aggressive Equity
Division) - seeks capital appreciation by investing primarily in common
stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market
averages.
The shares of each Fund of Putnam Variable Trust are purchased by the Insurance
Company at net asset value (without sales load) for the corresponding Separate
Account Division to support the cash values of the Contracts. The shares of
each Fund of Putnam Variable Trust are available on to serve as the underlying
investment for variable annuity and variable life insurance contracts. It is
possible that, in the future, it may be disadvantageous for variable annuity and
variable life insurance separate accounts to invest in the Funds simultaneously.
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The Insurance Company is not currently aware of any such disadvantages. It
should be noted that the prospectus of Putnam Variable Trust states that the
Trustees of the Fund intend to monitor events in order to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response to such conflicts.
In addition, shares of the Funds are sold to separate accounts of other,
unaffiliated, insurance companies, a practice which is known as "mixed funding."
As a result, there is a possibility that a material conflict may arise between
the interests of Owners of variable annuity contracts issued by the Insurance
Company and owners of contracts issued by such other, unaffiliated, insurers. In
the event of any such material conflicts, we will consider what action may be
appropriate under the circumstances. For a description of the risk which may be
involved with mixed funding, please refer to the discussion in the prospectus of
Putnam Variable Trust.
Putnam Management is the investment adviser to Putnam Variable Trust. Putnam
Management is owned by Marsh & McLennan Companies, Inc., a publicly owned
holding company whose principal businesses are international insurance and
reinsurance brokerage, employee benefit consulting and investment management.
Prior to April 10, 1998, Putnam Management agreed to reimburse the Insurance
Company for certain costs that it incurred in connection with the servicing of
Contracts. The amount of this reimbursement was equal to 25% of the effective
management fee received by Putnam Management with respect to assets allocated by
the Insurance Company to the applicable Fund of Putnam Variable Trust, plus an
annual rate of one basis point times the average daily net assets allocated
during the computation period by the Insurance Company to Putnam Variable Trust.
As of April 10, 1998, the reimbursement arrangement was terminated by mutual
agreement between Putnam Management and the Insurance Company.
The prospectus of Putnam Variable Trust, which accompanies this Prospectus,
contains a more complete description of the investment objectives, including
attendant risks, of each portfolio of Putnam Variable Trust. In considering the
purchase of the Contracts offered in this Prospectus, you should read the
prospectus of Putnam Variable Trust carefully.
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VOTING RIGHTS
The Insurance Company is the owner of record of the shares of each series of
shares of Putnam Variable Trust. It will vote such shares held in each Separate
Account Division at regular and special meetings of shareholders of Putnam
Variable Trust in accordance with instructions received from persons having an
interest in such series of Putnam Variable Trust shares.
During the Accumulation Period, owners of Contracts shall have a voting interest
with respect to their accounts. During the Annuity Period, the person entitled
to variable Annuity Payments will be the person having such voting interest.
Each person having a voting interest in shares of Putnam Variable Trust
attributable to a Contract will initially be allowed to vote the number of
Accumulation Units credited to a Contract under the Separate Account Division
composed of such Putnam Variable Trust shares. Persons receiving Annuity
Payments will be allowed an equivalent vote which shall be determined by
dividing the value of the reserve maintained in such Separate Account Division
to meet the annuity obligations, by the value of an Accumulation Unit. Since
voting power is determined by the Separate Account Division Contract value, such
power will normally diminish during the annuity payout phase.
After votes are tabulated, the Insurance Company will then determine the number
of shares of Putnam Variable Trust owned by the Separate Account to be voted
affirmatively in accordance with the proportion of affirmative votes received to
the total number of votes received from persons having a voting interest in such
shares. Negative votes will be similarly determined.
Assets may also be maintained in Separate Account Divisions with respect to
contracts other than those offered by this Prospectus, and votes attributable to
such other contracts will be computed in the same manner.
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DEDUCTIONS AND EXPENSES
A. CONTRACT CHARGES:
The following deductions are made under the Contracts:
o Administrative Expense: The Insurance Company deducts an Annual Contract
Fee of $30 from the Contract value on each anniversary of the issue date
during the Accumulation Period. Accumulation Units will be reduced
proportionately on each anniversary date to reflect this charge. No Annual
Contract Fee is deducted in the event of a full surrender or death benefit
settlement prior to the anniversary date.
The Insurance Company reserves the right to increase the administrative
expense charge by $5 for the second and each subsequent transfer of
Accumulation Units among Separate Account Divisions during the Contract
year (the "Exchange Fee"). This charge may also be imposed for the second
and each subsequent transfer of Annuity Units among Separate Account
Divisions during the Contract year. However, there is no present intent to
assess a charge for transfer, and notice will be given to Contract Owners
prior to imposition of this charge.
The Insurance Company's administrative expenses include salaries, rent,
postage, telephone, travel, legal, administrative, actuarial and accounting
fees, periodic reports, office equipment, stationary and custodial
expenses. The administrative expense charge is not anticipated to exceed
the expenses to be incurred by the Insurance Company for administration of
the Contracts.
o Premium Taxes: Premium taxes ranging from .5% to 3% are currently imposed
by certain states and municipalities on payments made under annuity
contracts. Under deferred Contracts, any premium tax will be deducted
either from the Purchase Payment or from the Accumulation Value upon
annuitization, as determined in accordance with applicable law.
o Deferred Sales Charge: The Contracts include a deferred sales charge, which
is assessed against amounts withdrawn during early Contract Years. The
charge also applies at the time Annuity Payments begin, unless (a) the
first Annuity Payment begins after the tenth Contract Year, (b) the first
Annuity Payment begins after the fifth Contract Year and the Annuitant has
attained age 59-1/2 at such time or (c) Annuity Payments are being made as
part of the Death Proceeds during the Accumulation Period or as part of a
distribution upon death of the Owner during the Accumulation Period.
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The charge is based on the number of full Contract Years between the date
of a Purchase Payment and the date of withdrawal or first Annuity Payment,
and ranges from 7% for periods of less than 2 Contract Years to 0% for
periods of 8 or more Contract Years. The amount subject to deferred sales
charges is allocated to each Contribution Year, to determine the applicable
percentage charge. In no event will this charge exceed 7% of the amount of
Purchase Payments accepted by the Insurance Company for a Contract. See
Appendix, pages 52 to 56 for a more complete description of this charge,
including examples.
In determining the amount of the charge, the Insurance Company assumes that
purchase payments are withdrawn on a "first in - first out" basis; this
assumption can not be used for purposes of determining federal income tax
liability.
Exempt Accumulation Value: If, after the first Contract Year (a) a
withdrawal request is received or Accumulation Value is applied to provide
an annuity payout and (b) no other withdrawal request has been received by
the Insurance Company during the Contract Year of withdrawal or first
Annuity Payment, then up to 10% of Accumulation Value will be exempt from a
sales charge. Such exempt Accumulation Value will be determined as of the
Valuation Date coincident with or next following the date that the written
request for withdrawal is received by the Insurance Company at its Home
Office or the date that Accumulation Value is applied to provide an annuity
payout, as applicable.
With respect to Contracts issued in connection with an Exchange Offer dated
February 25, 1987, the Deferred Sales Charge is not applicable to that
portion of the Accumulation Value applicable to amounts transferred to a
Contract in accordance with the provisions of such Exchange Offer. The
Exchange Offer was made available during the period from February 25, 1987
to March 23, 1987 by the Insurance Company to certain certificate holders
under group fixed annuity contracts issued by the Insurance Company, or by
Life Insurance Company of North America (a former affiliate of the
Insurance Company), to employers maintaining retirement plans which meet
the requirements of section 403(b) of the Internal Revenue Code. The
Exchange Offer applies only to amounts so transferred as of April 6, 1987.
The Deferred Sales Charge is made as a means for the Insurance Company to
recover expenses incurred in connection with distribution of the Contracts
when a withdrawal is made, or Annuity Payments commence, during early
Contract Years. Because the Contracts are normally purchased for the long
term, the Insurance Company expects to recover such expenses over time.
Amounts anticipated to be collected by this means may, however, be
insufficient to reimburse the Insurance Company for its anticipated
distribution expenses. Amounts from the Company's general account assets
(including the profits, if any, from the Mortality and Expense Risk
Deduction) may be used to cover such expenses.
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o Mortality and Expense Risk Deduction: The Insurance Company makes a daily
charge of 0.0000327 of the value of the assets in each subdivision of the
Separate Account (1.2% on an annual basis, consisting of approximately 0.8%
for mortality risks (the "Mortality Risk Fee") and approximately 0.4% for
expense risks (the "Expense Risk Fee")).
The Insurance Company's assumption of mortality risk arises from its
contractual obligation to make Annuity Payments to each Annuitant
regardless of how long he lives and how long all annuitants as a group
live. Also, the Insurance Company assumes mortality risk because of annuity
rates in the Contracts, which cannot be increased; and, if the Annuitant
should die during the Accumulation Period, the Insurance Company is at risk
that the Accumulation Value may not equal the Death Proceeds.
The Insurance Company also assumes the risk that the amounts deducted for
sales and administrative expenses may be insufficient to cover the actual
cost of such items.
The above-described deductions may be modified by the Insurance Company to the
extent required by applicable federal or state law. However, except as described
above, the deductions may not be modified by the Insurance Company.
B. EXPENSES AND RELATED INFORMATION:
The Contracts are sold by licensed insurance agents of the Insurance Company who
are also registered representatives of broker/dealers who have sales agreements
with the Insurance Company and the principal underwriter, ILG Securities
Corporation.
The sales agreements between the principal underwriter and broker/dealers
provide for commissions as a percentage of purchase payments. The percentage
depends upon the type of purchase payment (first contract year, renewal, lump
sum or increase), and ranges from 2-1/4% to 9%.
Registered representatives of ILG Securities Corporation may also sell the
Contracts.
In connection with the distribution of the Contracts, the Insurance Company may
pay servicing fees to certain broker/dealers who agree to provide ongoing
Contract Owner administrative services. No such fees are currently being paid.
No charges are separately assessed under the Contracts, nor are deductions made
from the Separate Account for these costs.
The expenses of the Separate Account consist of the mortality and expense risk
deduction described under "Contract Charges", above. As a percentage of average
net assets, this expense is 1.2% on an annual basis.
The prospectus of Putnam Variable Trust describes the expenses and fees which
are paid out of the assets of portfolios used to fund the Separate Account. For
a discussion of such expenses and fees, please refer to the prospectus of Putnam
Variable Trust.
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GENERAL DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
Description of Contract Rights: The Contracts provide certain rights during the
Accumulation Period, the Annuity Period and upon death of the Owner or
Annuitant:
a. Accumulation Period: During the Accumulation Period, the Owner of a
Contract has the right to:
o change the beneficiary for death proceeds;
o surrender the Contract in whole or in part for its Withdrawal Value;
o change the annuity payout option; o change the death benefit payout
option;
o transfer Contract values between Separate Account Divisions;
o instruct the Insurance Company as to voting of Fund shares
o cancel the Contract by returning it to the Insurance Company within 10
days after receipt;
o change the designated Separate Account Division for allocation of
future contributions;
o change the date Annuity Payments commence (not later then Annuitant's
age 75; an earlier age may be required in connection with certain
Contracts issued to tax qualified plans);
o change the payee to receive Annuity Payments;
o assign ownership rights under the Contract, upon advance written
notice to the Insurance Company.
b. Annuity Period: During the Annuity Period, the Owner of a Contract has the
right to:
o transfer Contract values between Separate Account Divisions;
o change the payee to receive Annuity Payments, during the lifetime of
Annuitant;
o change the beneficiary under any Annuity Payout Option which provides
for a death benefit upon death of the Annuitant; change may be made
only during lifetime of the Annuitant;
o instruct the Insurance Company as to voting of Fund shares.
c. Death Benefits - Accumulation Period:
In the event death benefit proceeds become payable during the
Accumulation Period, the Beneficiary designated by the Owner is
entitled to payment of such proceeds. If no designated Beneficiary
survives the Annuitant and no other designation is provided, the Owner
shall be the Beneficiary, if he survives the Annuitant; otherwise, the
Owner's estate shall be the Beneficiary.
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If no Annuity Payout Option has been selected by the Owner for death
benefit proceeds, and if the Insurance Company has not previously made
a lump sum payment, the beneficiary may choose an Annuity Payout
Option for receipt of such proceeds.
d. Death Benefits - Annuity Period:
If the Annuitant dies while receiving Annuity Payments, the remaining
payments, if any, will be payable to the Beneficiary designated by the
Owner. However, if Annuity Payments are being paid to a Beneficiary as
a death benefit, and such Beneficiary dies, the Beneficiary's estate
shall be entitled to receive payment of any remaining proceeds.
In the case of Contracts which are subject to the requirements of
section 72(s) of the Internal Revenue Code (See "Death Benefits -
Required Distribution Provisions"), the Contracts provide that if the
Owner dies while the Annuitant is receiving Annuity Payments, the
Annuitant is entitled to receive the remaining payments.
Limitation on Contract Rights: The Contracts may be issued pursuant to a tax
qualified or non-tax qualified plan or trust. Such plan or trust may limit the
exercise by participants in the plan or trust of certain rights granted by the
Contract to Owner, Annuitant or Beneficiary. For example, although the Contracts
permit redemption of all or part of their value prior to the time Annuity
Payments begin, the plan or trust may not permit the Owner to exercise such
right. Certain plans or trusts may require that the Owner acquire a 100% vested
or nonforfeitable interest in the benefits provided by the plan or trust before
he may exercise any of the rights provided by the Contract. The provisions of
the plan or trust instrument should be referred to in connection with the
Contracts.
In addition, assignment of interests under a Contract is prohibited when the
Contracts are used to fund retirement plans qualified under sections 401,
403(a), 403(b) or 408 of the Internal Revenue Code, unless the Owner is other
than the Annuitant or the Annuitant's employer.
Contracts issued in connection with Individual Retirement Annuity plans
(qualified under section 408 of the Internal Revenue Code) provide that the
amount of premiums in any taxable year of the Owner may not exceed the lesser of
$2,000 or 100% of "compensation" for such year; this limitation does not apply
to amounts which are treated as "IRA rollovers" under the Code.
Transfers Between Separate Account Divisions: Once each Contract Year, the Owner
may elect to transfer all or a portion of Contract value to one or more of the
other Separate Account Divisions, without charge. The Owner may also elect to
make additional transfers of Contract value(s) between Separate Account
Divisions each Contract Year; however, the Insurance Company reserves the right
to limit transfers to one per Contract Year and to assess a $5 charge for each
transfer after the first during a Contract Year. In either event, written notice
will be provided to all Contract owners.
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All elections to transfer must be in writing, signed by the Owner and received
by the Insurance Company.
No transfer of Separate Account Divisions is permitted: (i) within 30 days of
Annuity Commencement Date; (ii) if it would result in applying the value of a
Contract to more than five Separate Account Divisions, (iii) if prohibited by
state law; or (iv) if prohibited by the applicable retirement plan.
The number of Accumulation Units credited in the newly elected Separate Account
Division(s) will be equal to the dollar value of the amount transferred divided
by the current value of one Accumulation Unit in such newly elected Division(s).
The number of Annuity Units credited in a newly elected Division will be
determined by multiplying the number of Annuity Units in each Division to be
transferred by the current value of one such Annuity Unit in the newly elected
Division.
Contract Owners (and Payees) who contemplate making a transfer should first
carefully consider their annuity objectives and investment objectives of the
current and proposed underlying classes of Fund shares. Frequent transfers may
be inconsistent with the long-term objectives of the Contracts.
Substituted Securities:
If any class of Fund shares should become unavailable for purchase by the
Insurance Company, or if in the judgment of the Insurance Company further
investment in such class is no longer appropriate in view of the purposes of the
Separate Account, there may be substituted therefor other shares or classes of
shares of a mutual fund which will be described in the Prospectus by amendment
or revision and net Purchase Payments received after a date specified by the
Insurance Company may be applied to the purchase of other shares or classes of
shares of such fund. In either event, prior approval by the affected Separate
Account Division shall be obtained. No substitution for shares or classes of
shares of a fund not described in this Prospectus will be made without the prior
approval of the Securities and Exchange Commission.
Change in Operations:
The Insurance Company may also sell other forms of variable annuity contracts
from time to time, such as group contracts and flexible payment individual
contracts, which provide benefits that vary in accordance with the investment
experience of the particular Separate Account Division in which they
participate. In addition, the Insurance Company may create new Divisions of the
Separate Account to provide additional funding options to Contract Owners. No
assurance can be given that any new Divisions, if created, will be made
available to Contract Owners. The Contracts limit to five (5) the maximum number
of Divisions which may be selected.
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The Insurance Company reserves this right to amend the Contracts to meet the
requirements of the Investment Company Act of 1940, or other applicable federal
or state laws or regulations.
Contract Owner Inquiries: The Owner of a Contract should direct all inquiries
to: Investors Life Insurance Company of North America, Customer Service
Department, 701 Brazos Street, Austin, Texas 78701.
Reports: The Owner, or Annuitant as applicable, will receive notice of all Fund
shareholder meetings. A Fund report and a statement of account as to the value
of the accumulation units held under the Contract will be furnished annually to
the Owner. A Separate Account report will be furnished semi-annually.
THE ANNUITY PERIOD
Annuity Commencement Date: Annuity payments will begin on the first day of the
calendar month selected by the Owner. The selected date may be as early as the
50th birthday of the Annuitant, but may not be later than the 75th birthday of
the Annuitant, except where otherwise agreed to by the Insurance Company. The
selection of an annuity commencement date may also be affected by the terms of a
retirement plan or trust under which a Contract is issued. Contracts issued in
connection with Individual Retirement Annuity plans (qualified under section 408
of the Code) provide that payments must commence not later than the end of the
taxable year in which the Annuitant attains age 70-1/2. For Contracts issued in
connection with tax sheltered (section 403(b)) annuity plans, the Internal
Revenue Code requires that distributions must commence no later than the year
the Annuitant attains age 70-1/2 (or the year the Annuitant retires with respect
to years beginning prior to January 1, 1989); these provisions apply to benefits
accruing under a section 403(b) annuity contract after December 31, 1986. Unless
otherwise instructed by the Owner, the annuity commencement date is the Contract
anniversary nearest the Annuitant's age 65.
Annuity Payments: The level of annuity payments is based on (i) the table
specified in the Contract which reflects the adjusted age of the Annuitant, (ii)
the type of annuity payout option selected and (iii) the investment performance
of the underlying Fund shares selected. The amount of annuity payments will not
be affected by adverse mortality experience or any increase in the expenses of
the Insurance Company in excess of the charges made under the Contract. If the
Insurance Company is required to withhold certain amounts from annuity payments,
in compliance with Federal or State tax law relating to collection of income
taxes at the source of payment, the amount so required will be deducted from
each payment.
o Special Note for California Contracts: Certain Contracts which are
issued subject to California law contain annuity tables which reflect
the adjusted age and sex of the Annuitant. The Insurance Company
issues this type of contract where issuance is not known by the
Company to be part of an employer-sponsored plan.
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Annuity Payout Options: The Owner may elect to have Annuity Payments made under
any one of the Annuity Payout Options described below. In addition, the Annuity
Payout Options may be selected for payout of the Death Proceeds during the
Accumulation Period, upon the death of the Annuitant or Owner, as applicable. A
change of option is permitted if made at least 30 days before the date Annuity
Payments are to commence. In the absence of an election, Annuity payments will
be made in accordance with Option 2 below with 120 monthly payments certain
(10-year period). Annuity payments will be paid monthly except that (i) proceeds
of less than $3,000 will be paid in a single sum or (ii) a schedule of payments
payable monthly may be changed to avoid payments of less than $20.
Option 1 - Life Annuity: An annuity payable monthly during the lifetime of the
Annuitant and terminating with the last monthly payment preceding the death of
the Annuitant. There is no guarantee of a minimum number of payments or
provision for a death benefit for beneficiaries. IT WOULD BE POSSIBLE UNDER THIS
OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE ANNUITANT DIES BEFORE THE DUE
DATE OF THE SECOND ANNUITY PAYMENT, TWO IF DEATH OCCURS BEFORE THE DUE DATE OF
THE THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2 - Life Annuity with Annuity Payments Guaranteed for a Designated
Period: An annuity payable monthly during the lifetime of the Annuitant. If, at
the death of the Annuitant, payments have been made for less than the designated
period, any unpaid Annuity Payments will be paid to the end of the designated
period. Such period may be (a) 10 years, (b) 15 years, or (c) 20 years.
Option 3 - Unit Refund Life Annuity: An annuity payable monthly during the
lifetime of the Annuitant, terminating with the last Annuity Payment due before
the death of the Annuitant. An additional payment, less any amounts required to
be withheld for taxes, may then be payable. Such payment at death will be equal
to the dollar value of a number of annuity units equal to (a) minus (b), if such
difference is positive, where:
total amount applied under the Option at the
(a) = annuity commencement date
annuity unit value at the annuity commencement date
number of annuity units represented by each
(b) = monthly Annuity Payment paid times the number of monthly
annuity payments made.
Option 4 - Joint and Last Survivor Annuity: An annuity payable monthly during
the joint lifetime of the Annuitant and a designated second person, and
thereafter during the remaining lifetime of the survivor. AS UNDER OPTION 1,
THERE IS NO MINIMUM NUMBER OF GUARANTEED ANNUITY PAYMENTS UNDER THIS OPTION.
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Option 5 - Joint and Two-thirds Survivor Annuity: An annuity payable monthly
during the joint lifetime of the annuitant and a designated second person and
continuing during the lifetime of the survivor in a reduced amount which
reflects two-thirds of the number of annuity units in effect during such joint
lifetime. AS UNDER OPTION 1, THERE IS NO MINIMUM NUMBER OF GUARANTEED ANNUITY
PAYMENTS UNDER THIS OPTION.
Option 6 - Payments for a Designated Period: An annuity payable monthly for a
designated number of years from 5 to 30. In the event of the Annuitant's death
prior to the end of the designated period, Annuity Payments will be continued
during the remainder of such period.
ANNUITY PAYMENTS UNDER THIS OPTION ARE BASED UPON THE PAYMENT OF THE MORTALITY
AND EXPENSE RISK DEDUCTION, EVEN THOUGH THERE IS NO LIFE CONTINGENCY RISK
ASSOCIATED WITH THIS OPTION.
Determination of Monthly Annuity Payments: A description of the method for
determining the first and subsequent annuity payments is included in the
Statement of Additional Information. The Contracts contain tables indicating the
dollar amount of the first monthly Annuity Payment which can be purchased with
each $1,000 of value accumulated under the Contract. These tables include an
assumed interest rate of 6% per annum. This 6% assumed rate is the measuring
point for subsequent Annuity Payments. If the actual net investment rate (on an
annual basis) remains constant at 6%, the Annuity Payments will remain constant.
If the actual net investment rate exceeds 6%, the Annuity Payments will increase
at a rate equal to the amount of such excess. Conversely, if the actual rate is
less than 6%, Annuity Payments will decrease.
o Special Note for New Jersey Contracts: Contracts subject to New Jersey
law contain tables indicating an amount of first monthly annuity
payment based on an assumed interest rate of 5% rather than 6%.
The objective of the Contracts is to provide benefit installments which will
increase at a rate sufficient to maintain purchasing power at a constant level.
For this to occur, the actual net investment rate must exceed the assumed rate
of 6% (5% for New Jersey Contracts) by an amount equal to the rate of inflation.
Of course, no assurance can be made that this objective will be met. If the
assumed interest rate were to be increased, Annuity Payments would start at a
higher level but would increase more slowly or decrease more rapidly. Likewise,
a lower assumed interest rate would provide a lower initial payment with greater
increases or lesser decreases in subsequent Annuity Payments.
Transfer During the Annuity Period: For a description of the Contract provisions
applicable to transfers between Separate Account Divisions, refer to "General
Description of Variable Annuity Contracts - Transfers Between Separate Account
Divisions".
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DEATH BENEFITS
Accumulation Period: If the Annuitant dies during the Accumulation Period, and
prior to the death of the Owner (if the Owner is an individual other than the
Annuitant), death benefit proceeds will be equal to the Accumulation Value of
the Contract determined on the valuation date coincident with or next following
the date due proof of the Annuitant's death is received by the Insurance
Company. However, if death occurs before age 75, while the Owner (if other than
the Annuitant) is living and before Annuity Payments begin, the Insurance
Company guarantees that the death proceeds will not be less than the amount of
Purchase Payments made under the Contract, less a reduction for prior
redemptions.
The amount of death benefit proceeds payable to a Beneficiary will be reduced by
an applicable state premium taxes and by any amounts required to be withheld for
Federal or State income taxes.
The Owner may designate the Annuity Payout Option for death benefit proceeds. If
no such Option is in effect at the time death benefit proceeds are to be paid,
the proceeds will be payable either (i) in a single sum or (ii) under an Annuity
Payout Option selected by the Beneficiary. In the absence of such an election by
the Beneficiary, the proceeds will be paid in a single sum.
Annuity Period: If the Annuitant dies after the commencement of Annuity
Payments, the death proceeds, if any, will depend upon the Annuity Payout Option
in effect at the time of death. Under Options 2, 3 or 6, any remaining payments
will be made to the Beneficiary during the designated period. However, if
Annuity Payments are being made as a death benefit to a Beneficiary, and such
Beneficiary dies, the present value of the remaining payments under Options 2, 3
or 6 will be paid in a lump sum (at an interest rate of 6% for Options 2 and 6)
to the Beneficiary's estate.
Required Distribution Provisions (Applicable to Contracts other than Contracts
owned by the sponsor of a retirement plan qualified under section 401(a) or
403(a) of the Internal Revenue Code, Contracts issued in connection with a tax
sheltered annuity plan under Section 403(b) of the Internal Revenue Code, or
Contracts issued in connection with an Individual Retirement Arrangement under
Section 408 of the Internal Revenue Code):
Under the provisions of section 72(s) of the Internal Revenue Code, the
contracts described in this section must contain specific rules for distribution
of the value of the Contract in the event of the Owner's death. Contracts issued
by the Insurance Company which are subject to the requirements of section 72(s)
will include the following provisions:
o Accumulation Period - If the Owner of the Contract and the Annuitant
is the same person, the Contract provides that if the Owner dies
before annuity payments commence, death proceeds must be distributed
to the designated beneficiary within 5 years after death of the
Owner/Annuitant.
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Alternatively, if the designated beneficiary is a natural person, such
proceeds may be distributed over the life of such beneficiary, or a
period not extending beyond the life expectancy of such beneficiary.
In this event, payments to the beneficiary must commence not later
than one year after the death of the Owner/Annuitant (or such later
date as permitted under regulations to be issued by the Secretary of
Treasury). The amount of such death proceeds is determined as
described in "Death Benefits - Accumulation Period", above.
If the Owner of the Contract is a corporation or other non-
individual, section 72(s), as amended by the Tax Reform Act of 1986,
provides that the primary annuitant (as defined in the Code) shall be
treated as the Owner of the Contract for purposes of the required
distribution provisions. Thus, the death of the primary annuitant will
result in application of the distribution requirements described in
the preceding paragraph.
Where the Owner of the Contract is an individual other than the
Annuitant, the Contract provides that if the Owner dies before the
Annuitant and before annuity payments commence, death proceeds will be
equal to the accumulation value of the Contract determined on the
valuation date coincident with or next following the date proof of the
Owner's death is received by the Insurance Company. However, if the
death of the Owner occurs prior to his age 75 and before annuity
payments begin, the Insurance Company guarantees that the death
proceeds cannot be less than the amount of the Purchase Payment made
under such Contract, less a reduction for any prior redemptions. The
amount of death proceeds payable to a beneficiary will be reduced by
applicable state premium taxes and by any amounts required to be
withheld for Federal or State income taxes. The amount of such death
proceeds must be distributed to the designated beneficiary within 5
years after death of the Owner. Alternatively, if the designated
beneficiary is a natural person, such proceeds may be distributed over
the life of such beneficiary, or a period not extending beyond the
life expectancy of such beneficiary. In such event, payments to the
beneficiary must commence not later than one year after the death of
the Owner (or such later date as permitted under regulations to be
issued by the Secretary of Treasury). The Contract also provides that
if the designated beneficiary is the surviving spouse of the Owner, no
death proceeds shall be payable at the death of the Owner, and such
spouse shall become the owner of the Contract. If the death proceeds
are payable on account of death of the Owner, then no death proceeds
are payable upon the subsequent death of the Annuitant.
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o Annuity Period - If the owner of the Contract and the Annuitant is the
same person, the Contract provides that if the Owner dies after
annuity payments commence, the remaining payments under the Contract
must be paid at least as rapidly as under the method of payment in
effect on the date of death of the Owner.
If the Owner of the Contract is a corporation or other non-individual,
section 72(s), as amended by the Tax Reform Act of 1986, provides that
the primary annuitant (as defined in the Code) shall be treated as the
Owner of the Contract for purposes of the required distribution
provisions. Thus, the death of the primary annuitant will result in
the application of the distribution requirements described in the
preceding paragraph.
Where the Owner of the Contract is an individual other than the
Annuitant, the Contract provides that if the Owner dies after annuity
payments commence (or after the death of the Annuitant while payments
are being made to a beneficiary), the remaining payments must be paid
out at least as rapidly as under the method of payment in effect on
the date of death of the Owner.
PURCHASES AND CONTRACT VALUES
How to Purchase a Contract:
The Contracts are sold by licensed insurance agents of the Insurance Company who
are also registered representatives of broker/dealers which have sales
agreements with ILG Securities Corporation and the Insurance Company. Registered
representatives of ILG Securities Corporation may also sell the Contracts. The
principal underwriter of the Contracts is ILG Securities Corporation. ILG
Securities Corporation is an indirect, wholly-owned subsidiary of
InterContinental Life Corporation. The Insurance Company is a direct
wholly-owned subsidiary of InterContinental Life Corporation. The principal
business address of ILG Securities Corporation is 701 Brazos Street, Austin,
Texas 78701.
A Contract may be purchased by delivering a completed application, including
Purchase Payment allocation instructions, such other forms as the Insurance
Company requires and the Purchase Payment, where applicable, to the soliciting
agent who will forward such payment and forms to the Insurance Company.
If the application is complete and correct upon receipt by the Insurance
Company, and if all other required information and the Purchase Payment have
also been received by the Insurance Company at its Home Office, the Contract
will be issued and the net purchase payment will be credited to the Contract to
reflect the net asset value of the applicable Division'(s) underlying
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class of Fund shares next computed within two business days following such
receipt. In the event that the Purchase Payment and the application are received
by the Insurance Company in an amount or under circumstances whereby the
Insurance Company has not been provided with correct or sufficient information
to establish an account or with instructions as to the proper crediting of such
payment, then the Insurance Company will, within five (5) business days
following receipt, inform the purchaser of the reasons for delay and will
request the purchaser to supply corrections and further information or
instructions with regard to the applicable account. In this event, the Insurance
Company will return the Purchase Payment to the purchaser within 5 days, unless
it obtains the Purchaser's consent to retain the payment until the corrections
have been received. Upon such receipt, the Contract will be issued and the net
Purchase Payment will be credited to the Contract to reflect the net asset value
of the applicable Division'(s) underlying class of Fund Shares next computed
within the next two business days.
If the requested corrections, information or instructions are not subsequently
furnished to the Insurance Company within a reasonable time period following the
request, the Company will return any retained purchase payment to the purchaser.
Likewise, if at any time the Insurance Company determines that it cannot
establish the requested account, it will return such purchase payment
immediately upon making such determination.
If the application is for a Contract used in connection with an Individual
Retirement Arrangement (IRA) under Code Section 408, the Insurance Company will
hold the Purchase Payment in a suspense account until the expiration of the
IRS-mandated revocation period. Under IRS regulations, if an individual receives
IRA informational disclosure fewer than seven days prior to the date on which
the plan is established, the individual is permitted a seven-day period
following establishment of the plan during which to revoke the plan and receive
a refund. The Purchase Payment will be applied as of the valuation date next
following expiration of the revocation period. No interest will be paid on funds
held in such suspense accounts.
Purchase Payments:
The minimum initial Purchase Payment is $500 for an Owner not approved by the
Insurance Company for pre-authorized checks, salary deductions, or other list
bill remittances.
After a Contract is issued, any Owner may make Purchase Payments of $40 or more
by remitting checks directly to the Insurance Company at its Administrative
Office.
The Insurance Company reserves the right to reject any Purchase Payment if it is
less than the minimum amount or not in proper order.
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o Pre-authorized Checks, Salary Deductions and Other List Bill
Remittances:
Purchase Payments for the Contracts of at least $40 each may be made
at periodic intervals by Owners who have been approved by the
Insurance Company for pre-authorized checking, salary deductions, or
other list bill remittance.
Pre-authorized checks allow the Insurance Company to draw checks on a
routine basis, usually monthly, from a bank account previously
established by the Owner. No credit for a Purchase Payment will be
given should a check be dishonored for any reason by the bank
selected. Neither the Insurance Company nor ILG Securities Corporation
assume any liability for wrongful dishonor by the bank selected;
however, the Insurance Company may agree to indemnify a bank for
certain liabilities associated with the checking procedure.
A salary deduction mode authorizes a Contract Owner's employer to take
deductions of a set amount from the Owner's salary and remit such
amounts to the Insurance Company as Purchase Payments for a Contract.
The Insurance Company and ILG Securities Corporation assume no
liability for any amounts so deducted until received in full by the
Insurance Company at its Administrative Office.
Purchase Payments for a Contract issued to a retirement plan may be
remitted together with Purchase Payments for other Contracts issued to
such retirement plan pursuant to a "list bill" in a form acceptable to
the Insurance Company. Where permitted by the retirement plan, and
subject to the Insurance Company's underwriting requirements, Purchase
Payments for an amount less than the stated minimum for a Contract may
be remitted pursuant to such an approved "list bill".
Application of Net Purchase Payments:
The Insurance Company will reduce a Purchase Payment by any applicable Premium
Tax to determine the net Purchase Payment. Upon the purchase of a Contract, the
amount of the net Purchase Payment credited to a Contract will reflect the net
asset value of the applicable Division(s)' underlying class of Fund shares next
computed within the next two business days following the Insurance Company's
receipt of the payment. However, if any of the required material is incomplete,
incorrect or if the payment has not been made, then a delay in Contract issuance
or crediting of a subsequent payment may be encountered.
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Crediting Accumulation Units:
Accumulation Units represent the value of the Owner's Contract attributable to
the applicable Division(s) selected (maximum of five). The number of
Accumulation Units to be credited to the Owner's account within a Division is
determined by dividing the net Purchase Payment allocated to that Division by
the Accumulation Unit value of the applicable Division as of the Valuation Date
next computed following the Insurance Company's determination to credit a
payment to the Contract. The number of accumulation units will not change
because of a subsequent change in the value of the unit, but the dollar value of
an accumulation unit will vary to reflect the investment experience of the
class(es) of Fund shares underlying the selected Division(s).
Value of an Accumulation Unit: (Note - although the following refers to a
"Division", the values are determined independently for each sub-division). The
value of an Accumulation Unit for each Separate Account Division was established
at $1 as of the date the applicable class of Fund shares were first purchased
for that Division. The value of accumulation units subsequently is determined by
multiplying the value of an Accumulation Unit for the immediately preceding
Valuation Date by a net investment factor for the Valuation Period ending on
such date.
A net investment factor for a Valuation Period is the sum of 1.000000 plus the
net investment rate for the applicable Separate Account Division. The net
investment rate for the applicable Division is equal to the gross investment
rate of that Division for the valuation period expressed in decimal form to
seven places, less a deduction of 0.0000327 for each day in the valuation period
(1.2% annually - the fee charged by the Insurance Company for undertaking the
mortality and expense risks). The applicable gross investment rate is equal to
(i) the investment income for the valuation period, plus capital gains and minus
capital losses for the period, whether realized or unrealized on the assets
divided by (ii) the value of such assets at the beginning of the valuation
period. The gross investment rate may be positive or negative.
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REDEMPTIONS
Procedures for Redemption:
Unless prohibited by any applicable retirement plan, the Owner may redeem the
Contract during the Accumulation Period in whole or in part for its Contract
Withdrawal Value as of the next valuation date coincident with or next following
the date the request for redemption is received by the Insurance Company. In
determining redemption values, the Insurance Company does not anticipate that it
will be receiving or applying any premium tax refund credits. No redemptions may
be made once Annuity Payments have begun. Requests to redeem shall be made in
writing to the Insurance Company. If the request is for the entire redemption
value of the Contract, it shall be accompanied by the Contract. The Contract
Withdrawal Value is determined on the basis of the accumulation unit values on
such valuation date, reduced by any applicable sales charges and premium taxes.
Payment of the Contract Withdrawal Value, less any amounts required to be
withheld for taxes, will be made within seven days after the date proper written
request is received by the Insurance Company at its Home Office. However, such
payment may be postponed whenever (i) the New York Stock Exchange is closed,
except for holidays or weekends, or trading on the New York Stock Exchange is
restricted by the Securities and Exchange Commission; (ii) the Securities and
Exchange Commission permits postponement and so orders; or (iii) an emergency
exists, as defined by the Securities and Exchange Commission, so that valuation
of the assets or disposal of securities is not reasonably practicable.
The Owner may elect to have the redemption value applied to provide Annuity
Payments under any one of the annuity payout options, as permitted under the
applicable retirement plan.
AMOUNTS WITHDRAWN BY THE OWNER PRIOR TO THE ANNUITY
COMMENCEMENT DATE MAY BE SUBJECT TO A TAX PENALTY AND IMMEDIATE
TAXATION OF ANY INVESTMENT GAIN.
Partial Redemptions:
The Owner may request a partial redemption of his Contract value for an amount
not less than $300 provided this does not result in reducing the remaining value
of the Contract to less than $500 on the date of redemption. Amounts required to
be withheld for taxes in the event of a partial redemption will not be
considered part of the remaining value of the Contract. If a partial redemption
request would result in such a reduction, the Insurance Company will redeem the
total Contract value and pay the remaining Contract Withdrawal Value, less any
amounts required to be withheld for taxes, to the Owner.
Restrictions Under the Texas Optional Retirement Program:
Participants in the Texas Optional Retirement Program (ORP) currently are
prohibited from receiving their interest in a variable annuity contract issued
under the ORP prior to termination of employment in the Texas public
institutions of higher education, retirement, or death.
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Accordingly, the Insurance Company will require a Contract Owner whose Contract
is issued under the ORP to obtain a certificate of termination of employment
before Contract Withdrawal Value is paid to the Owner.
Restrictions Under Certain Section 403(b) Plans:
As described in "Federal Tax Status-Tax Qualified Plans", Section 403(b)(11) of
the Internal Revenue Code (the "Code") restricts the redemption under Section
403(b) annuity contracts of certain amounts which are derived from contract
contributions made pursuant to a salary reduction agreement.
As a result of these requirements, the Insurance Company will be required to
restrict the amount of contract withdrawals so as to comply with the provisions
of Section 403(b) (11) of the Code. The staff of the U.S. Securities and
Exchange Commission has issued a "no action" letter, informing insurance
companies issuing variable annuity contracts that the above-described Code
restrictions may be implemented, notwithstanding the otherwise applicable
redemption provisions of the Investment Company Act of 1940. The Insurance
Company intends to rely upon the provisions of the SEC staff "no action" letter,
and to comply with the provisions of said letter.
THE INSURANCE COMPANY REQUIRES AN ACKNOWLEDGMENT FORM TO BE SIGNED BY PURCHASERS
OF SECTION 403(b) ANNUITY CONTRACTS FOR WHICH CONTRIBUTIONS ARE MADE PURSUANT TO
A SALARY REDUCTION AGREEMENT. THE SIGNED ACKNOWLEDGMENT FORM - A COPY OF WHICH
IS INCLUDED AT THE END OF THIS PROSPECTUS - MUST ACCOMPANY THE CONTRACT
APPLICATION.
Right to Cancel:
The Owner may cancel the Contract by delivering or mailing a written notice (or
sending a telegram) to the Insurance Company and by returning the Contract
before midnight of the 10th day after the date of receipt. The Insurance Company
will return all amounts due to the Owner within ten days after receipt of notice
of cancellation and the returned contact. The Owner bears the investment risk
with respect to amounts allocated to the Separate Account, for the period from
the date the returned Contract is received by the Company. Under the terms of
the Contract, cancellation shall entitle the Owner to an amount equal to (a) the
difference between premiums paid, including any contract fees and other charges,
and the amounts allocated to the Separate Account, plus (b) the Accumulation
Value of the Contract on the date the returned Contract is received by the
Company.
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FEDERAL TAX STATUS
General:
The Contracts have been designed so as to qualify as "variable annuity
contracts" for Federal income tax purposes. Thus, the contracts permit the Owner
to defer Federal income taxation on increases in the value of a contract, until
such time that amounts are withdrawn from the contract, received in the form of
annuity payments or paid as a death benefit.
Under the current provisions of the Code, variable annuity contracts - other
than contracts issued under retirement plans which qualify for Federal tax
benefits under sections 401, 403(b) or 408 of the Internal Revenue Code, or
under government retirement plans (whether or not so qualified) or to a state or
municipal government for use under a deferred compensation plan - will not be
treated as an annuity contract for Federal income tax purposes for any period
for which the investments of the segregated asset account on which the contracts
are based are not adequately diversified. This "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of the Treasury. The Insurance Company believes that the
current structure of the Separate Account satisfies the requirements of the
regulations, and it intends that the Separate Account, as well as the underlying
Funds, will operate in the future so as to continue to meet such requirements.
In order for a variable annuity contract to qualify for deferral on Federal
income taxes on income credited to the contract, the assets in the segregated
asset account supporting the contract must be considered to be owned by the
Insurance Company, and not by the owner of the variable annuity contract. The
Internal Revenue Service ("IRS") has issued certain rulings which discuss the
matter of investor control of the assets supporting a variable annuity
contracts. In its rulings, the IRS has stated that certain incidents of
ownership by the contract owner, such as the ability to select and control
investments in a segregated asset account, will cause the contract owner to be
taxed as the owner of the assets for Federal income tax purposes. In addition ,
in its explanation of the temporary regulations adopted under Section 817 of the
Code, the Treasury Department noted that the temporary regulations "do not
provide guidance concerning the circumstances in which investor control of the
investments of a segregated asset account may cause the investor, rather than
the insurance company, to be treated as the owner of the assets in the Account."
That explanation also indicated that "the temporary regulations provide that in
appropriate cases a segregated asset account may include multiple sub-accounts,
but do not specify the extent to which policyholders may direct their
investments to a particular sub-account without being treated as the owners of
the underlying assets. Guidance on this and other issues will be provided in
regulations or revenue rulings under Section 817(d), relating to the definition
of variable contract." The final regulations issued under Section 817 did not
provide such guidance regarding investor control, and as of the date of this
prospectus, no other such guidance has been issued. The Insurance Company does
not know if, or in what form, such guidance will be issued. Nor does the
Insurance Company know whether any such guidance, if issued, would be
implemented on a prospective basis only, or if a ruling would be given
retroactive effect.
Accordingly, there is a certain degree of uncertainty as to whether an Owner of
the variable annuity contracts described in this prospectus would be considered
the owner of the underlying assets for Federal income tax purposes.
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Non-Tax Qualified Contracts:
A Non-Tax Qualified Contract is a Contract which is purchased by an individual
for his or her own purposes but not pursuant to any of the tax qualified
retirement plans described in the section below. A Non-Tax Qualified Contract
may also be a Contract issued to a retirement plan or plan of deferred
compensation which is a non-tax qualified plan. The tax status of the annuitant
or participant is determined by provisions of such plan and/or provisions of the
Code applicable to the contract.
Under the provisions of the Tax Reform Act of 1986, a Non-Tax Qualified Contract
which is held by a person who is not a natural person (e.g. a corporation or a
trust is not a natural person), is not treated as an annuity contract for
Federal income tax purposes, and the income on the contract for any taxable year
is treated as ordinary income received or accrued by the owner of the contract
during the taxable year. Certain exceptions are provide for Non-Tax Qualified
Contracts held by a trust or other entity as agent for a natural person and for
immediate annuities (as defined in the Code). THUS, OWNERSHIP OF A NON-TAX
QUALIFIED CONTRACT BY NON-NATURAL PERSONS WHO DO NOT QUALIFY FOR THE STATUTORY
EXCEPTIONS RESULTS IN DENIAL OF TAX DEFERRAL ON INCREASES IN THE VALUE OF THE
CONTRACT.
Taxation of payments under annuity contracts is governed by Code Section 72.
Under the current provisions of the Code, amounts received under a Non-Tax
Qualified Contract prior to the annuity commencement date (including payments
made upon the death of the Annuitant or Owner), or as non-periodic payments
after the annuity commencement date, are generally first attributable to any
investment gains credited to the Contract over the taxpayer's basis (if any) in
the Contract. Such amounts will be treated as income subject to Federal income
taxation. A 10% penalty tax on such withdrawn investment gains will be imposed
if the withdrawal is made prior to age 59-1/2. This penalty tax will not be
imposed irrespective of age if the amount received is one of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life or life expectancy of the payee. The requirement that the amount be
paid out as one of a series of "substantially equal" periodic payments is met
when the number of units withdrawn to make each distribution is substantially
the same. Also, the penalty tax will not be imposed if the withdrawal follows
the death of the Owner (or if the Owner is not an individual, the death of the
primary annuitant), or is attributable to the "total disability" (as defined in
the Code) of the Annuitant. Where the Owner of the Contract is an individual who
is other than the Annuitant, the Code (as amended by the Tax Reform Act of 1986)
provides that the penalty tax is applicable to the taxable portion of payments
required to be made under the Contract following the death of the Annuitant.
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If the Owner of a Contract transfers (assigns) the Contract to another
individual as a gift, the Code (as amended by the Tax Reform Act of 1986)
provides that the Owner will incur taxable income at the time of the transfer.
The amount of such taxable income is equal to the excess, if any, of the cash
surrender value of the Contract over the Owner's cash basis at the time of the
gift. An exception is provided for certain transfers between spouses.
Annuity payments made after the annuity commencement date are generally taxed to
the recipient only as received. A part of the payment received is a return of
investment in the contract, if any, and is non-taxable; a portion is a return of
income and is subject to ordinary income tax. An "exclusion ratio" is used to
determine the non-taxable and taxable portion of each payment. Such exclusion
ratio continues until such time that the taxpayer recovers his/her basis in the
Contract. Thereafter, all payments received are treated as taxable income.
Tax Qualified Contracts:
Tax Qualified Contracts are Contracts which are issued to or pursuant to the
following types of retirement plans:
o A plan established by a corporate employer for the benefit of its
employees and qualified under sections 401(a) or 403(a) of the Code
(Corporate plans).
o A plan established by self-employed individuals for themselves and
their employees and qualified under sections 401(a) or 403(a) of the
Code (Keogh or HR-10 plans).
o A tax sheltered annuity plan maintained by certain tax exempt
organizations, including educational institutions, to purchase annuity
contracts for employees (403(b) Annuity plans).
o An Individual Retirement Annuity (IRA) plan established by an
individual.
All of these plans differ with respect to the applicable rules which must be met
and followed if they are to attain and retain their qualified status. In
general, they have the following common attributes: tax deductibility of
contributions (to the extent permitted by the Code), tax deferral of investment
income and taxation to the plan participant only upon receipt of a withdrawal or
payment. Since the plan participant generally does not have a cost basis in the
value of the Contract, payments received by the participant are generally taxed
as income to the participant.
Under the Code (as amended by the Tax Reform act of 1986), certain distributions
prior to age 59-1/2 are considered premature distributions and may result in
application of a 10% additional tax. In addition, the Code requires that tax
qualified retirement plans generally provide for the commencement of retirement
benefits no later than the year in which the employee attains age 70- 1/2.
With respect to contracts issued in connection with Section 403(b) annuity
plans, the Code restricts the distribution under such contracts of certain
amounts which are derived from contract
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contributions made pursuant to a salary reduction agreement. These restrictions
are set forth in Section 403(b) (11) of the Code, effective January 1, 1989. The
restrictions apply to: (i) salary reduction contributions made after December
31, 1988, and earnings on such contributions, and (ii) earnings on contract
value as of December 31, 1988. The tax law restrictions do not apply to salary
reduction contributions made prior to January 1, 1989, or to earnings credited
to such contributions prior to January 1, 1989,
In accordance with the provisions of the Code, restricted amounts may be
distributed only in the event of attainment of age 59-1/2, separation from
service, death, disability (as defined in Section 72(m)(7) of the Code), or
financial hardship. The hardship exception is not available with respect to
income attributable to salary reduction contributions. The Insurance Company
will be required to restrict the amount of contract withdrawals so as to comply
with these provisions of the Code.
The Internal Revenue Service has indicated that Section 403(b)(11) does not
change the circumstances under which a tax-free exchange of annuity contracts
may be made. Individuals contemplating purchase of a contract should refer to
the provisions of their employer's section 403(b) arrangement to determine the
investment alternatives available.
Taxation of the Separate Account:
Under the current provisions of the Internal Revenue Code, the Insurance Company
pays no taxes on the investment income and capital gains of the assets of the
Separate Account where used to determine the value of Contracts. Accordingly,
the Insurance Company currently makes no adjustments for Federal income taxes
(or benefits) in connection with the Separate Account Divisions. The Insurance
Company retains the right to make adjustments for Federal income taxes to
Separate Account assets should future changes in the Code so warrant.
Tax Withholding and Reporting:
The Insurance Company may be required to withhold certain amounts from both
periodic and non-periodic payments under the Contracts in accordance with
Federal tax law relating to the collection of Federal income tax at the source
of payment. A payor of periodic annuity payments is required to withhold amounts
as if the payment were a payment of wages from an employer to an employee.
However, an individual recipient of certain types of periodic payments is
allowed to elect to have no withholding made in a manner prescribed by the
United States Treasury Department.
Similarly, a payor of certain non-periodic payments is required to withhold
amounts unless an individual recipient elects against tax withholding in a
manner prescribed by the U.S. Treasury Department. Non-periodic payments include
payments made before and after the annuity commencement date such as lump sum
death proceeds and partial or full surrenders (redemptions) of Contract value.
The withholding requirements will not apply to the portion of a payment which is
reasonably believed to be not includable in gross income of the recipient for
Federal tax purposes.
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The Insurance Company will transmit a notice to individual recipients of
Contract payments of the right to elect against Federal income tax withholding,
in a form and containing such information as the Secretary of the Treasury
prescribes. If an individual elects against withholding, the Insurance Company
may nonetheless be required to withhold if it has not received the recipient's
tax identification number.
Under the current provisions of the Code, the Insurance Company is required to
withhold Federal income taxes from certain distributions from tax-qualified
retirement plans and from section 403(b) Annuity plans. These requirements do
not apply to distributions from IRA plans or from deferred compensation plans
subject to section 457 of the Code. The mandatory withholding (at a 20% rate)
applies to distributions which are treated as "eligible rollover distributions"
under the Code, unless the amount is distributed as a "direct rollover". For
these purposes, a "direct rollover" is one which is made directly from the
qualified plan to another qualified plan, or directly from the qualified plan to
an IRA. In other words, a "direct rollover" does not involve the receipt of any
portion of the distribution by the taxpayer. Unless an "eligible rollover
distribution" qualifies as a "direct rollover", the taxable portion thereof is
subject to 20% withholding. The Insurance Company is required to forward the
amount of the withholding to the IRS. The taxpayer may not elect out of this
withholding described in this paragraph.
In addition to tax withholding, the Insurance Company is required to report
information on distributions under the Contracts. Distributions include partial
and full surrenders as well as annuity payments. Information is reported on
forms pursuant to Internal Revenue Service regulations.
General:
Because of the complexity of the law and the fact that tax results will vary
according to the factual status of the individual involved, tax advice may be
needed by a person contemplating purchase of a Contract or the exercise of
rights under a Contract. The above comments concerning Federal income tax
consequences are not an exhaustive discussion of all tax questions that might
arise. In addition, state income or estate tax considerations may also be
involved in the purchase of a Contract or the exercise of rights under a
Contract, and are not discussed in this Prospectus. The Insurance Company's
management cannot predict what, if any, future action the Congress or the
Internal Revenue Service might take with respect to the taxation of variable
annuity contracts of the type described in this Prospectus. For complete
information on particular Federal and state tax considerations, a qualified tax
advisor should be consulted.
LEGAL PROCEEDINGS
Various lawsuits against the Insurance Company have arisen in the normal course
of business. However, contingent liabilities arising from these matters are not
considered material in relation to the financial position of the Insurance
Company. The Insurance Company is a defendant in a lawsuit which was filed in
October, 1996, in Travis County, Texas. The named plaintiffs in the suit (a
husband and wife), allege that the universal life insurance policies sold to
them by INA
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Life Insurance Company (a company which was merged into the Insurance Company in
1992) utilized unfair sales practices. The named plaintiffs seek reformation of
the life insurance contracts and an unspecified amount of damages. The named
plaintiffs also seek a class action as to similarly situated individuals. No
certification of a class has been granted as of the date of this Prospectus. The
Insurance Company believes that the suit is without merit and intends to
vigorously defend this matter.
In August, 1997, another individual filed a similar action in Travis County,
Texas against the corporate entities identified above. The lawsuit involves the
same type of policy and includes allegations which are substantially identical
to the allegations in the first action. The named plaintiff also seeks class
certification. The Company believes that the court would consider class
certification with respect to only one of these actions. The Company also
believes that this action is without merit and intends to vigorously defend this
matter.
There is no litigation pending to which the Separate Account is a party.
TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information includes a description of the following
items:
1. General Information and History
2. Services
3. Purchase of Securities Being Offered
4. Principal Underwriter
5. Yield Quotations of Money Market Division
6. Annuity Payments
7. Additional Information
8. Year 2000
9. Financial Statements
o The Separate Account
o The Insurance Company
-46-
<PAGE>
APPENDIX
Examples of Deferred Sales Charge Calculations
The Insurance Company will determine the amount of Sales Charge applicable to a
withdrawal or commencement of Annuity Payments as follows:
STEP 1 A Gross Chargeable Amount is determined by the Insurance Company.
This amount is the lesser of (a) the dollar amount of Purchase
Payments made and not previously withdrawn and (b) the amount
requested to be withdrawn or applied to Annuity Payments;
STEP 2 A Net Chargeable Amount is determined by the Insurance Company. This
amount is the Gross Chargeable Amount less any Exempt Accumulation
Value then applicable.
STEP 3 A Net Chargeable Amount is then allocated by the Insurance Company
to each Contribution Year.
STEP 4 The Net Chargeable Amount allocated to a Contribution Year is
multiplied by the Applicable Percentage shown:
No. of Full Contract Years
Between the Beginning of a
Contribution Year and Date
of Withdrawal (or First Annuity Payment)
Applicable
Percentage
less than 2 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or more 0%
STEP 5 The Sales Charge applicable to a withdrawal request or application
of Accumulation Value is the sum of amounts determined under STEP 4.
-47-
<PAGE>
Contract Withdrawal Value is the amount of a withdrawal request reduced by the
applicable Sales Charge.
The Insurance Company assumes that Purchase Payments are withdrawn on a "first
in - first out" basis for purposes of determining the Sales Charge. This
assumption cannot be used for purposes of determining federal income tax
liability.
SALES CHARGE EXAMPLES
The following examples assume that Purchase Payments for a Contract are as
follows:
Contract Year Total Purchase Payments
1 $1,200
2 2,400
3 2,400
4 0
5 0
6 0
7 0
8 0
9 3,600
$9,600
The assumed Accumulation Value on the date of withdrawal is $10,600. No other
withdrawal requests are assumed to have been made by the Owner.
Example 1: Illustration of a Sales Charge on a partial withdrawal request
for $8,000
STEP 1 The Gross Chargeable Amount is $8,000.
STEP 2 The Net Chargeable Amount is the Gross Chargeable Amount ($8,000)
less Exempt Accumulation Value:
Exempt Accumulation Value =
$10,600 X 0.1 = $1,060
Net Chargeable Amount = $8,000 - $1,060 = $6,940
STEP 3 The Net Chargeable Amount is applied to "Contribution Years":
-48-
<PAGE>
Gross Chargeable Net Chargeable
Amount allocated Amount allocated
Contract Year to Contribution Year to Contribution Year
1 $ 1,200 $ 1,200
2 2,400 2,400
3 2,400 2,400
4 0 0
5 0 0
6 0 0
7 0 0
8 0 0
9 2,000 940
$8,000 $6,940
*The Gross Chargeable Amount for subsequent withdrawals is $1,600 ($3,600 -
$2,000), allocated to Contract Year 9.
STEP 4 Net Chargeable Amounts allocated to Contribution Years are
multiplied by the Applicable Percentage and STEP 5, added together:
Net
Chargeable Applicable Sales
Contract Year Amount Percentages Charge
1 $1,200 0% $ 0.00
2 2,400 1% 24.00
3 2,400 2% 48.00
4 0 3% 0.00
5 0 4% 0.00
6 0 5% 0.00
7 0 6% 0.00
8 0 7% 0.00
9 940 7% 65.80
$6,940 $137.80
Contract Withdrawal Value ($8,000 - $137.80) = $7,862.20
-49-
<PAGE>
Example 2: Illustration of Sales Charge on full Surrender
STEP 1 The Gross Chargeable Amount is the lesser of Purchase Payments for
the Contract ($9,600) and the Accumulation Value ($10,600) = $9,600.
STEP 2 The Net Chargeable Amount is the Gross Chargeable Amount ($9,600)
less Exempt Accumulation Value:Exempt Accumulation Value = $10,600 X
0.1 = $1,060 Net Chargeable Amount = $10,600 -$1,060 = $8,540
STEP 3 The Net Chargeable Amount is applied to "Contribution Years"
Gross Chargeable Net Chargeable
Amount allocated Amount allocated
Contract Year to Contribution Year to Contribution Year
1 $1,200 $1,200
2 2,400 2,400
3 2,400 2,400
4 0 0
5 0 0
6 0 0
7 0 0
8 0 0
9 3,600 2,540
$9,600 $8,540
STEP 4 Net Chargeable Amounts allocated to Contribution Years are
multiplied by the Applicable Percentage and STEP 5, added together:
-50-
<PAGE>
Net Chargeable Applicable Sales
Contract Year Amount Percentages Charge
1 $1,200 0% $ 0.00
2 2,400 1% 24.00
3 2,400 2% 48.00
4 0 3% 0.00
5 0 4% 0.00
6 0 5% 0.00
7 0 6% 0.00
8 0 7% 0.00
9 2,540 7% 177.80
$8,540 $249.80
Contract Withdrawal Value (Surrender Value)
= $10,600 - $249.80 = $10,350.20
-51-
<PAGE>
To obtain a copy of the Statement of Additional Information for the Individual
Flexible Payment Variable Annuity Contracts, detach and mail this form.
TO: Investors Life Insurance Company of North America
701 Brazos Street
Austin, Texas 78701
I have been furnished with a Prospectus of Investors Life Insurance Company of
North America Separate Account I (dated April 30, 1999), describing the
Individual Flexible Payment Variable Annuity Contracts. Please send me a copy of
the Statement of Additional Information pertaining to such Contracts.
(Please Print)
NAME:
Mailing
(Date) Address: (Street or P.O. Box)
City State Zip
-53-
<PAGE>
ACKNOWLEDGMENT FORM
SECTION 403 (b) PLANS
NOTE: This form is required in connection with all applications for
Contracts to be issued in connection with Section 403(b)
plans, where contributions are to be made pursuant to a salary
reduction agreement.
TO: Investors Life Insurance Company of North America
701 Brazos Street
Austin, Texas 78701
With reference to my application for a variable annuity contract to be issued in
connection with a Section 403(b) annuity plan maintained by my employer, I have
been furnished with a prospectus of Investors Life Insurance Company of North
America Separate Account I (dated April 30, 1999). The contributions to the
contract will be made pursuant to a salary reduction agreement with my employer.
I acknowledge that I have read and understand the description on pages 43 and 47
of the prospectus, pertaining to the restrictions or redemptions imposed by
Section 403(b) (11) of the Internal Revenue Code. I further acknowledge that I
understand any investment alternatives under my employer's Section 403(b) plan,
to which I may elect to transfer contract values.
Date Signature of Applicant
Address:
-54-
<PAGE>
Investors Life Insurance
Company of North America
701 Brazos Street
Austin, Texas 78701
ILG Securities Corporation
701 Brazos Street
Austin, Texas 78701
PROSPECTUS
April 30, 1999
Flexible Payment
Individual Variable Annuity Contracts
Issued by
Investors Life Insurance Company
of North America
<PAGE>
ILCO Investors Life Insurance
Company
701 Brazos Street
Austin, Texas 78701
ILG Securities Corporation
701 Brazos Street
Austin, Texas 78701
PROSPECTUS
April 30, 1999
Flexible Payment
Individual Variable Annuity Contracts
Issued by
ILCO Investors Life Insurance Company
<PAGE>
PROSPECTUS
SEPARATE ACCOUNT I
INDIVIDUAL SINGLE PAYMENT
VARIABLE ANNUITY CONTRACTS
ISSUED BY
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
The Individual Single Payment Deferred Variable Annuity Contracts (the
"Contracts") described in this Prospectus are designed to be used to provide
retirement programs for individual purchasers. The Contracts may be issued in
connection with retirement plans which qualify for tax benefits under the
Internal Revenue Code ("tax qualified Contracts"), as well as retirement plans
which do not qualify for tax benefits under the Code ("non-tax qualified
Contracts").
This Prospectus sets forth information about Separate Account I and the
Contracts that a prospective purchaser ought to know before investing.
Additional information about the Separate Account, contained in a Statement of
Additional Information, has been filed with the Securities and Exchange
Commission. A copy of the Statement is available upon request and without charge
by writing to Investors Life Insurance Company of North America (the "Insurance
Company" or "Investors Life"), 701 Brazos Street, Austin, Texas 78701 (a reply
form has been included with this Prospectus), or by calling (512) 404-5346. The
Statement of Additional Information has the same date as the date of this
Prospectus, and is incorporated by reference into this Prospectus. A table of
contents for the Statement of Additional Information appears on page 46 of this
Prospectus.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT
PROSPECTUS OF PUTNAM VARIABLE TRUST. BOTH PROSPECTUSES SHOULD BE
RETAINED FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
April 30, 1999
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
Definitions 3
Introduction 5
Expense Table 7
Financial Information 11
Description of the Insurance Company, the
Separate Account and the Fund 20
Deductions and Expenses 24
General Description of Variable Annuity
Contracts 27
The Annuity Period 31
Death Benefits 34
Purchases and Contract Values 36
Redemptions 39
Federal Tax Status 41
Legal Proceedings 46
Table of Contents of the Statement of
Additional Information 46
The Contracts are not available in all states.
NO PERSON IS AUTHORIZED BY THE INSURANCE COMPANY TO GIVE INFORMATION OR TO MAKE
ANY REPRESENTATION, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF, OR SOLICITATION OF AN OFFER TO
ACQUIRE, ANY INTEREST OR PARTICIPATION IN THE VARIABLE ANNUITY CONTRACTS OFFERED
BY THIS PROSPECTUS TO ANYONE IN ANY STATE OR JURISDICTION IN WHICH SUCH
SOLICITATION OR OFFER MAY NOT BE MADE LAWFULLY.
-2-
<PAGE>
DEFINITIONS
The following terms as used in this Prospectus have the indicated meanings:
Accumulation Period: The period between the commencement of the first Contract
Year and the annuity commencement date.
Accumulation Unit: A unit of measurement used to determine the value of a
person's interest under the Contract before Annuity payments begin.
Adjusted Age: The age of the Annuitant which is used to determine the applicable
annuity purchase rate. The age is adjusted by either adding or subtracting
a specified number of years in order to reflect predicted longevity. The
number of years to be added or subtracted depends upon the year of birth of
the Annuitant.
Annuity: A contract providing for Annuity Payments varying in amount in
accordance with the investment experience of the applicable subdivision of
the Separate Account Division selected by the Contract Owner.
Annuitant: The person designated under the contract as the measuring life for
annuity payout options involving life contingencies; normally, the
recipient of Annuity Payments.
Annuity Payments: Periodic amounts payable by the Insurance Company on and at
regular intervals after the annuity commencement date preselected under the
Contract.
Annuity Unit: A unit of measurement used to determine the amount of the variable
Annuity Payments.
Contract Year: A twelve month period between anniversaries of the Date of Issue
of a Contract. The first Contract Year begins on the Date of Issue.
Contribution Year: A Contract Year in which at least one Purchase Payment is
made.
Fund:A series of Putnam Variable Trust. Prior to January 1, 1997, the Putnam
Variable Trust was known as Putnam Capital Manager Trust.
Owner: The person (or other entity) to whom a Contract is issued by the
Insurance Company.
Purchase Payment: The dollar amount paid to the Insurance Company by or on
behalf of a Contract Owner. The "Net Purchase Payment" is the Purchase
Payment reduced by any applicable state premium taxes.
Separate Account: The segregated investment account entitled "Separate Account
I" established by the Insurance Company and registered as a unit investment
trust under the Investment Company Act of 1940, as amended. Prior to April
18, 1995, the Separate Account was known as the "CIGNA Separate Account".
As a result of the substitution of shares of the Putnam Capital Manager
Trust (now known as Putnam Variable Trust) as the underlying investment
vehicle, the name of the Separate Account was changed to Separate Account
I, effective April 18, 1995.
-3-
<PAGE>
Separate Account Division: A Division of the Separate Account, the assets of
which consist of shares of a specified class of shares of the Fund. Each of
the Separate Account Divisions contains two subdivisions, one for funding
Contracts issued under tax qualified retirement plans and the other for
non-tax qualified Contracts. Each of the subdivisions has its own
identified assets and value. References to a Division in this Prospectus
include, where the context requires, the appropriate subdivision for a
Contract.
Contract Withdrawal Value: The amount payable to the Owner or other payee upon
termination of the Contract during the Accumulation Period, other than by
reason of the Annuitant's or Owner's death.
Valuation Date. A day on which the net asset value of each share of the Fund is
determined.
Valuation Period: Each business day on which the New York Stock Exchange is open
for general business, together with any consecutive non-business days
immediately preceding such business day and irrespective of whether such
exchange is open for general business on each business day, together with
any consecutive non-business day, immediately preceding such business day
when the Fund values its portfolio securities based upon its determination
that there is a sufficient degree of trading in such securities that the
net asset value of its shares might be materially affected.
NOTE:All masculine references in this Prospectus are intended to include the
feminine gender. The singular context also includes the plural and vice
versa where appropriate.
-4-
<PAGE>
INTRODUCTION
The Contracts described in this Prospectus are designed to provide Annuity
Payments based on the life expectancy of the Annuitant. Such benefits will begin
on a future date which has been preselected under a Contract. Alternative
annuity payout options are available, but may be limited by a retirement plan
under which a Contract is issued. See "The Annuity Period - Annuity Payout
Options", page 31, and "Limitation on Contract Rights", page 28.
The Contracts offer Accumulation Units in up to five Separate Account Divisions.
The value of an Accumulation Unit is based on the investment results of the
underlying shares of the Fund allocated to applicable subdivisions of the
Separate Account Division(s) selected. Similarly, the amount of Annuity Payments
will vary based on such underlying investment results. See "The Annuity Period -
Annuity Payments", page 31.
The following is a synopsis of certain features of the Contracts, together with
a cross-reference to the page in this Prospectus where the purchaser may find a
more complete description:
o The Contracts provide for allocation of the net Purchase Payments to
several underlying investment mediums, each with a different investment
objective. See "Description of the Fund", page 20.
o The Contracts provide that, in the event of death of the Annuitant or Owner
before Annuity Payments begin, the Insurance Company will pay death
proceeds to a named beneficiary. See "Death Benefits", page 34.
o The Contracts provide that the owner may surrender (redeem) a contract in
whole or in part for cash before the annuity commencement date (unless
restricted by the retirement plan or applicable Federal tax law) subject to
a sales charge. See "Redemptions", page 39 and "Contract Charges", page 24.
o A penalty tax may be assessed under the Internal Revenue Code in the event
of certain early withdrawals. See "Federal Tax Status", page 41.
o The Contracts provide that the annuity rates and contract charges generally
may not be changed adversely to a Contract Owner for the duration of his
Contract. See "Contract Charges", page 24.
o The Contracts provide for transfer of Contract values among Separate
Account Divisions, unless restricted by a retirement plan. See "Description
of Contract Rights", page 27.
o The Contracts include a limited right of cancellation. See "Redemption -
Right to Cancel", page 40.
-5-
<PAGE>
The objective of the Contracts, which may or may not be realized, is to provide
relatively level Annuity Payments during periods when the economy is relatively
stable and to provide increased Annuity Payments during inflationary and growth
periods. The Insurance Company seeks to assist the Contract Owner in
accomplishing this objective by making several classes of shares of the Fund
available from which the Owner may select underlying investment mediums. Each
such class is based upon a portfolio of Fund investments with a different
investment objective.
No assurance can be given that the value of a Contract before Annuity Payments
begin, or the aggregate amount of Annuity Payments made under a Contract, will
equal or exceed the Purchase Payment for a Contract. Thus, the investment risk
under a Contract is borne by the Contract Owner.
-6-
<PAGE>
EXPENSE TABLE
The following Expense Table lists the transaction expenses, annual Contract fee,
Separate Account annual expenses, as well as the approximate annual expenses of
each Fund of Putnam Variable Trust, related to an investment in each Division of
the Separate Account. Following the Expense Table is an Example which
illustrates the cumulative amount of fees and expenses on a hypothetical,
one-time investment of $1,000, assuming a 5% rate of return for the stated time
periods.
<TABLE>
<S> <C> <C> <C> <C>
Growth
Money and
Market Income Income II Voyager
Division Division (5) Division Division
A. Contract owner
Transaction Expenses
Deferred Sales
Charge (maximum, as
a percentage of
amount Surrendered(1) 6% 6% 6% 6%
Exchange Fee (2) $ 5.00 $ 5.00 $ 5.00 $ 5.00
B. Annual Contract Fee(3) $ 25.00 $ 25.00 $ 25.00 $ 25.00
C. Separate Account
Annual Expenses (as
a percentage of
average account value)
Mortality Risk Fee 0.8% 0.8% 0.8% 0.8%
Expense Risk Fee 0.4% 0.4% 0.4% 0.4%
Total Separate
Account
Annual Expenses 1.2% 1.2% 1.2% 1.2%
D. Fund Annual Expenses (as a percentage of Fund average net assets) (4)
Management Fees 0.45% 0.60% 0.46% 0.54%
All Other Expenses 0.08% 0.07% 0.04% 0.04%
Total Fund Annual
Expenses 0.53% 0.67% 0.50% 0.58%
</TABLE>
-7-
<PAGE>
Notes to Expense Table:
(1) Represents maximum deferred sales charge. The percentage is based on the
number of full Contract years between the date of a Purchase Payment and
the date of withdrawal or first Annuity Payment and ranges from 6% for
periods of less than two Contract years to 0% for periods of eight or more
Contract years. For additional information, please refer to the section
entitled "Contract Charges-Deferred Sales Charge."
(2) Applicable to the second and subsequent transfer of Accumulation Value or
Annuity Value among Divisions during a Contract Year.
(3) The Annual Contract fee is deducted from the value of a Contract on each
anniversary of the issue date, during the Accumulation Period. If a
Contract Owner participates in more than one Fund under a Contract, only
one such fee is deducted annually.
(4) Based on amounts incurred by the applicable Putnam Variable Trust during
calendar year 1998. The inclusion of the 1998 Total Annual Fund Expenses of
the applicable Fund of Putnam Variable Trust has been included in this
prospectus solely for the purposes of the hypothetical illustration set
forth in the Expense Table. (5) On April 9, 1999, Putnam U.S.
Government and High Quality Bond Fund changed its name to name to Putnam
Income Fund. In addition, the Fund's investment policy changed. Prior to
April, 9, 1999, the Fund's policies required it to invest at least 25% of
its assets in U.S. Government securities and limited the amount of assets
invested in securities rated below "A". Consequently, the historic
information listed in this Expenses Table with respect to the Income
Division does not reflect the performance of Putnam Income Fund under the
Fund's current investment policies or its current distribution policies.
-8-
<PAGE>
EXAMPLES
Growth
Money and
Market Income Income II Voyager
Division Division Division Division
If you surrender your
contract at the end of the
applicable time period:
You would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on asset
1 year $ 91.34 $ 92.71 $ 91.05 $ 91.83
3 years 114.11 118.33 113.20 115.61
5 years 136.92 144.17 135.39 139.52
10 years 220.73 236.05 217.42 226.23
If you annuitize at the end
of the applicable time
period:
You would pay the following
expenses on a $1,000
investment, assuming 5%
annual return on assets
1 year $ 91.53 $ 92.90 $91.44 $ 92.32
3 years 114.71 118.93 114.41 117.12
5 years 137.96 145.20 137.44 142.11
10 years 222.93 238.22 221.83 231.69
If you do not surrender your
contract:
You would pay the following
expenses on a $1,000
investment assuming 5% annual
return on assets
1 year $ 19.18 $ 20.65 $ 18.87 $ 19.71
3 years 59.34 63.79 58.38 60.93
5 years 102.01 109.50 100.40 104.69
10 years 220.73 236.05 217.42 226.23
-9-
<PAGE>
The purpose of the Expense Table is to assist a prospective purchaser in
understanding the various costs and expenses that a Contract Owner will bear
directly or indirectly. For further information concerning the Separate Account
fees and expenses, please refer to the section of this prospectus entitled
"Deductions and Expenses". Additional information pertaining to Fund Annual
Expenses is contained in the prospectus of Putnam Variable Trust. In addition to
the costs and expenses described above, the Contract may be subject to state
premium taxes. For a discussion of premium taxes please refer to the section
entitled "Contract Charges-Premium Taxes."
The example is not intended as, and should not be considered, a representation
of past or future expenses. Actual expenses may be greater or lesser than those
shown.
-10-
<PAGE>
FINANCIAL INFORMATION
1. Accumulation Unit Values (for an Accumulation Unit outstanding throughout the
period):
The following information should be read in conjunction with the financial
statements of the Separate Account, which are available with the Statement of
Additional Information. This historical data for Accumulation Unit Values is not
indicative of future performance.
MONEY MARKET DIVISION
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 2.1487 $ 2.2336 593,464
1997 $ 2.0665 $ 2.1483 684,786
1996 $ 1.9898 $ 2.0660 847,412
1995 $ 1.9080 $ 1.9894 1,096,192
1994 $ 1.8661 $ 1.9074 1,488,534
1993 $ 1.8446 $ 1.8659 1,778,411
1992 $ 1.8062 $ 1.8444 2,620,375
1991 $ 1.7286 $ 1.8059 4,203,167
1990 $ 1.6223 $ 1.7281 7,114,568
1989 $ 1.5065 $ 1.6218 8,331,835
-11-
<PAGE>
MONEY MARKET DIVISION
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 2.1336 $ 2.2177 968,809
1997 $ 2.0518 $ 2.1331 1,065,062
1996 $ 1.9756 $ 2.0514 1,288,780
1995 $ 1.8944 $ 1.9753 1,334,785
1994 $ 1.8548 $ 1.8935 1,660,811
1993 $ 1.8335 $ 1.8546 2,525,627
1992 $ 1.7954 $ 1.8332 3,196,702
1991 $ 1.7181 $ 1.7951 3,868,744
1990 $ 1.6124 $ 1.7175 5,103,872
1989 $ 1.4973 $ 1.6119 5,870,485
-12-
<PAGE>
GROWTH AND INCOME II DIVISION *
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 7.6501 $ 8.6752 2,497,011
1997 $ 6.1814 $ 7.6183 2,818,975
1996 $ 5.1880 $ 6.2071 3,277,019
1995 $ 3.8659 $ 5.1527 3,699,687
1994 $ 3.8800 $ 3.8384 3,672,031
1993 $ 4.1195 $ 3.8802 5,709,891
1992 $ 3.7959 $ 4.1409 6,907,180
1991 $ 2.7828 $ 3.7798 8,510,262
1990 $ 3.0137 $ 2.7991 10,978,705
1989 $ 2.3164 $ 2.9680 12,887,382
* = As of April 18, 1995, the former Growth and Income Division was merged into
the Equity Division and the name of the Equity Division was changed to Growth
and Income II Division.
-13-
<PAGE>
GROWTH AND INCOME II DIVISION *
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 6.5538 $ 7.4431 1,557,788
1997 $ 5.2962 $ 6.5265 1,753,068
1996 $ 4.4442 $ 5.3182 2,002,962
1995 $ 3.3094 $ 4.4140 2,104,990
1994 $ 3.3224 $ 3.2870 1,733,131
1993 $ 3.5222 $ 3.3225 2,180,991
1992 $ 3.2453 $ 3.5405 2,447,435
1991 $ 2.3781 $ 3.2315 2,668,712
1990 $ 2.5758 $ 2.3921 3,515,922
1989 $ 1.9798 $ 2.5367 4,363,345
* = As of April 18, 1995, the former Growth and Income Division was merged into
the Equity Division and the name of the Equity Division was changed to Growth
and Income II Division.
-14-
<PAGE>
INCOME DIVISION
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.4216 $ 3.6748 772,236
1997 $ 3.1564 $ 3.4066 920,186
1996 $ 3.1355 $ 3.1734 1,313,122
1995 $ 2.6495 $ 3.1359 1,580,611
1994 $ 2.7613 $ 2.6484 2,006,254
1993 $ 2.4922 $ 2.7602 2,372,918
1992 $ 2.3148 $ 2.4665 3,146,768
1991 $ 2.0194 $ 2.3365 3,898,682
1990 $ 1.9064 $ 1.9976 4,611,938
1989 $ 1.6895 $ 1.9058 5,842,385
-15-
<PAGE>
INCOME DIVISION
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.3804 $ 3.6322 1,781,007
1997 $ 3.1183 $ 3.365 1,981,587
1996 $ 3.0972 $ 3.1351 2,394,183
1995 $ 2.6168 $ 3.0976 2,678,698
1994 $ 2.7274 $ 2.6157 3,034,007
1993 $ 2.4620 $ 2.7263 3,998,875
1992 $ 2.2868 $ 2.4366 4,270,125
1991 $ 1.9950 $ 2.3082 4,705,841
1990 $ 1.8835 $ 1.9735 6,081,726
1989 $ 1.6693 $ 1.8830 7,317,320
-16-
<PAGE>
VOYAGER DIVISION *
TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.1133 $ 3.8346 714,343
1997 $ 2.4606 $ 3.1215 738,882
1996 $ 2.2334 $ 2.4937 751,632
1995 $ 1.6061 $ 2.2337 781,624
1994 $ 1.6303 $ 1.6261 798,724
1993 $ 1.4965 $ 1.6546 825,839
1992 $ 1.3365 $ 1.5166 972,470
1991 $ 0.8190 $ 1.3366 978,329
1990 $ 0.9012 $ 0.8289 1,022,612
1989 $ 0.7563 $ 0.8914 992,682
* = Prior to April 18, 1995, the Voyager Division was named the Aggressive
Equity Division.
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VOYAGER DIVISION *
NON-TAX QUALIFIED
YEAR ACCUMULATION ACCUMULATION NUMBER OF
UNIT VALUE AT UNIT VALUE AT ACCUMULATION
BEGINNING OF END OF PERIOD UNITS
PERIOD OUTSTANDING AT
END OF PERIOD
1998 $ 3.1078 $ 3.8299 679,382
1997 $ 2.4563 $ 3.1160 653,214
1996 $ 2.2298 $ 2.4894 633,799
1995 $ 1.6031 $ 2.2301 645,524
1994 $ 1.6302 $ 1.6231 649,408
1993 $ 1.4965 $ 1.6545 767,780
1992 $ 1.3363 $ 1.5164 761,087
1991 $ 0.8188 $ 1.3364 757,114
1990 $ 0.9011 $ 0.8287 781,471
1989 $ 0.7562 $ 0.8913 750,969
* = Prior to April 18, 1995, the Voyager Division was named the Aggressive
Equity Division.
2. Money Market Division - Yield Information:
The Separate Account provides "current yield" and "effective yield"
quotations with respect to the Money Market Division. Both yield figures
are based on historical earnings and are not intended to indicate future
performance. A description of the method used to compute such yield
quotations is included in the Statement of Additional Information.
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The "current yield" of the Money Market Division refers to the income
generated by an investment in such Division over a particular seven-day
period; the particular seven-day period will be stated in the quotation.
This income is then "annualized" - that is, the amount of income generated
by the investment during the seven-day period is assumed to be earned each
week over a 52-week period and is shown as a percentage of the investment.
The "effective yield" is calculated in a similar manner; however, when
annualized, the income earned by an investment in the Money Market Division
is assumed to be reinvested. Due to the compounding effect of this assumed
reinvestment, the "effective yield" will be slightly higher than the
"current yield".
3. Financial Statements:
The financial statements of the Separate Account and Investors Life
Insurance Company of North America are included in the Statement of
Additional Information.
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DESCRIPTION OF THE INSURANCE COMPANY,
THE SEPARATE ACCOUNT AND THE FUND
THE INSURANCE COMPANY
Investors Life Insurance Company of North America ("Investors Life")is a stock
life insurance company, organized in 1963 under the laws of the Commonwealth of
Pennsylvania. In December, 1992, the Insurance Company changed its state of
domicile to the State of Washington and merged with its immediate parent company
(Investors Life Insurance Company of California). As a result of the merger,
Investors Life Insurance Company of North America assumed all of the assets and
obligations of Investors Life Insurance Company of California, and Investors
Life Insurance Company of North America was the surviving company. In June,
1993, Investors Life merged with its immediate parent company, Standard Life
Insurance Company. Investors Life was the surviving entity. As a result,
Investors Life became a direct subsidiary of InterContinental Life Corporation,
an insurance and financial service holding company. The administrative offices
of the Insurance Company are located at 701 Brazos Street, Austin, Texas 78701.
The statutory home office of the Insurance Company is 2101 4th Ave., Seattle,
Washington 98121-2371. Prior to December 28, 1988, the Insurance Company was an
indirect wholly-owned subsidiary of CIGNA Corporation.
THE SEPARATE ACCOUNT
The Insurance Company established the Separate Account pursuant to the
provisions of the Pennsylvania Insurance Code and has registered it as a unit
investment trust under the Investment Company Act of 1940. The Separate Account
commenced operations on September 15, 1982.
The Separate Account currently contains four Divisions, one for each class of
shares of the Fund. Prior to the substitution of certain series of shares of
Putnam Variable Trust for shares of CIGNA Annuity Funds group as the underlying
funding vehicle for the Separate Account, the Separate Account contained five
divisions. In connection with the substitution, the Equity Division was merged
with the Growth and Income Division; thereafter, the name of the Equity Division
was changed to the Growth and Income II Division. See also, the discussion of
the substitution under the caption "Putnam Variable Trust" (page 21). Each
Division reflects the investment performance of the specific class of Fund
shares allocated to it, and is divided into subdivisions for tax qualified and
non-tax qualified contracts, respectively. The Voyager Division (formerly the
Aggressive Equity Division) was initially made available under the Separate
Account on March 31, 1987. Each Separate Account Division is administered and
accounted for as part of the general business of the Insurance Company; however,
the income, capital gains or capital losses of each Division's subdivision are
credited to or charged against the assets allocated to that subdivision without
regard to other income, capital gains or capital losses of any other subdivision
or arising out of any other business the Insurance Company may conduct.
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The contractual obligations under the Contracts funded by the Separate Account
are assumed by the insurance Company; however, the investment risk under a
Contract is borne by the Contract Owner.
Putnam Variable Trust
Putnam Variable Trust, formerly known as the Putnam Capital Manager Trust, was
established to fund variable annuity contracts offered by various insurance
companies. Putnam Variable Trust is a diversified, open-end management
investment company registered under the Investment Company Act of 1940, as
amended. Putnam Variable Trust offers a number of separate portfolios of
investments having a variety of investment objectives. Currently, only the
following portfolios of Putnam Variable Trust are available under variable
annuity contracts offered by this Prospectus:
Putnam VT Income Fund, formerly Putnam VT U.S. Government and High
Quality Bond Fund (which serves as the underlying funding vehicle for
the Income Division) - seeks current income consistent with
preservation of capital through investing in U.S government securities
and corporate debt securities. The corporate securities range in credit
quality from investment grade to potentially higher-yielding, higher
risk bonds, commonly known as "junk bonds." The fund also invests
significantly in mortgage-backed securities.
Putnam VT Growth and Income Fund (which serves as the underlying
funding vehicle for the Growth and Income II Division, formerly known
as the Equity Division) - seeks capital growth and current income by
investing primarily in common stocks that offer potential for capital
growth, current income or both.
Putnam VT Money Market Fund (which serves as the underlying funding
vehicle for the Money Market Division) - seeks as high a rate of
current income as Putnam Management believes is consistent with
preservation of capital and maintenance of liquidity by investing in
high quality money market instruments.
Putnam VT Voyager Fund (which serves as the underlying funding vehicle
for the Voyager Division, formerly known as the Aggressive Equity
Division) - seeks capital appreciation by investing primarily in common
stocks of companies that Putnam Management believes have potential for
capital appreciation that is significantly greater than that of market
averages.
The shares of each portfolio of Putnam Variable Trust are purchased by the
Insurance Company at net asset value (without sales load) for the corresponding
Separate Account Division to support the cash values of the Contracts.
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The shares of each Fund of Putnam Variable Trust are available on to serve as
the underlying investment for variable annuity and variable life insurance
contracts. It is possible that, in the future, it may be disadvantageous for
variable annuity and variable life insurance separate accounts to invest in the
Funds simultaneously. The Insurance Company is not currently aware of any such
disadvantages. It should be noted that the prospectus of Putnam Variable Trust
states that the Trustees of the Fund intend to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise and to
determine what action, if any, should be taken in response to such conflicts.
In addition, shares of the Funds are sold to separate accounts of other,
unaffiliated, insurance companies, a practice which is known as "mixed funding."
As a result, there is a possibility that a material conflict may arise between
the interests of Owners of variable annuity contracts issued by the Insurance
Company and owners of contracts issued by such other, unaffiliated, insurers. In
the event of any such material conflicts, we will consider what action may be
appropriate under the circumstances. For a description of the risk which may be
involved with mixed funding, please refer to the discussion in the prospectus of
Putnam Variable Trust.
Putnam Investment Management, Inc. ("Putnam Management") is the investment
adviser to Putnam Variable Trust. Putnam Management is owned by Marsh & McLennan
Companies, Inc., a publicly owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee benefit consulting
and investment management.
Prior to April 10, 1998, Putnam Management agreed to reimburse the Insurance
Company for certain costs that it incurred in connection with the servicing of
Contracts. The amount of this reimbursement was equal to 25% of the effective
management fee received by Putnam Management with respect to assets allocated by
the Insurance Company to the applicable portfolio of Putnam Variable Trust, plus
an annual rate of one basis point times the average daily net assets allocated
during the computation period by the Insurance Company to Putnam Variable Trust.
As of April 10, 1998, the reimbursement arrangement was terminated by mutual
agreement between Putnam Management and the Insurance Company.
The prospectus of Putnam Variable Trust, which accompanies this Prospectus,
contains a more complete description of the investment objectives, including
attendant risks, of each portfolio of Putnam Variable Trust. In considering the
purchase of the Contracts offered in this Prospectus, you should read the
prospectus of Putnam Variable Trust carefully.
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VOTING RIGHTS
The Insurance Company is the owner of record of the shares of each series of
shares of Putnam Variable Trust. It will vote such shares held in each Separate
Account division at regular and special meetings of shareholders of Putnam
Variable Trust in accordance with instructions received from persons having an
interest in such series of Putnam Variable Trust shares.
During the Accumulation Period, owners of Contracts shall have a voting interest
with respect to their accounts. During the Annuity period, the person entitled
to variable Annuity Payments will be the person having such voting interest.
Each person having a voting interest in shares of Putnam Variable Trust
attributable to a Contract will initially be allowed to vote the number of
accumulation units credited to a Contract under the Separate Account Division
composed of such Putnam Variable Trust shares. Persons receiving Annuity
Payments will be allowed an equivalent vote which shall be determined by
dividing the value of the reserve maintained in such Separate Account Division
to meet the annuity obligations, by the value of an accumulation unit. Since
voting power is determined by the Separate Account Division Contract value, such
power will normally diminish during the annuity payout phase.
After votes are tabulated, the Insurance Company will then determine the number
of Separate Account Fund shares to be voted affirmatively in accordance with the
proportion of affirmative votes received to the total number of votes received
from persons having a voting interest in such Fund shares. Negative votes will
be similarly determined.
Assets may also be maintained in Separate Account Divisions with respect to
contracts other than those offered by this Prospectus, and votes attributable to
such other contracts will be computed in the same manner.
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DEDUCTIONS AND EXPENSES
A. CONTRACT CHARGES:
The following deductions are made under the Contracts:
o Administrative Expense: The Insurance Company deducts expense charges from
the Contract value on each anniversary of the issue date.
During the Accumulation Period, this charge is $25.00 (the "Annual Contract
Fee"), plus $5.00 (the "Exchange Fee") for the second and each subsequent
transfer of Accumulation Value among Divisions during the Contract Year.
Accumulation units will be reduced proportionately on each anniversary date
to reflect this charge. No administrative expense charges are deducted in
the event of a full surrender or death benefit settlement prior to the
anniversary date.
During the Annuity Period, this charge is $5.00 (the "Exchange Fee") for
the second and subsequent transfer of Annuity Unit values among Divisions
during the Contract Year.
The Insurance Company reserves the right to terminate the privilege of the
Contract Owner to make more than one transfer of Accumulation Units, or
Annuity Units, during a Contract Year. However, there is no present intent
to impose such a limitation, and written notice will be given to Contract
Owners prior to any such change.
The Insurance Company's administrative expenses include salaries, rent,
postage, telephone, travel, legal, administrative, actuarial and accounting
fees, periodic reports, office equipment, stationary and custodial
expenses. The administrative expense charge is not anticipated to exceed
the expenses to be incurred by the Insurance Company for administration of
the Contracts.
o Premium Taxes: Premium taxes ranging from .5% to 3% are currently imposed
by certain states and municipalities on payments made under annuity
contracts. Under deferred Contracts, any premium tax will be deducted
either from the Purchase Payment or from the Accumulation Value upon
annuitization, as determined in accordance with applicable law.
o Deferred Sales Charge: The Contracts include a deferred sales charge, which
is assessed against amounts withdrawn (total or partial surrender) during
early Contract Years, measured from the date of Contract issuance.
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The charges determined as follows will be assessed upon amounts withdrawn
during any one of the first six Contract Years (measured from the date of
issue) which exceed 10% of the Purchase Payment:
Contract Year Percentage Charge
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and thereafter 0%
In no event will this charge exceed 8 1/2% of the amount of the Purchase
Payment accepted by the Insurance Company for a Contract.
An amount up to 10% of the Purchase Payment may be withdrawn in any one
Contract Year without charge. Federal penalty taxes may be imposed on early
withdrawals.
The Deferred Sales Charge is made as a means for the Insurance Company to
recover expenses incurred in connection with distribution of the Contracts
when a withdrawal is made during early Contract Years. Because the
Contracts are normally purchased for the long term, the Insurance Company
expects to recover such expenses over time. Amounts anticipated to be
collected by this means may, however, be insufficient to reimburse the
Insurance Company for its anticipated distribution expenses. Amounts from
the Company's general account assets (including the profits, if any, from
the Mortality and Expense Risk Deduction) may be used to cover such
expenses.
o Mortality and Expense Risk Deduction: The Insurance Company makes a daily
charge of 0.0000327 of the value of the assets in each subdivision of the
Separate Account (1.2% on an annual basis, consisting of approximately 0.8%
for mortality risks (the "Mortality risk Fee") and approximately 0.4% for
expense risks (the "Expense Risk Fee")).
The Insurance Company's assumption of mortality risk arises from its
contractual obligation to make Annuity Payments to each Annuitant
regardless of how long he lives and how long all annuitants as a group
live. Also, the Insurance Company assumes mortality risk because of annuity
rates in the Contracts, which cannot be increased; and, if the Annuitant
should die during the Accumulation Period, the Insurance Company is at risk
that the Accumulation Value may not equal the Death Proceeds.
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<PAGE>
The Insurance Company also assumes the risk that the amounts deducted for
sales and administrative expenses may be insufficient to cover the actual
cost of such items.
The above-described deductions may be modified by the Insurance Company to the
extent required by applicable federal or state law. However, except as described
above, the deductions may not be modified by the Insurance Company.
B. EXPENSES AND RELATED INFORMATION:
The Contracts are sold by licensed insurance agents of the Insurance Company who
are also registered representatives of broker/dealers who have sales agreements
with the Insurance Company and the principal underwriter, ILG Securities
Corporation.
The sales agreements between the principal underwriter and broker/dealers
provide for commissions in an amount equal to 4% of the Purchase Payment under
the Contract.
Registered representatives of ILG Securities Corporation may also sell the
Contracts.
In connection with the distribution of the Contracts, the Insurance Company pays
servicing fees to certain broker/dealers who agree to provide ongoing Contract
Owner administrative services. No charges are separately assessed under the
Contracts, nor are deductions made from the Separate Account for these costs.
The expenses of the Separate Account consist of the mortality and expense risk
deduction described under "Contract Charges", above. As a percentage of average
net assets, this expense is 1.2% on an annual basis.
The prospectus of Putnam Variable Trust describes the expenses and fees which
are paid out of the assets of portfolios used to fund the Separate Account. For
a discussion of such expenses and fees, please refer to the prospectus of Putnam
Variable Trust.
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GENERAL DESCRIPTION OF VARIABLE ANNUITY CONTRACTS
Description of Contract Rights: The Contracts provide certain rights during the
Accumulation Period, the Annuity Period and upon death of the Owner or
Annuitant:
a. Accumulation Period: During the Accumulation Period, the Owner of a
Contract has the right to:
o Change the beneficiary for death proceeds;
o surrender the Contract in whole or in part for its Withdrawal Value;
o change the annuity payout option;
o change the death benefit payout option;
o transfer Contract values between Separate Account Divisions;
o instruct the Insurance Company as to voting of Fund shares;
o cancel the Contract by returning it to the Insurance Company within 10
days after receipt;
o change the designated Separate Account Division for allocation of
future contributions;
o change the date Annuity Payments commence (not later then Annuitant's
age 75; an earlier age may be required in connection with certain
Contracts issued to tax qualified plans);
o change the payee to receive Annuity Payments;
o assign ownership rights under the Contract, upon advance written
notice to the Company.
b. Annuity Period: During the Annuity Period, the Owner of a Contract has the
right to:
o transfer Contract values between Separate Account Divisions;
o change the payee to receive Annuity Payments, during the lifetime of
the Annuitant;
o change the beneficiary under any Annuity Payout Option which provides
for a death benefit upon death of the Annuitant; change may be made
only during lifetime of the Annuitant;
o instruct the Insurance Company as to voting of Fund shares.
c. Death Benefits - Accumulation Period:
In the event death benefit proceeds become payable during the Accumulation
Period, the Beneficiary designated by the Owner is entitled to payment of
such proceeds. If no designated Beneficiary survives the Annuitant and no
other
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<PAGE>
designation is provided, the Owner shall be the Beneficiary, if he survives
the Annuitant; otherwise, the Owner's estate shall be the Beneficiary.
If no Annuity Payout Option has been selected by the Owner for death
benefit proceeds, and if the Insurance Company has not previously made a
lump sum payment, the beneficiary may choose an Annuity Payout Option for
receipt of such proceeds.
d. Death Benefits - Annuity Period:
If the Annuitant dies while receiving Annuity Payments, the remaining
payments, if any, will be payable to the Beneficiary designated by the
Owner. However, if Annuity Payments are being paid to a Beneficiary as a
death benefit, and such Beneficiary dies, the Beneficiary's estate shall be
entitled to receive payment of any remaining proceeds.
In the case of Contracts which are subject to the requirements of section
72(s) of the Internal Revenue Code (See "Death Benefits - Required
Distribution Provisions"), the Contracts provide that if the Owner dies
while the Annuitant is receiving Annuity Payments, the Annuitant is
entitled to receive the remaining payments.
Limitation on Contract Rights: The Contracts may be issued pursuant to a tax
qualified or non-tax qualified plan or trust. Such plan or trust may limit the
exercise by participants in the plan or trust of certain rights granted by the
Contract to Owner, Annuitant or Beneficiary. For example, although the Contract
permits redemption of all or part of their value prior to the time Annuity
Payments begin, the plan or trust may not permit the Owner to exercise such
right. Certain plans or trusts may require that the Owner acquire a 100% vested
or nonforfeitable interest in the benefits provided by the plan or trust before
he may exercise any of the rights provided by the Contract. The provisions of
the plan or trust instrument should be referred to in connection with the
Contracts.
In addition, assignment of interests under the Contract is prohibited when the
Contracts are used to fund retirement plans qualified under sections 401,
403(a), 403(b) or 408 of the Internal Revenue Code, unless the Owner is other
than the Annuitant or the Annuitant's employer.
Transfers Between Separate Account Divisions: Once each Contract Year, the Owner
may elect to transfer all or a portion of Contract value to one or more of the
other Separate Account Divisions, without charge. The Owner may also elect to
make additional transfers of Contract value(s) between Separate Account
Divisions each Contract Year; a charge of $5.00 is made by the Insurance Company
for each such additional transfer. The Insurance Company reserves the right to
limit transfers to one per Contract Year. In such event, written notice will be
provided to all Contract Owners.
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All elections to transfer must be in writing, signed by the Owner and received
by the Insurance Company.
No transfer of Separate Account Divisions is permitted: (i) within 30 days of
Annuity Commencement Date; (ii) if it would result in applying the value of a
Contract to more than five Separate Account Divisions, (iii) if prohibited by
state law; or (iv) if prohibited by the applicable retirement plan.
The number of Accumulation Units credited in the newly elected Separate Account
Division(s) will be equal to the dollar value of the amount transferred divided
by the current value of one Accumulation Unit in such newly elected Division(s).
The number of Annuity Units credited in a newly elected Division will be
determined by multiplying the number of Annuity Units in each Division to be
transferred by the current value of one such Annuity Unit in the newly elected
Division.
Contract Owners (and Payees) who contemplate making a transfer should first
carefully consider their annuity objectives and investment objectives of the
current and proposed underlying classes of Fund shares. Frequent transfers may
be inconsistent with the long-term objectives of the Contracts.
Substituted Securities:
If any class of Fund shares should become unavailable for purchase by the
Insurance Company, or if in the judgment of the Insurance Company further
investment in such class is no longer appropriate in view of the purposes of the
Separate Account, there may be substituted therefor other shares or classes of
shares of a mutual fund which will be described in the Prospectus by amendment
or revision and net Purchase Payments received after a date specified by the
Insurance Company may be applied to the purchase of other shares or classes of
shares of such fund. In either event, prior approval by the affected Separate
Account Division shall be obtained. No substitution for shares or classes of
shares of a fund not described in this Prospectus will be made without the prior
approval of the Securities and Exchange Commission.
Change in Operations:
The Insurance Company may also sell other forms of variable annuity contracts
from time to time, such as group contracts and flexible payment individual
contracts, which provide benefits that vary in accordance with the investment
experience of the particular Separate Account Division in which they
participate. In addition, the Insurance Company may create new Divisions of the
Separate Account to provide additional funding options to Contract Owners. No
assurance can be given that any new Divisions, if created, will be made
available to Contract Owners. The Contracts limit to five (5) the maximum number
of Divisions which may be selected.
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The Insurance Company reserves this right to amend the Contracts to meet the
requirements of the Investment Company Act of 1940, or other applicable federal
or state laws or regulations.
Contract Owner Inquiries:
The Owner of a Contract should direct all inquiries to: Investors Life Insurance
Company of North America, Customer Service Department, 701 Brazos Street,
Austin, Texas 78701.
Reports:
The Owner, or Annuitant as applicable, will receive notice of all Fund
shareholder meetings. A Fund report and a statement of account as to the value
of the accumulation units held under the Contract will be furnished annually to
the Owner. A Separate Account report will be furnished semi-annually.
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THE ANNUITY PERIOD
Annuity Commencement Date: Annuity payments will begin on the first day of the
calendar month selected by the Owner. The selected date may be as early as the
50th birthday of the Annuitant, but may not be later than the 75th birthday of
the Annuitant, except where otherwise agreed to by the Insurance Company. The
selection of an annuity commencement date may also be affected by the terms of a
retirement plan or trust under which a Contract is issued. Contracts issued in
connection with Individual Retirement Annuity plans (qualified under section 408
of the Code) provide that payments must commence not later than the end of the
taxable year in which the Annuitant attains age 70-1/2. For Contracts issued in
connection with tax sheltered (section 403(b)) annuity plans, the Internal
Revenue Code requires that distributions must commence no later than the year
the Annuitant attains age 70-1/2 (or the year the Annuitant retires with respect
to years beginning prior to January 1, 1989); these provisions apply to benefits
accruing under a section 403(b) annuity contract after December 31, 1986. Unless
otherwise instructed by the Owner, the annuity commencement date is the Contract
anniversary nearest the Annuitant's age 65.
Annuity Payments: The level of annuity payments is based on (i) the table
specified in the Contract which reflects the adjusted age of the Annuitant, (ii)
the type of annuity payout option selected and (iii) the investment performance
of the underlying Fund shares selected. The amount of annuity payments will not
be affected by adverse mortality experience or any increase in the expenses of
the Insurance Company in excess of the charges made under the Contract. If the
Insurance Company is required to withhold certain amounts from annuity payments,
in compliance with Federal or State tax law relating to collection of income
taxes at the source of payment, the amount so required will be deducted from
each payment.
o Special Note for California Contracts: Certain Contracts which are issued
subject to California law contain annuity tables which reflect the adjusted
age and sex of the Annuitant. The Insurance Company issues this type of
contract where issuance is not known by the Company to be part of an
employer-sponsored plan.
Annuity Payout Options: The Owner may elect to have Annuity Payments made under
any one of the Annuity Payout Options described below. In addition, the Annuity
Payout Options may be selected for payout of the Death Proceeds during the
Accumulation Period, upon the death of the Annuitant or Owner, as applicable. A
change of option is permitted if made at least 30 days before the date Annuity
Payments are to commence. In the absence of an election, Annuity payments will
be made in accordance with Option 2 below with 120 monthly payments certain
(10-year period). Annuity payments will be paid monthly except that (i) proceeds
of less than $3,000 will be paid in a single sum or (ii) a schedule of payments
payable monthly may be changed to avoid payments of less than $20.
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Option 1 - Life Annuity: An annuity payable monthly during the lifetime of the
Annuitant and terminating with the last monthly payment preceding the death of
the Annuitant. There is no guarantee of a minimum number of payments or
provision for a death benefit for beneficiaries. IT WOULD BE POSSIBLE UNDER THIS
OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE ANNUITANT DIES BEFORE THE DUE
DATE OF THE SECOND ANNUITY PAYMENT, TWO IF DEATH OCCURS BEFORE THE DUE DATE OF
THE THIRD ANNUITY PAYMENT DATE, AND SO ON.
Option 2 - Life Annuity with Annuity Payments Guaranteed for a Designated
Period: An annuity payable monthly during the lifetime of the Annuitant. If, at
the death of the Annuitant, payments have been made for less than the designated
period, any unpaid Annuity Payments will be paid to the end of the designated
period. Such period may be (a) 10 years, (b) 15 years, or (c) 20 years.
Option 3 - Unit Refund Life Annuity: An annuity payable monthly during the
lifetime of the Annuitant, terminating with the last Annuity Payment due before
the death of the Annuitant. An additional payment, less any amounts required to
be withheld for taxes, may then be payable. Such payment at death will be equal
to the dollar value of a number of annuity units equal to (a) minus (b), if such
difference is positive, where:
total amount applied under the Option at the
(a) = annuity commencement date
annuity unit value at the annuity commencement date
number of annuity units represented by each
(b) = monthly Annuity Payment paid times the number
of monthly annuity payments made.
Option 4 - Joint and Last Survivor Annuity: An annuity payable monthly during
the joint lifetime of the Annuitant and a designated second person, and
thereafter during the remaining lifetime of the survivor. AS UNDER OPTION 1,
THERE IS NO MINIMUM NUMBER OF GUARANTEED ANNUITY PAYMENTS UNDER THIS OPTION.
Option 5 - Joint and Two-thirds Survivor Annuity: An annuity payable monthly
during the joint lifetime of the annuitant and a designated second person and
continuing during the lifetime of the survivor in a reduced amount which
reflects two-thirds of the number of annuity units in effect during such joint
lifetime. AS UNDER OPTION 1, THERE IS NO MINIMUM NUMBER OF GUARANTEED ANNUITY
PAYMENTS UNDER THIS OPTION.
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Option 6 - Payments for a Designated Period: An annuity payable monthly for a
designated number of years from 5 to 30. In the event of the Annuitant's death
prior to the end of the designated period, Annuity Payments will be continued
during the remainder of such period.
ANNUITY PAYMENTS UNDER THIS OPTION ARE BASED UPON THE PAYMENT OF THE MORTALITY
AND EXPENSE RISK DEDUCTION, EVEN THOUGH THERE IS NO LIFE CONTINGENCY RISK
ASSOCIATED WITH THIS OPTION.
Determination of Monthly Annuity Payments: A description of the method for
determining the first and subsequent annuity payments is included in the
Statement of Additional Information. The Contracts contain tables indicating the
dollar amount of the first monthly Annuity Payment which can be purchased with
each $1,000 of value accumulated under the Contract. These tables include an
assumed interest rate of 6% per annum. This 6% assumed rate is the measuring
point for subsequent Annuity Payments. If the actual net investment rate (on an
annual basis) remains constant at 6%, the Annuity Payments will remain constant.
If the actual net investment rate exceeds 6%, the Annuity Payments will increase
at a rate equal to the amount of such excess. Conversely, if the actual rate is
less than 6%, Annuity Payments will decrease.
o Special Note for New Jersey Contracts: Contracts subject to New Jersey law
contain tables indicating an amount of first monthly annuity payment based
on an assumed interest rate of 5% rather than 6%.
The objective of the Contracts is to provide benefit installments which will
increase at a rate sufficient to maintain purchasing power at a constant level.
For this to occur, the actual net investment rate must exceed the assumed rate
of 6% (5% for New Jersey Contracts) by an amount equal to the rate of inflation.
Of course, no assurance can be made that this objective will be met. If the
assumed interest rate were to be increased, Annuity Payments would start at a
higher level but would increase more slowly or decrease more rapidly. Likewise,
a lower assumed interest rate would provide a lower initial payment with greater
increases or lesser decreases in subsequent Annuity Payments.
Transfer During the Annuity Period: For a description of the Contract provisions
applicable to transfers between Separate Account Divisions, refer to "General
Description of Variable Annuity Contracts - Transfers Between Separate Account
Divisions".
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DEATH BENEFITS
Accumulation Period: If the Annuitant dies during the Accumulation Period, and
prior to the death of the Owner (if the Owner is an individual other than the
Annuitant), death benefit proceeds will be equal to the Accumulation Value of
the Contract determined on the valuation date coincident with or next following
the date due proof of the Annuitant's death is received by the Insurance
Company. However, if death occurs before age 75, while the Owner (if other than
the Annuitant) is living and before Annuity Payments begin, the Insurance
Company guarantees that the death proceeds will not be less than the amount of
Purchase Payments made under the Contract, less a reduction for prior
redemptions.
The amount of death benefit proceeds payable to a Beneficiary will be reduced by
an applicable state premium tax and by any amounts required to be withheld for
Federal or State income taxes.
The Owner may designate the Annuity Payout Option for death benefit proceeds. If
no such Option is in effect at the time death benefit proceeds are to be paid,
the proceeds will be payable either (i) in a single sum or (ii) under an Annuity
Payout Option selected by the Beneficiary. In the absence of such an election by
the Beneficiary, the proceeds will be paid in a single sum.
Annuity Period: If the Annuitant dies after the commencement of Annuity
Payments, the death proceeds, if any, will depend upon the Annuity Payout Option
in effect at the time of death. Under Options 2, 3 or 6, any remaining payments
will be made to the Beneficiary during the designated period. However, if
Annuity Payments are being made as a death benefit to a Beneficiary, and such
Beneficiary dies, the present value of the remaining payments under Options 2, 3
or 6 will be paid in a lump sum (at an interest rate of 6% for Options 2 and 6)
to the Beneficiary's estate.
Required Distribution Provisions (Applicable to Contracts other than Contracts
owned by the sponsor of a retirement plan qualified under section 401(a) or
403(a) of the Internal Revenue Code, Contracts issued in connection with a tax
sheltered annuity plan under Section 403(b) of the Internal Revenue Code, or
Contracts issued in connection with an Individual Retirement Arrangement under
Section 408 of the Internal Revenue Code):
Under the provisions of section 72(s) of the Internal Revenue Code, the
contracts described in this section must contain specific rules for distribution
of the value of the Contract in the event of the Owner's death. Contracts issued
by the Insurance Company which are subject to the requirements of section 72(s)
will include the following provisions:
o Accumulation Period - If the Owner of the Contract and the Annuitant is the
same person, the Contract provides that if the Owner dies before annuity
payments commence, death proceeds must be distributed to the designated
beneficiary within 5 years after death of the Owner/Annuitant.
Alternatively, if the designated
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beneficiary is a natural person, such proceeds may be distributed over the
life of such beneficiary, or a period not extending beyond the life
expectancy of such beneficiary. In this event, payments to the beneficiary
must commence not later than one year after the death of the
Owner/Annuitant (or such later date as permitted under regulations to be
issued by the Secretary of Treasury). The amount of such death proceeds is
determined as described in "Death Benefits Accumulation Period", above.
If the Owner of the Contract is a corporation or other non-individual,
section 72(s), as amended by the Tax Reform Act of 1986, provides that the
primary annuitant (as defined in the Code) shall be treated as the Owner of
the Contract for purposes of the required distribution provisions. Thus,
the death of the primary annuitant will result in application of the
distribution requirements described in the preceding paragraph.
Where the Owner of the Contract is an individual other than the Annuitant,
the Contract provides that if the Owner dies before the Annuitant and
before annuity payments commence, death proceeds will be equal to the
accumulation value of the Contract determined on the valuation date
coincident with or next following the date proof of the Owner's death is
received by the Insurance Company. However, if the death of the Owner
occurs prior to his age 75 and before annuity payments begin, the Insurance
Company guarantees that the death proceeds cannot be less than the amount
of the Purchase Payment made under such Contract, less a reduction for any
prior redemptions. The amount of death proceeds payable to a beneficiary
will be reduced by applicable state premium taxes and by any amounts
required to be withheld for Federal or State income taxes. The amount of
such death proceeds must be distributed to the designated beneficiary
within 5 years after death of the Owner. Alternatively, if the designated
beneficiary is a natural person, such proceeds may be distributed over the
life of such beneficiary, or a period not extending beyond the life
expectancy of such beneficiary. In such event, payments to the beneficiary
must commence not later than one year after the death of the Owner (or such
later date as permitted under regulations to be issued by the Secretary of
Treasury). The Contract also provides that if the designated beneficiary is
the surviving spouse of the Owner, no death proceeds shall be payable at
the death of the Owner, and such spouse shall become the owner of the
Contract. If death proceeds are payable on account of death of the Owner,
then no death proceeds are payable upon the subsequent death of the
Annuitant.
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o Annuity Period - If the Owner of the Contract and the Annuitant is the same
person, the Contract provides that if the Owner dies after annuity payments
commence, the remaining payments under the Contract must be paid at least
as rapidly as under the method of payment in effect on the date of death of
the Owner.
If the Owner of the Contract is a corporation or other non-individual,
section 72(s), as amended by the Tax Reform Act of 1986, provides that the
primary annuitant (as defined in the Code) shall be treated as the Owner of
the Contract for purposes of the required distribution provisions. Thus,
the death of the primary annuitant will result in the application of the
distribution requirements described in the preceding paragraph.
Where the Owner of the Contract is an individual other than the Annuitant,
the Contract provides that if the Owner dies after annuity payments
commence (or after the death of the Annuitant while payments are being made
to a beneficiary), the remaining payments must be paid out at least as
rapidly as under the method of payment in effect on the date of death of
the Owner.
PURCHASES AND CONTRACT VALUES
How to Purchase a Contract:
The Contracts are sold by licensed insurance agents of the Insurance Company who
are also registered representatives of broker/dealers which have sales
agreements with ILG Securities Corporation and the Insurance Company. Registered
representatives of ILG Securities Corporation may also sell the Contracts. The
principal underwriter of the Contracts is ILG Securities Corporation. ILG
Securities Corporation is an indirect, wholly-owned subsidiary of
InterContinental Life Corporation. The Insurance Company is a direct,
wholly-owned subsidiary of InterContinental Life Corporation. The principal
business address of ILG Securities Corporation is 701 Brazos Street, Austin,
Texas 78701.
A Contract may be purchased by delivering a completed application, including
Purchase Payment allocation instructions, such other forms as the Insurance
Company requires and the Purchase Payment, where applicable, to the soliciting
agent who will forward such payment and forms to the Insurance Company.
If the application is complete and correct upon receipt by the Insurance
Company, and if all other required information and the Purchase Payment have
also been received by the Insurance Company at its Home Office, the Contract
will be issued and the net purchase payment will be credited to the Contract to
reflect the net asset value of the applicable Division'(s) underlying
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class of Fund shares next computed within two business days following such
receipt. In the event that the Purchase Payment and the application are received
by the Insurance Company in an amount or under circumstances whereby the
Insurance Company has not been provided with correct or sufficient information
to establish an account or with instructions as to the proper crediting of such
payment, then the Insurance Company will, within five (5) business days
following receipt, inform the purchaser of the reasons for the delay and will
request the purchaser to supply corrections and further information or
instructions with regard to the applicable account. In this event, the Insurance
Company will return the Purchase Payment to the purchaser within 5 days, unless
it obtains the Purchaser's consent to retain the payment until the corrections
have been received.
Upon such receipt, the Contract will be issued and the net Purchase Payment will
be credited to the Contract to reflect the net asset value of the applicable
Division'(s) underlying class of Fund Shares next computed within the next two
business days.
If the requested corrections, information or instructions are not subsequently
furnished to the Insurance Company within a reasonable time period following the
request, the Company will return any retained purchase payment to the purchaser.
Likewise, if at any time the Insurance Company determines that it cannot
establish the requested account, it will return such purchase payment
immediately upon making such determination.
If the application is for a Contract used in connection with an Individual
Retirement Arrangement (IRA) under Code Section 408, the Insurance Company will
hold the Purchase Payment in a suspense account until the expiration of the
IRS-mandated revocation period. Under IRS regulations, if an individual receives
IRA informational disclosure fewer than seven days prior to the date on which
the plan is established, the individual is permitted a seven-day period
following establishment of the plan during which to revoke the plan and receive
a refund. The Purchase Payment will be applied as of the valuation date next
following expiration of the revocation period. No interest will be paid on funds
held in such suspense accounts.
Purchase Payments:
The minimum Purchase Payment is $3,000.
Application of Net Purchase Payments:
The Insurance Company will reduce the Purchase Payment by any applicable Premium
Tax to determine the Net Purchase Payment. Upon the purchase of a Contract, the
amount of the Net Purchase Payment credited to a Contract will reflect the net
asset value of the applicable Division(s)' underlying class of Fund shares next
computed within the next two business days following the Insurance Company's
receipt of the payment. However, if any of the required material is incomplete,
incorrect or if the payment has not been made, then a delay in Contract issuance
or crediting of a subsequent payment may be encountered.
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Crediting Accumulation Units:
Accumulation Units represent the value of the Owner's Contract attributable to
the applicable Division(s) selected (maximum of five). The number of
Accumulation Units to be credited to the Owner's account within a Division is
determined by dividing the Net Purchase Payment allocated to that Division by
the Accumulation Unit value of the applicable Division as of the Valuation Date
next computed following the Insurance Company's determination to credit a
payment to the Contract. The number of accumulation units will not change
because of a subsequent change in the value of the unit, but the dollar value of
an accumulation unit will vary to reflect the investment experience of the
class(es) of Fund shares underlying the selected Division(s).
Value of an Accumulation Unit: (Note - although the following refers to a
"Division", the values are determined independently for each sub-division). The
value of an Accumulation Unit for each Separate Account Division was established
at $1 as of the date the applicable class of Fund shares were first purchased
for that Division. The value of accumulation units subsequently is determined by
multiplying the value of an Accumulation Unit for the immediately preceding
Valuation Date by a net investment factor for the Valuation Period ending on
such date.
A net investment factor for a Valuation Period is the sum of 1.000000 plus the
net investment rate for the applicable Separate Account Division. The net
investment rate for the applicable Division is equal to the gross investment
rate of that Division for the valuation period expressed in decimal form to
seven places, less a deduction of 0.0000327 for each day in the valuation period
(1.2% annually - the fee charged by the Insurance Company for undertaking the
mortality and expense risks). The applicable gross investment rate is equal to
(i) the investment income for the valuation period, plus capital gains and minus
capital losses for the period, whether realized or unrealized on the assets of
the Division divided by (ii) the value of such assets at the beginning of the
valuation period. The gross investment rate may be positive or negative.
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REDEMPTIONS
Procedures for Redemption:
Unless prohibited by any applicable retirement plan, the Owner may redeem the
Contract during the Accumulation Period in whole or in part for its Contract
Withdrawal Value as of the next valuation date coincident with or next following
the date the request for redemption is received by the Insurance Company. In
determining redemption values, the Insurance Company does not anticipate that it
will be receiving or applying any premium tax refund credits. No redemptions may
be made once Annuity Payments have begun. Requests to redeem shall be made in
writing to the Insurance Company. If the request is for the entire redemption
value of the Contract, it shall be accompanied by the Contract. The Contract
Withdrawal Value is determined on the basis of the accumulation unit values on
such valuation date, reduced by any applicable sales charges and premium taxes.
Payment of the Contract Withdrawal Value, less any amounts required to be
withheld for taxes, will be made within seven days after the date proper written
request is received by the Insurance Company at its Home Office. However, such
payment may be postponed whenever (i) the New York Stock Exchange is closed,
except for holidays or weekends, or trading on the New York Stock Exchange is
restricted by the Securities and Exchange Commission; (ii) the Securities and
Exchange Commission permits postponement and so orders; or (iii) an emergency
exists, as defined by the Securities and Exchange Commission, so that valuation
of the assets or disposal of securities is not reasonably practicable.
The Owner may elect to have the redemption value applied to provide Annuity
Payments under any one of the annuity payout options, as permitted under the
applicable retirement plan.
AMOUNTS WITHDRAWN BY THE OWNER PRIOR TO THE ANNUITY
COMMENCEMENT DATE MAY BE SUBJECT TO A TAX PENALTY AND IMMEDIATE
TAXATION OF ANY INVESTMENT GAIN.
Partial Redemptions:
The Owner may request a partial redemption of his Contract value for an amount
not less than $300 provided this does not result in reducing the remaining value
of the Contract to less than $1,000 on the date of redemption. Amounts required
to be withheld for taxes in the event of a partial redemption will not be
considered part of the remaining value of the Contract. If a partial redemption
request would result in such a reduction, the Insurance Company will redeem the
total Contract value and pay the remaining Contract Withdrawal Value, less any
amounts required to be withheld for taxes, to the Owner.
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Restrictions Under Certain Section 403(b) Plans:
As described in "Federal Tax Status-Tax Qualified Plans" Section 403(b)(11) of
the Internal Revenue Code (the "Code") restricts the redemption under Section
403(b) annuity contracts of certain amounts which are derived from contract
contributions made pursuant to a salary reduction agreement.
As a result of these requirements, the Insurance Company will be required to
restrict the amount of contract withdrawals so as to comply with the provisions
of Section 403(b) (11) of the Code. The staff of the U.S. Securities and
Exchange Commission has issued a "no action" letter, informing insurance
companies issuing variable annuity contracts that the above-described Code
restrictions may be implemented, notwithstanding the otherwise applicable
redemption provisions of the Investment Company Act of 1940. The Insurance
Company intends to rely upon the provisions of the SEC staff "no action" letter,
and to comply with the provisions of said letter.
THE INSURANCE COMPANY REQUIRES AN ACKNOWLEDGMENT FORM TO BE SIGNED BY PURCHASERS
OF SECTION 403(b) ANNUITY CONTRACTS FOR WHICH CONTRIBUTIONS ARE MADE PURSUANT TO
A SALARY REDUCTION AGREEMENT. THE SIGNED ACKNOWLEDGMENT FORM - A COPY OF WHICH
IS INCLUDED AT THE END OF THIS PROSPECTUS - MUST ACCOMPANY THE CONTRACT
APPLICATION.
Right to Cancel:
The Owner may cancel the Contract by delivering or mailing a written notice (or
sending a telegram) to the Insurance Company and by returning the Contract
before midnight of the 10th day after the date of receipt. The Insurance Company
will return all amounts due to the Owner within ten days after receipt of notice
of cancellation and the returned contact. The Owner bears the investment risk
with respect to amounts allocated to the Separate Account, for the period from
the date the returned Contract is received by the Company. Under the terms of
the Contract, cancellation shall entitle the Owner to an amount equal to (a) the
difference between premiums paid, including any contract fees and other charges,
and the amounts allocated to the Separate Account, plus (b) the Accumulation
Value of the Contract on the date the returned Contract is received by the
Company.
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FEDERAL TAX STATUS
General
The Contracts have been designed so as to qualify as "variable annuity
contracts" for Federal income tax purposes. Thus, the Contracts permit the Owner
to defer Federal income taxation on increases in the value of a contract, until
such time that amounts are withdrawn from the contract, received in the form of
annuity payments or paid as a death benefit.
Under the current provisions of the Code, variable annuity contracts - other
than contracts issued under retirement plans which qualify for Federal tax
benefits under sections 401, 403(b) or 408 of the Internal Revenue Code, or
under government retirement plans (whether or not so qualified) or to a state or
municipal government for use under a deferred compensation plan - will not be
treated as an annuity contract for Federal income tax purposes for any period
for which the investments of the segregated asset account on which the contracts
are based are not adequately diversified. This "adequately diversified"
requirement may be met if the underlying investments satisfy either a statutory
safe harbor test or diversification requirements set forth in regulations issued
by the Secretary of the Treasury. The Insurance Company believes that the
current structure of the Separate Account satisfies the requirements of the
regulations, and it intends that the Separate Account, as well as the underlying
Funds, will operate so as to meet such requirements. In order for a variable
annuity contract to qualify for deferral on Federal income taxes on income
credited to the contract, the assets in the segregated asset account supporting
the contract must be considered to be owned by the Insurance Company, and not by
the owner of the variable annuity contract. The Internal Revenue Service ("IRS")
has issued certain rulings which discuss the matter of investor control of the
assets supporting a variable annuity contracts. In its rulings, the IRS has
stated that certain incidents of ownership by the contract owner, such as the
ability to select and control investments in a segregated asset account, will
cause the contract owner to be taxed as the owner of the assets for Federal
income tax purposes. In addition , in its explanation of the temporary
regulations adopted under Section 817 of the Code, the Treasury Department noted
that the temporary regulations "do not provide guidance concerning the
circumstances in which investor control of the investments of a segregated asset
account may cause the investor, rather than the insurance company, to be treated
as the owner of the assets in the Account." That explanation also indicated that
"the temporary regulations provide that in appropriate cases a segregated asset
account may include multiple sub-accounts, but do not specify the extent to
which policyholders may direct their investments to a particular sub-account
without being treated as the owners of the underlying assets. Guidance on this
and other issues will be provided in regulations or revenue rulings under
Section 817(d), relating to the definition of variable contract." The final
regulations issued under Section 817 did not provide such guidance regarding
investor control, and as of the date of this prospectus, no other such guidance
has been issued. The Insurance Company does not know if, or in what form,
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such guidance will be issued. Nor does the Insurance Company know whether any
such guidance, if issued, would be implemented on a prospective basis only, or
if a ruling would be given retroactive effect. Accordingly, there is a certain
degree of uncertainty as to whether an Owner of the variable annuity contracts
described in this prospectus would be considered the owner of the underlying
assets for Federal income tax purposes.
Non-Tax Qualified Contracts:
A Non-Tax Qualified Contract is a Contract which is purchased by an individual
for his or her own purposes but not pursuant to any of the tax qualified
retirement plans described in the section below. A Non-Tax Qualified Contract
may also be a Contract issued to a retirement plan or plan of deferred
compensation which is a non-tax qualified plan. The tax status of the annuitant
or participant is determined by provisions of such plan and/or provisions of the
Code applicable to the contract.
Under the provisions of the Tax Reform Act of 1986, a Non-Tax Qualified Contract
which is held by a person who is not a natural person (e.g. a corporation or a
trust is not a natural person), is not treated as an annuity contract for
Federal income tax purposes, and the income on the contract for any taxable year
is treated as ordinary income received or accrued by the owner of the contract
during the taxable year. Certain exceptions are provide for Non-Tax Qualified
Contracts held by a trust or other entity as agent for a natural person and for
immediate annuities (as defined in the Code). THUS, OWNERSHIP OF A NON-TAX
QUALIFIED CONTRACT BY NON-NATURAL PERSONS WHO DO NOT QUALIFY FOR THE STATUTORY
EXCEPTIONS RESULTS IN DENIAL OF TAX DEFERRAL ON INCREASES IN THE VALUE OF THE
CONTRACT.
Taxation of payments under annuity contracts is governed by Code Section 72.
Under the current provisions of the Code, amounts received under a Non-Tax
Qualified Contract prior to the annuity commencement date (including payments
made upon the death of the Annuitant or Owner), or as non-periodic payments
after the annuity commencement date, are generally first attributable to any
investment gains credited to the Contract over the taxpayer's basis (if any) in
the Contract. Such amounts will be treated as income subject to Federal income
taxation. A 10% penalty tax on such withdrawn investment gains will be imposed
if the withdrawal is made prior to age 59-1/2. This penalty tax will not be
imposed irrespective of age if the amount received is one of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life or life expectancy of the payee. The requirement that the amount be
paid out as one of a series of "substantially equal" periodic payments is met
when the number of units withdrawn to make each distribution is substantially
the same. Also, the penalty tax will not be imposed if the withdrawal follows
the death of the Owner (or if the Owner is not an individual, the death of the
primary annuitant), or is attributable to the "total disability" (as defined in
the Code) of the Annuitant. Where the Owner of the Contract is an individual who
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is other than the Annuitant, the Code (as amended by the Tax Reform Act of 1986)
provides that the penalty tax is applicable to the taxable portion of payments
required to be made under the Contract following the death of the Annuitant.
If the Owner of a Contract transfers (assigns) the Contract to another
individual as a gift, the Code (as amended by the Tax Reform Act of 1986)
provides that the Owner will incur taxable income at the time of the transfer.
The amount of such taxable income is equal to the excess, if any, of the cash
surrender value of the Contract over the Owner's cash basis at the time of the
gift.
An exception is provided for certain transfers between spouses.
Annuity payments made after the annuity commencement date are generally taxed to
the recipient only as received. A part of the payment received is a return of
investment in the contract, if any, and is non-taxable; a portion is a return of
income and is subject to ordinary income tax. An "exclusion ratio" is used to
determine the non-taxable and taxable portion of each payment. Such exclusion
ratio continues until such time that the taxpayer recovers his/her basis in the
Contract.
Thereafter, all payments received are treated as taxable income.
Tax Qualified Contracts:
Tax Qualified Contracts are Contracts which are issued to or pursuant to the
following types of retirement plans:
o A plan established by a corporate employer for the benefit of its employees
and qualified under sections 401(a) or 403(a) of the Code (Corporate
plans).
o A plan established by self-employed individuals for themselves and their
employees and qualified under sections 401(a) or 403(a) of the Code (Keogh
or HR-10 plans).
o A tax sheltered annuity plan maintained by certain tax exempt
organizations, including educational institutions, to purchase annuity
contracts for employees (403(b) Annuity plans).
o An Individual Retirement Annuity (IRA) plan established by an individual.
All of these plans differ with respect to the applicable rules which must be met
and followed if they are to attain and retain their qualified status. In
general, they have the following common attributes: tax deductibility of
contributions (to the extent permitted by the Code), tax deferral of investment
income and taxation to the plan participant only upon receipt of a withdrawal or
payment. Since the plan participant generally does not have a cost basis in the
value of the Contract, payments received by the participant are generally taxed
as income to the participant.
Under the Code (as amended by the Tax Reform act of 1986), certain distributions
prior to age
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59-1/2 are considered premature distributions and may result in application of a
10% additional tax. In addition, the Code requires that tax qualified retirement
plans generally provide for the commencement of retirement benefits no later
than the year in which the employee attains age 70- 1/2.
With respect to contracts issued in connection with Section 403(b) annuity
plans, the Code (as amended by the Tax Reform Act of 1986) restricts the
distribution under such contracts of certain amounts which are derived from
contract contributions made pursuant to a salary reduction agreement. These
restrictions are set forth in Section 403(b) (11) of the Code, effective January
1, 1989. The restrictions apply to: (i) salary reduction contributions made
after December 31, 1988, and earnings on such contributions, and (ii) earnings
on contract value as of December 31, 1988. The tax law restrictions do not apply
to salary reduction contributions made prior to January 1, 1989, or to earnings
credited to such contributions prior to January 1, 1989.
In accordance within the provisions of the Code, restricted amounts may be
distributed only in the event of attainment of age 59-1/2, separation from
service, death, disability (as defined in Section 72(m)(7) of the Code), or
financial hardship. The hardship exception is not available with respect to
income attributable to salary reduction contributions. The Insurance Company
will be required to restrict the amount of contract withdrawals so as to comply
with these provisions of the Code.
The Internal Revenue Service has indicated that Section 403(b)(11) does not
change the circumstances under which a tax-free exchange of annuity contracts
may be made. Individuals contemplating purchase of a contract should refer to
the provisions of their employer's section 403(b) arrangement to determine the
investment alternatives available.
Taxation of the Separate Account:
Under the current provisions of the Internal Revenue Code, the Insurance Company
pays no taxes on the investment income and capital gains of the assets of the
Separate Account where used to determine the value of Contracts. Accordingly,
the Insurance Company currently makes no adjustments for Federal income taxes
(or benefits) in connection with the Separate Account Divisions. The Insurance
Company retains the right to make adjustments for Federal income taxes to
Separate Account assets should future changes in the Code so warrant.
Tax Withholding and Reporting:
The Insurance Company may be required to withhold certain amounts from both
periodic and non-periodic payments under the Contracts in accordance with
Federal tax law relating to the collection of Federal income tax at the source
of payment. A payor of periodic annuity payments is required to withhold amounts
as if the payment were a payment of wages from an employer to an employee.
However, an individual recipient of periodic payments is allowed to elect to
have no withholding made in a manner prescribed by the United States Treasury
Department.
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Similarly, a payor of certain non-periodic payments is required to withhold
amounts unless an individual recipient elects against tax withholding in a
manner prescribed by the U.S. Treasury Department. Non-periodic payments include
payments made before and after the annuity commencement date such as lump sum
death proceeds and partial or full surrenders (redemptions) of Contract value.
The withholding requirements will not apply to the portion of a payment which is
reasonably believed to be not includable in gross income of the recipient for
Federal tax purposes.
The Insurance Company will transmit a notice to individual recipients of
Contract payments of the right to elect against Federal income tax withholding,
in a form and containing such information as the Secretary of the Treasury
prescribes. If an individual elects against withholding, the Insurance Company
may nonetheless be required to withhold if it has not received the recipient's
tax identification number.
Under the current provisions of the Code, the Insurance Company is required to
withhold Federal income taxes from certain distributions from tax-qualified
retirement plans and from section 403(b) Annuity plans. These requirements do
not apply to distributions from IRA plans or from deferred compensation plans
subject to section 457 of the Code. The mandatory withholding (at a 20% rate)
applies to distributions which are treated as "eligible rollover distributions"
under the Code, unless the amount is distributed as a "direct rollover". For
these purposes, a "direct rollover" is one which is made directly from the
qualified plan to another qualified plan, or directly from the qualified plan to
an IRA. In other words, a "direct rollover" does not involve the receipt of any
portion of the distribution by the taxpayer. Unless an "eligible rollover
distribution" qualifies as a "direct rollover", the taxable portion thereof is
subject to 20% withholding. The Insurance Company is required to forward the
amount of the withholding to the IRS. The taxpayer may not elect out of this
withholding described in this paragraph.
In addition to tax withholding, the Insurance Company is required to report
information on distributions under the Contracts. Distributions include partial
and full surrenders as well as annuity payments. Information is reported on
forms pursuant to Internal Revenue Service regulations.
General:
Because of the complexity of the law and the fact that tax results will vary
according to the factual status of the individual involved, tax advice may be
needed by a person contemplating purchase of a Contract or the exercise of
rights under a Contract. The above comments concerning Federal income tax
consequences are not an exhaustive discussion of all tax questions that might
arise. In addition, state income or estate tax considerations may also be
involved in the purchase of a Contract or the exercise of rights under a
Contract, and are not discussed in this Prospectus. The Insurance Company's
management cannot predict what, if any, future action the Congress or the
Internal Revenue Service might take with respect to the taxation of variable
annuity contracts of the type described in this Prospectus.
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For complete information on particular Federal and state tax considerations, a
qualified tax advisor should be consulted.
LEGAL PROCEEDINGS
Various lawsuits against the Insurance Company have arisen in the normal course
of business. However, contingent liabilities arising from these matters are not
considered material in relation to the financial position of the Insurance
Company. The Insurance Company is a defendant in a lawsuit which was filed in
October, 1996, in Travis County, Texas. The named plaintiffs in the suit (a
husband and wife), allege that the universal life insurance policies sold to
them by INA Life Insurance Company (a company which was merged into the
Insurance Company in 1992) utilized unfair sales practices. The named plaintiffs
seek reformation of the life insurance contracts and an unspecified amount of
damages. The named plaintiffs also seek a class action as to similarly situated
individuals. No certification of a class has been granted as of the date of this
Prospectus. The Insurance Company believes that the suit is without merit and
intends to vigorously defend this matter.
In August, 1997, another individual filed a similar action in Travis County,
Texas against the corporate entities identified above. The lawsuit involves the
same type of policy and includes allegations which are substantially identical
to the allegations in the first action. The named plaintiff also seeks class
certification. The Company believes that the court would consider class
certification with respect to only one of these actions. The Company also
believes that this action is without merit and intends to vigorously defend this
matter.
There is no litigation pending to which the Separate Account is a party.
TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information includes a description of the following
items:
1. General Information and History
2. Services
3. Purchase of Securities Being Offered
4. Principal Underwriter
5. Yield Quotations of Money Market Division
6. Annuity Payments
7. Additional Information
8. Year 2000
9. Financial Statements
o The Separate Account
o The Insurance Company
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To obtain a copy of the Statement of Additional Information for the Individual
Single Payment Variable Annuity Contracts, detach and mail this form.
TO: Investors Life Insurance Company of North America
701 Brazos Street
Austin, Texas 78701
I have been furnished with a Prospectus of Investors Life Insurance Company of
North America Separate Account I (dated April 30,1999) describing the Individual
Single Payment Variable Annuity Contracts. Please send me a copy of the
Statement of Additional Information pertaining to such Contracts.
NAME:
(Please Print)
Mailing
(Date) Address:
Street or P.O. Box
City State Zip
-47-
<PAGE>
ACKNOWLEDGMENT FORM
SECTION 403 (b) PLANS
NOTE:This form is required in connection with all applications for Contracts to
be issued in connection with Section 403(b) plans, where contributions are
to be made pursuant to a salary reduction agreement.
TO: Investors Life Insurance Company of North America 701 Brazos Street Austin,
Texas 78701
With reference to my application for a variable annuity contract to be issued in
connection with a Section 403(b) annuity plan maintained by my employer, I have
been furnished with a prospectus of Separate Account I (dated April 30, 1999).
The contributions to the contract will be made pursuant to a salary reduction
agreement with my employer.
I acknowledge that I have read and understand the description on pages 41 and 45
of the prospectus, pertaining to the restrictions or redemptions imposed by
Section 403(b) (11) of the Internal Revenue Code. I further acknowledge that I
understand any investment alternatives under my employer's Section 403(b) plan,
to which I may elect to transfer contract values.
DATE Signature of Applicant
Address:
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<PAGE>
Investors Life Insurance
Company of North America
701 Brazos Street
Austin, Texas 78701
ILG Securities Corporation
701 Brazos Street
Austin, Texas 78701
PROSPECTUS
April 30, 1999
Single Payment
Individual Variable Annuity Contracts
Issued by
Investors Life Insurance Company
of North America
<PAGE>
ILCO Investors Life Insurance
Company
701 Brazos Street
Austin, Texas 78701
ILG Securities Corporation
701 Brazos Street
Austin, Texas 78701
PROSPECTUS
April 30, 1999
Single Payment
Individual Variable Annuity Contracts
Issued by
ILCO Investors Life Insurance Company
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
SEPARATE ACCOUNT I
INDIVIDUAL FLEXIBLE PAYMENT
[ ] VARIABLE ANNUITY CONTRACTS
(the "Contracts")
INDIVIDUAL SINGLE PAYMENT
[ ] VARIABLE ANNUITY CONTRACTS
(the "Contracts")
issued by
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
(the "Insurance Company")
701 Brazos Street
Austin, Texas 78701
Telephone No. 512-404-5000
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Prospectus for the indicated Contracts offered by
Investors Life Insurance Company of North America Separate Account I having the
same date as this Statement. A copy of the Prospectus for the Contracts may be
obtained by writing to Investors Life Insurance Company of North America, 701
Brazos Street, Austin, Texas 78701, or by calling 512-404-5346.
April 30, 1999
<PAGE>
TABLE OF CONTENTS
Item Page
General Information and History..................................... 3
Services............................................................ 5
Purchase of Securities Being Offered................................ 5
Principal Underwriter............................................... 6
Yield Quotations of Money Market Division........................... 7
Annuity Payments.................................................... 8
Additional Information............................................. 11
Year 2000 .......................................................... 11
Financial Statements
The Separate Account............................................. 15
The Insurance Company............................................ 23
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General Information and History
Investors Life Insurance Company of North America is a stock life insurance
company, organized in 1963 under the laws of the Commonwealth of Pennsylvania.
It was acquired by Life Insurance Company of North America in 1978. Ownership
was subsequently transferred to an affiliate, Investors Life Insurance Company
of California (formerly INA Life Insurance Company). Prior to December, 1988,
the Insurance Company and Investors Life Insurance Company of California were
indirect wholly-owned subsidiaries of CIGNA Corporation. On December 28, 1988,
the purchase by InterContinental Life Corporation (through a subsidiary company)
of CIGNA Corporation's interest in Investors Life Insurance Company of North
America, Investors Life Insurance Company of California and ILG Securities
Corporation was completed. As a result of such purchase, the Insurance Company
became an indirect wholly-owned subsidiary of InterContinental Life Corporation
("ILCO"), a holding company incorporated in Texas.
In December, 1992, the Insurance Company changed its state of domicile to the
State of Washington and merged with its immediate parent company (Investors Life
Insurance Company of California). As a result of the merger, the Insurance
Company assumed all of the assets and liabilities of Investors Life Insurance
Company of California, and Investors Life Insurance Company of North America was
the surviving company. In June, 1993, the Insurance Company merged with its
immediate parent company, Standard Life Insurance Company. Investors Life was
the surviving entity. As a result, Investors Life became a direct subsidiary of
InterContinental Life Corporation. The administrative offices of Investors Life
are located at 701 Brazos Street, Austin, Texas 78701. The statutory home office
of Investors Life is 2101 4th Ave., Seattle, Washington 98121-2371.
The Insurance Company is principally engaged in the business of selling and
underwriting ordinary life insurance and individual annuities. It is
authorized to conduct variable annuity business in the District of Columbia
and in all states of the United States except New York. In Arizona, Wyoming
and Oregon, business is conducted under the name of ILCO Investors Life
Insurance Company. The Insurance Company does not know of any person
who owns beneficially more than 5% of the outstanding common stock of
InterContinental Life Corporation, except as follows (as of the date of
this filing): (i) Financial Industries Corporation ("FIC") directly and
indirectly owns approximately 44.74% of the outstanding common stock of
ILCO; FIC is a publicly-owned Texas corporation; (ii) Roy F. Mitte is the
beneficial owner of 29.54% of the common stock of FIC. The combined
beneficial ownership of Mr. Mitte with respect to ILCO's common stock,
taking into account FIC's 44.74% interest in ILCO's common stock, is
45.36%. The executive offices of ILCO, FIC and Mr. Mitte are located at 701
Brazos Street, Suite 1400, Austin, Texas 78701, (iii) Investors Life
Insurance Company of North America ("Investors-NA"), a wholly-owned
subsidiary of ILCO, is the owner of 106,800 shares of ILCO's common stock
and the beneficial owner of 563,120 shares of ILCO's common stock
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<PAGE>
owned by Investors Life Insurance Company of Indiana (formerly InterContinental
Life Insurance Company) ("Investors-IN"). The beneficial ownership of
Investors-NA represents 7.62% of ILCO's outstanding common stock. Investors-IN
is a wholly-owned subsidiary of Investors-NA. The administrative offices of
Investors-NA Investors-IN are located at 701 Brazos Street, Austin, Texas 78701;
(iv) Investors-IN owns 563,120 shares of ILCO's common stock (or 6.41%); (v)
Fidelity Management & Research Company ("Fidelity") owns 867,800 shares of
ILCO's common stock, as reported to the Company on a Schedule 13(G) and a
Schedule 13(G)/A filed by FMR Corporation, the parent company of Fidelity
Management & Research Company ("Fidelity"). According to the Schedule 13(G) and
the Schedule 13(G)/A, Fidelity acts as investment advisor to the Fidelity
Low-Priced Stock Fund, a registered investment company, and the Fund is the
owner of 432,700 shares of ILCO common stock, of which 418,300 shares were
reported on a Schedule 13(G) filed on February 14, 1997, 14,400 additional
shares which were reported on a Schedule 13(G)/A filed on February 14, 1998 and
1,200 additional shares which were reported on a Schedule 13(G)/A filed on
February 1, 1999. As a result of the stock dividend (one share of common stock
for each outstanding share of common stock) paid on March 17, 1999, the number
of shares owned by Fidelity is currently two times the number of shares
described above. The offices of Fidelity are located at 82 Devonshire Street,
Boston, MA 02109; and (vi) Heartland Advisors, Inc. ("Heartland") owns 529,600
shares of ILCO's common stock (6.03%). Heartland filed a Schedule 13(G) on
January 21, 1999; according to the Schedule 13(G), Heartland acts as investment
advisor with respect to certain investment advisory accounts, with respect to
which various persons have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of securities. The
Schedule 13(G) identifies that the interests of one such account, the Heartland
Value Fund, a series of Heartland Group, Inc., a registered investment company,
relates to more than 5% of the common stock of ILCO. The reported ownership
interest of Heartland has been adjusted to reflect the stock dividend paid on
March 17, 1999. The offices of Heartland are located at 790 North Milwaukee
Street, Milwaukee, WI 53202.
Investors Life Insurance Company of North America is also the Sponsor of another
separate account, Separate Account A (formerly known as the INA/Putnam Separate
Account). The operations of that separate account are separate and distinct from
the operations of Separate Account I. Due to Revenue Ruling 81-225, which was
issued by the Internal Revenue Service on September 21, 1981, the Insurance
Company, suspended the issuance of variable annuity contracts issued by the
Separate Account A. In Rev. Rul. 81-225, the IRS questioned the tax treatment of
variable annuity contracts where the underlying mutual funds are not managed by
the issuing insurance company or an affiliate. Since the underlying mutual funds
for Separate Account A were not so managed, the Insurance Company suspended
sales of contracts issued by that Account.
The assets of the Growth and Income II Division (formerly the Equity Division)
and the Voyager Division (formerly the Aggressive Equity Division of the
Separate Account include amounts
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<PAGE>
attributable to initial capital contributed by the Insurance Company to the
Separate Account. As of December 31, 1998, approximately 13.34% of the
assets of the Growth and Income II Division and 71.8% of the assets of
the Voyager Division were attributable to such contributed capital.
SERVICES
Safekeeping of Assets:
All assets of the Separate Account are held in custody for safekeeping by the
Separate Account. The assets of each subdivision of each Separate Account
division will be kept physically segregated and held separate and apart from
assets of other subdivisions. Shares of the underlying funds, if issued, may be
left on deposit with the shareholder servicing agent of Putnam Variable Trust.
The Separate Account will maintain a record of all purchases and redemptions for
shares of the underlying funds held in each subdivision of each Separate Account
Division. Additional protection for the assets of the Separate Account is
afforded by the Insurance Company's fidelity bond, presently in the amount of $5
million, covering all officers and employees of the Insurance Company.
Independent Public Accountant:
PricewaterhouseCoopers LLP acts as independent accountants for the Separate
Account and the Insurance Company. Its offices are at 2001 Ross Ave., Suite
1800, Dallas, Texas 75201. As independent accountants, PricewaterhouseCoopers
LLP annually performs an audit of the financial statements of the Separate
Account and the Insurance Company.
PURCHASE OF SECURITIES BEING OFFERED
The Contracts may be sold by licensed insurance salesmen of the Insurance
Company who are also registered representatives of broker/dealers under the
Securities Exchange Act of 1934 which broker/dealers have sales agreements with
ILG Securities Corporation and the Insurance Company. Such broker/dealers are
also members of the National Association of Securities Dealers, Inc. Registered
representatives of ILG Securities Corporation may also sell the Contracts. ILG
Securities Corporation is a registered broker/dealer under the Securities
Exchange Act of 1934 and is a member of the National Association of Securities
Dealers, Inc. The address of ILG Securities Corporation is 701 Brazos Street,
Austin, Texas 78701.
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<PAGE>
PRINCIPAL UNDERWRITER
(a) The principal underwriter of the Contracts is ILG Securities Corporation, a
registered broker/dealer under the Securities Exchange Act of 1934 and a
member of the National Association of Securities Dealers, Inc. ILG
Securities Corporation is an affiliate of Investors Life Insurance Company
of North America.
(b) The Contracts are offered on a continuing basis.
(c) The following table sets forth the aggregate amount of underwriting
commissions paid to ILG Securities Corporation, for each of the calendar
years 1996 to 1998, with respect to the Contracts:
Year Amount
1998 $ 66
1997 $ 784
1996 $ 738
(d) Prior to April 10, 1998, Putnam Investment Management, Inc. ("Putnam
Management"), the Fund's investment adviser, agreed to reimburse the
Insurance Company for certain costs that it will incur in connection with
the servicing of Contracts. The amount of this reimbursement was equal to
25% of the effective management fee received by Putnam Management with
respect to assets allocated by the Insurance Company to the applicable
portfolio of Putnam Variable Trust, plus an annual rate of one basis point
times the average daily net assets allocated during the computation period
by the Insurance Company to Putnam Variable Trust. For the period from
January 1, 1998 to April 9, 1998, the amount of this reimbursement was $
19,140 . As of April 10, 1998, the reimbursement arrangement was terminated
by mutual agreement between Putnam Management and the Insurance Company.
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<PAGE>
YIELD QUOTATIONS OF MONEY MARKET DIVISION
The Separate Account provides "current yield" and "effective yield" quotations
with respect to the Money Market Division. For the seven-day period ending
December 31, 1998, the annualized "current yield" for the tax qualified and
non-tax qualified subdivisions of the Money Market Divisions was 4.30 %
for Single Payment Contracts and 4.29 % for Flexible Payment Contracts.
The annualized "effective yield" of each such subdivision for such period was
4.48% for Single Payment Contracts and 4.46 % for Flexible
Payment Contracts.
In accordance with applicable rules issued by the Securities and Exchange
Commission, such yield quotations are computed by a standardized method, based
on a historical seven day calendar period. The yield is determined separately
for Single Payment Contracts and Flexible Payment Contracts, and separately for
the qualified and non-tax qualified subdivisions of the Money Market Division.
The computation of the standardized current yield does not take into account any
deductions from premium payments to provide for Premium Taxes. The deduction for
Premium Taxes is made either from Purchase Payments made under a Contract, or
from the Accumulated Value applied upon annuitization, as determined under
applicable state law. In the case of those states which impose a Premium Tax,
the deduction ranges from .5% to 3%. Also, the computation of the standardized
current yield does not take into account any Deferred Sales Charge that may be
assessed against amounts withdrawn during early Contract Years. The amount of
such Deferred Sales Charge depends upon the type of Contract which is purchased.
For Single Payment Contracts, the charge is assessed against amounts withdrawn
(total or partial surrender) during the first six Contract Years (measured from
the date of issue) which exceed 10% of the Purchase Payment. The amount of the
charge ranges from 6% during the first Contract Year to 1% during the sixth
Contract Year. With respect to Flexible Payment Contracts, the Deferred Sales
Charge is assessed against amounts withdrawn (total or partial surrender) during
early Contract Years; the charge also applies, with certain exceptions, to
amounts applied to provide annuity payments. The charge is based on the number
of full Contract Years between the date of a Purchase Payment and the date of
withdrawal or first annuity payments, and ranges from 7% for periods of less
than two Contract Years to 0% for periods of eight or more Contract Years.
Please refer to the applicable Prospectus for the Contracts for a more complete
description of this Deferred Sales Charge.
Each such standardized current yield is computed by determining the net change
in the value of a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the seven day period, dividing the net
change by the value of the account at the beginning of the period to obtain the
base period return, and multiplying the base period return by 365/7. The net
change in the value of an account in the Money Market Division reflects:
(i) the value of additional accumulation units purchased with dividends
from the original accumulation unit, as well as dividends declared on
the original
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<PAGE>
accumulation unit and any such additional units;
(ii) application of the Mortality and Expense Risk Deduction, which is a
daily charge of 0.0000327 of the value of the assets in each
subdivision of the Money Market Division (1.2% on an annual basis);
and
(iii)deduction of a pro-rata share of the annual Administrative Expense
charge ($25.00 for Single Payment Contracts or $30.00 for Flexible
payment Contracts), in proportion to the length of the base period and
the respective average number of accounts allocated to the Money
Market Division.
The determination of the net change in the value of an account in the Money
Market Division does not include realized gains and losses, or unrealized
appreciation and depreciation; nor, does it take into account any charges that
may be incurred in connection with transfers between Separate Account Divisions.
The Separate Account may also provide an effective annualized yield, determined
by adding 1 to the base period return (calculated in accordance with the
preceding paragraph), raising the sum to a power equal to 365 divided by 7, and
subtracting 1 from the result.
Current yields will fluctuate and are not intended to be representative of
future results. An individual contemplating the purchase of a Contract should
remember that yield will vary from time to time depending on market conditions,
the quality, maturity and type of instruments held in, and operating expenses
of, the underlying portfolio of the Money Market Division.
ANNUITY PAYMENTS
Annuity Payments - General:
As described in the Prospectus, annuity payments will be determined on the basis
of (i) the table specified in the Contract which reflects the adjusted age of
the annuitant, (ii) the type of annuity payout option selected, and (iii) the
investment performance of the class of Fund shares underlying the Division(s)
selected. The amount of Annuity Payments will not be adversely affected by
adverse mortality experience or any increase in the expenses of the Insurance
Company in excess of the charges specified in the Contracts. The value of a
fixed number of annuity units each month is paid by the Insurance Company to the
Owner, or to another payee designated by the Owner in written form and received
by the Insurance Company, reduced by any amounts required to be withheld for
taxes. The value of an annuity unit will reflect the investment experience of
the Division(s) selected and the amount of each Annuity Payment will vary
accordingly.
o Certain contracts which are issued subject to California law contain
annuity
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<PAGE>
payment tables which reflect the adjusted age and sex of the
annuitant. The Company issues this type of contract where issuance is
not known by the Company to be part of an employer sponsored plan.
Value of an Annuity Unit:
The value of an annuity unit is determined independently for each subdivision of
a Separate Account Division. The value of an annuity unit will be established at
$1 on the date the first Annuity payment is made from such subdivision and will
be determined on each subsequent valuation date by multiplying the value of the
annuity unit as of the immediately preceding valuation date by the products of
(i) 0.9998404 adjusted for the number of days in the valuation period ending
with such valuation date (this factor neutralizes the effect of the 6% annual
interest rate used in calculating the amount of the first payment), and (ii) the
net investment factor of the appropriate subdivision for the fourteenth day
immediately preceding the last day of the valuation period for which the value
of the annuity is being determined.
Amount of the First Annuity Payment:
At the time Annuity Payments begin, the value of the Owner's account is
determined by multiplying the Accumulation Unit value on the valuation date 14
days before the date the first monthly Annuity Payment is due by the number of
accumulation units credited to the Owner's account as of the date the first
Annuity Payment is due, less applicable premium taxes not previously deducted.
The amount so determined is then applied to the specified annuity payout option.
The Contracts contain tables indicating the dollar amount of the first monthly
Annuity Payment which can be purchased with each $1,000 of value accumulated
under the Contract. The amount depends on the annuity payout option, and the
adjusted age of the annuitant. The adjusted age may be more than or less than
the Annuitant's actual age, depending upon the year of birth. Amounts shown in
the tables for each Contract are based on the following factors:
(i) Flexible Payment Contracts: For Options 1 to 5 amounts are based on the
1971 Individual Annuity Mortality Table set back five years, with interest
at the rate of 6% per annum and assumes birth in the year 1920. For
California Contracts issued in non-employer sponsored situations, amounts
are also based on the sex of the annuitant. For Option 6, the tables assume
interest at the rate of 6% per annum.
(ii) Single Payment Contracts: California Contracts issued in non-employer
sponsored situations: amounts are based on the adjusted age and sex of the
annuitant and the Progressive Annuity Table with interest at the rate of 6%
per annum and assumes birth in the year 1900.
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<PAGE>
o All other Contracts: amounts are based on the 1971 Individuals Annuity
Mortality Table set back five years, with interest at the rate of 6% per
annum and assumes birth in the year 1920.
The first Annuity Payment is determined by multiplying the benefit per $1,000 of
value shown in the Contract tables by the number of thousands of dollars of
value accumulated under the Contract.
The 6% interest rate stated above is the measuring point for subsequent Annuity
Payments. If the actual net investment rate (on an annual basis) remains
constant at 6%, the Annuity Payments will remain constant. If the actual net
investment rate exceeds 6%, the Annuity Payments will increase at a rate equal
to the amount of such excess. Conversely, if the actual rate is less than 6%,
Annuity Payments will decrease.
Special Note for New Jersey Contracts: Contracts subject to
New Jersey law contain tables indicating an amount of first
monthly annuity payment based on an assumed interest rate of
5%, rather than 6%. The value of an annuity unit utilizes a
corresponding adjustment factor of 0.9998663.
The objective of the Contract is to provide benefit installments which will
increase at a rate sufficient to maintain purchasing power at a constant level.
For this to occur, the actual net investment rate must exceed the assumed rate
of 6% (5% for New Jersey Contracts) by an amount equal to the rate of inflation.
Of course, no assurance can be made that this objective will be met. If the
assumed interest rate were to be increased, Annuity Payments would start at a
higher level but would increase more slowly or decrease more rapidly. Likewise,
a lower assumed interest rate would provide a lower initial payment with greater
increases or lesser decreases in subsequent Annuity Payments. The amount of an
Annuity Payment will be reduced by any taxes required to be withheld.
Determination of the Second and Subsequent Annuity Payments:
The amount of the second and subsequent Annuity Payments is determined by
multiplying the number of annuity units by the annuity unit value as of the
valuation date coincident with or next following the date on which each Annuity
Payment is due. The number of annuity units under a Contract is determined by
dividing the first monthly Annuity Payment by the value of the appropriate
annuity unit on the date of such payment. This number of annuity units remains
fixed during the Annuity Payment period, unless Contract Value is transferred
between Separate Account Division subdivisions.
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<PAGE>
ADDITIONAL INFORMATION
o Mortality and Expense Risk Deduction:
As described in the Prospectus (See "Contract Charges - Mortality and
Expense Risk Deduction"), the Insurance Company makes a daily charge of
0.0000327 of the value of the assets in each subdivision of the Separate
Account (1.2% on an annual basis, consisting of approximately 0.8% for
mortality risks and approximately 0.4% for expense risks). This charge is
designed to cover the cost of mortality and expense risks described below.
The Insurance Company's assumption of a mortality risk arises from its
contractual obligation to continue to make Annuity Payments to each
Annuitant regardless of how long he lives and regardless of how long all
annuitants as a group live. This assures each Annuitant that neither his
own longevity nor a general improvement in life expectancy will have an
adverse effect on the Annuity Payments he will receive under a Contract,
and relieves the annuitant from the risk that he will outlive the amounts
actually accumulated for retirement. In addition, the Insurance Company
assumes mortality risks because of annuity rates in the Contracts, which
cannot be increased and, if the Annuitant should die during the
Accumulation Period, the Insurance Company is at risk that the Accumulation
Value may not equal the Death Proceeds.
The Insurance Company also assumes the risk that the amounts deducted for
sales and administrative expenses may be insufficient to cover the actual
cost of such items.
No portion of the mortality and expense risk charge is directly related to
any specific distribution expense. However, the Insurance Company expects
to make a profit from such charge, although there is no assurance that it
will do so. The Insurance Company believes that this charge is reasonable
in relation to the risks assumed under the Contracts. In addition, the
Insurance Company believes that the charge has a reasonable likelihood of
benefiting Contract Owners.
YEAR 2000
The Insurance Company and its wholly-owned subsidiary (Investors Life Insurance
Company of Indiana) utilize a centralized computer system to process
policyholder records and financial information. In addition, the Insurance
Company uses non-centralized computer terminals in connection with its
operations. The software programs used in connection with these systems will be
affected by what is referred to as the "year 2000 problem". This refers to the
limitations of the programming code in certain existing software programs to
recognize date sensitive information as the year 2000 approaches. Unless
modified prior to the year 2000, such systems may not properly recognize such
information and could generate erroneous data or cause a system to fail
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<PAGE>
to operate properly. The following discussion, including the discussion of the
costs associated with attaining Y2K compliance and the number of policies
involved in the compliance project, pertains to the combined operations of the
Insurance Company and its subsidiary. As of March 31, 1999, the number of
in-force life insurance policies and annuity contracts at the Insurance Company
was approximately 136,800, of which approximately 827 were variable annuity
contracts of the type described in this Statement of Additional Information and
the prospectus to which it relates. For Investors Life Insurance Company of
Indiana, the number of in-force life insurance and annuity contracts was
approximately 50,000.
The Insurance Company has evaluated its centralized computer systems and has
developed a plan to reach year 2000 compliance. A central feature of the Plan is
to convert most of the centralized systems to a common system which is already
in compliance with year 2000 requirements. The Company is in the process of this
systems conversion and anticipates that the project will be completed in advance
of the year 2000.
The Plan calls for a conversion of certain systems onto the Insurance Company's
CK/4 System; a system which is designed to be Y2K compliant according to the
representations of the vendor. Those systems which are not converted will be
upgraded by changing individual lines of computer code in order to modify
current operating software such that it will become Y2K compliant.
Under the Plan, the Insurance Company will utilize its own personnel and
personnel of its affiliated company, FIC Computer Services, Inc., acquire Y2K
compliant operating software, and engage the assistance of outside consultants
to facilitate the systems conversions and modifications. The Company is in the
process of this systems conversion and anticipates that the project will be
completed in advance of the year 2000. The Insurance Company has increased the
budget for the implementation and completion of the Plan from the prior years
estimate. As of December 31, 1997, it had budgeted approximately $470,000 for
implementing the Plan. Based on its current analysis, the Insurance Company
expects that the cost of implementing and completing the Plan will result in an
after-tax expense of approximately $587,000 for the three-year (1997 - 1999)
conversion period. For the twelve month period ended December 31, 1998, the
Company has incurred an after tax expense of approximately $158,000 in
connection with the completion of the Plan. Between January 1, 1997 and December
31, 1998, the Company has expended approximately 50.7% of the three-year
expected after-tax cost discussed above. In the event that the Plan does not
achieve full compliance by the target dates, or if unforeseen matters involving
Y2K appear before or after January 1, 2000, the Company will utilize the staff
of FIC Computer Services, Inc. to identify and resolve such issues as and if
they arise.
In order to continuously evaluate the effectiveness of the modifications and
conversions made to the various systems, FIC Computer Services has acquired
testing software to simulate dates on or after January 1, 2000. Additionally,
FIC Computer Services runs the systems through model office cycles and also
conducts visual inspections of screen displays to determine whether the systems
are functioning in a Y2K compliant manner.
As of March 1, 1999, FIC Computer Services, Inc. estimated that it had completed
the necessary
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conversions and modifications on the administrative systems which process
approximately 66 % of the insurance policies for the Company and its subsidiary.
This included the conversion of the ALIS System (administering approximately
42,000 active policies) to CK/4 in February, 1998, the System 38 (administering
approximately 9,400 active policies) conversion in January, 1997, the TI System
(administering approximately 5,240 active policies) conversion to CK/4 in July,
1998 and the conversion of the Lifecomm-B system (which is responsible for
approximately 18,000 policies assumed after the acquisition of State Auto Life
by Investors-IN) in February,1999. The conversion of the Life 70 system
(administering approximately 16,120 active policies for Investors-IN) is
scheduled for completion in May, 1999. The conversion of the Lifecomm-A system
(administering approximately 62,410 active policies for Investors Life Insurance
Company of North America, including the 827 variable annuity contracts of the
type described in this Statement of Additional Information and the prospectus to
which it relates) is scheduled for completion in September of 1999. The
modification of one of the Company's smaller systems which administers
approximately 3,680 active credit life policies was completed on schedule in
December 1998. The modification of a smaller system which administers
approximately 15,550 active industrial life policies is scheduled for completion
in June of 1999.
The various software applications described above are licensed to the Company
under agreements which permit the Company's subsidiaries to process business on
its computer systems utilizing such software.
In 1997, FIC Computer Services, Inc. purchased new mainframe hardware and
accompanying operating software, which the vendor has represented to be Y2K
compliant. FIC Computer Services, Inc. has completed the installation and
testing of such new mainframe hardware and software for compliance with the
requirements of the Year 2000 conversion. In addition, FIC Computer Services has
purchased certain third-party software which is run on the mainframe. This
software has been represented by the vendor as being in compliance with Year
2000 requirements. Testing is currently being done on such third-party software,
which testing is expected to be completed by September 1, 1999. The telephone
system, which includes both PBX and voice mail systems, has been tested by the
maintenance provider for that system and the Company has received assurances
that the telephone system is Y2K compliant.
With respect to non-centralized systems (i.e., desktop computers), the Company
has obtained updated software releases and new hardware designed to be Y2K
compliant according to the representations of the vendors. The Company expects
that the effort needed to correct for Y2K problems on such systems will be less
time intensive than the effort needed to achieve compliance for its centralized
systems. The installation of such new PC hardware and software was commenced in
early 1999 and is expected to be completed by September 1, 1999.
The Company also faces the risk that one or more of its external suppliers of
goods or services ("third party providers") will not be in a position to
properly interact with the Company due to the inability of such third party
provider to resolve its own Y2K issues. Pursuant to the Plan, the Company has
completed an inventory of its third party provider relationships. In order to
assess the Y2K readiness of such third party providers, the Company has
developed and forwarded a
-13-
<PAGE>
detailed questionnaire to such providers. As the responses to the questionnaires
are received, the Company will evaluate the overall Y2K readiness of its third
party provider relationships. However, the Company does not have sufficient
information at the current time to determine whether the computer systems of its
third party providers will be in compliance with the Y2K requirements as the
year 2000 approaches.
In the event that a major administrative system fails to operate properly due to
the Y2K problem, or the Company does not complete the necessary systems
conversions prior to January 1, 2000, the Company has developed a plan to
respond to such a contingency. FIC Computer Services has assigned certain
personnel to be members of an emergency response team to resolve Y2K operations
problems. Additionally, insurance policies would be administered manually if the
necessary systems conversions were not completed prior to January 1, 2000, or
subsequent Y2K operational problems arise. Manual policy administration would
require additional personnel. If substantial additional personnel become
necessary for manual policy administration, the training and salary expenses of
such personnel could materially affect the Company's business and results of
operations. The Company is not able to estimate the likelihood that manual
administration will be needed or the amount of any expense which it would incur
in connection with such manual administration.
Cautionary Statements for Purposes of the "Safe
Harbor" Provisions of the Private Securities Litigation
Reform Act of 1995
Except for historical factual information set forth in the foregoing discussion
of the "year 2000 issue" certain statements made in that discussion are forward
looking and contain information about Y2K risks and other risks and known
uncertainties. The Company cautions the reader that actual results could differ
materially from those anticipated by the Company, depending upon the eventual
outcome of certain factors, including adverse changes in the Y2K readiness of
the Company or its significant third party providers.
FINANCIAL STATEMENTS
The following pages set forth the financial statements of:
(a) Investors Life Insurance Company of North America Separate Account I.
(b) Investors Life Insurance Company of North America.
-14-
INVESTORS
LIFE INSURANCE COMPANY
OF NORTH AMERICA
(Herein called Investors Life)
SEPARATE ACCOUNT I
FINANCIAL STATEMENTS
December 31, 1998
(Audited)
This report is submitted for the general information of owners of Investors Life
Insurance Company of North America Separate Account I variable annuity
contracts. This report is not authorized for distribution to prospective
purchasers of such contracts unless it is accompanied by a current prospectus.
Investors Life Insurance
Company of North America
Administrative Offices: Austin, TX
<PAGE>
Report of Independent Accountants
To the Contract Owners of Investors Life Insurance Company of North America
Separate Account I and the Board of Directors of Investors Life Insurance
Company of North America
In our opinion, the accompanying combined balance sheet and the related
individual statements of operations and of changes in total assets present
fairly, in all material respects, the combined financial position of the
subdivisions comprising the Investors Life Insurance Company of North America
Separate Account I (the Separate Account) at December 31, 1998, the results of
each of their operations for the year then ended and the changes in each of
their total assets for the two years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Separate Account's management; our responsibility is
to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which 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, assessing
the accounting principles used and significant estimates made management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998 by
correspondence with the underlying funds, provide a reasonable basis for the
opinion expressed above.
PricewaterhouseCoopers LLP
Dallas, Texas
February 19, 1999
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
COMBINED BALANCE SHEET
Year Ended December 31, 1998
ASSETS
Investments at Market Value (Notes 1 and 2):
Portfolios of Putnam Capital Manager Trust:
Putnam Variable Trust Money Market
1,325,566 qualified shares (Cost $1,325,566) 1,325,566
2,148,545 non-qualified shares (Cost $2,148,545) 2,148,545
Putnam Variable Trust U.S. Government and High Quality Bond
204,894 qualified shares (Cost $2,773,678) 2,813,192
467,082 non-qualified shares (Cost $6,141,977) 6,413,033
Putnam Variable Trust Growth and Income
675,900 qualified shares (Cost $15,168,803) 19,445,646
77,035 shares owned by Investors Life (Cost $1,728,852) 2,216,302
325,810 non-qualified shares (Cost $7,213,430) 9,373,558
77,208 shares owned by Investors Life(Cost $1,709,394) 2,221,288
Putnam Variable Trust Voyager
17,926 qualified shares (Cost $493,688) 821,912
41,816 shares owned by Investors Life(Cost $1,151,634) 1,917,283
14,984 non-qualified shares (Cost $413,645) 687,009
41,765 shares owned by Investors Life(Cost $1,152,975) 1,914,933
Total Assets 51,298,267
CONTRACT OWNERS' EQUITY
Contract Owners' Equity (Notes 3 and 6):
Putnam Variable Trust Money Market
593,464 qualified accumulation
units outstanding (2.2336077 Per Unit) 1,325,566
968,809 non-qualified accumulation
units outstanding (2.2177178 Per Unit) 2,148,545
Putnam Variable Trust U.S. Government and High Quality Bond
772,236 qualified accumulation
units outstanding (3.6429178 Per Unit) 2,813,192
1,781,007 non-qualified accumulation
units outstanding (3.6007904 Per Unit) 6,413,033
Putnam Variable Trust Growth and Income
2,241,534 qualified accumulation
units outstanding (8.6751509 Per Unit) 19,445,646
255,477 Investors Life equity (8.6751509 Per Unit) 2,216,302
1,259,354 non-qualified accumulation
units outstanding (7.4431478 Per Unit) 9,373,558
298,434 Investors Life equity (7.4431478 Per Unit) 2,221,288
Putnam Variable Trust Voyager
214,343 qualified accumulation
units outstanding (3.8345659 Per Unit) 821,912
500,000 Investors Life equity (3.8345659 Per Unit) 1,917,283
179,382 non-qualified accumulation
units outstanding (3.8298664 Per Unit) 687,009
500,000 Investors Life equity (3.8298664 Per Unit) 1,914,933
Contract Owners' Equity 51,298,267
The accompanying notes are an integral part of these financial statements
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
INDIVIDUAL STATEMENTS OF OPERATIONS
Year Ended December 31, 1998
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Investment Income:
Dividends $74,230 $121,194
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 17,239 28,456
Investment income - net 56,991 92,738
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 451,762 679,673
Cost of shares sold 451,762 679,673
Net realized gain on investments 0 0
Net unrealized gain (loss) on investments 0 0
Net realized and unrealized
gain on investments 0 0
Net Increase in Net Assets
from Investment Operations $56,991 $92,738
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Govmt and High Govmt and High
Quality Bond Quality Bond
Qualified Non-Qualified
Investment Income:
Dividends $161,920 $363,023
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 35,058 77,891
Investment income - net 126,862 285,132
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 0 0
Net realized gain (loss) on investments:
Proceeds from sale of shares 758,168 773,705
Cost of shares sold 684,652 700,907
Net realized gain on investments 73,516 72,798
Net unrealized gain (loss) on investments (3,021) 81,679
Net realized and unrealized
gain on investments 70,495 154,477
Net Increase in Net Assets
from Investment Operations $197,357 $439,609
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified* Non-Qualified*
Investment Income:
Dividends $822,998 $450,029
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 254,063 135,542
Investment income - net 568,935 314,487
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 1,899,116 1,038,467
Net realized gain (loss) on investments:
Proceeds from sale of shares 3,170,923 1,745,101
Cost of shares sold 2,002,374 1,112,663
Net realized gain on investments 1,168,549 632,438
Net unrealized gain on investments (842,800) (471,025)
Net realized and unrealized
gain on investments 2,224,865 1,199,880
Net Increase in Net Assets
from Investment Operations $2,793,800 $1,514,367
* Includes shares owned by Investors Life
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Investment Income:
Dividends $5,815 $5,193
Expenses:
Mortality risk and expense
fees guarantees (Notes 1 and 3) 29,472 25,997
Investment income - net (23,657) (20,804)
Net Realized and Unrealized Gain (Loss)
on Investments:
Net realized capital gain distribution 141,877 126,718
Net realized gain (loss) on investments:
Proceeds from sale of shares 238,304 180,879
Cost of shares sold 138,926 103,941
Net realized gain (loss) on investment 99,378 76,938
Net unrealized gain (loss) on investme 292,657 302,163
Net realized and unrealized
gain (loss) on investments 533,912 505,819
Net Increase (Decrease) in Net Assets
from Investment Operations $510,255 $485,015
The accompanying notes are an integral part of these financial statements
* Includes shares owned by Investors Life
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
INDIVIDUAL STATEMENTS OF CHANGES IN TOTAL ASSETS
Year Ended December 31, 1998
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Investment Operations:
Investment income-net $56,991 $92,738
Realized capital gain distributions 0 0
Net realized gain (loss) on investments 0 0
Net unrealized gain (loss) on investments 0 0
Net increase (decrease) in net assets
from investment operations 56,991 92,738
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 198,798 436,426
Net contract surrenders
and transfers out (Note 3) (394,261) (618,288)
Benefit payments to annuitants (7,075) (34,277)
Net increase (decrease)
from accumulation unit transactions (202,538) (216,139)
Net (Decrease) Increase in Net Assets (145,547) (123,401)
Net assets at December 31, 1997 1,471,113 2,271,946
Net assets at December 31, 1998 $1,325,566 $2,148,545
Year Ended December 31, 1997
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Investment Operations:
Investment income-net $62,277 $95,862
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 0 0
Net unrealized gain (loss) on investme 0 0
Net increase (decrease) in net assets
from investment operations 62,277 95,862
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 100,446 34,792
Net contract surrenders
and transfers out (Note 3) (440,229) (465,907)
Benefit payments to annuitants (2,159) (36,608)
Net increase (decrease)
from accumulation unit transactions (341,942) (467,723)
Net (Decrease) Increase in Net Assets (279,665) (371,861)
Net assets at December 31, 1996 1,750,778 2,643,807
Net assets at December 31, 1997 $1,471,113 $2,271,946
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Government and Government and
High Quality Bond High Quality Bond
Qualified Non-Qualified
Investment Operations:
Investment income-net $126,862 $285,132
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 73,516 72,798
Net unrealized gain (loss) on investme (3,021) 81,679
Net increase (decrease) in net assets
from investment operations 197,357 439,609
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 119,096 15,992
Net contract surrenders
and transfers out (Note 3) (614,443) (612,664)
Benefit payments to annuitants (23,515) (99,141)
Net increase (decrease)
from accumulation unit transactions (518,862) (695,813)
Net (Decrease) Increase in Net Assets (321,505) (256,204)
Net assets at December 31, 1997 3,134,697 6,669,237
Net assets at December 31, 1998 $2,813,192 $6,413,033
Year Ended December 31, 1997
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Government and Government and
High Quality Bond High Quality Bond
Qualified Non-Qualified
Investment Operations:
Investment income-net $214,909 $390,590
Realized capital gain distributions 0 0
Net realized gain (loss) on investment 95,026 103,799
Net unrealized gain (loss) on investme (50,657) 1,802
Net increase (decrease) in net assets
from investment operations 259,278 496,191
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 23,639 145,621
Net contract surrenders
and transfers out (Note 3) (1,310,074) (1,422,542)
Benefit payments to annuitants (5,189) (55,995)
Net increase (decrease)
from accumulation unit transactions (1,291,624) (1,332,916)
Net (Decrease) Increase in Net Assets (1,032,346) (836,725)
Net assets at December 31, 1996 4,167,043 7,505,962
Net assets at December 31, 1997 $3,134,697 $6,669,237
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified* Non-Qualified*
Investment Operations:
Investment income-net $568,935 $314,487
Realized capital gain distributions 1,899,116 1,038,467
Net realized gain (loss) on investment 1,168,549 632,438
Net unrealized gain (loss) on investme (842,800) (471,025)
Net increase (decrease) in net assets
from investment operations 2,793,800 1,514,367
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 217,936 261,081
Net contract surrenders
and transfers out (Note 3) (2,719,592) (1,493,533)
Benefit payments to annuitants (106,044) (128,522)
Net increase (decrease)
from accumulation unit transactions (2,607,700) (1,360,974)
Net (Decrease) Increase in Net Assets 186,100 153,393
Net assets at December 31, 1997 21,475,848 11,441,453
Net assets at December 31, 1998 $21,661,948 $11,594,846
* Includes shares owned by Investors Life
Year Ended December 31, 1997
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified* Non-Qualified*
Investment Operations:
Investment income-net $357,791 $189,484
Realized capital gain distributions 820,977 433,146
Net realized gain (loss) on investment 1,486,456 589,042
Net unrealized gain (loss) on investme 1,749,996 1,104,254
Net increase (decrease) in net assets
from investment operations 4,415,220 2,315,926
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 634,334 130,374
Net contract surrenders
and transfers out (Note 3) (3,900,090) (1,537,206)
Benefit payments to annuitants (14,478) (119,771)
Net increase (decrease)
from accumulation unit transactions (3,280,234) (1,526,603)
Net (Decrease) Increase in Net Assets 1,134,986 789,323
Net assets at December 31, 1996 20,340,862 10,652,130
Net assets at December 31, 1997 $21,475,848 $11,441,453
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Investment Operations:
Investment income-net ($23,657) ($20,804)
Realized capital gain distributions 141,877 126,718
Net realized gain (loss) on investment 99,378 76,938
Net unrealized gain (loss) on investme 292,657 302,163
Net increase (decrease) in net assets
from investment operations 510,255 485,015
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 33,436 229,908
Net contract surrenders
and transfers out (Note 3) (106,935) (148,405)
Benefit payments to annuitants (3,988) 0
Net increase (decrease)
from accumulation unit transactions (77,487) 81,503
Net (Decrease) Increase in Net Assets 432,768 566,518
Net assets at December 31, 1997 2,306,427 2,035,424
Net assets at December 31, 1998 $2,739,195 $2,601,942
* Includes shares owned by Investors Life
Year Ended December 31, 1997
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Investment Operations:
Investment income-net ($18,840) ($16,213)
Realized capital gain distributions 87,856 71,570
Net realized gain (loss) on investment 59,862 30,400
Net unrealized gain (loss) on investme 355,156 323,702
Net increase (decrease) in net assets
from investment operations 484,034 409,459
Accumulation Unit Transactions:
Net contract considerations
and transfers in (Note 3) 87,480 105,653
Net contract surrenders
and transfers out (Note 3) (139,414) (57,462)
Benefit payments to annuitants 0 0
Net increase (decrease)
from accumulation unit transactions (51,934) 48,191
Net (Decrease) Increase in Net Assets 432,100 457,650
Net assets at December 31, 1996 1,874,327 1,577,774
Net assets at December 31, 1997 $2,306,427 $2,035,424
* Includes shares owned by Investors Life
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
SEPARATE ACCOUNT I
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
Note 1. Organization
Investors Life Insurance Company of North America ("Investors Life") established
Investors Life Insurance Company of North America - Separate Account I (the
"Separate Account") as a unit investment trust registered under the Investment
Company Act of 1940, as amended. Operations of the Separate Account commenced on
September 15, 1982. The Separate Account currently has four Divisions each
corresponding to a portfolio of Putnam Variable Trust (formerly known as Putnam
Capital Manager Trust). Prior to the substitution of shares of Putnam Variable
Trust for shares of CIGNA Annuity Funds Group as the underlying funding vehicle
for the Separate Account (the "Substitution"), the Separate Account contained
five divisions. The Substitution was effective as of April 18, 1995, following
approvals of the Substitution by the U.S. Securities and Exchange Commission and
the contractholders having their contract values determined by the affected
portfolios of the CIGNA Annuity Funds Group. In connection with the
Substitution, the Equity Division was merged with the Growth and Income
Division; thereafter, the Equity Division was renamed the Growth and Income
Division II. Each Division contains two subdivisions, one for the allocation of
tax qualified and one for the allocation of non-tax qualified net payments made
under variable annuity contracts.
Net purchase payments to the Separate Account may be allocated to one or more of
the following classes of shares of the Putnam Variable Trust: Putnam Variable
Trust Money Market Fund, Putnam Variable Trust U.S. Government and High Quality
Bond Fund, Putnam Variable Trust Growth and Income Fund or Putnam Variable Trust
Voyager Fund. The contract owners' equity of each subdivision of the Separate
Account is affected by the investment results of the appropriate portfolio(s) of
shares of Putnam Variable Trust designated for the subdivision and the mortality
risk and expense fees guarantees assessed on the Separate Account assets (See
Note 3), and the administrative charge deductions.
Under the current provisions of the Internal Revenue Code (the "Code"),
transfers of contract values from one division of the Separate Account to
another division are not subject to current taxation. There can be no assurance
that future changes in the Code will not subject such transfers to current
taxation.
Note 2. Significant Accounting Policies
Following is a summary of the significant accounting policies of the Separate
Account:
(a) the market value of the investments is based on closing bid prices (net
asset value) at December 31, 1998; (b) investment transactions are accounted for
on the trade date and income is recorded on the ex-dividend date; (c) the cost
of investments sold is determined on the specific identification method. See
Notes 4 and 5 with respect to income taxes.
Note 3. Contract Owner Transactions
Net contract considerations represent gross contributions under variable annuity
contracts less deductions by Investors Life for any applicable premium taxes.
Net contract considerations for the period ended December 31, 1998, were
$156,419 after deductions for premium taxes of $0 . Contract owners have limited
rights to transfer their contract values between Separate Account Divisions. For
the period ended December 31, 1998, the total of all transfers was $1,356,255 .
Contract surrender benefits amounted to $5,351,870 . Annuity benefits amounted
to $402,562 . Investors Life charges a fee to each Separate Account subdivision
for assuming the mortality risk and expense fees guarantees. The daily
equivalent of the annual charge of 1.2% is made against the average net value of
the Separate Account.
Note 4. Income Taxes
Investors Life is taxed as a life insurance company under the Code. The Separate
Account is taxed as a part of Investors Life. Under the current provisions of
the Code, no federal income taxes are payable by Investors Life with respect to
the operations of the Separate Account when such operations are used to
determine the contract values of the Separate Account. Investors Life retains
the right to make adjustments for taxes to Separate Account assets should future
changes in the Internal Revenue Code so warrant.
Note 5. Diversification Requirements
Under the provisions of Section 817(h) of the Code, a variable annuity contract,
other than a contract issued in connection with certain types of employee
benefit plans, will not be treated as an annuity contract for federal tax
purposes for any period for which the investments of the segregated asset
account on which the contract is based are not adequately diversified. The Code
provides that the "adequately diversified" requirement may be met if the
underlying investments satisfy either a statutory safe harbor test or
diversification requirements set forth in regulations issued by the Secretary of
Treasury.
The Internal Revenue Service has issued regulations under section 817(h) of the
Code. Investors Life believes that the Separate Account satisfies the current
requirements of the regulations.
Note 6. Accumulation Unit Transactions
Year Ending December 31, 1998
The changes in the number of accumulation units (the measure of ownership in the
Separate Account) during the twelve months of 1998 and units outstanding at
December 31, 1998 were as follows:
Putnam Putnam
Variable Trust Variable Trust
Money Money
Market Market
Qualified Non-Qualified
Units outstanding at December 31, 1997 684,786 1,065,062
Units purchased and transfers in 90,662 200,761
Benefits, surrenders and transfers out (181,984) (297,014)
Units outstanding at December 31, 1998 593,464 968,809
* Includes shares owned by Investors Life
Putnam Variable Putnam Variable
Trust U.S. Trust U.S.
Government Government
and High and High
Quality Bond Quality Bond
Qualified Non-Qualified
Units outstanding at December 31, 1997 920,186 1,981,587
Units purchased and transfers in 33,814 4,651
Benefits, surrenders and transfers out (181,764) (205,231)
Units outstanding at December 31, 1998 772,236 1,781,007
* Includes shares owned by Investors Life
Putnam Variable Putnam Variable
Trust Growth Trust Growth
and Income and Income
Qualified Non-Qualified
Units outstanding at December 31, 1997 2,818,975 1,753,068
Units purchased and transfers in 39,464 39,640
Benefits, surrenders and transfers out (361,428) (234,920)
Units outstanding at December 31, 1998 2,497,011 1,557,788
* Includes shares owned by Investors Life
Putnam Putnam
Variable Trust Variable Trust
Voyager Voyager
Qualified * Non-Qualified *
Units outstanding at December 31, 1997 738,882 653,214
Units purchased and transfers in 14,819 71,184
Benefits, surrenders and transfers out (39,358) (45,016)
Units outstanding at December 31, 1998 714,343 679,382
* Includes shares owned by Investors Life
The accumulation units for six of the subdivisions include units applicable to
contract owners who are "on benefit annuitants." At December 31, 1998 the number
of accumulation units, the aggregate value of the subdivisions' equity and the
number of monthly annuity units and value per unit of "on benefit annuitants"
are as follows:
Accumulation Aggregate
Units Value
Putnam Variable Trust
Money Market, Qualified 41,320 $92,293
Putnam Variable Trust
Money Market, Non-Qualified 196,266 $435,263
Putnam Variable Trust
Growth and Income II, Qualified 123,951 $1,075,293
Putnam Variable Trust
Growth and Income II, Non-Qualified 88,359 $657,669
Putnam Variable Trust U.S. Government
and High Quality Bond, Qualified 78,595 $286,316
Putnam Variable Trust U.S. Government
and High Quality Bond, Non-Qualified 177,387 $638,731
Putnam Variable Trust Voyager, Qualified 30,398 $116,564
Monthly Annuity
Annuity Units Unit Value
Putnam Variable Trust
Money Market, Qualied 774 $0.8161456
Putnam Variable Trust
Money Market, Non-Qualified 3,958 $0.8165745
Putnam Variable Trust
Growth and Income II, Qualified 4,883 $1.9570484
Putnam Variable Trust
Growth and Income II, Non-Qualified 5,706 $2.1000633
Putnam Variable Trust U.S. Government
and High Quality Bond, Qualified 1,466 $1.4199439
Putnam Variable Trust U.S. Government
and High Quality Bond, Non-Qualified 4,707 $1.4209644
Putnam Variable Trust Voyager, Qualified 462 $1.0780159
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Statutory Financial Statements
December 31, 1998 and 1997
<PAGE>
Report of Independent Accountants
To the Board of Directors of
Investors Life Insurance Company of North America
We have audited the accompanying statutory balance sheets of Investors Life
Insurance Company of North America as of December 31, 1998 and 1997, and the
related statutory statements of operations, of changes in capital and surplus,
and of cash flows for each of the three years in the period ended December 31,
1998. 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 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.
As described in Note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the Insurance Department of
the State of Washington, which practices differ from the generally accepted
accounting principles. The effects on the financial statements of the variances
between the statutory basis of accounting and generally accepted accounting
principles, although not reasonably determinable, are presumed to be material.
In our opinion, because of the effects of the matters referred to in the
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of Investors Life Insurance Company of North America at
December 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1998.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the statutory financial position of Investors Life
Insurance Company of North America at December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, on the basis of accounting described in Note 1.
PricewaterhouseCoopers LLP
Dallas, Texas
March 26, 1999
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Statutory Balance Sheets
(In thousands)
December 31,
1998 1997
Admitted Assets
Cash and investments:
Bonds, at amortized cost
(market value $358,781
and $379,886) $347,668 $376,912
Common stock, at market
value (cost $23,936 and
$27,797) 26,091 26,476
Mortgage loans on real estate 10,168 10,695
Real estate, net of accumulated
depreciation of $5,270 and $5,189 14,473 6,217
Policy loans 42,514 44,828
Cash 11,548 8,331
Short-term investments 139,757 149,448
Total cash and investments 592,219 622,907
Accrued investment income 5,846 6,168
Premiums receivable 6,394 6,575
Receivable from reinsurers 2,507 2,478
Receivable from affiliates 3,090 -
Other assets 13,076 4,009
Separate account assets 456,564 444,131
Total admitted assets $1,079,696 $1,086,268
Liabilities, Capital and Surplus
Aggregate reserve for life
and accident and health
policies and contracts $543,207 $553,381
Interest maintenance reserve 4,240 4,475
Accrued expenses 333 354
Asset valuation reserve 4,266 4,813
Payables to affiliates - 2,655
Other liabilities 8,729 8,568
Separate account liabilities 448,294 438,090
Total liabilities 1,009,069 1,012,336
Capital and surplus:
Common stock - $80 par value,
40,000 shares authorized
30,000 shares issued and
outstanding 2,400 2,400
Paid-in and contributed surplus 4,800 4,800
Surplus debentures 15,896 27,796
Unassigned surplus 47,531 38,936
Total capital and surplus 70,627 73,932
Total liabilities, capital and surplus $1,079,696 $1,086,268
The accompanying notes are an integral
part of these financial statements.
2
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Statutory Statements of Operations
Year Ended December 31,
1998 1997 1996
Revenues:
Insurance premiums and
annuity considerations $46,529 $47,708 $48,844
Net investment income 45,190 45,792 46,700
Other revenues 2,288 4,023 2,887
Total revenues 94,007 97,523 98,431
Benefits, losses and
expenses:
Policyholder claims
and benefits 59,345 62,243 62,395
Commissions 4,088 3,057 3,428
Other operating expenses 14,679 16,493 16,829
Total benefits, losses
and expenses" 78,112 81,793 82,652
Operating income before
federal income taxes
and net realized capital gains 15,895 15,730 15,779
Provision for federal
income taxes 3,651 2,423 1,016
Net income from operations 12,244 13,307 14,763
Net realized capital
gains 137 9,532 13,636
Net income $12,381 $22,839 $28,399
The accompanying notes are an integral
part of these financial statements.
3
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Statutory Statements of Changes in Capital and Surplus
(In thousands)
Paid-in and
Common Stock Contributed
Shares Amount Surplus
Balance as of December 31, 1995 30 $2,400 $4,800
Net income
Change in net unrealized capital
gains
Change in non-admitted
assets
Increase in asset valuation
reserve
Prior year surplus adjustment for
reserve changes
Surplus note
payment
Balance as of December 31, 1996 30 2,400 4,800
Net income
Change in net unrealized capital
gains
Change in non-admitted
assets
Decrease in asset valuation
reserve
Prior year surplus adjustment
Surplus note
payment
Balance as of December 31, 1997 30 2,400 4,800
Net income
Change in net unrealized capital
gains
Change in non-admitted assets
Decrease in asset valuation
reserve
Change in reserve on account of
change in valuation basis
Change in surplus in separate
accounts
Surplus note payment
Balance as of December 31, 1998 30 $2,400 $4,800
The accompanying notes are an integral
part of these financial statements.
4
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Statutory Statements of Changes in Capital and Surplus
(In thousands)
Unassigned
Surplus Surplus
Debentures (Deficit) Total
Balance as of December 31, 1995 $69,296 $(14,600) $61,896
Net income 28,399 28,399
Change in net unrealized capital
gains 611 611
Change in non-admitted
assets (687) (687)
Increase in asset valuation
reserve (259) (259)
Prior year surplus adjustment
for reserve changes (3,036) (3,036)
Surplus note payment (30,750) - (30,750)
Balance as of December 31, 1996 38,546 10,428 56,174
Net income 22,839 22,839
Change in net unrealized capital
gains (2,045) (2,045)
Change in non-admitted assets 963 963
Decrease in asset valuation reserve 5,261 5,261
Prior year surplus adjustment 1,490 1,490
Surplus note payment (10,750) (10,750)
Balance as of December 31, 1997 27,796 38,936 73,932
Net income 12,381 12,381
Change in net unrealized capital
gains (5,530) (5,530)
Decrease in asset valuation reserve 549 549
Prior year surplus adjustment (975) (975)
Change in reserve on account of
change in valuation basis (137) (137)
Change in surplus in separate
accounts 2,228 2,228
Surplus note payment (11,900) (11,900)
Balance as of December 31, 1998 $15,896 $47,531 $70,627
The accompanying notes are an integral
part of these financial statements.
5
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Statutory Statements of Cash Flows
Year Ended December 31,
1998 1997 1996
Cash flows from operating
activities:
Premiums and annuity considerations
received $45,485 $46,769 $48,180
Net investment income received 43,496 47,312 44,549
Other income received 3,515 4,380 3,378
Death and accident and health
benefits paid (28,497) (28,440) (26,511)
Surrender benefits paid (30,722) (30,487) (30,397)
Annuity benefits paid (41,770) (47,989) (43,900)
Net transfers to Separate Accounts 27,310 29,502 25,610
Reserve changes due to modified
coinsurance 5,909 6,910 6,524
Other benefits paid (1,751) (1,888) (1,779)
Federal income taxes paid
excluding tax on capital gains (11,700) (2,200) (5,424)
Dividends paid to policyholders (214) (208) (242)
Commissions paid (4,091) (3,058) (3,428)
General expenses, taxes, licenses and
fees (12,798) (13,234) (12,085)
Cash flows from investing
activities:
Proceeds from investments sold or
matured, net of tax on capital gains 58,569 93,739 92,421
Cost of investments acquired (36,343) (17,433) (45,782)
Net decrease in policy loans 2,245 1,261 846
Net cash provided by investing
activities 24,471 77,567 47,485
Cash flows from financing activities
and other miscellaneous activities:
Surplus debenture payments (11,900) (10,750) (30,750)
Interest paid on surplus
debentures (1,482) (3,344) (5,538)
Net decrease in remittances and
items not allocated (133) (402) (7,216)
Net (increase) decrease in
receivable from affiliates (5,745) 10,651 (3,168)
Other (uses) sources and
applications, net (5,857) 3,225 (1,882)
Net cash used in financing and
other miscellaneous activities (25,117) (620) (48,554)
Net increase (decrease) in cash and
short-term investments (6,474) 84,316 3,406
Cash and short-term investments at
beginning of year 157,779 73,463 70,057
Cash and short-term investments at
end of year $151,305 $157,779 $73,463
The accompanying notes are an integral
part of these financial statements.
6
<PAGE>
1. Organization and Summary of Significant Accounting Policies
Organization Investors Life Insurance Company of North America
(Investors-NA or the Company) is a wholly-owned subsidiary of
InterContinental Life Corporation (ILCO), a life insurance holding
company. Financial Industries Corporation (FIC), a life insurance holding
company, owns approximately 45% of ILCO's outstanding common stock.
The Company is principally engaged in administering existing portfolios of
individual life insurance policies and annuity products. The Company is
also engaged in the business of marketing and underwriting individual life
insurance and annuity products in 49 states and the District of Columbia.
Such products are marketed through independent, non-exclusive general
agents. The Company also administers an in-force book of credit life and
disability insurance.
Prior to December 1997, the Company owned two insurance subsidiaries:
InterContinental Life Insurance Company (ILIC) and Investors Life
Insurance Company of Indiana (Investors-IN). Investors-IN was acquired
during 1995. In December 1997, ILIC transferred its domicile from New
Jersey to Indiana. Following completion of the redomestication, ILIC merged
with Investors-Indiana, with ILIC as the surviving entity in the merger
process. Immediately after the merger, ILIC changed its name to Investors
Life Insurance Company of Indiana. As used hereinafter, the phrase
"Investors-IN" shall be used to refer to the merged entity. The Company
also is the parent of a registered broker-dealer, ILG Securities
Corporation.
Summary of Significant Accounting Policies
Basis of presentation The accompanying statutory financial statements have
been prepared in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of Washington (the
Department). These accounting practices differ in certain respects from
generally accepted accounting principles. The more significant differences
from generally accepted accounting principles are:
a) Policy reserves are based on statutory mortality and interest
requirements and are calculated without consideration of withdrawals,
which may differ from generally accepted accounting principles
reserves based on more realistic estimates of mortality, interest and
withdrawals.
b) Policy acquisition costs which vary with and are directly related to
the production of new and renewal business, such as commissions,
premium taxes and other costs, are charged to operations as incurred.
Under generally accepted accounting principles, such costs are
deferred and amortized over the expected lives of the contracts.
c) Deferred income taxes are not provided on differences between the tax
bases of assets and liabilities and their reported amounts in the
statutory financial statements. Under generally accepted accounting
principles, deferred taxes, if any, are provided on these differences.
d) Certain assets which are designated as "non-admitted" by the laws and
regulations of the State of Washington are charged to surplus. Under
generally accepted accounting principles, these assets less applicable
allowance accounts are restored to the balance sheet. ) An asset
valuation reserve (AVR) must be recorded under statutory accounting
practices. The AVR is calculated in accordance with methods prescribed
by the National Association of Insurance Commissioners (NAIC) and as
permitted by the Department. Under generally accepted accounting
principles, no such liability is recorded.
7
<PAGE>
e) An asset valuation reserve ("AVR") must be recorded under statutory
accounting practices. The AVR is calculated in accordance with methods
prescribed by the National Association of Insurance Commissioners
("NAIC") and as permitted by the Department. Under generally accepted
accounting principles, no such liability is recorded.
f) An interest maintenance reserve (IMR) must be recorded under
statutory accounting practices to defer gains and losses recognized on
the sale of bonds prior to maturity. The resulting deferred gain or
loss is recognized over the remaining period to maturity. Under
generally accepted accounting principles, no such liability is
recorded.
g) Fixed maturities classified as "available for sale" are carried at
market value under generally accepted accounting principles.
Unrealized gains or losses are reflected as a separate component of
equity. These securities are carried at amortized cost under statutory
accounting practices.
h) Policy reserves are reported net of amounts recoverable from
reinsurers. Under generally accepted accounting principles, ceded
reserves are recorded as a receivable on the balance sheet.
i) Premiums received from and benefits paid on universal life and
investment-type products are recognized as revenue and expense in the
statutory statement of operations. Under generally accepted accounting
principles, these types of policies are accounted for using a deposit
method of accounting.
j) Net intangible assets arising from the acquisition of business assets
are deferred and amortized in relation to the business in force under
generally accepted accounting principles. In addition, acquired assets
are recorded at fair market value at the date of acquisition. These
purchase accounting adjustments are not recognized under statutory
accounting principles.
Investments Investments are carried in accordance with valuation procedures
established by the NAIC. In general, bonds are carried at amortized cost.
Common stocks of subsidiaries are carried at equity in the underlying net
assets of the subsidiaries. Equity in insurance subsidiaries is determined
in accordance with statutory accounting practices and equity in other
subsidiaries is determined in accordance with generally accepted accounting
principles. Net income of the subsidiaries is included in investment income
and other changes in the equity of the subsidiaries are included in
unrealized capital gains and losses. Other common stocks are carried at
NAIC market value. Short-term investments include those securities which
mature within one year and are carried at cost, which approximates market
value.
Premiums and discounts on collateralized mortgage obligations (CMOs) are
amortized over the estimated redemption period as opposed to the stated
maturities. An adjustment to the investment and investment income is booked
on a retrospective basis to reflect the amounts that would have existed had
the new effective yield been applied since the acquisition of the CMOs.
The Company's general investment philosophy is to hold fixed maturities for
long-term investment. However, in response to changing market conditions,
liquidity requirements, interest rate movements and other investment
factors, fixed maturities may be sold prior to their maturity. Realized
gains and losses on the disposal of investments, net of amounts deferred as
part of the IMR, are recognized in net income on the specific
identification basis, except for stocks, for which the first-in, first-out
method is employed. Unrealized gains and losses on equity securities are
recorded directly to surplus.
8
<PAGE>
Mortgage loans on real estate and policy loans are carried at their
aggregate unpaid principal balance. Real estate occupied by the Company and
held for investment is carried at cost less accumulated depreciation. Real
estate acquired in satisfaction of debt is stated at the lower of fair
market value or the amount of debt, including capitalized taxes and
expenses. Depreciation is calculated using the straight line method over 20
to 40 years. Depreciation expense for 1998, 1997 and 1996 amounted to
$338,513, $1,680,763 and $1,197,128, respectively.
Approximately $49.9 and $56.4 million, or 14% and 15%, of the total bond
portfolio (at amortized cost) at December 31, 1998 and 1997, respectively,
consists of private placement bonds. The market value of private placement
bonds is determined in good faith by management with the assistance of an
independent pricing service. Factors considered in the market valuation of
such bonds include the quality of the issuer, interest rates and maturity
dates.
Aggregate reserves for life policies and contracts Aggregate reserves for
life policies and contracts are based on statutory mortality tables and
interest assumptions ranging from 2% to 6% using the Net Level Premium or
the Commissioners= Reserve Valuation Method.
The primary mortality tables utilized are the 1941 CSO and 1958 CSO tables,
except for contracts issued in 1986 and later for which the 1980 CSO
Mortality Table is used. Premium deficiency reserves are held (when the
gross premium charged is less than the valuation net premium) in the amount
equal to the present value of such deficiency.
Reserves for annuities in pay status are established using the Progressive
Annuity Table, A49 MOD 60 Table, 1971 IAM Table or the 1983 CARVM Table
with interest rate assumptions ranging from 3% to 13.25%. During the
deferred period, annuity reserves are established using a retrospective
accumulation of cash value based on declared interest rates which vary
depending on the Company's expectation of investment return.
9
<PAGE>
The withdrawal characteristics of the Company's annuity actuarial reserves
and deposit liabilities (including reserves for annuity contracts
maintained in the Company's separate accounts) at December 31, 1998 and
1997 are as follows (in thousands):
1998 1997
% of % of
Amount Total Amount Total
Subject to discretionary
withdrawal with
adjustments:
with market value
adjustment $443,927 83.42% $433,611 83.36%
at book value less
surrender charge 14,794 2.78% 9,458 1.82%
Subtotal 458,721 86.20% 443,069 85.18%
Subject to discretionary
withdrawal without
adjustment:
at book value 64,275 12.09% 67,834 13.04%
Not subject to discretionary
withdrawal provision 9,125 1.71% 9,248 1.78%
Total annuity actuarial reserves
and deposit liabilities (gross) 532,121 100.00% 520,151 100.00%
Reinsurance ceded 3,435 3,331
Total annuity actuarial reserves
and deposit liabilities ( net) $528,686 $516,820
Policy and contract claims Policy and contract claims include provisions
for reported claims and claims incurred but not reported. The provision for
claims incurred but not reported is estimated based on Company experience.
The liability for policy and contract claims is subject to the impact of
changes in claim severity, frequency and other factors. Although there is
considerable variability inherent in such estimates, management believes
that the liability recorded is adequate.
Premium recognition Universal life insurance premiums are recognized as
earned when collected. Traditional life premiums, after adjustment for
deferred and uncollected premiums, are recognized as earned on the policy
anniversary date. Deferred life premiums represent modal premiums (other
than annual) to be collected in 1999 related to policy years beginning in
1998. Uncollected premiums represent premiums due but not collected in
1998. Both deferred and uncollected premiums have been reduced by the
estimated cost of collection and are recorded as premiums receivable.
Annuity and supplementary contract premiums are recognized as earned when
collected.
Separate accounts Assets held for purchasers of investment annuity
contracts or variable annuity contracts, and the related liabilities, are
included in the statutory balance sheet. These accounts are maintained
independently from the general account of Investors-NA. Investment earnings
from these separate account assets accrue directly to the policyholders and
are not included in the Company's statement of operations. Unrealized gains
or losses on the Company's investment in certain separate account assets
are recorded in the accompanying statement of changes in capital and
surplus in 1998 and in the accompanying statement of operations in 1997 and
1996 in accordance with NAIC Annual Statement instructions.
10
<PAGE>
The following reconciles net transfers from separate accounts per the
Separate Accounts Statement to net transfers to separate accounts included
in the Company's Statement of Operations for the years ended December 31,
1998, 1997 and 1996 (in thousands):
1998 1997 1996
Transfers to separate accounts per
Separate Accounts Statement $503 $712 $1,031
Transfers from separate accounts per
Separate Accounts Statements (30,600) (33,921) (28,438)
Net transfers from separate accounts
per Separate Accounts Statement (30,097) (33,209) (27,407)
Reconciling adjustments:
Charges for investment management,
administration and contract
guarantees 2,787 3,707 1,797
Net transfers to separate accounts
per Statement of Operations $(27,310) $(29,502) $(25,610)
Reinsurance Reinsurance premiums, commissions, loss and expense
reimbursements and reserves related to reinsured business are accounted for
on a basis consistent with those used in accounting for the original
policies issued and the terms of the reinsurance contracts.
Admitted and non-admitted assets Assets must be included in the statutory
balance sheet at "admitted asset value" and "non-admitted assets"
(principally miscellaneous receivables, certain furniture and equipment,
and agents' debit balances) are excluded through a charge to unassigned
surplus.
1998 1997
Mortgage loans $- $81
Furniture and equipment 858 635
Agents' debit balances 1,086 1,111
Accounts receivable 1,948 1,192
Prepaid expenses 187 1,138
Other 164 165
$4,243 $4,322
11
<PAGE>
Use of estimates The preparation of these statutory financial statements
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Because of the inherent subjectivity of this process, actual results will
differ from those estimates.
NAIC Codification In 1998, the NAIC adopted the Codification of Statutory
Accounting Principles guidance, which will replace the current Accounting
Practices and Procedures manual as the NAIC's primary guidance on statutory
accounting. The NAIC is now considering amendments to the Codification
guidance that would also be effective upon implementation. The Codification
provides guidance for areas where statutory accounting has been silent and
changes current statutory accounting in some areas, e.g. deferred income
taxes are recorded. It is not known whether the Insurance Department of
Washington (the Department) will adopt the Codification and whether the
Department will make any changes to that guidance. The Company has not
estimated the potential effect of the Codification guidance on statutory
net income and statutory capital and surplus if adopted by the Department.
However, the actual effect of adoption could differ as changes are made to
the Codification guidance, prior to its recommended effective date of
January 1, 2001.
2. Investments
An analysis of the Company's net investment income for the years ended
December 31, 1998, 1997 and 1996 is as follows (in thousands):
1998 1997 1996
Interest on bonds $29,391 $31,658 $33,800
Interest on short-term investments 6,805 4,012 3,548
Interest on policy loans 3,086 3,145 3,426
Interest on mortgage loans 938 1,040 1,349
Income on real estate 455 7,117 5,036
40,675 46,972 47,159
Equity in earnings of
wholly-owned subsidiary 5,009 2,043 2,380
Other income 71 4 40
Amortization of IMR 331 309 279
Gross investment income 46,086 49,328 49,858
Less investment expenses (896) (3,536) (3,158)
Net investment income $45,190 $45,792 $46,700
The carrying values of investments at December 31, 1998 and 1997 that were
non-income producing for the preceding twelve months were as follows (in
thousands):
1998 1997
Mortgage loans $81 $81
$81 $81
12
<PAGE>
Realized capital gains and losses for the years ended December 31, 1998,
1997 and 1996 are as follows (in thousands):
1998 1997 1996
Gains on sales of real estate $54 $14,662 $23,183
Gains on sales of bonds 150 118 272
Gains on sales of other investments 164 7 1
Losses on sales of bonds - - (81)
Losses on mortgage loans transferred
to real estate - - (13)
Less amounts deferred as
IMR (97) (80) (150)
271 14,707 23,212
Income tax provision (134) (5,175) (9,576)
Net realized capital gains $137 $9,532 $13,636
Net realized capital gains for 1997 includes $14 million (before federal
income tax) resulting from the sale during the fourth quarter of 1997 of
the Bridgepoint Square Office Complex. The aggregate selling price was $78
million which was allocated approximately 78.5% to Investors-NA and 21.5%
to an affiliate. The sale closed on December 5, 1997.
Net realized capital gains for 1996 includes $23 million (before federal
income tax) resulting from the sale during the first quarter of 1996 of the
Austin Centre, a hotel/office complex, located in Austin, Texas, which
serves as the Company's home office building. The selling price was $62.672
million, less $1 million paid to a capital reserve account for the
purchaser. The property was purchased in 1991 for $31,275 million. Proceeds
from the sale of $15 million were used to reduce ILCO's senior loan
obligations. The balance of the proceeds, net of federal income tax, was
retained and reinvested by the Company. The sale closed on March 29, 1996.
The Company continues to rent space in the building under the terms of an
operating lease which expires in September 2002.
Unrealized gains and losses on common stocks as of December 31, 1998 and
1997 are as follows (in thousands):
1998 1997
Unrealized capital gains $2,162 $2,539
Unrealized capital losses (15,348) (10,345)
Net unrealized capital
losses $(13,186) $(7,806)
13
<PAGE>
Proceeds from sales and maturities of bonds were $57,633,007, $33,577,393
and $38,730,892 for the years ended December 31, 1998, 1997 and 1996,
respectively.
The carrying value and estimated market value of investments in bonds by
category at December 1998 are as follows (in thousands):
Gross Gross
Carrying Unrealized Unrealized Market
Value Gains Losses Value
U.S. Treasury securities
and obligations of U.S.
Government agencies
and corporations $4,482 $1,076 $- $5,558
Obligations of states and
political subdivisions 1,947 197 - 2,143
Corporate securities 146,099 4,071 (55) 150,115
Mortgage-backed
securities 195,140 6,004 (180) 200,965
Total bonds $347,668 $11,348 $(235) "$358,781
The carrying value and estimated market value of investments in bonds by
category at December 31, 1997 are as follows (in thousands):
Gross Gross
Carrying Unrealized Unrealized Market
Value Gains Losses Value
U.S. Treasury securities
and obligations of U.S.
Government agencies and
corporations $7,480 $793 $- $8,273
Obligations of states and
political subdivisions 1,945 180 - 2,125
Corporate securities 137,056 2,305 (304) 139,057
Mortgage-backed
securities 230,431 - - 230,431
Total bonds $376,912 $3,278 $(304) $379,886
14
<PAGE>
The carrying value and estimated market value of bonds at December 31, 1998
are shown below by contractual maturity. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
Carrying Market
Value Value
(in thousands)
Due in one year or less $8,180 $8,193
Due after one year through five years 34,944 35,219
Due after five years through ten years 45,135 45,747
Due after ten years 64,269 68,657
152,528 157,816
Mortgage-backed securities 195,140 200,965
$347,668 $358,781
The Company's mortgage loans and real estate are diversified by property
type, location and issuer. Mortgage loans are collateralized by the related
properties and such loans generally range from 15% to 80% of the properties
value at the time the loan is made.
3. Disclosures About Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments at
December 31, 1998 are as follows (in thousands):
Carrying Market
Value Value
(in thousands)
Financial assets:
Bonds $347,668 $358,781
Policy loans 42,514 42,514
Mortgage loans 10,168 10,883
Short-term investments 139,757 139,757
Cash 11,548 11,548
Financial liabilities:
Deferred annuities 75,635 74,880
Supplemental contracts 9,170 8,780
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Bonds
Fair values are based on quoted market prices or dealer quotes, except for
notes from affiliates, which are based on a discounted cash flow analysis
using current rates offered to the Company for debt of the same remaining
maturities.
Policy loans
Policy loans are, generally, issued with coupon rates below market rates
and are considered early payment of the life benefit. As such, the carrying
amount of these financial instruments is a reasonable estimate of their
fair value.
15
<PAGE>
Mortgage loans
The fair value of mortgage loans is estimated using a discounted cash flow
analysis using rates for BBB-rated bonds with similar coupon rates and
maturities.
Cash and short-term investments
The carrying amount of these instruments approximates market value.
Deferred annuities and supplemental contracts
The fair value of deferred annuities is estimated using cash surrender
values. Fair values for supplemental contracts is estimated using a
discounted cash flow analysis, based on interest rates currently offered on
similar products.
4. Federal Income Taxes
Pursuant to a tax sharing agreement (the Agreement), the Company will
join in the filing of a consolidated income tax return with its
wholly-owned life insurance subsidiary. Under the Agreement, the Company
records its federal income tax expense or benefit as if it filed a separate
federal income tax return. The Company's federal income tax recoverable as
of December 31, 1998 and 1997 is approximately $5,995,892 and $164,637,
respectively.
The Company elected to adjust its bases in assets in accordance with
Internal Revenue Code Section 338 as of the date it was acquired by
InterContinental Life Corporation. As a result of this election, various
differences occur in the amount and timing of the recognition of income and
expenses for statutory and tax purposes.
The components of income tax for 1998, 1997 and 1996 are as follows (in
thousands):
1998 1997 1996
Tax on underwriting profits
and investment income $3,651 $2,423 $1,016
Tax on capital gains 134 5,175 9,576
16
<PAGE>
The following is a reconciliation of tax on operating income at the
statutory federal rate of 35% in 1998, 1997 and 1996 to the Company's
provision for federal income taxes (in thousands):
1998 1997 1996
Tax on operating income at
statutory rates $5,563 $5,506 $5,523
Dividends received deduction (30) (33) (25)
Difference in recognition of income and
expenses relating to adjustment in
asset bases due to Section 338 election 380 (2,068) (2,115)
Difference between statutory and income
tax policy reserves 100 (81) (870)
Differences in accounting for deferred
policy acquisition costs (236) (317) (227)
Accrual or market discount (289) (312) (362)
Equity in earnings of subsidiaries (1,753) (715) (833)
Other, net (84) 443 (75)
Provision for federal income taxes $3,651 $2,423 $1,016
Under the provisions of pre-1984 life insurance tax regulations, the
Company was taxed on the lesser of taxable investment income or income from
operations, plus one-half of any excess of income from operations over
taxable investment income. One-half of the excess (if any) of the income
from operations over taxable investment income, plus special deductions
allowed in computing the income from operations, were placed in the
Company's Policyholders' Surplus Account. The aggregate accumulation in the
account at December 31, 1998 and December 31, 1997 approximated $8,225,000.
Federal income taxes will become payable on this account at the then
current tax rate when and to the extent that the account exceeds a specific
maximum, or when and if distributions to stockholders, other than stock
dividends and other limited exceptions, are made in excess of the
accumulated previously taxed income. At December 31, 1998 and December 31,
1997, the Company had approximately $130,000,000 and $120,000,000 in its
Shareholders' Surplus Account from which it could make distributions to
ILCO without incurring any federal tax liability. The amount of dividends
which may be paid by the Company is limited by statutory regulations.
5. Reinsurance
The Company reinsures portions of certain policies it writes, thereby
providing greater diversification of risk and minimizing exposure on larger
policies. The Company's maximum retention on any one individual policy is
$250,000. Policy liabilities and contract-holder deposit funds are reported
in the accompanying statutory financial statements net of such reinsurance
ceded. The Company remains liable to the extent the reinsurance companies
are unable to meet their obligations under the reinsurance agreements.
17
<PAGE>
In December 1997, ILCO's life insurance subsidiaries entered into a
reinsurance treaty under which all of the contractual obligations and risks
under accident and health insurance policies were assumed by a third party
reinsurer. The transfer is effective as of July 1, 1997. These risks and
contractual obligations were sold pursuant to, first, a coinsurance
reinsurance agreement. Following applicable regulatory approvals, the
reinsurer will assume the direct obligations of the companies, on an
assumption reinsurance basis.
The amounts deducted in the accompanying financial statements for
reinsurance ceded are as follows (in thousands):
1998 1997
Aggregate reserve for life
policies and contracts $5,727 $5,183
Other policy claims and
benefits payable 3,253 2,805
Estimated amounts recoverable from reinsurers on paid claims were
$2,488,391 and $2,458,39 at December 31, 1998 and 1997, respectively. Total
premiums ceded during 1998, 1997 and 1996 were $7,914,925, $7,980,779 and
$5,591,028, respectively. Total premiums assumed during 1998, 1997 and 1996
were $4,217,474, $5,197,749 and $5,529,381, respectively.
6. Capital and Surplus
The insurance regulations of the State of Washington require minimum
capital of $2,400,000 and minimum surplus of $2,400,000. The Company's
Articles of Incorporation require that the Company maintain capital
applicable to common stock of $2,400,000.
Under current Washington law, any proposed payment of a dividend or
distribution, together with dividends or distributions paid during the
preceding twelve months, which exceeds the greater of i) 10% of statutory
surplus as of the preceding December 31, or ii) statutory net gain from
operations for the preceding calendar year is called an extraordinary
dividend and may not be paid until either it has been approved, or a
waiting period shall have passed during which it has not been disapproved,
by the insurance commissioners.
Effective July 25, 1993 Washington amended its insurance code to retain the
greater of standard but enacted requirements that prior notification of a
proposed dividend be given to the Washington Insurance Commissioner and
that dividends may be paid only from earned surplus. As of December 31,
1998, Investors-NA had earned surplus of $39,260,195. Since the law applies
only to dividend payments, the Company's ability to make principal and
interest payments on its surplus debentures is not affected.
During 1992, the NAIC passed a model regulation for minimum risk-based
capital (RBC) requirements for life and health insurance companies. The
RBC model requires that companies maintain certain amounts of capital and
surplus based on an insurer's investment and insurance risk. The
requirements were effective for the year ended December 31, 1993. The
ability of the Company to pay dividends could be further limited by the RBC
requirements.
18
<PAGE>
7. Permitted Statutory Accounting Practices
The insurance regulations of the State of Washington limit the amount an
insurer may invest in the obligations of any one corporation to 4% of the
insurer's statutory admitted assets. The Company held $40,903,140 and
$46,057,300 in subordinated notes issued by Family Life Corporation, a
wholly-owned subsidiary of FIC, at December 31, 1998 and 1997,
respectively. This investment exceeds the limit on investments prescribed
by the State of Washington by $2,558,685 at December 31, 1997. The
investment was not in excess of prescribed limits at December 31, 1998.
Prior to the acquisition of these notes, Investors-NA received written
approval from the Washington Insurance Department for the inclusion of the
full amount of these notes in its statutory admitted assets. At December
31, 1997, this permitted practice increased statutory surplus by $2,558,685
over what it would have been under prescribed statutory accounting
practices. There was no excess surplus above prescribed amounts at December
31, 1998. The Company employed no other permitted statutory accounting
practices that individually or in the aggregate materially affected
statutory surplus or risk-based capital at December 31, 1998 and 1997.
8. Employee Benefit Plans
Retirement plan
The employees of Investors-NA are covered under the ILCO Pension Plan (the
Plan). The Plan is a noncontributory defined benefit pension plan which
covers each employee of ILCO and its subsidiaries who has attained 21 years
of age and has completed one year or more of service. Each affiliate
company contributes any amounts necessary (as actuarially determined) to
fund the benefits provided for its eligible employees. ILCO made no
contributions in 1998, 1997 or 1996.
The normal retirement benefit provided under the Plan is equal to 1.57% of
final average eligible earnings less 65% of the participant's Social
Security Covered Compensation multiplied by the number of years of credited
service (up to 30 years). The compensation used in determining benefits
under the Plan is the highest average earnings received in any five
consecutive full calendar years during the last ten full calendar years
before the participant's retirement date. The Plan provides for reduced
early retirement benefits at age 60, with at least 5 completed years of
service.
Employee stock ownership plan
The Company, with its parent company and its affiliates, participates in an
Employee Stock Ownership Plan and a related trust maintained by ILCO. The
Plan generally covers employees who have attained the age of 21 and have
completed one year of service. Vesting of benefits to employees is based on
number of years of service. No contributions were made to the Plan in 1998,
1997 or 1996.
19
<PAGE>
Stock option plans
Under ILCO's Incentive Stock Option (ISO) Plan, certain key employees of
the Company have been granted options to purchase shares of ILCO's common
stock, at 100% of fair market value on the date of grant. At December 31,
1998 and 1997 respectively, there were no options remaining under the ISO
plan to purchase shares of ILCO's common stock.
Under ILCO's Non-Qualified Stock Option Plan, the Board of Directors of
ILCO is authorized to issue options to certain officers, directors, agents
and others to purchase up to 600,000 shares of ILCO's common stock at 100%
of the fair market value on the date of grant but in no case less than
$3.33 per share. As of December 31, 1998 and 1997, respectively, options to
purchase 42,000 and 84,000 shares of ILCO's common stock were outstanding
and unexercised.
Savings and investment plans
The Company's employees may participate in the ILCO Savings and Investment
Plan that allows eligible employees who have met a one-year service
requirement to make contributions to the Plan on a tax-deferred basis. A
Plan participant may elect to contribute up to 16% of eligible earnings on
a tax deferred basis, subject to certain limitations applicable to highly
compensated employees@ as defined in the Internal Revenue Code. Plan
participants may allocate contributions, and earnings thereon, between
several investment options. The account balance of each participant is 100%
vested at all times. Prior to the discontinuance of employer contributions
effective January 1, 1990, ILCO made matching contributions of up to 50% of
the first 6% of eligible compensation contributed by the plan participants.
Vesting of such company contributions is based on number of years of
service. In 1997, the Plan was amended to provide for a matching
contribution by ILCO. The match, which is in the form of shares of ILCO
common stock, is equal to 100% of an eligible participant's elective
deferral contributions, as defined in the Plan, not to exceed 1% of the
participant's plan compensation. Allocations are made on a quarterly basis
to the account of participants who have at least 250 hours of service in
that quarter.
9. Related Parties
Included in capital and surplus at December 31, 1998 and 1997 are two (2)
surplus debentures payable to ILCO with initial principal balances of
$140,000,000 and $15,000,000. The outstanding balances of both notes at
December 31, 1998 and 1997 totaled $15,896,000 and $27,796,000,
respectively. The rate of interest payable on the debentures is calculated
as one and one-half percent (12%) above the prime lending rate as adjusted
at the beginning of each quarter. The $140,000,000 debenture is payable in
43 consecutive quarterly installments of $2,000,000 each beginning December
31, 1988, with a final payment of the balance remaining due September 30,
1999. Payments on the $15,000,000 debenture are calculated based on
available surplus, as defined in the surplus debenture agreement, at the
end of each quarter. In accordance with the surplus debenture agreements,
the Company may prepay the debentures so long as prepayment does not cause
the surplus funds of the Company to be reduced below $10,000,000 (the
statutory capital and surplus floor prescribed by the State of Washington).
The Company has received written notification from the Washington
Department of Insurance that it does not need to obtain specific permission
from the Department prior to making a scheduled principal payment on the
debentures. However, Investors-NA has voluntarily agreed with the
Washington Insurance Commissioner that it will provide at least five days
advance notice of payments which it will make under the surplus debenture.
Principal payments totaling $11,150,000, $9,750,000 and $29,750,000 were
made on the $140,000,000 debenture during 1998, 1997 and 1996,
respectively, and payments totaling $750,000, $1,000,000 and $1,000,000
were made on the $15,000,000 debenture during 1998, 1997 and 1996,
respectively. Total interest paid by the Company on the surplus debentures
was $1,482,361, $3,343,711 and $5,538,469 during 1998, 1997 and 1996,
respectively. Cumulative interest paid by the Company on the debentures was
$93,415,549 at December 31, 1998. Unpaid accrued interest on these
debentures was $400,672 and $131,225 at December 31, 1998 and 1997,
respectively.
20
<PAGE>
The Company has a net balance due from or (to) related parties at December
31, 1998 and 1997 of $3,090,497 and $(2,655,380), respectively. The balance
resulted from transactions consisting of reimbursement of expenses and
receipts and disbursements of funds related to an administrative service
agreement between various affiliates.
Bonds include $47,644,777 of notes receivable from affiliates which
comprise (a) a loan of $28,528,140 (original principal balance of
$30,000,000) to Family Life Corporation (FLC), a wholly-owned subsidiary of
FIC; (b) a loan of $12,375,000 (original principal balance of $22,500,000)
to FLC; (c) a loan of $4,279,221 (original principal balance of $2,500,000
plus $1,779,221 of interest added to the principal) to Family Life
Insurance Investment Company (FLIIC), a wholly-owned subsidiary of FIC; and
(d) a loan of $2,462,416 to FIC. Interest received by the Company for all
loans during 1998, 1997 and 1996 amounted to $4,581,721, $5,265,784 and
$6,886,966, respectively.
In December 1998, FLIIC was dissolved. In connection with the dissolution,
all of the assets and liabilities of FLIIC became the obligations of
FLIIC's sole shareholder, FIC. Accordingly, the obligations under the
provisions or the $4.5 million note described above are now the obligations
of FIC.
In June 1996, the provisions of the notes from Investors-NA to FIC, FLC and
FLIIC were modified as follows: (a) the $22.5 million note was amended to
provide for twenty quarterly principal payments, in the amount of
$1,125,000 each, to commence on December 12, 1996; the final quarterly
principal payment is due on September 12, 2001; the interest rate on the
note remains at 11%, (b) the $30 million note was amended to provide for
forty quarterly principal payments, in the amount of $163,540 each for the
period December 12, 1996 to September 12, 2001; beginning with the
principal payment due on December 12, 2001, the amount of the principal
payment increases to $1,336,458; the final quarterly principal payment is
due on September 12, 2006; the interest rate on the note remains at 9%, (c)
the $4.5 million note was amended to provide for forty quarterly principal
payments, in the amount of $24,531 each for the period December 12, 1996 to
September 12, 2001, beginning with the principal payment due on December
12, 2001, the amount of the principal payment increases to $200,469; the
final quarterly principal payment is due on September 12, 2006; the
interest rate on the note remains at 9%, (d) the $2.5 million note was
amended to provide for the principal balance of the note to be repaid in
twenty quarterly installments of $125,000 each, commencing December 12,
1996 with the final payment due on September 12, 2001; the rate of interest
remains at 12%, (e) the Master PIK note, which was issued to provide for
the payment in kind of interest due under the terms of the $2.5 million
note prior to June 12, 1996, was amended to provide for the $1,977,119
principal balance of the note to be paid in twenty quarterly principal
payments, in the amount of $98,855.95 each, to commence December 12, 1996
with the final payment due on September 12, 2001; the interest rate on the
note remains at 12%.
21
<PAGE>
Common stocks at December 31, 1998 include: 53,400 shares of ILCO which has
a book value of $380,478 and a statement value of $764,572, 145,500 common
shares of FIC which has a book value of $229,890 and a statement value of
$1,978,220, 55,000 common shares of Investors-IN which has a book value of
$38,405,528 and a statement value of $23,098,367 and 300 common shares of
ILG Securities Corporation which has a book value of $245,440 and a
statement value of $217,065. Investors-IN and ILG Securities Corporation
are wholly-owned subsidiaries of the Company.
Rent and certain other operating expenses aggregating approximately $0,
$822,000 and $305,000 were paid to FIC in 1998, 1997 and 1996,
respectively, by the Company. The Company shares office facilities with
various affiliates and is a party to an intercompany expense allocation
agreement. Under this agreement, the Company was reimbursed $14 million,
$18 million and $16 million in 1998, 1997 and 1996, respectively, for
shared expenses it paid on behalf of its affiliates.
In 1995, Investors-NA entered into a reinsurance agreement with Family Life
pertaining to universal life insurance written by Family Life Insurance
Company ( Family Life), a wholly-owned subsidiary of FIC. The reinsurance
agreement is on a co-insurance basis and applies to all covered business
with effective dates on and after January 1, 1995. The agreement applies to
only that portion of the face amount of the policy which is less than
$200,000; face amounts of $200,000 or more are reinsured by Family Life
with a third party reinsurer. In 1996, Investors-NA entered into a
reinsurance agreement with Family Life, pertaining to annuity contracts
written by Family Life. The agreement applies to contracts written on or
after January 1, 1996. These reinsurance arrangements reflect management's
plan to develop universal life and annuity business at Investors-NA, with
Family Life concentrating on the writing of term life insurance products.
In October of 1993, ILCO entered into an agreement with the Chairman of the
Board of Directors whereby the Chairman agreed to surrender all of his
remaining common stock options for consideration of $6,847,000. Prior to
entering into this agreement, ILCO had accrued compensation expense related
to these options of $4,225,000. Upon entering into the agreement,
additional compensation was recorded totaling $2,622,000 for the year ended
December 31, 1993 to increase to a compensation to the surrender price.
Accordingly, a liability was recorded for the unpaid portion of the
agreement. Pursuant to this agreement, during 1993 the Chairman was paid
$3,237,120 for cancellation of 240,000 of these options an during 1994 he
was paid $997,520 for cancellation of 68,500 options and $379,143 for
federal income tax reimbursement relating to the cancellation of options in
1993. During 1995, the Chairman was paid $836,582 for the cancellation in
1995 of options to purchase 50,000 shares of ILCO's common stock, $156,323
for the federal income tax reimbursement relating to the cancellation in
1994 of options to purchase 68,500 shares and $127,608 as the final payment
relating to the cancellation in 1993 of options to purchase 240,000 shares.
22
<PAGE>
During 1996, the Company paid the Chairman: (i) $1,862,000 for the
cancellation in 1996 of options to purchase 121,500 shares of the Company's
common stock, plus interest at the rate of 8% per year on such amount for a
one year period (for a total of $2,011,737); (ii) $120,700 for the federal
income tax reimbursement relating to the cancellation in 1995 of options to
purchase 50,000 shares of the Company's common stock; and (iii) $313,960
for the federal income tax reimbursement relating to the 1996 options
cancellation. The federal income tax reimbursements are expensed in the
period when they occurred.
On June 12, 1991, FIC granted to the Company non-transferable options to
purchase up to a total of 9.9% of the common shares of FIC. These options
were granted in conjunction with the senior subordinated loan of $22.5
million and a senior loan of $2.5 million issued to the Company by FIC and
a subsidiary, relating to FIC's acquisition of Family Life. The option
price is $10.50 per share, equivalent to the then current market price,
subject to adjustment to prevent the effect of dilution. As a result of
FIC's five-for-one stock split, effective in November 1996, the option
price is currently $2.10 per share. The options provide for their
expiration upon final repayment of the respective loans.
Data processing services for ILCO's and FIC's insurance subsidiaries are
provided by FIC Computer Services, Inc. (FIC Computer), a subsidiary of
FIC. Each of FIC's and ILCO's insurance subsidiaries has entered into a
data processing agreement with FIC Computer whereby FIC Computer provides
data processing services to each subsidiary for fees equal to such
subsidiary's proportionate share of FIC Computer's actual costs of
providing those services to all of the subsidiaries. The Company paid
$1,795,790, $2,223,647 and $1,748,402 to FIC Computer for data processing
services provided during 1998, 1997 and 1996, respectively.
10. Commitments and Contingencies
The Company is a defendant in certain legal actions related to the normal
business operations of the Company. Management believes that the resolution
of such matters will not have a material impact on the financial
statements.
23
<PAGE>
11. Acquisition of Subsidiary
On July 9, 1997, the Company's subsidiary Investors-IN acquired State Auto
Life Insurance Company, (State Auto) an Ohio domiciled life insurer, from
State Automobile Mutual Insurance Company for an adjusted cash purchase
price of $11.8 million. Under the terms of the transaction, State Auto Life
Insurance Company was merged with Investors-IN, with Investors-IN being the
surviving entity.
On June 30, 1998, Investors-IN acquired Grinnell Life Insurance Company
(Grinnell Life), an Iowa domiciled life insurer, from Grinnell Mutual Life
Insurance Company for an adjusted purchase price of $16.6 million. Under
the terms of this transaction, Grinnell Life was merged with Investors-IN,
with Investors-IN being the surviving entity.
The Company's equity investment in Investor-IN reflects the impact of the
above transactions.
<PAGE>
REGISTRATION STATEMENT
ON
FORM N-4
Part C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
The following financial statements and exhibits are filed with this
Post-Effective Amendment:
(a) Financial Statements:
Part A: None
Part B:
(i) Registrant:
Report of Independent Accountants
Combined Balance Sheet, as of December 31, 1998
Individual Statements of Operations, For the Year Ended December 31,
1998
Individual Statements of Changes in Total Assets, For the Years Ended
December 31, 1998 and December 31, 1997
Notes to Financial Statements
(ii) Depositor:
Report of Independent Accountants
Statutory Balance Sheets, as of December 31, 1998 and December 31,
1997
Statutory Statements of Operations, for the Years Ended December 31,
1998, December 31, 1997 and December 31, 1996
Statutory Statements of Changes in Capital and Surplus, for the Years
Ended December 31, 1998, December 31, 1997 and December 31, 1996
Statutory Statements of Cash Flows, for the Years Ended December 31,
1998, December 31, 1997 and December 31, 1996
C-1
<PAGE>
Notes to Statutory Financial Statements
(b) Exhibits:
1. Resolution of board of directors of Investors Life Insurance
Company of North America authorizing the establishment of the
registrant.
2. Not applicable
3 (a) Distribution Agreement between Investors Life Insurance
Company of North America and INA Security Corporation (n/k/a ILG
Securities Corporation).
3 (b) Specimen Agreement between principal distributor and dealer.
3 (c) Specimen Agreement between principal distributor and its
agents (registered representatives).
4 (a) Form of single premium variable annuity contract.
4 (b) Form of flexible premium variable annuity contract.
4 (c) Form of endorsement conforming the single payment and
flexible payment variable annuity contracts to the requirements
of section 72(s) of the Internal Revenue Code of 1954, as amended
by section 222(b) of the Tax Reform Act of 1984.
5 (a) Form of application for single payment variable annuity
contract.
5 (b) Form of application for flexible payment variable annuity
contract.
6 Certificate of incorporation and by-laws of Investors Life
Insurance Company of North America.
7 Not applicable
8 Participation Agreement between Investors Life Insurance Company
of North America, Putnam Capital Manager Trust and Putnam Mutual
Funds Corp.
9 Opinion of counsel as to the legality of the securities.
C-2
<PAGE>
10(a) Consent of Independent Accountants
11 Not Applicable
12 Not Applicable
13 Schedule for computation of performance returns.
Item 25. Directors and Officers of the Depositor
Name and Principal Position and Offices
Business Address* with Depositor
Roy F. Mitte Chairman, President and Chief Executive Officer,
Director
James M. Grace Executive Vice President, Chief Financial Officer and
Treasurer; Director
Eugene E. Payne Executive Vice President, Chief Operations Officer and
Secretary; Director
Jeffrey H. Demgen Executive Vice President and Chief Sales and Marketing
Officer
Theodore A. Fleron Senior Vice President, General Counsel and Assistant
Secretary; Director
Dale E. Mitte Director
Steven P. Schmitt Senior Vice President and Assistant Secretary;
Director
David C. Hopkins Senior Vice President and Controller
Thomas C. Richmond Senior Vice President
Walter Reed Senior Vice President
John M. Welliver Senior Vice President
Roberta A. Mitchell Senior Vice President
John W. Peasley Senior Vice President
C-3
<PAGE>
Name and Principal Position and Offices
Business Address* with Depositor
Bradley A. Groff Senior Vice President
Laurie C. Black Senior Vice President
Cindy Hall-Davis Senior Vice President
Ricardo A. Cruz Vice President
Robert D. Rue Vice President
Peter A. Tritz Vice President
Laurie Cleveland Vice President
Sherry Stroud Vice President
Joanne Shattuck Vice President
*701 Brazos Street, Austin, Texas 78701
C-4
<PAGE>
Item 26. Persons Controlled by or Under Common Control
with the Depositor or Registrant
Financial Industries Corporation (a financial services holding company,
incorporated in Texas)
:
:
: 44.74%
InterContinental Life Corporation (a financial services holding company
incorporated in New Jersey)
:
:
: 100%
Investors Life Insurance Company of North America
(a Washington Life insurance company)
: :
: :
: : 100%
:
: ILG Securities Corporation:
(a registered broker-dealer
: incorporated in Pennsylvania)
:
:
: 100%
:
Investors Life Insurance Company of Indiana
(an Indiana life insurance company)
C-5
<PAGE>
Item 27. Number of Contract Owners
As of December 31, 1998 the number of contract owners of qualified and
non-qualified contracts (single payment and flexible payment) issued by the
Registrant was as follows:
(i) Money Market Division:
Qualified..................................... 114
Non-qualified................................. 60
(ii) Growth and Income II Division:
Qualified..................................... 474
Non-qualified................................. 138
(iii) Income Division:
Qualified..................................... 116
Non-qualified................................. 133
(iv) Voyager Division
Qualified....................................... 31
Non-qualified................................... 15
Item 28. Indemnification
(a) The Depositor: Article VII, Section 7.1 of the By-Laws of Investors Life
Insurance Company of North America provides, in relevant part, that:
This Corporation shall indemnify its directors and officers to the full
extent permitted by the Washington Business Corporation Act now or
hereafter in force. However, such indemnity shall not apply on account of:
(1) acts or omissions of the director or officer finally adjudged to be
intentional misconduct or a knowing violation of law; (2) conduct of the
director finally adjudged to be in violation of RCW 23B.08.310; or (3) any
transaction with respect to which it was finally adjudged that such
director or officer personally received a benefit in money, property, or
services to which the director or officer was not legally entitled.
This Corporation shall advance expenses for such persons as authorized by
separate directors' resolutions or contracts.
(b) The Principal Underwriter: Article VII, Section 7.4 of the By-Laws of ILG
C-6
<PAGE>
Securities Corporation provide, in relevant part, 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 (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, or agent 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, against expenses (including
attorneys' fees), judgments, fines 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 The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent, shall not, of itself, create a presumption that the
person 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 reasonable
cause to believe that his conduct was unlawful.
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 by or in the right of the corporation to procure
a judgment in its favor of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation as a partnership, joint venture, trust of other enterprise,
against expenses (including attorneys' fees), actually and reasonably
incurred by him in connection with the defense or settlement of 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 expect that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to
the corporation unless and only to the extent that the Court of Chancery or
the court in which such action, suit or proceeding was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and
C-7
<PAGE>
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, and is therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted against the Registrant by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
on the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
C-8
<PAGE>
Item 29. Principal Underwriter:
(a) The principal underwriter for the Contracts issued by the Registrant is ILG
Securities Corporation, 701 Brazos Street, Austin, Texas 78701. ILG
Securities Corporation also acts as a principal underwriter for variable
annuity contracts issued by Life Insurance Company of North America (an
indirect, wholly-owned subsidiary of CIGNA Corporation), and funded through
Life Insurance Company of North America Separate Account A.
(b) The officers and directors of ILG Securities Corporation are as follows:
Name and Positions and offices
Business Address* with Underwriter
James M. Grace Director
Eugene E. Payne Director
Roberta A. Mitchell President; Director
Ricardo A. Cruz Treasurer
David C. Hopkins Assistant Treasurer
Theodore A. Fleron Secretary
*701 Brazos Street, Austin, Texas 78701.
(c) The following table sets forth information pertaining to commissions and
other compensation received by ILG Securities Corporation from Investors
Life Insurance Company of North America during the fiscal year ended
December 31, 1998:
(1) Net underwriting discounts and commissions*.......$-0-
(2) Compensation on redemption or annuitization....... -0-
(3) Brokerage commissions............................. -0-
(4) Compensation**...................................$ -0-
*Represents amounts paid to principal underwriter.
C-9
<PAGE>
**Represents amounts paid to principal underwriter by Sponsor in
connection with the provision of ongoing Contract Owner administrative
services.
Item 30. Location of Accounts and Records
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and Rules 31a-1 to 31a-3 thereunder, and records
relating to shareholders are maintained by Investors Life Insurance Company of
North America, Separate Accounting Unit, 701 Brazos Street, Austin, Texas 78701.
Corporate records pertaining to the Depositor, including its Certificate of
Incorporation, By-Laws and Resolution of Board of Directors authorizing
establishment of the Separate Account, are maintained by its Secretary, whose
business address is 701 Brazos Street, Austin, Texas 78701.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
The Sponsor of the Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial
statements in the registration statement are never more than 16 months
old, so long as payments under the Contracts may be accepted;
(b) to include in the prospectus a form letter which the investor can
remove to send to the Depositor to obtain a copy of the Statement of
Additional Information. (c) to mail a copy of the Statement of
Additional Information promptly upon receipt of (i) a written request
on the form described in sub-paragraph (b), above, or other written
request directed to the address shown on the cover page of the current
prospectus of the Registrant, or (ii) an oral request to the telephone
number shown on the cover page of the current prospectus of the
Registrant. (d) that it intends to rely upon the provisions of the SEC
staff no-action letter dated November 28, 1988, issued to the American
Council of Life Insurance (Ref. No. IP- 6-88). The sponsor of the
Registrant represents that it has complied with the provisions of
paragraphs (1) to (4) of said letter.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Sponsor of the
Registrant has caused this Post-Effective Amendment No. 25 to the Separate
Account I Registration Statement to be duly signed on behalf of the Registrant
in the City of Austin, and the State of Texas, on the 29th day of April, 1999.
SEPARATE ACCOUNT I
(Registrant)
By: Investors Life Insurance Company
of North America
/s/ Roy F. Mitte
Roy F. Mitte Chairman, President
and Chief Executive Officer
Pursuant to the requirements of paragraph (b)(4) of Rule 485 under the
Securities Act of 1933, the Registrant hereby certifies that this Post-Effective
Amendment No. 25 meets all of the requirements for effectiveness pursuant to
paragraph (b) of said Rule 485.
Pursuant to the requirements of the Securities Act of 1933, this Separate
Account I Registration Statement has been signed below by the following persons
in the capacities and on the date indicated:
/s/ Roy F. Mitte /s/ James M. Grace
Roy F. Mitte James M. Grace
Principal Executive Officer Principal Financial Officer
Director Principal Accounting Officer
Director
/s/ Eugene E. Payne /s/ Theodore A. Fleron
Eugene E. Payne Theodore A. Fleron
Director Director
/s/ Jeffrey H. Demgen /s/ Steven P. Schmitt
Jeffrey H. Demgen Steven P. Schmitt
Director Director
/s/ Dale E. Mitte
Dale E. Mitte
Director
C-11
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No. Description
1 * Ex-4 Resolution of board of directors of Investors Life
Insurance Company of North America authorizing
the establishment of the registrant.
2 Not applicable
3 (a) * Ex-7 Distribution Agreement between Investors Life
Insurance Company of North America and INA
Security Corporation (n/k/a ILG Securities
Corporation).
3 (b) * Ex-12 Specimen Agreement between principal distributor
and dealer.
3 (c) * Ex-17 Specimen Agreement between principal distributor
and its agents (registered representatives).
4 (a) * Ex-36 Form of single premium variable annuity contract.
4 (b) ** Ex-46 Form of flexible premium variable annuity contract.
4 (c) *** Ex-58 Form of endorsement conforming the single payment
and flexible payment variable annuity contracts to the
requirements of section 72(s) of the Internal Revenue
Code of 1954, as amended by section 222(b) of the
Tax Reform Act of 1984.
5 (a) * Ex-62 Form of application for single payment variable
annuity contract.
5 (b) ** Ex-66 Form of application for flexible payment variable
annuity contract.
6 **** Ex-70 Certificate of incorporation and by-laws of Investors
Life Insurance Company of North America.
7 Not applicable
Ex-1
<PAGE>
Exhibit No. Page No. Description
8 Ex-108 Participation Agreement between Investors Life
Insurance Company of North America, Putnam
Capital Manager Trust and Putnam Mutual Funds
Corp. Filed with Post-Effective Amendment No. 20,
dated April 14, 1995 and filed herewith in order to
comply with the requirements of Reg.
ss.232.303(a)(3), pertaining to the electronic
submissions more than three years after a
Registrant's Edgar phase-in date.
9 Ex-120 Opinion of counsel as to the legality of the
securities.
10(a) Ex-122 Consent of Independent Accountants
11 Not Applicable
12 Not Applicable
13 Ex-123 Schedule for computation of performance returns.
Filed with Post-Effective Amendment No. 11 (Form
N-4), and filed herewith in order to comply with the
requirements of Reg.ss.232.303(a)(3), pertaining to
the electronic submissions more than three years after
a Registrant's Edgar phase-in date.
* Filed as an exhibit to Amendment No. 1 to Form N-8B-2(File No. 811-3470)
dated July 7, 1982, and filed herewith in order to comply with the
requirements of Reg. ss.232.303(a)(3), pertaining to the electronic
submissions more than three years after a Registrant's Edgar phase-in date.
** Filed as an exhibit to Amendment No. 3 to Form N-8B-2 (File No. 811-3470)
dated September 24, 1982, and filed herewith in order to comply with the
requirements of Reg. ss.232.303(a)(3), pertaining to the electronic
submissions more than three years after a Registrant's Edgar phase-in date.
*** Filed with Post-Effective Amendment No. 4 (Form S-6) dated March 1, 1985,
and filed herewith in order to comply with the requirements of Reg.
ss.232.303(a)(3), pertaining to the electronic submissions more than three
years after a Registrant's Edgar phase-in date.
**** The initial certificate of incorporation and by-laws of the Registrant were
filed as an
Ex-2
<PAGE>
exhibit to Amendment No. 1 to Form N-8B-2 (File No. 811-3470) dated July 7,
1982. The certificate of incorporation and by-laws of the Registrant which
were adopted in connection with the redomestication of the Registrant from
the Commonwealth of Pennsylvania to the State of Washington are filed
herewith in order to comply with the requirements of Reg. ss.232.303(a)(3),
pertaining to the electronic submissions more than three years after a
Registrant's Edgar phase-in date.
Ex-3
<PAGE>
Exhibit 1
Resolution of Board of Directors of Investors Life
Insurance Company of North America
Authorizing the Establishment of the Registrant
WHEREAS, it is desired that the Company should engage in the business of
reinsuring and issuing various forms of variable annuity contracts.
BE IT RESOLVED THAT
1. The Company shall and it hereby does establish one more separate
accounts pursuant to Section 406.2 (a) of The Insurance Company Law of 1921, May
17, P.L. 682, as amended (40 P.S. Section 506.2 (a)) of which one such account
is hereby designated as INA Investors Separate Account A ("Account A") and a
second such separate account shall be designated as INA Investors Separate
Account B ("Account B"). The remaining separate accounts ("Accounts") shall be
designated by the President from time to time.
2. The Company may allocate to Account A, Account B, and the Accounts any
amounts (including without limitation proceeds applied under optional modes of
settlement) to provide for the issuance and reinsuring of all forms of annuities
(and benefits incidental thereto) payable in fixed or variable amounts or both,
subject to the applicable provisions of state and federal law.
3. Account A and Account B shall each be registered as an investment
company in the form of a unit investment trust under the Investment Company Act
of 1940.
4. The Accounts shall be registered under the Investment Company Act of
1940 only if the President shall determine that such action be necessary. In
such event, the President shall designate the form of such registration.
5. The Company may issue any and all forms of variable annuity contracts as
shall be approved by the President or a Vice President, such approval to be
evidenced by their signatures or facsimile signatures to the same.
6. Any and all variable annuity contracts may be registered under the
Securities Act of 1933 in such amounts as shall be determined by the President
or any Vice President of the Company from time to time and may be filed for
approval for issuance in any state in which the Company is authorized to conduct
its business upon the written approval of the President or any Vice President of
the Company.
7. The Company is authorized to enter into any and all lawful agreements
relating to the issuance of variable annuity contracts as may be required from
time to time including but not limited to distribution agreements and custodial
agreements, as determined by any officer of the Company. Where required, the
Company shall comply with the Securities Exchange Act of 1934 and all other
federal and state laws in connection with the sale of its variable annuity
contracts.
Ex-4
<PAGE>
8. The officers of the Company are hereby authorized and directed to take
all action necessary to effect the establishment of Account A, Account B and
Accounts, including, without limitation, the execution of any and all
instruments, the preparation, execution and filing of all instruments in
Pennsylvania and any other state or other jurisdiction in which the Company is
authorized to conduct its business, the preparation, execution and filing of
registration statements, contracts, amendments and exhibits thereto, proxy
statements, proxies, applications, and other instruments that they may deem
necessary or advisable to enable Account A, Account B or the Accounts to comply
with any rules, regulations or requirements of the states, territories of the
United States, other lawful jurisdictions, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the Investment Company
Act of 1940, as amended, or under any other securities act under the
jurisdiction of the SEC or any other federal law in connection with any variable
annuity contracts offered in connection with Account A, Account B, or the
Accounts; further including, without limitation, the filing of a power of
attorney in a form approved by a resolution of the Company appointing named
individuals as true and lawful attorneys and agents of the Company, Account A,
Account B and Accounts to do the acts and things therein described and finally
to do such other acts and things as may be necessary to carry out the purposes
and intent of this resolution.
/s/ Theodore A. Fleron, Assistant Secretary
Ex-5
<PAGE>
CERTIFIED to be a true and correct copy of the Resolution
adopted by the Board of Directors of INVESTORS LIFE
INSURANCE COMPANY OF NORTH AMERICA at a Regular Meeting
held on October 4, 1978, a quorum being present.
/s/ Theodore A. Fleron, Assistant Secretary
Ex-6
<PAGE>
Exhibit 3(a)
Distribution Agreement Between Investors Life Insurance
Company of North America and INA Security Corporation
(n/k/a ILG Securities Corporation)
VARIABLE ANNUITY DISTRIBUTION AGREEMENT
THIS AGREEMENT made this _____ day of June, 1982, by and between INVESTORS
LIFE INSURANCE COMPANY OF NORTH AMERICA ("Investors Life"), a corporation
organized and existing under the laws of Pennsylvania, and INA SECURITY
CORPORATION ("Distributor"), a corporation organized and existing under the laws
of Pennsylvania:
WHEREAS, Investors Life is the sponsor of CIGNA Separate Account I
("Account"), a unit investment trust registered under the Investment Company Act
of 1940 ("40 Act"), through which it will offer and issue various forms of
variable annuity contracts (the "Contracts") which are or will be registered
under the Securities Act of 1933 ("33 Act"), and wishes to issue these Contracts
to the general public; and
WHEREAS, Distributor is a broker/dealer registered under the Securities
Exchange Act of 1934 (11134 Act"), a member of the National Association of
Securities Dealers Inc. ("NASD") , and a licensed life insurance agency under
Pennsylvania law; and
WHEREAS, Distributor is interested in promoting and distributing the
Contracts through SEC registered dealers and their qualified personnel, and is
financially able and employs qualified personnel to accomplish such activities;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto hereby covenant and mutually agree as follows:
1. DISTRIBUTION OF CONTRACTS BY DISTRIBUTOR. Distributor agrees to act as a
principal distributor for the Contracts and will have the right, as principal,
to enter into agreements with securities dealers who are registered under the
'34 Act and are members of the NASD and whose representatives are properly
licensed with Investors Life under applicable state insurance law, to permit
such dealers to engage in the solicitation and sale of the Contracts to the
general public through such properly licensed personnel and take orders
("Applications") therefor at the current public offering price. (Such
individuals or firms will hereafter be referred to as "Dealers".) Investors Life
shall be a party to all such Dealer agreements. It is understood that
Distributor's function as principal distributor is limited to sales
relationships with Dealers, except as otherwise provided in Section 8 hereof.
Distributor shall also have the right, but not the obligation, as Dealer,
to sell Contracts to the public upon such conditions as Investors Life from time
to time may determine, all such sales to comply with the '33 Act, '40 Act,'34
Act,
Ex-7
<PAGE>
the NASD and applicable insurance laws and regulations. The price at which the
Contracts are offered to the public through Distributor shall be computed and
shall be effective as set forth in the Prospectus of Account describing such
Contracts, current as of the time of such sale.
2. CUSTOMER APPLICATIONS. The current Prospectus for the Contracts shall
provide that all customer Contract Applications and initial payments for the
Contracts shall be transmitted by the Dealers to Investors Life at its Home
Office for acceptance and confirmation or rejection, or to a designee authorized
by Investors Life for such purposes.
Upon the receipt of any Contract payment and the acceptance of an
Application for the purchase of such Contract, Investors Life or Distributor
will confirm such acceptance to the appropriate Dealer, if any, and to the
Contract owner who submitted the Application. Investors Life will thereafter
issue such Contract for delivery to the owner as soon as practicable after its
receipt and acceptance of the Application and payment therefor.
3. SUPERVISION - BOOKS AND RECORDS. Distributor shall establish such rules
and procedures as may be necessary to supervise diligently the sales activities
of its agents or employees. The Dealer agreements shall require the Dealers to
establish similar rules and procedures governing the sales activities of their
agents and employees. The Dealer agreements shall provide that upon request by
Investors Life or Distributor, the Dealers shall furnish to Investors Life or
Distributor such appropriate records as may be necessary to insure such diligent
supervision. Distributor will maintain or cause to be maintained for it all
books and records required to be maintained by it under applicable Federal and
state law and NASD regulations.
Distributor will maintain at its own expense insurance against public
liability in such an amount as the Officers or Directors of Investors Life may
from time to time reasonably request.
4. AUTHORIZED MATERIAL. Distributor will not prepare or distribute any
materials other than Investors Life's and Account's current and effective
Prospectus, and such supplemental sales literature or advertising as is approved
by Investors Life in writing. Distributor agrees to file with the Securities and
Exchange Commission and the NASD, and such state securities authorities as
Investors Life prescribes, copies of any advertisement, pamphlet, circular, form
letter, or other sales literature relating to Account or the Contracts used by
Distributor and addressed to or intended for distribution to prospective
investors, within the time required by such regulatory authorities and to
furnish Investors Life at its Home
Page 2
Ex-8
<PAGE>
Office with sufficient copies of all such material to meet Investors Life's
needs. Investors Life will make all filings of all material which it is required
to file by the insurance laws and regulations of any state or Federal agency.
5. INVESTORS LIFE - JURISDICTION. Investors Life shall comply with the
applicable laws and regulations of the United States and of the individual
states within which Distributor and Investors Life may do business, including
but not limited to jurisdictions where the Contracts are offered for sale, and
will conduct its affairs with the Dealers and Contract offerees and purchasers
in accordance with the '33 Act, the '34 Act, the '40 Act and the Rules of the
NASD including its Rules of Fair Practice.
6. CONTRACT REGISTRATION. Investors Life, at its expense, will (a) prepare,
file and will take all reasonable action to keep effective the '33 Act and '40
Act Registration Statements and Prospectuses and state approvals covering the
offering of the Contracts and Account as may be necessary to meet Distributor's
reasonable requirements for distribution and sale of the Contracts in all
jurisdictions where they may lawfully be sold, notify Distributor if such
material ceases to be effective, and advise Distributor as to such jurisdictions
where the Contracts may be offered for sale or sold; (b) provide Distributor
with the "net accumulation unit values" of Account computed as at the time(s)
prescribed by and in compliance with all pertinent requirements of the NASD and
the Securities and Exchange Commission; (c) pay the fees required to have Dealer
personnel licensed under applicable state law to offer the Contracts for sale to
the public.
7. BOOKS AND RECORDS - INVESTORS LIFE. Investors Life will maintain all
books and records with respect to the Contracts required to be maintained by it
under applicable Federal securities laws and the applicable insurance laws and
regulations of the states in which the Contracts are offered for sale.
Distributor may request that all or some of the books and records required to be
maintained by it as a registered broker/dealer, in connection with the sale of
the Contracts, be prepared and maintained by Investors Life or an affiliate
thereof as agent for Distributor. Any such books and records with respect to the
Contracts which Investors Life agrees to keep and maintain for Distributor shall
be the joint property of Distributor and Investors Life and they will be made
available for examination by the Securities and Exchange Commission, the NASD,
and state insurance agencies in accordance with the applicable laws and
regulations.
8. CONTRACT OWNER SERVICES. At the request of Investors Life, Distributor
will require the Dealers to maintain facilities and provide competent personnel
to respond to Contract owners' routine requests for information and forms in
connection
Page 3
Ex-9
<PAGE>
with the exercise of rights and privileges afforded under the Contracts.
Distributor shall require such Dealers to perform Contract owner servicing in
accordance with the rules and procedures of Investors Life.
In the event Investors Life requests a Dealer to provide such Contract
owner services, Distributor agrees to compensate such Dealer in such amounts as
may be agreed upon by Investors Life and the Distributor.
9. RESERVATION OF RIGHTS. Investors Life reserves the right to refuse at
any time to issue any of the Contracts for any reason deemed adequate by it.
Investors Life shall at all times have the sole right to appoint and/or license
for insurance purposes or to terminate the insurance license under applicable
insurance law of any person or Dealer.
10. COMPENSATION. In full satisfaction of all services herein agreed to be
performed by it, Distributor shall receive commissions from Investors Life in
accordance with the Compensation Addendum attached hereto.
11. TERMINATION. This Agreement shall become effective on the date of
signing and shall continue for a period of one year and from year to year
thereafter, subject to termination by either party upon six months' prior
written notice to the other party, except that in the event Distributor shall
cease to be a registered broker/dealer or a member of the NASD, this Agreement
shall immediately terminate. This Agreement may not be assigned by either party
without the written consent of the other party.
Subject to the provisions of the immediately preceding paragraph, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, provided, however, that this Agreement
shall terminate automatically upon assignment by Distributor as provided for and
defined in the '40 Act, as amended, unless under an appropriate exemptive
provision of such Act, the Securities and Exchange Commission shall determine
that a conditional or unconditional order of exemption is necessary or
appropriate in the public interest and consistent with the protection of
investors and the purpose fairly intended by the policy and practice of such
Act; in which event this Agreement shall continue in full force and effect.
12. GOVERNING LAW. It is the intention of the parties hereto that this
Agreement shall be governed and construed according to the laws of the
Commonwealth of Pennsylvania.
Page 4
Ex-10
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
(SEAL)
By:_______________________________________________
ATTEST:
______________
INA SECURITY CORPORATION
(SEAL)
By:________________________________________________
ATTEST:
_______________
7255A
Page 5
Ex-11
<PAGE>
Exhibit 3(b)
Specimen Agreement Between Principal Distributor and Dealer
PRINCIPAL DISTRIBUTOR
INA SECURITY CORPORATION
1600 ARCH STREET
PHILADELPHIA, PENNSYLVANIA 19101
VARIABLE ANNUITY DEALER AGREEMENT
Dealer_______________________________________________________________("Dealer")
Address_______________________________________________________________________
Date of Agreement_____________________________________________________________
Effective
Date__________________________________________________________________________
1. INA Security Corporation ("Security Corp.") is the principal distributor
of variable annuity contracts (the "Contracts") issued by Investors Life
Insurance Company of North America ("Investors Life") through the CIGNA
Separate Account I (the "Separate Account").
2. Dealer is hereby appointed by Security Corp. and Investors Life to
supervise solicitations for and sales of the Contracts and to perform
certain administrative duties with respect to the Contracts as outlined
herein, subject to the terms and conditions set forth below.
3. Dealer represents that it is a registered broker/dealer 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. (the "NASD") . Dealer agrees to maintain its registration under the
1934 Act and its membership in good standing with the NASD during the term
of this Agreement. Dealer agrees to abide by all rules and regulations of
the NASD and to comply with all applicable state and Federal laws and the
rules and regulations of regulatory agencies having jurisdiction which may
affect the sale of the Contracts.
4. Dealer agrees to select persons associated with it ("registered
representatives") who Dealer shall train and qualify as agents to solicit
applications for the Contracts in conformance with applicable state and
Federal laws. Such registered representatives of Dealer will be permitted o
solicit sales of Contracts only in states where Investors Life is
authorized to transact a variable annuity business and where the registered
representative is licensed by appointment with Investors Life to solicit
the Contracts.
Ex-12
<PAGE>
5. Solicitations for the Contracts hereunder will be made only by NASD
registered representatives of Dealer who possess the required licenses and
appointments, including, but not limited to registration with the NASD.
Continued solicitation for the Contracts shall be contingent upon the
continued qualification of such registered representatives under all
applicable laws including but not limited to possession of the required
licenses and appointments.
6. The activities of all registered representatives of Dealer, who are
referred to in paragraphs 4 and 5 will be under the direct and diligent
supervision of Dealer. Dealer shall perform its supervisory duties in
strict compliance with Investors Life's and Security Corp's. rules and the
laws, rules and regulations of the NASD, the Securities and Exchange
Commission, and any other government or other agencies that have
jurisdiction over variable annuity contracts. Dealer shall indemnify and
hold Security Corp. and Investors Life harmless from any wrongful acts
committed by its registered representatives in the solicitation for the
Contracts.
7. Dealer also agrees to perform the following administrative duties in
connection with the solicitation, sale and servicing of the Contract by its
duly licensed and appointed registered representatives.
A. Dealer will review all applications for the Contracts for
completeness and will promptly forward such applications together with
all gross purchase payments to Investors Life, together with any other
documents concerning such applications. It is expressly understood
that Investors Life reserves the right to reject any such application.
B. Dealer will maintain appropriate books and records concerning the
activities of its registered representatives authorized to solicit and
sell the Contracts, as are required by the SEC, NASD and other
regulatory agencies that have jurisdiction or that may be reasonably
required by Investors Life and Security Corp. Such books and records
shall be considered to be the books and records of Investors Life and
available to Investors Life or Security Corp. at any reasonable time
upon written notification to Dealer.
C. Dealer will review for completeness all applications for licensing
submitted by its registered representatives for initial appointment
and renewal as variable annuity agents with Investors Life. Dealer
will also maintain variable annuity agent records and will notify
Investors Life of any notice Dealer may receive
Page 2
Ex-13
<PAGE>
concerning the suspension or revocation of any registered
representative's variable annuity license.
D. Dealer will process and pay to variable annuity agents all
commissions on behalf of Investors Life and Security Corp. for sales
of the Contracts. Dealer will also maintain complete records on total
compensation received from sales of the Contracts and the allocation
of such compensation by Dealer for the administrative duties it
performs and the commissions paid to variable annuity agents.
E. Dealer will establish rules and procedures as may be necessary to
supervise diligently the sales activities of its agents and employees.
Upon written request by Investors Life or Security Corp., Dealer shall
promptly furnish such appropriate records as may be necessary to
insure such diligent supervision.
F. Dealer will maintain facilities on behalf of Investors Life and
provide competent personnel to respond to Contract owners' routine
requests for information and forms in connection with the exercise of
rights and privileges afforded under the Contracts. Dealer shall
perform such Contract Owners servicing in a manner (i) as is necessary
to assure prompt and satisfactory attention to Contract Owner needs
and (ii) in accordance with the rules and procedures as may be
established from time to time by Investors Life.
G. Dealer will disseminate all, directives, procedural rules and
information releases that may be issued by Investors Life from time to
time, to appropriate administrative personnel and registered
representatives, and maintain a record thereof.
8. Dealer agrees that registered representatives will offer and sell the
Contracts only in accordance with the terms and conditions of the then current
prospectus applicable to the Contracts and will make no representations not
included in the prospectus or in any authorized supplementary material approved
by Security Corp. and Investors Life. Dealer shall not use or permit to be used
sales literature or advertising with regard to the Contracts other than with the
prior written approval of Security Corp. and Investors Life.
9. Compensation for sales of the Contracts and Dealers diligent supervision
of sales personnel in accordance with the Dealer's Compensation attached hereto,
or the same as may be amended to time by Investors Life and Security Corp. and
at the time of issuance of a Contract.
Page 3
Ex-14
<PAGE>
10. This Agreement may not be assigned except by mutual consent and shall
continue for a period of one year and from year to year thereafter subject to
termination by any party upon 30 days' prior written notice to the parties at
their normal place of business, except that in the event the Dealer ceases to be
a member of the NASD or not possess the requisite licenses and the appointments
this Agreement shall immediately terminate. No compensation shall be payable to
Dealer following termination of this Agreement, unless otherwise specifically
provided in the Dealers Compensation Schedule hereto. Security Corp. and
Investors Life reserve the right of revising the amount of Compensation paid to
Dealer under paragraphs 9 and 10 at any time upon the mailing of written notice
to Dealer at its last known address.
11. Failure of any party to terminate this Agreement for any of the causes
set forth therein shall not constitute a waiver of the right to terminate this
Agreement at a later time for any such causes.
12. Dealer understands and agrees that in performing the services covered
by this Agreement, it is acting in the capacity of an independent contractor and
not as agent or employee of Security Corp. or Investors Life, and that it is not
authorized to act for Security Corp., nor to make any representation on behalf
of Security Corp. or Investors Life.
13. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania, and shall be binding upon receipt by Security
Corp. of a counterpart duly accepted and signed by the Dealer and Investors
Life.
14. This Agreement shall supersede and revoke all prior agreements,
discussions or understandings, whether written or oral, concerning the
Contracts.
Page 4
Ex-15
<PAGE>
DEALER: INA SECURITY CORPORATION
BY____________________________ BY_________________________
TITLE_________________________ TITLE______________________
INVESTORS LIFE INSURANCE
COMPANY OF NORTH AMERICA
BY_________________________
TITLE______________________
Page 5
Ex-16
<PAGE>
Exhibit 3(c)
Specimen Agreement Between Principal Distributor
and its Agents (Registered Representatives)
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA SECURITY CORPORATION
DEALER'S COMPENSATION SCHEDULE
(EFFECTIVE ______,1982)
Sales Compensation for Single Premium Variable Annuity Contract (Forms 82SPL15
or 82SPN15) solicited by Dealer's registered representatives shall be in an
amount equal to 4% of purchase payments for such contracts, subject to the
following rules:
A. Sales Compensation shall be payable each month to Dealer based upon the
total of all such single premium variable annuity contracts issued and made
effective by Investors Life Insurance Company of North America ("Investors
Life") during such months; provided, however, that no such compensation shall be
payable where a purchase payment is the result of a transfer of all or part of
the cash values of an annuity contract issued by:_______________________________
________________________________________________________________________________
________________________________________________________________________________
B. Receipt of Sales Compensation by Dealer shall fully discharge Investors
Life and INA Security Corp., jointly and severally, from further obligation to
Dealer to the extent of payment so received.
C. Dealer agrees that in the event that a Single Premium Annuity Contract
(Forms 82SPLl5 or 82SPN15) is surrendered during the Inspection Period
thereunder, 100% of the Compensation paid on the account of such Contract will
be refunded by Dealer to Security Corp. and Investors Life.
D. Investors Life and INA Security Corp. reserve the right at any time and
from time to time to change the rates of compensation payable for contracts
applied for on or after the effective date of such change.
Page 6
Ex-17
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA SECURITY CORPORATION
DEALER'S BONUS COMPENSATION SCHEDULE
(EFFECTIVE _____,1982)
As additional compensation for the performance of sales supervisory
activities, Dealer shall be paid Bonus Compensation on sales of Single Premium
Variable Annuity Contract (Forms 82SPL15 or 82SPN15) solicited by Dealer's
registered representatives in an amount equal to ____% of purchase payments for
such contracts, subject to the same rules of Investors Life Insurance Company of
North America and INA Security Corporation as are contained in Dealer's
Compensation Schedule of even date herewith.
Page 7
Ex-18
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
("Investors Life")
1600 ARCH STREET
PHILADELPHIA, PENNSYLVANIA 19101
Dealer:_________________________________________________________________________
Address:________________________________________________________________________
Date of Dealer Agreement:_______________________________________________________
SERVICE FEE AGREEMENT
(EFFECTIVE DECEMBER 31, 1982)
WHEREAS, Dealer has agreed to perform certain Contract owner services on
behalf of Investors Life pursuant to a Variable Annuity Dealer Agreement
relating to sales of certain Investors Life contracts funded through its CIGNA
Separate Account I ("Separate Account"); and
WHEREAS, Dealer acknowledges that Investors Life may, but is not obligated
to, provide compensation in addition to Sales Compensation from time to time for
the performance of such Contract owner service obligations; and
WHEREAS, Investors Life desires to provide additional compensation
effective December 31, 1982 and until further notice,
NOW, THEREFORE, in consideration of the above premises, Additional
Compensation for Contract owner services shall be payable to Dealer by Investors
Life as follows:
1. Beginning on the effective date of this Schedule, and at the end of each
calendar quarter thereafter, Investors Life shall determine, in its sole
discretion, the value of assets of its CIGNA Separate Account I which are
attributable to the Single Premium Annuity Contracts (Forms 82SPLl5 or
82SPN15) currently serviced by Dealer ("CIGNA assets").
2. Dealer shall be paid a quarterly Service Fee based on the value of its
CIGNA assets at the end of the quarter, multiplied by a factor of .0005
provided (1) such CIGNA assets equal or exceed $5OO,000 and (2) the Dealer
is performing said Contract Owner Service obligations to the satisfaction
of Investors Life.
3. In no event will Investors Life pay Service Fees for an amount less than
$250 each calendar quarter. Each calendar quarter's calculation of CIGNA's
assets by
Page 8
Ex-19
<PAGE>
Investors Life shall be determined without reference to any previous
calculation.
4. Investors Life reserves the right to modify or terminate payment of such
Service Fees upon 60 days prior notice to Dealer at its last known address.
Payment of Service Fees shall terminate in any event upon termination of
the Variable Annuity Dealer Agreement.
7332A
Page 9
Ex-20
<PAGE>
INA
Investors Life Insurance Company of North America
INA Security Corporation
VARIABLE ANNUITY AGENT AGREEMENT
The Investors Life Insurance Company of North America ("Investors Life"), INA
Security Corporation (the "Dealer") ______________ and ("Agent") Code Number
_________ Social Security Number _____________ agree this _______ day of
______,19__ as follows:
1. EFFECTIVE DATE. This Agreement shall be effective as of ) 19 , or, if
later upon the Agent becoming properly licensed with Investors Life to
solicit applications for Investors Life variable annuity contracts (the
"Contracts").
2. APPOINTMENT - DUTIES.
(a) Agent is appointed by Dealer as its representative to solicit
applications for Contracts in such territory as may be determined by
Investors Life and the Dealer. This appointment of territory is not
exclusive.
Investors Life reserves the right to accept business placed in the
territory of the Agent by other agents of Investors Life and to make such
rules and regulations concerning the territory as it deems necessary.
(b) This Agreement is not a contract of employment and nothing herein
contained shall be construed to create the relationship of employer and
employee between Investors Life and the Agent, or between the Dealer and
the Agent. Agent is an independent contractor and shall be free to exercise
his own judgment and discretion as to the persons from whom he will solicit
applications for Contracts, as to the time and place of solicitation, and
as to the methods by which the desired results are to be obtained, subject
to rules and regulations with respect to the conduct of the business
covered by this Agreement, as more particularly described in Section 2(d)
below.
(c) The Agent shall forward all Contract proposals, applications and
initial purchase payments to Dealer
Ex-21
<PAGE>
without deduction for compensation. Investors Life and Dealer reserve the
right to reject any Contract application and return any payment received
with that application. Contracts issued by Investors Life on accepted
applications will be forwarded to the Agent for delivery to the Contract
owner or, at the sole discretion of Investors Life, directly to the
Contract Owner. The initial purchase payment shall be in the form of check
or money order payable to the order of the Investors Life Insurance Company
of North America.
(d) The Agent shall comply with all rules and regulations as the National
Association of Securities Dealers, Inc., the Securities and Exchange
Commission, Investors Life, or the Dealer relating to the sale of the
Contracts, observe all applicable state and Federal laws relating to such
sales and submit to supervision by Dealer to insure necessary compliance.
In addition, the Agent
(i) shall at the time of solicitation furnish a current prospectus for
the Contracts and for the applicable underlying mutual funds which
conform to the requirements of the Securities Act of 1933;
(ii) shall adhere to high standards of commercial honor and just and
equitable principles of trade in all respects in the sale of the
Contracts;
(iii) shall not use advertising media, sales literature or other
solicitation materials unless approved in writing or supplied by
Investors Life and the Dealer;
(iv) shall not directly or indirectly improperly replace insurance
policies, annuities or securities of other companies offering
investment securities, annuities or insurance;
(v) shall maintain facilities and provide competent personnel to
respond to Contract owners' routine requests for information and forms
in connection with the exercise of rights and privileges afforded
under the Contracts. General Agent shall perform such Contract owners'
servicing in a manner (i) as is necessary to assure prompt and
satisfactory attention to Contract owner
Page 2
Ex-22
<PAGE>
needs and (ii) in accordance with the rules and procedures as may be
established from time to time by Investors Life or Dealer; and
(iv) shall disseminate all directives, procedural rules and
information releases as may be issued by Dealer or Investors Life from
time to time, to appropriate administrative personnel and maintain a
record thereof.
3. LIMITATIONS. Agent shall not have authority to make, alter, vary or
discharge Contracts, to extend time for initial purchase payment for
Contracts, to receive funds due Investors Life or the Dealer except as
provided above, to endorse or negotiate checks payable to Investors Life or
the Dealer, to institute legal proceedings on behalf of Investors Life or
the Dealer, or to voluntarily accept service of legal process on behalf of
Investors Life or the Dealer except by specific written authorization
signed by an officer of the respective company.
AGENT AGREES TO RENDER NO INVESTMENT ADVICE, WHETHER FOR COMPENSATION OR
OTHERWISE, WITHOUT THE PRIOR WRITTEN CONSENT OF DEALER AND INVESTORS LIFE.
4. COMPENSATION. The Agent shall be entitled to compensation for sales of
Contracts issued on applications solicited by Agent in accordance with the
Agent's Compensation Schedule attached to this Agreement and which is in
effect at the time the Contracts are issued by Investors Life. Investors
Life and Dealer reserve the right to change the schedule of compensation as
to Contracts issued by Investors Life after the effective date of such
change. The Agent shall refund compensation paid on any Contract which is
tendered for redemption during the Inspection Period thereunder.
5. SET-OFF FOR INDEBTEDNESS. Dealer or Investors Life shall have the right
at any time and from time to time to set-off against any amounts due Agent
under this Agreement or independently hereof (i) any indebtedness,
obligations, fees and taxes imposed by reason of this Agreement which
Dealer and Investors Life, in their sole discretion, deem it advisable to
pay to discharge for the benefit of Agent (and Dealer and Investors Life
are hereby authorized to pay such indebtedness, obligations, fees and
taxes) and (ii) any indebtedness, matured or unmatured, absolute or
contingent, of Agent to Dealer or Investors Life, whether arising under
this Agreement or independently hereof. As security for all such payments
made for the benefit of Agent and for all such indebtedness, Agent hereby
transfers, assigns and grants to Dealer and Investors Life a
Page 3
Ex-23
<PAGE>
security interest in and a lien upon all amounts now or hereafter payable
to Agent hereunder. Such security interest, lien and right to set off shall
not be extinguished by the termination of Agent's appointment hereunder.
6. ASSIGNMENT. Agent shall have no right to assign, transfer, encumber or
otherwise dispose of the Agreement or any interest therein except with the
prior written consent of Dealer and Investors Life, and any purported
assignment, transfer, encumbrance or other disposition shall be void.
7. FIDELITY BOND, LEGAL ACTIONS. Agent shall promptly upon demand by Dealer
or Investors Life furnish and maintain at his own expense a bond
satisfactory to Dealer or Investors Life for the payment of all sums which
may become payable to Dealer or Investors Life. Agent shall pay to Dealer
or Investors Life on demand any sums expended by Dealer or Investors Life
in answering any attachment, garnishment or other legal proceeding
involving Agent, and all such sums shall be a debt hereunder.
8. WAIVERS, AMENDMENTS AND CONSTRUCTION. No failure or delay on the part of
Dealer or Investors Life in exercising any power or right hereunder shall
operate as a waiver thereof. All remedies hereunder or afforded by law
shall be cumulative and not alternative. No amendment, alteration, or
change of any nature of this Agreement shall be valid unless made in
writing and duly executed with the same formalities as the Agreement. This
Agreement shall be construed under, and the rights and duties of the
parties shall be governed by, the laws of Pennsylvania, and it shall not be
effective until executed by Agent, Dealer and Investors Life.
9. TERMINATIONS. This Agreement may be terminated at any time, without
cause, by Agent or Dealer giving to the other parties at least thirty (30)
days written notice by ordinary mail or personally served, of its intention
to do so. In addition, Agent's appointment hereunder may be terminated
immediately for violation of any provision of this Agreement, by written
notice, personally served or sent by ordinary mail to Agent's last known
address. Notwithstanding the aforesaid provisions, this Agreement shall
immediately terminate, without notice of any kind, upon occurrence of any
of the following events:
(a) Retirement, death, incompetency or total disability of Agent; or
if Agent be a partnership or corporation, the retirement, death,
incompetency or total disability of any partner or officer of Agency
who in the sole opinion of the Dealer is deemed to have been essential
to the continuance of the business of the Agent,
Page 4
Ex-24
<PAGE>
(b) Revocation, suspension or termination of Agent's insurance license
with Investors Life,
(c) The insolvency of Agent or the inability of the Agent to pay his
debts as they mature or the making by the Agent of an assignment for
the benefit of creditors, or the dissolution of an Agent partnership,
the appointment of a receiver or liquidator for Agent or for a
substantial part of the Agent's property or the institution of
bankruptcy, reorganization, arrangement, insolvency or similar
proceedings by or against Agent under the laws of any jurisdiction.
(d) Misappropriation of funds or property of Dealer or Investors Life,
or of funds received for them by Agent; the failure of Agent to remit
to Investors Life or Dealer funds due them promptly upon demand; the
commission by Agent of any fraud against Dealer or Investors Life.
(e) If Agent shall (i) rebate or offer to rebate all or any part of a
premium on a Contract issued or to be issued by Investors Life, or
(ii) conduct himself or the Agency so as to injure Dealer's or
Investors Life's standing or good name.
Upon termination of this Agreement, all obligations, if any, due from Agent to
Dealer and Investors Life shall become immediately due and payable,
notwithstanding the stated maturity dates thereof, and Agent shall promptly
return to Dealer all books, records, manuals, supplies and other property
furnished or sent to Agent by Dealer or Investors Life.
Page 5
Ex-25
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
By_______________________________________________
INA SECURITY CORPORATION
By_______________________________________________
AGENT____________________________________________
Page 6
Ex-26
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA SECURITY CORPORATION
AGENT'S COMPENSATION SCHEDULE
(EFFECTIVE ____,1982)
Sales Compensation for Single Premium Variable Annuity Contract (Forms 82SPL15
or 82SPN15) solicited through Agent shall be in an amount equal to 4% of
purchase payments for such contracts, subject to the following rules:
A. Sales Compensation shall be payable each month to Agent based upon the
total of all such single premium variable annuity contracts issued and made
effective by Investors Life Insurance Company of North America ("Investors
Life") during such months; provided, however, that no such compensation
shall be payable where a purchase payment is the result of a transfer of
all or part of the cash values of an annuity contract issued by:___________
___________________________________________________________________________
___________________________________________________________________________
B. Receipt of Sales Compensation by Agent shall fully discharge Investors
Life and INA Security Corp., jointly and severally, from further obligation
to Agent to the extent of payment so received.
C. Agent agrees that in the event that a Single Premium Annuity Contract
(Forms 82SPLl5 or 82SPNl5) is surrendered during the Inspection Period
thereunder, 100% of the Compensation paid on the account of such Contract
will be refunded by Agent to Security Corp. and Investors Life.
D. Investors Life and INA Security Corp. reserve the right at any time and
from time to time to change the rates of compensation payable for contracts
applied for on or after the effective date of such change.
1085A
Page 7
Ex-27
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA SECURITY CORPORATION
1600 Arch Street
Philadelphia, PA 19101
VARIABLE ANNUITY GENERAL AGENT AGREEMENT
The Investors Life Insurance Company of North America ("Investors Life"), INA
Security Corporation (the "Dealer") and ____________________________________
("General Agent" or "General Agency") Code Number _______ Social Security Number
_________ agree this _____ day of _________ ,19__ as follows:
1. EFFECTIVE DATE. This agreement shall be effective on ____________,19___,
or, if later, upon the General Agent becoming properly-licensed with
Investors Life to solicit applications for Investors Life variable annuity
contracts (the "Contracts") and a Registered Representative of the Dealer
in accordance with the Rules and Regulations of the Securities and Exchange
Commission ("SEC") and the National Association of Securities Dealers, Inc.
("NASD").
2. APPOINTMENT - DUTIES.
(a) General Agent is appointed by Dealer as its representative to solicit
applications for Contracts in such territory as may be determined by
Investors Life and the Dealer. This appointment of territory is not
exclusive.
Investors Life reserves the right to accept business placed in the
territory of the General Agent by other agents of Investors Life and to
make such rules and regulations concerning the territory as it deems
necessary.
(b) The General Agent shall recruit, train and supervise agents to assist
him in the solicitation of Contract applications and in service of the
Contracts. Agents so recruited and trained shall not be permitted to
solicit any Contract application unless and until they become registered
representatives of the Dealer in accordance with Federal and state
securities laws and rules and regulations thereunder, including but not
limited to those of the SEC and the NASD, and agents of Investors Life in
accordance with the insurance laws of such designations as Investors Life
Ex-28
<PAGE>
may designate. Each contract between the General Agent and an agent shall
be subject to approval by Dealer and Investors Life and a copy of the
contract shall be filed with the Dealer. The General Agent shall not permit
an agent to continue to act as an agent after notice by Dealer or Investors
Life of withdrawal of approval of the agent's contract.
(c) This Agreement is not a contract of employment and nothing herein
contained shall be construed to create the relationship of employer and
employee between (1) Dealer or Investors Life and (2) General Agent or his
agents. General Agent is an independent contractor and shall be free to
exercise his own judgment and discretion as to the persons from whom he
will solicit applications for Contracts, as to the time and place of
solicitation, and as to the methods by which the desired results are to be
obtained, subject to rules and regulations with respect to the conduct of
the business covered by this Agreement, as more particularly described in
Section 2(e) below.
(d) The General Agent and his agents shall forward all contract proposals,
applications and initial purchase payments to Investors Life without
deduction for compensation. Investors Life and Dealer reserve the right to
reject any Contract application and return any payment received with that
application. Contracts issued by Investors Life on accepted applications
will be forwarded to the General Agent for delivery to the Contract owner
or, at the sole discretion of Investors Life, directly to the Contract
owner. The initial purchase payment shall be in the form of check or money
order payable to the order of the Investors Life Insurance Company of North
America.
(e) The General Agent and his agents shall comply with all rules and
regulations of the NASD, the SEC, Investors Life, or the Dealer relating to
the sale of the Contracts, observe all applicable state and Federal laws
relating to such sales and submit to supervision by Dealer to insure
necessary compliance. In addition, the General Agent and his agents
(i) shall at the time of solicitation furnish a current prospectus for
the Contracts and for the applicable underlying mutual fund(s) which
conform to the requirements of the Securities Act of 1933;
(ii) shall adhere to high standards of commercial honor and just and
equitable principles of trade in all respects in the sale of the
Contracts;
Page 2
Ex-29
<PAGE>
(iii) shall not use advertising media, sales literature or other
solicitation materials unless approved in writing or supplied by
Investors Life and the Dealer;
(iv) shall not directly or indirectly improperly replace insurance
policies, annuities or securities owned or held by persons solicited
with the Contracts;
(v) shall maintain facilities on behalf of Investors Life and provide
competent personnel to respond to Contract owners' routine requests
for information and forms in connection with the exercise of rights
and privileges afforded under the Contracts. General Agent shall
perform such Contract owners' servicing in a manner (i) as is
necessary to assure prompt and satisfactory attention to Contract
owner needs and (ii) in accordance with the rules and procedures as
may be established from time to time by Investors Life; and
(vi) shall disseminate all directives, procedural rules and
information releases as may be issued by Dealer or Investors Life from
time to time, to appropriate administrative personnel and maintain a
record thereof.
3. LIMITATIONS. General Agent and his agents shall not have authority to
make, alter, vary or discharge Contracts, to extend time for initial
purchase payment for Contracts, to receive funds due Investors Life or the
Dealer, except as provided above, to endorse or negotiate checks payable to
Investors Life or the Dealer, to institute legal proceedings on behalf of
Investors Life or the Dealer, or to voluntarily accept service of legal
process on behalf of Investors Life or the Dealer except by specific
written authorization signed by an officer of the respective company.
General Agent agrees that it and its agents shall render no investment
advice, whether for compensation or otherwise, without the prior written
consent of Dealer and Investors Life.
4. SALES COMPENSATION. The General Agent shall be entitled to compensation
for sales of Contracts issued on applications solicited by General Agent
and his agents in accordance with the General Agent's Compensation Schedule
attached to this Agreement or the same as may be amended from time to time
by Investors Life and Dealer and which is in effect at the time a Contract
is issued by Investors
Page 3
Ex-30
<PAGE>
Life. The General Agent shall refund compensation paid on any Contract
which is tendered for redemption during the Inspection Period thereunder.
5. SET-OFF FOR INDEBTEDNESS. Dealer or Investors Life shall have the right
at any time and from time to time to setoff against any amounts due General
Agent under this Agreement or independently hereof (i) any indebtedness,
obligations, fees and taxes imposed by reason of this Agreement which
Dealer and Investors Life in their sole discretion deem it advisable to pay
to discharge for the benefits of General Agent or his agents (and Dealer
and Investors Life are hereby authorized to pay such indebtedness,
obligations, fees and taxes) and (ii) any indebtedness, matured or
unmatured, absolute or contingent, of General Agent to Dealer or Investors
Life, whether arising under this Agreement or independently hereof. As
security for all such payments made for the benefit of General Agent and
his agents and for all such indebtedness, General Agent hereby transfers,
assigns and grants to Dealer and Investors Life a security interest in and
a lien upon all amounts now or hereafter payable to General Agent
hereunder. Such security interest, lien and right to setoff shall not be
extinguished by the termination of General Agent's appointment hereunder.
6. ASSIGNMENT. General Agent shall have no right to assign, transfer,
encumber or otherwise dispose of the Agreement or any interest therein
except with the prior written consent of Dealer and Investors Life, and any
purported assignment, transfer, encumbrance or other disposition shall be
void.
7. FIDELITY BOND, LEGAL ACTIONS. General Agent shall promptly upon demand
by Dealer or Investors Life furnish and maintain at his own expense a bond
satisfactory to Dealer or Investors Life for the payment of all sums which
may become payable to Dealer or Investors Life. General Agent shall pay to
Dealer or Investors Life on demand any sums expended by Dealer or Investors
Life in answering any attachment, garnishment or other legal proceeding
involving General Agent, and all such sums shall be a debt hereunder.
8. WAIVERS, AMENDMENTS AND CONSTRUCTION. No failure or delay on the part of
Dealer or Investors Life in exercising any power or right hereunder shall
operate as a waiver thereof. All remedies hereunder or afforded by law
shall be cumulative and not alternative. No amendment, alteration, or
change of any nature of this Agreement shall be valid unless made in
writing and duly executed with the same formalities as the Agreement. This
Agreement shall be construed under, and the rights and duties of the
parties
Page 4
Ex-31
<PAGE>
shall be governed by, the laws of Pennsylvania, and it shall not be
effective until executed by General Agent, Dealer and Investors Life.
9. TERMINATION. This Agreement may be terminated at any time, without
cause, by General Agent or Dealer giving to the other party and Investors
Life at least thirty (30) days written notice by ordinary mail or
personally served, of its intention to do so. In addition, General Agent's
appointment hereunder may be terminated immediately for violation of any
provision of this Agreement, by written notice, personally served or sent
by ordinary mail to General Agent's last known address. Notwithstanding the
aforesaid provisions, this Agreement shall immediately terminate, without
notice of any kind, upon occurrence of any of the following events:
(a) Retirement, death, incompetency or total disability of General
Agent; or if General Agent be a partnership or corporation, the
retirement, death, incompetency or total disability of any partner or
officer of General Agency who, in the sole opinion of the Dealer, is
deemed to have been essential to the continuance of the business of
the General Agent;
(b) Revocation, suspension or termination of General Agent's insurance
license with Investors Life or registration with INA Security
Corporation;
(c) The insolvency of General Agent or the inability of the General
Agent to pay his debts as they mature or the making by the General
Agent of an assignment for the benefit of creditors, or the
dissolution of a General Agent partnership, the appointment of a
receiver or liquidator for General Agent or for a substantial part of
the General Agent's property or the institution of bankruptcy,
reorganization, arrangement, insolvency or similar proceedings by or
against General Agent under the laws of any jurisdiction;
(d) Misappropriation of funds or property of Dealer, Investors Life or
Distributor, or of funds received for them by Agent; the failure of
General Agent to remit to Investors Life or Dealer funds due them
promptly upon demand; the commission by Agent of any fraud against
Dealer, Investors Life or Distributor; or
(e) If General Agent shall (i) rebate or offer to rebate all or any
part of a premium on a Contract issued or to be issued by Investors
Life, or (ii) conduct himself or the General Agency so as to injure
Dealer's or Investors Life's standing or good name.
Page 5
Ex-32
<PAGE>
10. GENDER. Reference in this Agreement to masculine gender shall include
the feminine or neuter gender where appropriate, and the singular shall include
the plural and vice versa where the Agreement so requires.
Upon termination of this Agreement, all obligations, if any, due from General
Agent to Dealer and Investors Life shall become immediately due and payable,
notwithstanding the stated maturity dates thereof, and General Agent shall
promptly return to Dealer all books, records, manuals, supplies and other
property furnished or sent to General Agent by Dealer or Investors Life.
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
By:_______________________________________________
INA SECURITY CORPORATION
By:_______________________________________________
GENERAL AGENT
By:_______________________________________________
Signature and Title
By:______________________________________________
Signature and Title
Page 6
Ex-33
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA SECURITY CORPORATION
GENERAL AGENT'S COMPENSATION SCHEDULE
(EFFECTIVE _____,1982)
Sales Compensation for Single Premium Variable Annuity Contract (Forms 82SPL15
or 82SPN15) solicited through General Agent shall be in an amount equal to 4% of
purchase payments for such contracts, subject to the following rules:
A. Sales Compensation shall be payable each month to General Agent
based upon the total of all such single premium variable annuity
contracts issued and made effective by Investors Life Insurance
Company of North America ("Investors Life") during such months;
provided, however, that no such compensation shall be payable where a
purchase payment is the result of a transfer of all or part of the
cash values of an annuity contract issued by:_________________________
______________________________________________________________________
______________________________________________________________________
B. Receipt of Sales Compensation by General Agent shall fully
discharge Investors Life and INA Security Corp. , jointly and
severally, from further obligation to General Agent to the extent of
payment so received.
C. General Agent agrees that in the event that a Single Premium
Annuity Contract (Forms 82SPL15 or 82SPN15) is surrendered during the
Inspection Period thereunder, 100% of the Compensation paid on the
account of such Contract will be refunded by General Agent to Security
Corp. and Investors Life.
D. Investors Life and INA Security Corp. reserve the right at any time
and from time to time to change the rates of compensation payable for
contracts applied for on or after the effective date of such change.
Page 7
Ex-34
<PAGE>
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
INA SECURITY CORPORATION
GENERAL AGENT'S BONUS COMPENSATION SCHEDULE
(EFFECTIVE ____, 1982)
As additional compensation for the performance of sales supervisory
activities, General Agent shall be paid Bonus Compensation on sales of Single
Premium Variable Annuity Contract Forms 82SPLl5 or 82SPNl5) solicited by
licensed variable annuity agents assigned to General Agent in an amount equal to
%_____ of purchase payments for such contracts, subject to the same rules of
Investors Life Insurance Company of North America and INA Security Corporation
as are contained in General Agent's Compensation Schedule of even date herewith.
MGA
4429A
Page 8
Ex-35
<PAGE>
Exhibit 4(a)
Form of Single Premium Variable Annuity Contract
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
A STOCK COMPANY - PHILADELPHIA - PENNSYLVANIA
ANNUITANT CONTRACT NUMBER
DATE Of ISSUE AGE AT ISSUE
RETIREMENT DATE SEX OF ANNUITANT
(ANNUITY COMMENCEMENT DATE)
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA (herein called "the Company")
will pay to the Owner or to another payee designated by the Owner in written
form and received by the Company the first of a series of Annuity payments on
the Retirement Date, if the Annuitant is then living. Subsequent payments will
be paid on the same day of each month thereafter so long as the Annuitant lives.
A minimum of One Hundred Twenty Monthly Annuity payments, including the first,
shall be paid, unless a different Retirement Option is selected under provision
9. The dollar amounts of the payments shall be determined as provided in
Sections 14 and 15.
The Owner is the Annuitant unless another person is named in the Application or
later becomes the Owner as allowed by this Contract. The Owner may elect to
change the Retirement Date or form of annuity in accordance with Section 9.
This Contract is effective as of the Date of Issue in consideration of the
attached Application and the payment of the Single Premium shown on the Schedule
Page. The provisions on the following pages are a part of the contract. Signed
at the Home Office, Philadelphia, Pennsylvania, on the date of issue.
RIGHT TO CANCEL
The Owner may cancel this Contract by delivering or mailing a written notice or
sending a telegram to INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA, 1600
Arch Street, Philadelphia, PA 19101 and by returning the contract before
midnight of the tenth day after the date of receipt. Notice given by mail and
return of the contract by mail are effective on being postmarked, properly
addressed and postage prepaid. The Company will return all amounts due to the
Owner within ten days after receipt of notice of cancellation and the returned
contract. This cancellation shall entitle the Owner to an amount equal to the
sum of (a) the difference between the premiums paid including any contract fees
or other charges and the amounts allocated to the Separate Account under this
Contract plus (b) the cash value of this Contract on the date the returned
contract is received by the Company or its agent.
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
/s/EUGENE E. PAYNE, Secretary /s/ROY F. MITTE, President
ATTEST:_____________________________________
Countersigned
Single Premium Deferred Variable Annuity
Ten Years Certain Life Annuity or Optional Annuity Settlement
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE IN AMOUNT AND ARE
NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
82SPL15 FI-6905
Ex-36
<PAGE>
TABLE OF CONTENTS
Policy Provisions Page No.
1. General Definitions 4
2. Separate Account and Fund 4
Voting Rights and Reports 4-5
Substituted Securities 5
3. Net Premium 5
4. Accumulation Unit Value 5
5. Net Investment Rate and Net Investment Factor 5
6. Contract Charges 5
Administrative Expense Charge 5
Separate Account Charge 6
Surrender Charge 6
Premium Tax Charge 6
7. Transfer of Contract Division 6
Additional Transfer Privileges 6
Termination of Additional Transfer Privileges 6
General Transfer Provisions 6
8. Nonforfeiture Provision 6-7
9. Retirement Options 7
Change of Retirement Date 7
Change of Retirement Annuity Form 7
10. Payments After The Annuitant's Death 7
11. Annuity Payout Options (Retirement or Settlement) 7-8
General Provisions 8
12. Change of Beneficiary or Frequency of Payment of Proceeds 8-9
13. Annuity Unit Values 9
14. Determination of the First Annuity Installment 9
15. Determination of the Amount of Annuity Installments After the First 11
16. The Contract 11
17. Control 11
18. Modification of Contract 11
19. Incontestability 11
20. Misstatement of Age or Sex 11
21. Assignment 11
22. Settlement 11
23. Proof of Age and Survival 11
24. Nonparticipating 11
25. Ownership of the Assets 11
26. Non-Transferability of Ownership 11
Page 2
Ex-37
<PAGE>
1. GENERAL DEFINITIONS-As used in this Contract, the term:
(a) "Accumulation Unit" means a unit of measurement used to determine the
value of the Owner's interest under the contract before annuity payments
begin;
(b) "Accumulation Value" means the value of all the Accumulation Units as
of any Valuation Date allocated to this Contract;
(c) "Annuity Unit" means a unit used to determine the amount of each
variable annuity payment after the first;
(d) "Contract Year" means the twelve month period starting with the Date of
Issue or each succeeding twelve month period thereafter;
(e) "Division" means an account within the Separate Account to which is
allocated a single class of Fund shares. Each Division contains two
subdivisions for measuring the funding results of accumulations and annuity
payments. One subdivision is for contracts issued under tax qualified plans
and the other for contracts issued under non-tax qualified plans. Each of
the subdivisions has its own identified values. The assets of each Division
consist of a single class of Fund shares unless securities are substituted
as this Contract provides;
(f) "Fund" means the CIGNA Annuity Fund, Inc.;
(g) "Net Premium" means the gross amount of the Single Premium less any
applicable state premium taxes;
(h) "Separate Account" means a segregated investment account of the Company
entitled "CIGNA Separate Account I", established pursuant to applicable law
and registered as a unit investment trust under the Investment Company Act
of 1940, as amended. The Separate Account is composed of separate
Divisions, to each of which is allocated a single class of Fund shares,
upon which the value of this Contract and the amount of variable annuity
payments thereunder are determined;
(i) "Single Premium" means the amount paid to the Company under this
Contract as a consideration for the benefits described herein;
(j) "Valuation Date" means the date on which the net asset value of a class
of Fund shares which underlies a Division (and subdivision) is determined;
(k) "Valuation Period" means the period between two consecutive Valuation
Dates, beginning with the end of the first of such Valuation Dates;
(1) "Variable Annuity" means a contract under which the Company promises to
pay to an annunitant or other properly designated payee one or more
payments which vary in amount in accordance with the net investment
experience of a segregated asset account(s) of an insurance company.
2. SEPARATE ACCOUNT AND FUND-An amount equal to the net premium accepted by the
Company hereunder will be allocated to the applicable subdivision of the
Division(s) selected by the Owner (maximum of five), as shown on the Schedule
Page. The applicable subdivision for allocations made under this Contract will
be determined by the Federal tax status of the retirement plan under which it
has been issued. Each Division is comprised of a particular class of Fund
shares. The Company provides, Fund shares for the applicable Division(s) equal
in amount to its reserve obligations under the Contracts. The Company is the
owner of all Fund shares purchased. No person having the right to receive any
payments hereunder shall be entitled to receive Fund shares allocated to the
Separate Account. All Fund shares allocated to a Division will be held for the
exclusive benefit of persons entitled to receive benefits under variable annuity
contracts, for which that Division measures the contract value. The income, if
any, and gains or losses, realized or unrealized, on such Fund shares will be
allocated to the applicable Division and will be credited to or charged against
the amounts allocated to such Division without regard to the other income, gains
or losses on the assets allocated to any other Division. Divdends and capital
gains distributions received for a class of Fund shares allocated to a Division
will be reinvested in additional Fund shares at the net asset value of such
class and allocated to the applicable Division. No Division shall be chargeable
with the liabilities arising out of the Company's business valued by any other
Division; nor shall the Separate Account as a whole be chargeable with the
liabilities arising out of any other business that the Company may conduct.
VOTING RIGHTS AND REPORTS-The Company will vote Fund shares allocated to a
Division by class, in accordance with instructions received from the persons
having contract values determined by that
Page 4
FI-10430
Ex-38
<PAGE>
Division. The Owner shall have the right to instruct the Company as to how he or
she wishes to vote the pro rata value of this Contract in a Division. The
Company will mail Fund proxy material to the Owner together with an appropriate
form which may be used to give voting instructions to the Company. If
instructions are not received by the Company in a timely manner as specified in
the voting instructions, the pro rata value of this Contract will be voted by
the Company in proportion to the instructions received from all persons having
contract values determined by such Division who furnish timely instructions to
the Company.
SUBSTITUTED SECURITIES-if any class of the Fund shares becomes unavailable for
purchase by the Company for allocation to any Division, or if in the judgment of
the Company further investment in such class is no longer appropriate in view of
the purposes of the Separate Account, (i) there may be substituted therefor
other shares or classes of shares of a registered investment company; or (ii)
net premiums received after a date specified by the Company may be used to
provide other shares of a registered investment company. In either event, prior
approval by the vote of a majority of the votes to be cast by persons having
their contract values determined by the affected Division will be obtained.
3. NET PREMIUM-The Company will apply the Net Premium in accordance with the
designated percentage allocations specified on the Schedule Page to provide
Accumulation Units of the applicable subdivisions of Divisions shown on the
Schedule Page. The number of Accumulation Units provided will be determined by
dividing the Net Premium allocated to each subdivision by the dollar value of
one Accumulation Unit of that subdivision as of the last date of the Valuation
Period during which the Premium is received at the Company's Home Office. The
dollar value of each Accumulation Unit may vary from one Valuation Period to the
next Valuation Period and will depend on the investment experience of the
applicable subdivision.
4. ACCUMULATION UNIT VALUE-The value of the Accumulation Unit for each
subdivision of a Division was established at $1.00 as of the date on which the
first Fund shares were purchased by the Company for that subdivision. The value
of an Accumulation Unit is subsequently determined by multiplying its value on
the immediately preceding Valuation Date by the Net Investment Factor for the
current Valuation Period. The value of an Accumulation Unit as of any date other
than a Valuation Date is equal to its value as of the next following Valuation
Date. The method of determination by the Company of the value of an Accumulation
Unit will be conclusive upon the Owner, any assignee, the Annuitant and any
beneficiary.
5. NET INVESTMENT RATE AND NET INVESTMENT FACTOR-For each subdivision of a
Division the net investment rate for any Valuation Period is equal to the gross
investment rate for that subdivision expressed in decimal form to seven places
less a deduction of .0000327 for each day in such valuation period (1.2%
annually). Such gross investment rate is equal to (i) the investment income for
the Valuation Period, plus capital gains and minus capital losses for the
period, whether realized or unrealized, on the assets of the subdivision of a
Division allocated to this Contract, less a deduction for any applicable taxes
with respect to such income and capital gains, divided by (ii) the value of
assets allocated to this Contract in the applicable subdivision of a Division at
the beginning of the Valuation Period. The gross investment rate may be positive
or negative. The Net Investment Factor for a subdivision of a Division is 1.0000
plus the net investment rate for the period applicable for that subdivision.
6. CONTRACT CHARGES
Administrative Expense Charge-At the end of each Contract Year prior to the
Retirement Date, the Company will deduct an administrative charge from the
Contract value. This charge will be made by reducing the number of Accumulation
Units allocated to this Contract. If allocation is made to more than one
Division, the deduction will be made proportionately.
The administrative charge before the Retirement Date is $25.00 plus $5.00 for
the second and for each subsequent transfer of Accumulation Value among
Divisions during the Contract Year, as described in Section 7.
After the Retirement Date, the Company will deduct an administrative charge at
the end of each Contract Year of $5.00 for the second and for each subsequent
transfer of Annuity Unit value among Divisions during the Contract Year, as
described in Section 7.
The Company assesses no $5.00 charge for the first transfer of Divisions within
a Contract Year either before or after the Retirement Date.
Page 5
Ex-39
<PAGE>
Separate Account Charge-The Company assesses a daily charge of .0000327 of the
value of the assets allocated to each subdivision of a Division (1.2% on an
annual basis of which approximately 0.8% is for mortality risk and 0.4% is for
expense risk) for its assumption of mortality and expense risks under this
Contract. (See Section 15 for an explanation of these guarantees.)
Surrender Charge-Amounts withdrawn during any one of the first six (6) Contract
Years which exceed ten percent (10%) of the Single Premium shown on the Schedule
Page will be reduced by a Surrender Charge before payment. The amount of such
charge is determined by applying the percentage shown below for the applicable
Contract Year to the withdrawal amount which is subject to the charge. The
applicable percentage to be applied is as follows:
Contract Year Applicable
Applicable Percentage
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 and later 0%
In no event will the total amount of all Surrender Charges exceed 81/2% of the
Single Premium shown on the Schedule Page.
Premium Tax Charge-The Company will deduct any applicable state premium taxes,
when due, from the value of this Contract.
7. TRANSFER OF CONTRACT DIVISION-Once each Contract Year, the Owner may elect to
transfer all or any portion of the Accumulation Value, or the value of his or
her Annuity Units, to one or more of the other Divisions without charge.
Additional Transfer Privileges- Unless terminated by Company, the Owner may
elect to make additional transfers of contract value between Divisions during
each Contract Year, subject to the Administrative Expense Charge described in
Section 6.
Termination of Additional Transfer Privileges-The Additional Transfer Privileges
may be terminated by Company at any time and in its sole discretion upon written
notice to the Owner or payee under a settlement option.
General Transfer Provisions-No transfer of Divisions is permitted within 30 days
of a Retirement Date and no transfer is permitted if it would result in applying
the value of this Contract to more than five Divisions.
The number of Accumulation Units credited in the newly elected subdivision(s)
will be equal to the dollar value of the amount transferred divided by the
current value of one Accumulation Unit in the newly elected subdivision(s).
The number of Annuity Units credited in a newly elected subdivision will be
determined by multiplying the number per subdivision of Annuity Units to be
transferred by the current value of one such Annuity Unit, then dividing such
product by the current value of one Annuity Unit in the newly elected
subdivision.
8. NONFORFEITURE PROVISION-Prior to the Retirement Date, the Owner may request
to withdraw all the Accumulation Value of this Contract. The Owner may also
request a partial withdrawal for not less than $300 of the Accumulation Value.
If a partial withdrawal request would reduce the remaining Accumulation Value to
under $1,000, the total balance of the Contract withdrawal value will be paid to
the Owner and the Contract will be cancelled. Contract withdrawal value is the
requested amount of Accumulation Value reduced by any applicable premium taxes
and surrender charges. All payments of Contract withdrawal value will be made by
the Company within seven days after the date that a written request in a form
satisfactory to the Company is received by the Company at its Home Office,
except to the extent that the Company is permitted to defer the date of payment
in accordance with applicable provisions of the Investment Company Act of 1940,
as amended. Contract withdrawal value will be determined as of the Valuation
Date coincident with or next following the date that the proper written request
therefor is received by the Company. Amounts withdrawn will be reflected in the
Accumulation
Page 6
F1-010431
Ex-40
<PAGE>
Value by a corresponding reduction in the number of Accumulation Units allocated
to this Contract. Accumulation Units will be reduced proportional to the
Accumulation Value allocated to each Division from which a partial withdrawal is
made, as requested by the Owner, on the Valuation Date coincident with the date
a partial withdrawal is made.
9. RETIREMENT OPTIONS
Change of Retirement Date-Upon written request by the Owner received by the
Company at least 30 days prior to the Retirement Date, the Retirement Date may
be changed to any date which is not later than the Annuitant's 75th birthday,
unless a different time is agreed to by the Company in writing.
Change of Retirement Annuity Form-During the Annuitant's lifetime, the Owner may
change the form of the Retirement Annuity otherwise provided in this Contract to
one or more of the different Retirement Annuity Payout Option(s) described in
Section 11 by filing written notice of the change with the Company at least
thirty days before the Retirement Date. The amount which will be applied to
provide the selected Retirement Annuity Payout Option(s) will be the
Accumulation Value less any applicable premium taxes. The payee under any
selected Retirement Option shall be the Owner or any other payee designated by
the Owner during the annuitant's lifetime, in writing and received by the
Company. The Owner may, by written notice received by the Company during the
Annuitant's lifetime, change a previously designated payee to another payee.
10. PAYMENTS AFTER THE ANNUITANT'S DEATH-If the Annuitant dies before the
Retirement Date, the Company will pay Death Proceeds to the Owner (if he or she
is not also the Annuitant). If the Annuitant is also the Owner, Death Proceeds
will be paid to the Beneficiary(ies) designated as such by the Owner prior to
his or her death.
As used herein, Death Proceeds means the greater of (a) the Accumulation Value
of this Contract determined on the Valuation Date coincident with or next
following the date due proof of the Annuitant's death is received by the Company
less the amount of any applicable premium taxes or (b) if the Annuitant's death
occurs before his or her 75th birthday, the Single Premium less the amount of
any prior withdrawals.
When due, Death Proceeds will be paid either in one sum or in the form of an
Annuity Option selected under Section 11 ("Settlement Option"). During the
Annuitant's lifetime before the Retirement Date, the Owner may select the form
of Settlement Option (or change a previous selection) under Section 11 by which
all or a portion of Death Proceeds shall be paid. The Settlement Option
selection or change thereof shall take effect as of the date that the Owner
signed the written request therefor, subject to the prior of any action taken by
the Company before receipt of such selection or change. If no Settlement Option
has been previously selected by the Owner at the time of the Annuitant's Death,
Death Proceeds will be paid in a lump sum. If no prior Settlement Option has
been selected by the Owner before the Annuitant's death, and if no lump sum
Death Proceed payment has been previously made by the Company, the
Beneficiary(ies) may within one year following the Annuitant's death, elect to
receive Death Proceeds under one or more of the Settlement Options available
under Section 11 . Such election must be filed with the Company in written form
acceptable to it. If a Settlement Option has been selected for the payment of
Death Proceeds, the Beneficiary or Beneficiaries shall become the Settlement
Annuitant(s).
The payee under a previously elected Settlement Option shall be the Settlement
Annuitant or another payee designated by the Settlement Annuitant during his or
her lifetime.
11. ANNUITY PAYOUT OPTIONS (RETIREMENT OR SETTLEMENT)-The Annuity Payout Options
are available under this Contract as Retirement Options or as Settlement
Options. In addition to the following specified options of this contract, the
Owner (or the beneficiary, if applicable) may also choose from any other options
available from the Company at the time benefit payments are to begin. If an
Annuity Payout Option is elected as a Retirement Option, then the "Annuitant"
referred to in such Option is the person named as such on the first page of this
Contract. If an Annuity Payout Option is elected as a Settlement Option, then
the "Annuitant" referred to under the Annuity Payout Option is the Beneficiary
or Beneficiaries designated as the Settlement Annuitant(s) in accordance with
the provisions of Section 10. If Option 4 or 5 is chosen, the Owner, during the
Annuitant's lifetime, (or the Beneficiary, if applicable) must also select a
Joint Annuitant. The Annuity Payout Options are:
Option I -Life Annuity with No Refund-A monthly annuity payable throughout the
lifetime of the Annuitant ceasing with the last installment prior to the death
of the Annuitant.
Page 7
Ex-41
<PAGE>
Option 2-Life Annuity and Annuity Installments Guaranteed for Designated
Period-A monthly annuity payable during the period certain elected and
thereafter throughout the lifetime of the Annuitant. The period certain may be
(a) 10 years, (b) 15 years, or (c) 20 years.
Option 3-Unit Refund Life Annuity-A monthly annuity payable during the lifetime
of the Annuitant terminating with the last installment due prior to the death of
the Annuitant, provided that, at such death, an additional payment may be made.
Such payment at death shall be the then dollar value of the number of Annuity
Units equal to the excess, if any, of (a) over (b) where (a) is the total amount
applied under the option divided by the Annuity Unit Value, as defined in
Section 13, at the effective date of such application, and (b) is the product of
the number of Annuity Units represented by each installment and the number of
installments paid prior to such death.
Option 4-Joint and Survivor Annuity-A monthly annuity payable throughout the
joint lifetime of the Annuitant and the Joint Annuitant and continuing for life
to the survivor upon the death of either Annuitant.
Option 5-Joint and Two-Thirds Survivor Annuity-A monthly annuity payable
throughout the joint lifetime of the Annuitant and the Joint Annuitant with
two-thirds of the number of Annuity Units in effect during such joint lifetime
continuing for life to the survivor upon the death of either Annuitant.
The amount of the first installment for Options 1 through 5 above will be
determined in accordance with Section 14 and the subsequent installments shall
be determined in accordance with Section 15.
GENERAL PROVISIONS-The minimum amount of proceeds which may be applied under any
Annuity Payout Option for any payee shall be $3,000, proceeds of a smaller
amount due any Annuitant will be paid in one sum. If at any time the installment
payments to any Annuitant under an Annuity Payout Option are or become less than
$20 each, the Company shall have the right to change the frequency of payment to
such intervals as will result in payments of at least $20.
Annuity Payout Options are based on the sex and age nearest birthday of the
Annuitant(s) or, if applicable, Settlement Annuitant(s) as of the date such
benefits are to start. Satisfactory proof of the age and sex of such
Annuitant(s) is required.
Except with the consent of the Company, these Annuity Payout options shall not
be available with respect to any part of the proceeds payable to an assignee or
to other than a natural person entitled to receive proceeds in his or her own
right.
Neither the Owner nor any other person receiving payments under this contract,
whether under an Annuity Payout Option or otherwise, shall have the right to
assign, encumber or alienate any of the payments under an Annuity Payout Option.
The Annuitant may make no change in the manner of payout except as provided in
the election.
To the extent permitted by law, neither the proceeds nor the payments under any
Annuity Payout Option shall be subject to any Beneficiary's debts, contracts or
engagements or to any judicial process to levy upon or attach the same for
payment thereof.
At the time of the Annuitant's or Settlement Annuitant's death after payments
have commenced under an Annuity Payout Option, and if no Beneficiary has been
previously designated, the then present value of the current dollar amount of
any unpaid installments certain then due under Option 2, or the amount specified
above as payable at the death of the Annuitant or Settlement Annuitant under
Option 3, shall be paid in one sum to the executors or administrators of the
estate of the Annuitant or Settlement Annuitant unless other provisions shall
have been specified in the Annuity Payment election and approved by the Company.
Present values will be based on a net investment rate of 6% per annum.
12. CHANGE OF BENEFICIARY OR FREQUENCY OF PAYMENT OF PROCEEDS-While this
contract is in force, the Owner, subject to the terms of any existing
assignment, may change the previously designated Beneficiary or Beneficiaries or
may change the frequency of the annuity payments being made under this contract
to any different annuity payment frequency upon which the Owner and the Company
may agree, by filing at the Home Office of the Company a written request
therefor which is satisfactory to the Company. Such change, either in
Beneficiary(ies) or in the frequency of annuity payments, shall take effect when
so filed. If any designated Beneficiary predeceases the Annuitant, the interest
of that Beneficiary shall pass to the designated surviving Beneficiary or, if
more than one Beneficiary survives the
Page 8
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Ex-42
<PAGE>
Annuitant, such interest shall pass to such surviving Beneficiaries in
proportion to their respective interests, unless otherwise previously specified
by the Owner. If no designated Beneficiary survives the Annuitant and no other
designation is provided, the proceeds of this contract shall be payable in one
sum to the Owner, if he or she survives the Annuitant; otherwise, to the
executors or administrators of the Owner's estate.
13. ANNUITY UNIT VALUES-The value of an Annuity Unit for each subdivision of a
Contract Division was established at $1.0000 on the date on which the first
Variable Annuity benefit payment based on such subdivision was determined. On
each subsequent Valuation Date, such value is determined by multiplying the
value of that Annuity Unit on the immediately preceding Valuation Date by the
product of (a) .9998404 raised to a power corresponding to the number of days in
the Valuation Period ending with such Valuation Date (a factor which neutralizes
the effect of the 6% annual interest rate used in calculating the amount of the
first payment), and (b) the Net Investment Factor for the applicable subdivision
of the Contract Division for the fourteenth day immediately preceding the last
day of the Valuation Period for which the value is being calculated. (See
Section 5 for a description of Net Investment Factor.)
The valuation of all assets in the Separate Account shall be determined in
accordance with the provisions of applicable laws, rules and regulations. The
method of determination by the Company of the value of an Annuity Unit will be
conclusive upon the Owner, any assignee, the Annuitant and any beneficiary.
14. DETERMINATION OF THE FIRST ANNUITY INSTALLMENT-The tables below show the
dollar amount of the first Annuity Installment for each $1,000 of proceeds
applied. The amount of proceeds applied to effect Annuity Installments will be
equal to the product of the value of an Accumulation Unit on the fourteenth day
immediately preceding the date the first Annuity Installment is due and the
number of Accumulation Units credited to the Contract as of the date the first
Annuity Installment is due, less any applicable premium taxes. Amounts shown for
Single Life Annuity, Joint and Survivor Annuity and joint and Two Thirds
Survivor Annuity are based on the Progressive Annuity Table with interest at the
rate of 6% per annum and assumes births in year 1900. Under these annuity
options, the amount of each installment will depend upon the sex and adjusted
age of the Annuitant and the Joint Annuitant, if any. The adjusted age is
determined from the actual age nearest birthday at the time the first annuity
installment is due in the following manner:
Calendar Year of Birth Adjusted Age
Before 1900 Actual Age increased by 1
1900-1919 Actual Age
1920-1939 Actual Age decreased by 1
1940-1959 Actual Age decreased by 2
1960-1979 Actual Age decreased by 3
1980-1999 Actual Age decreased by 4
Page 9
Ex-43
<PAGE>
DOLLAR AMOUNT OF THE FIRST MONTHLY ANNUITY INSTALLMENT WHICH IS PURCHASED
WITH EACH $1,000 OF PROCEEDS APPLIED
Single Life Annuity
Option I Option 2 Option 3
Adjusted Age No Period Period Certain Unit
Male Female Certain 10 Years 15 Years 20 Years Refund
50 54 $ 6.27 $6.20 $6.11 $5.99 $6.10
51 55 6.36 6.28 6.18 6.04 6.17
52 56 6.45 6.36 6.25 6.10 6.25
53 57 6.55 6.45 6.32 6.15 6.33
54 58 6.66 6.54 6.40 6.21 6.41
55 59 6.78 6.64 6.47 6.26 6.50
56 60 6.90 6.74 6.56 6.32 6.60
57 61 7.04 6.85 6.64 6.38 6.70
58 62 7.18 6.97 6.73 6.43 6.80
59 63 7.33 7.09 6.82 6.49 6.92
60 64 7.49 7.21 6.91 6.55 7.04
61 65 7.67 7.35 7.00 6.60 7.16
62 66 7.86 7.48 7.09 6.65 7.29
63 67 8.06 7.63 7.19 6.70 7.44
64 68 8.27 7.78 7.28 6.75 7.59
65 69 8.51 7.93 7.38 6.79 7.74
66 70 8.76 8.09 7.47 6.83 7.91
67 71 9.02 8.26 7.56 6.87 8.09
68 72 9.31 8.43 7.64 6.90 8.28
69 73 9.63 8.60 7.73 6.93 8.48
70 74 9.96 8.78 7.81 6.95 8.70
71 75 10.33 8.95 7.88 6.97 8.92
72 76 10.72 9.13 7.95 6.99 9.17
73 77 11.15 9.31 8.01 7.01 9.43
74 78 11.61 9.48 8.07 7.02 9.70
75 79 12.11 9.65 8.12 7.02 9.99
Joint and Survivor Life Annuity
Option 4
<TABLE>
<CAPTION>
Adjusted Age of Adjusted Age of Annuitant
Joint Annuitant Male 51 Male 56 Male 58 Male 61 Male 63 Male 66 Male 71
Male Female Female 55 Female 60 Female 62 Female 65 Female 67 Female 70 Female 75
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 54 $5.71 $5.84 $5.89 $5.96 $6.00 $6.06 $6.13
55 59 5.85 6.04 6.12 6.23 6.29 6.39 6.52
57 61 5.91 6.12 6.21 6.34 6.42 6.54 6.70
60 64 5.98 6.24 6.35 6.51 6.62 6.77 7.00
62 66 6.03 6.32 6.44 6.63 6.76 6.94 7.22
65 69 6.10 6.43 6.57 6.80 6.96 7.19 7.57
70 74 6.19 6.58 6.77 7.06 7.28 7.61 8.19
</TABLE>
Joint and Two-Thirds to Survivor Life Annuity
Option 5
<TABLE>
<CAPTION>
Adjusted Age of Adjusted Age of Annuitant
Joint Annuitant Male 51 Male 56 Male 58 Male 61 Male 63 Male 66 Male 71
Male Female Female 55 Female 60 Female 62 Female 65 Female 67 Female 70 Female 75
<S> <C> <C> <C> <C> <C> <C> <C> <C>
50 54 $6.10 $6.31 $6.40 $6.56 $6.66 $6.84 $7.15
55 59 6.31 6.55 6.66 6.84 6.97 7.18 7.55
57 61 6.40 6.66 6.78 6.97 7.11 7.33 7.73
60 64 6.55 6.84 6.98 7.19 7.34 7.59 8.05
62 66 6.66 6.97 7.11 7.35 7.51 7.78 8.28
65 69 6.84 7.18 7.34 7.60 7.79 8.09 8.66
70 74 7.16 7.56 7.75 8.06 8.29 8.68 9.40
</TABLE>
The dollar amount of the first monthly annuity installment for any age or
combination of ages not shown in the above tables will be calculated on the
same basis as the installments for those shown and may be obtained from the
Company.
Page 10
FI-10413
Ex-44
<PAGE>
15. DETERMINATION OF THE AMOUNT OF ANNUITY INSTALLMENTS AFTER THE FIRST-The
number of Separate Account Annuity Units is determined by dividing the amount of
the first payment by the Separate Account Annuity Unit value on the Valuation
Date coincident with or next following the date on which the first installment
is due. Thereafter the number of Separate Account Annuity Units remains fixed.
The dollar amount of the second and each subsequent installment is not
predetermined but may change from month to month. The actual amount of any such
installment is determined by multiplying the number of Annuity Units of the
applicable subdivision of the Contract Division by the Annuity Unit Value of
such subdivision on the Valuation Date coincident with or next following the
date on which such installments are due.
The Company guarantees that the dollar amount of each installment after the
first shall not be adversely affected by the actual expenses which it incurs for
administration of the contract or by variations in mortality experience from the
mortality assumptions on which the first installment is based.
16. THE CONTRACT-This contract and the Application therefor constitutes the
entire contract. All statements made by the Owner or Annuitant or on his or her
behalf shall be deemed representations and not warranties, and no such statement
shall be used in defense to a claim under this contract unless it is contained
in the Application and a copy of the Application is attached to this document
when issued.
17. CONTROL-The Owner may, during the lifetime of the Annuitant and without the
consent of an contingent Owner or Beneficiary, assign or surrender this
contract, amend or modify it with the written consent of the Company, and
exercise, receive and enjoy every other right, benefit and privilege contained
in this contract.
18. MODIFICATION OF CONTRACT-Only the President, a Vice President or a Secretary
of the Company has power on behalf of the Company to change, modify or waive the
provisions of this contract. Any such action must be in writing. The Company
shall not be bound by any promise or representation heretofore or hereafter made
by or to any agent or person other than as specified above.
19. INCONTESTABILITY-This contract will be incontestable from the Date of Issue.
20. MISSTATEMENT OF AGE OR SEX-if the age or sex of the Annuitant has been
misstated, any amount payable shall be that which the premiums paid would have
purchased at the correct age and sex. Overpayments by the Company because of
such misstatement, with interest at 6% a year, compounded annually, will be
charged against benefits falling due after the adjustment. Underpayment by the
Company because of such misstatement with interest at 6% a year, compounded
annually, will be paid by the Company immediately.
21. ASSIGNMENT-No assignment of this contract shall be binding on and until it
is filed with the Company at its Home Office. The Company will assume no
responsibility for the validity or sufficiency of any assistant. Unless
otherwise provided in the assignment, the interest of any revocable Beneficiary
shall be subordiante to the interest of any assignee, whether the assignment was
made before or after the designation of Beneficiary, and the assignee shall
receive any sum payable to the extent of his interest.
22. SETTLEMENT-Any payment by the Company under this contract is payable at its
Home Office.
23. PROOF OF AGE AND SURVIVAL-The Company has the right to require satisfactory
proof of age of the payee or payees and that a payee is living when a payment is
contingent upon the payee survival.
24. NON PARTICIPATING-This contract is nonparticipating and will not share in
the surplus earnings of the Company.
25. OWNERSHIP OF THE ASSETS-The Company shall have exclusive and absolute
ownership and control of its assets, including all assets allocated to the
Separate Account.
26. NON-TRANSFERABILITY OF OWNERSHIP- Provided this contract is issued in
conjunction with a retirement plan qualified under the internal Revenue Code,
and notwithstanding any other provisions of this contract, the Owner may not
change the ownership of this contract nor may this contract be sold, assigned or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose to any person other than the Company, unless
the Owner is the trustee of an employee trust qualified under the Internal
Revenue Code, the custodian of a custodial account treated as such or the
employer under a qualified non-trusteed pension plan.
Page 11
Ex-45
<PAGE>
Exhibit 4(b)
Form of Flexible Premium Variable Annuity Contract
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
A Stock Company - Philadelphia - Pennsylvania
ANNUITANT CONTRACT NUMBER
DATE OF ISSUE AGE OF ISSUE
RETIREMENT DATE SEX OF ANNUITANT
(Annuity Commencement Date)
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA (herein called "the Company")
will pay to the Owner or to another payee designated by the Owner in written
form and received by the Company the first of a series of Annuity payments on
the Retirement Date, if the Annuitant is then living. Subsequent payments will
be paid on the same day of each month thereafter so long as the Anuuitant lives.
A minimum of One Hundred Twenty Monthly Annuity Payments, including the first,
shall be paid, unless a different Retirement Option is selected under Section 9.
The dollar amounts of the payments shall be determined as provided in Sections
14 and 15.
The Owner is the Annuitant unless another person is named as the Annuitant in
the Application. The Owner may elect to change the Retirement Date or form of
annuity in accordance with Section 9.
This Contract is effective as of the Date of Issue in consideration of the
attached Application and the payment of the Initial Premium shown on the
Schedule Page. The provisions on the following pages are a part of the Contract.
Signed at the Home Office, 1600 Arch Street, Philadelphia, Pennsylvania, on the
date of issue.
RIGHT TO CANCEL
The Owner may cancel this Contract by delivering or mailing a written notice or
sending a telegram to INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA, 1600
Arch Street, Philadelphia, PA 19103 and by returning the Contract before
midnight of the tenth day after the date of receipt. Notice given by mail and
return of the contract by mail are effective on being postmarked, properly
addressed and postage prepaid. The Company will return all amounts due to the
Owner within ten days after receipt of notice of cancellation and the returned
contract. This cancellation shall entitle the Owner to an amount equal to the
sum of (a) the difference between the premiums paid including any contract fees
or other charges and the amounts allocated to the Separate Account under this
Contract plus (b) the Accumulation Value of this Contract on the date the
returned contract is received by the Company or its agent.
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
/S/EUGENE E. PAYNE, Secretary /s/ROY F. MITTE, President
ATTEST:___________________________________
Countersigned
Flexible Premium Deferred Variable Annuity
Ten Years Certain Life Annuity or Optional Annuity Settlement
ALL PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE IN AMOUNT AND ARE
NOT GUARANTEED AS TO SUCH AMOUNT.
83FVA01 F1-7M19a
Ex-46
<PAGE>
TABLE OF CONTENTS
Policy Provisions Page No.
1. General Definitions 4
2. Payment of Premiums 4
3. Net Premiums 4
4. Accumulation Unit Value 5
5. Net Investment Rate and Net Investment Factor 5
6. Nonforfeiture Provision 5
7. Contract Charges 5
Administrative Expense Charge 5
Separate Account Charge 5
Sales Charge 5
Premium Tax Charge 6
8. Transfer of Divisions 6
Designated Division Allocation 6
General Transfer Provisions 7
9. Retirement Options 7
Change of Retirement 7
Change of Retirement Annuity Form 7
10. Death Benefit Before the Retirement 7
11. Annuity Payout Option 7
General Provision 8
12. Change of Beneficiary or Frequency of Payment of Proceeds 8
13. Annuity Unit Values 9
14. Determination of the First Annuity Payment 9, 10
15. Determination of the Amount of Annuity Payment After the First 11
16. The Contract 11
17. Control 11
18. Assignment 11
19. Non-Transferability of Ownership 11
20. Modification of Contract 11
21. Incontestability 12
22. Misstatement of Age 12
23. Settlement 12
24. Proof of Age and Survival 12
25. Nonparticipating 12
26. Ownership of the Assets 12
Voting Rights and Reports 12
Substituted Securities 12
27. Gender, Use of Plural 12
Copy of the Application, Amendments and Endorsements
Page 2
Ex-47
<PAGE>
1. GENERAL DEFINITIONS-As used in this Contract, the term:
(a) "Accumulation Unit" means a unit of measurement used to determine the
value of the Owner's interest under the Contract before annuity payments
begin;
(b) "Accumulation Value" means the value of all the Accumulation Units as
of any Valuation Date allocated to this Contract. "Exempt Accumulation
Value" means the Accumulation Value not subject to the Sales Charge
described herein;
(c) "Annuity Payment" means an amount paid by the Insurance Company under
an Annuity Payout Option as described in this Contract;
(d) "Annuity Unit" means a unit used to determine the amount of each
annuity payment after the first;
(e) "Contract Year" means the twelve month period starting with the Date of
Issue or each succeeding twelve month period thereafter;
(f) "Contribution Year" means each Contract Year in which at least one
Premium is paid;
(g) "Division" means a subdivision within the Separate Account to which is
allocated a single class of Fund shares, unless securities are substituted
as this Contract provides. The Separate Account contains two subdivisions
for each class of Fund shares. One subdivision is for contracts issued
under tax qualified plans and the other is for contracts issued under
non-tax qualified plans. Each of the subdivisions has its own identified
values. The value of this Contract and the amount of variable annuity
payments thereunder are determined in accordance with the federal tax
status of this Contract and the Division(s) selected;
(h) "Fund" means the CIGNA Annuity Fund, Inc.;
(i) "Premium" means an amount paid to the Company under this Contract as a
consideration for the benefits described herein. The first Premium is the
"Initial Premium". "Net Premium" means the gross amount of a Premium
payment less any applicable state premium taxes;
(j) "Separate Account" means a segregated investment account of the Company
entitled "CIGNA Separate Account I," established pursuant to applicable law
and registered as a unit investment trust under the Investment Company Act
of 1940, as amended. The Separate Account is composed of separate
Divisions;
(k) "Valuation Date" means the date on which the net asset value of a class
of Fund shares which underlies a Division is determined;
(1) "Valuation Period" means the period between two consecutive Valuation
Dates, beginning with the end of the first of such Valuation Dates;
(m) "Variable Annuity" means a contract under which the Company promises to
pay to an annuitant or other properly designated payee one or more payments
which vary in amount in accordance with the net investment experience of a
segregated asset account(s) of the Company.
2. PAYMENT OF PREMIUMS-After the Initial Premium, Premiums may be paid at any
time before the Retirement Date, or date of Annuitant's death, if earlier, and
in any amount at the Company's Home Office, subject to the minimum amount of
$40.00.
Premiums less than the minimum will be accepted only with the consent of the
Company.
Ex-48
<PAGE>
3. NET PREMIUM-The Company will reduce each accepted Premium payment by any
applicable Premium Tax Charge to determine a Net Premium. Each Net Premium will
be applied by the Company to provide Accumulation Units in accordance with the
Designated Division(s) allocation for this Contract. The Designated Division(s)
allocation is shown on the Schedule Page, but may be changed by written request
of the Owner in a form satisfactory to the Company. No more than five (5)
Divisions may be so requested.
The number of Accumulation Units to be provided will be determined by the
Company as of the last day of the Valuation Period during which the
corresponding Premium is received at its Home Office and will be based on the
then current value of an Accumulation Unit of the applicable Division(s).
The dollar value of each Accumulation Unit may vary from one Valuation Period to
the next Valuation Period and will depend on the investment experience of the
applicable Division. Additional Accumula-
Page 4
F1-7M21
Ex-49
<PAGE>
tion Units are credited to this Contract by the Company dividing a Net Premium
allocated to a Division by the Division's then current Accumulation Unit Value.
4. ACCUMULATION UNIT VALUE-The value of an Accumulation Unit for each Division
was established at $1 .00 as of the date on which the first Fund shares were
purchased by the Company for that Division. The value of an Accumulation Unit is
subsequently determined by multiplying its value on the immediately preceding
Valuation Date by the Net Investment Factor for the current Valuation Period.
The value of an Accumulation Unit as of any date other than a Valuation Date is
equal to its value as of the next following Valuation Date. The method of
determination by the Company of the value of an Accumulation Unit will be
conclusive upon the Owner, any assignee, the Annuitant and any Beneficiary.
5. NET INVESTMENT RATE AND NET INVESTMENT FACTOR-The net investment rate for any
Valuation Period is equal to the gross investment rate for a Division expressed
in decimal form to seven places less a deduction of 0.0000327 for each day in
such valuation period (1.2% annually). Such gross investment rate is equal to
(i) the investment income for the Valuation Period, plus capital gains and minus
capital losses for the period, whether realized or unrealized, on the assets of
the Division, less a deduction for any applicable taxes with respect to such
income and capital gains, divided by (ii) the value of assets allocated to this
Contract in the applicable Division at the beginning of the Valuation Period.
The gross investment rate may be positive or negative. The Net Investment Factor
for a Division is 1 .0000 plus the net investment rate for the period applicable
for that Division.
6. NONFORFEITURE PROVISION-Prior to the retirement Date, the Owner may request
to withdraw all or a partial amount of the Accumulation Value of this Contract
by written request in a form satisfactory to the Company. No request to withdraw
a partial amount of Accumulation Value will be accepted by the Company for a
requested amount less than $300. The Company will make a payment of Contract
Withdrawal Value, less any amounts required to be withheld under applicable tax
law, within seven days after the date such request is received by the Company at
its Home Office, except to the extent that the Company is permitted to defer the
date of payment in accordance with the Investment Company Act of 1940, as
amended. Contract Withdrawal Value is the requested amount of Accumulation Value
reduced by any applicable Premium Tax Charge and Sales Charge as described in
Section 7. If a partial withdrawal request would reduce the remaining
Accumulation Value to under $500, the Company will consider the request to be a
withdrawal request of all the Accumulation Value of the Contract. In such event,
the total Contract Withdrawal Value will be payable to the Owner and this
Contract will be cancelled.
Contract Withdrawal Value will be determined as of the Valuation Date coincident
with or next following the date that the proper written request is received by
the Company. Amounts withdrawn will result in the reduction of Accumulation
Units credited to this Contract.
7. CONTRACT CHARGES
Administrative Expense Charge-At the end of each Contract Year prior to the
Retirement Date, the Company will deduct an administrative charge from the
Contract value. This charge will be made by reducing the number of Accumulation
Units allocated to this Contract. If allocation is made to more than one
Division, the deduction will be made proportionately.
The administrative charge before the Retirement Date is $30.00. In addition, the
Company reserves the right to charge an additional $5.00 for the second and for
each subsequent transfer of Accumulation Value among Divisions during the
Contract Year, as described in Section 8.
After the Retirement Date, the Company reserves the right to deduct an
administrative charge at the end of each Contract Year of $5.00 for the second
and for each subsequent transfer of Annuity Unit value among Divisions during
the Contract Year, as described in Section 8.
The Company assesses no charge for the first transfer of Divisions within a
Contract Year either before or after the Retirement Date.
Separate Account Charge-The Company assesses a daily charge of 0.0000327 of the
value of the assets allocated to each Division (1.2% on an annual basis) for its
assumption of mortality and expense risks under this Contract. (See Section 15
for an explanation of these guarantees.)
Sales Charge-This charge is assessed against Accumulation Value (1) at the time
that an amount is withdrawn and (2) at the time Accumulation Value is applied as
a "Retirement Option" under an Annuity
Page 5
Ex-50
<PAGE>
Payout Option described in Section 11 unless: (a) the first annuity payment
begins after the tenth Contract Year, or (b) the first annuity payment begins
after the fifth Contract Year and the Annuitant has attained age 591/2 at the
time of such payment.
Exempt Accumulation Value-if: (a) a withdrawal request is received or
Accumulation Value is applied to a Retirement Option after the first Contract
Year and (b) no other partial or full withdrawal request has been received by
the Company during the Contract Year of withdrawal or such application of
Accumulation Value, then up to 10% of Accumulation Value will be exempt from a
Sales Charge. Such Exempt Accumulation Value will be determined as of the
Valuation Date coincident with or next following the date that the written
request for withdrawal is received by the Company at its Home Office or the date
that Accumulation Value is applied to an Annuity Payout Option as a Retirement
Option, as applicable.
Determination of Charge-The Company will determine the amount of Sales Charge as
follows:
STEP I A Gross Chargeable Amount is determined by the Company. This amount
is the lesser of (a) the dollar amount of Premiums paid, and not previously
withdrawn and (b) the amount requested to be withdrawn or applied as a
Retirement Option;
STEP 2 A Net Chargeable Amount is determined by the Company. This amount is
the Gross Chargeable Amount less any Exempt Accumulation Value then
applicable.
STEP 3 A Net Chargeable Amount is then allocated by the Company to each
Contribution Year.
STEP 4 The Net Chargeable Amount allocated to a Contribution Year is
multiplied by the Applicable Percentage shown:
No. of Full Contract Years Between the
Beginning of a Contribution Year and Date
of Withdrawal (or First Annuity Payment) Applicable Percentage
less than 2 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 1%
8 or more 0%
STEP5 The Sales Charge applicable to the withdrawal request or application
of proceeds is the sum of amounts determined under STEP 4.
For purposes of computing of a Sales Charge, payments of Contract Withdrawal
Value and the amount of any Sales Charge for prior withdrawals will be deemed by
the Company to reduce the amount of Premiums paid for this Contract at the time
of subsequent withdrawal, or first annuity payment. Premiums paid during early
Contract Years will be deemed by the Company to have been withdrawn prior to
Premiums paid during later Contract Years. In no event will the Sales Charge
exceed 7% of the amount of Premiums accepted by the Company for this Contract.
Premium Tax Charge-The Company will deduct any applicable premium taxes, when
due, from the value of this Contract.
8. TRANSFER OF DIVISIONS-Once each Contract Year, the Owner may elect to
transfer all or any portion of the Accumulation Value or the value of Annuity
Units from the current Divisions to one or more of the other Divisions without
charge.
The Owner may also elect to make additional transfers of contract value between
Divisions during each Contract Year, subject to the Administrative Expense
Charge described in Section 6.
The Company reserves the right to limit transfers to one per Contract Year upon
written notice to the Owner.
Designated Division Allocation unless otherwise requested by the Owner in
writing and approved by the Company, the allocation for Premium payments
accepted by the Company after a transfer will remain unchanged from the
allocation in effect prior to the transfer.
Page 6
FI-7M22
Ex-51
<PAGE>
General Transfer Provisions-No transfer of Divisions is permitted within 30 days
of a Retirement Date and no transfer is permitted if it would result in applying
the value of this Contract to more than five Divisions.
The number of Accumulation Units credited in the newly elected Division(s) will
be equal to the dollar value of the amount transferred divided by the current
value of one Accumulation Unit in the newly elected Division(s).
The number of Annuity Units credited in a newly elected Division will be
determined by multiplying the number per Division of Annuity Units to be
transferred by the current value of one such Annuity Unit, then dividing such
product by the current value of one Annuity Unit in the newly elected Division.
9. RETIREMENT OPTIONS
Change of Retirement Date-Upon written request by the Owner received by the
Company during the Annuitant's lifetime and at least 30 days prior to the
Retirement Date, the Retirement Date, may be changed to any date which is not
later than the Annuitant's 75th birthday, unless a different time is agreed to
by the Company in writing.
Change of Retirement Annuity Form-During the Annuitant's lifetime, the Owner may
change the form of the Retirement Option otherwise provided in this Contract to
one or more of the different Retirement Option(s) described in Section 11 by
filing written notice of the change with the Company at least thirty days before
the Retirement Date. The amount which will be applied to provide the selected
Retirement Option(s) will be the Accumulation Value less any applicable Premium
Tax Charge or Sales Charge as described in Section 7. The payee under any
selected Retirement Option shall be the Owner or any other payee designated by
the Owner in writing and received by the Company during the Annuitant's
lifetime. The Owner may, by written notice received by the Company during the
Annuitant's lifetime, change a previously designated payee to another payee.
10. DEATH BENEFIT BEFORE THE RETIREMENT DATE-If the Annuitant dies before the
Retirement Date, the Company will pay a death benefit to the Beneficiary
designated as such by the Owner.
The death benefit before the Retirement Date is the greater of (a) the
Accumulation Value as of the Valuation Date coincident with or next following
the date that due proof of the Annuitant's death is received by the Company,
less any applicable Premium Tax Charge; or (b) if the Annuitant's death occurs
before his or her 75th birthday, the total Premiums paid less the amount of any
prior withdrawals. This benefit will be paid either in one sum or as an Annuity
Payout Option as described in Section 11.
During the Annuitant's lifetime, the Owner may select Annuity Payout Option(s)
for death benefits before the Retirement Date. A selection, or change of
selection, shall take effect as of the date the Owner signs a written request
thereof, subject to any prior action taken by the Company before receipt of such
selection or change.
If no Annuity Payout Option for death benefits is in effect at the time of the
Annuitant's death before the Retirement Date, the death benefit will be payable
as a single sum. In such event, the Beneficiary may, within one year following
the Annuitant's death, elect to apply the death benefit to an Annuity Payout
Option described in Section 11 unless a single sum death benefit payment has
been made by the Company. Such election must be filed with the Company in
written form acceptable to it.
11. ANNUITY PAYOUT OPTIONS-The Annuity Payout Options are available under this
Contract as Retirement Options or as a death benefit before the Retirement Date.
In addition to the following specified options of this Contract, the Owner (or
the Beneficiary, if applicable) may also choose from any other options available
from the Company at the time benefit payments are to begin. The Annuity Payout
Options are:
Option 1-Life Annuity with No Refund-A monthly annuity payable during the
lifetime of the Annuitant ceasing with the last annuity payment due prior to the
death of the Annuitant.
Option 2-Life Annuity and Annuity Payments Guaranteed for Fixed Period-A monthly
annuity payable during the lifetime of the Annuitant. If, at the death of the
Annuitant, payments have been made for less than the fixed period, the remaining
annuity payments will be payable to the end of the fixed period. The fixed
period may be (a) 10 years, (b) 15 years, or (c) 20 years.
Page 7
Ex-52
<PAGE>
Option 3-Unit Refund Life Annuity-A monthly annuity payable during the lifetime
of the Annuitant. At Annuitant's death, an additional payment may be made. Such
payment at death shall be the then dollar value of the number of Annuity Units
equal to the excess, if any, of (a) over (b) where (a) is the total amount
applied under the option divided by the Annuity Unit Value, as defined in
Section 13, at the effective date of such application, and (b) is the product of
the number of Annuity Units represented by each annuity payment and the number
of annuity payments made prior to such death.
Option 4-Joint and Survivor Annuity-A monthly annuity payable throughout the
joint lifetime of the Annuitant and the Joint Annuitant and continuing for life
to the survivor upon the death of either Annuitant.
Option 5-Joint and Two-Thirds Survivor Annuity-A monthly annuity payable
throughout the joint lifetime of the Annuitant and the Joint Annuitant with
two-thirds of the number of Annuity Units in effect during such joint lifetime
continuing for life to the survivor upon the death of either Annuitant.
Option 6-Annuity Payments Guaranteed for a Fixed Period-A monthly annuity
payable for a fixed number of years. The number of years must be at least 5, but
not more than 30. If the Annuitant dies before the last annuity payment is made,
the remaining payments will be payable to the end of the fixed period.
The amount of the first annuity payment for Options 1 through 6 above will be
determined in accordance with Section 14 and the subsequent payments shall be
determined in accordance with Section 15.
General Provisions-If an Annuity Payout Option is elected as a Retirement
Option, then (1) the "Annuitant" referred to in such Option is the person named
as such in this Contract and (2) amounts payable after the death of the
Annuitant under Options 2, 3 and 6 will be paid to the designated Beneficiary in
accordance with Section 12. If an Annuity Payout Option is selected for the
death benefit described in Section 10, then (1) the "Annuitant" referred to
under the Annuity Payout Option is the designated Beneficiary and (2) amounts
payable upon the death of such "Annuitant," under Options 2, 3 and 6, will be
paid to such Annuitant's estate in a lump sum (based on a present value at 6%
for any remaining annuity payments under Options 2 and 6), unless other
provisions have been specified and approved by the Company at the time of
election of these Annuity Payout Options. If Option 4 or 5 is chosen, the Owner,
during the Annuitant's lifetime, (or the Beneficiary, if applicable) must also
select a Joint Annuitant. If Option 6 is chosen, the Owner, during the
Annuitant's lifetime, and the Beneficiary (if other than the Annuitant),
thereafter may redeem this Contract for a lump sum based on a present value at
6% for any remaining annuity payments, unless other provisions have been
specified and approved by the Company. The minimum amount which may be applied
under any Annuity Payout Option for any payee shall be $3,000, net of any
applicable charge. Proceeds of a smaller amount due to any person will be paid
in one sum. If at any time the annuity payments under an Annuity Payout Option
are or become less than $20 each, the Company shall have the right to change the
frequency of payment to such intervals as will result in payments of at least
$20.
Annuity Payout Options are based on the age nearest birthday of the Annuitant(s)
as of the date annuity payments are to start. Satisfactory proof of the age of
such Annuitant(s) is required.
Except with the written consent of the Company, amounts due under an Annuity
Payout Option shall not be available to an assignee or to other than a natural
person entitled to receive proceeds in his own right.
Neither the Owner nor any other person receiving payments under this Contract,
whether under an Annuity Payout Option or otherwise, shall have the right to
assign, encumber or alienate any of the payments under an Annuity Payout Option.
To the extent permitted by law, neither the proceeds nor the payments under any
Annuity Payout Option shall be subject to any Annuitant's or Beneficiary's
debts, contracts or engagements or to any judicial process to levy upon or
attach the same for payment thereof.
12. CHANGE OF BENEFICIARY OR FREQUENCY OF PAYMENT OF PROCEEDS-While this
Contract is in force during the Annuitant's lifetime, the Owner, subject to the
terms of any existing assignment, may change a previously designated Beneficiary
or may change the frequency of the annuity payments being made under this
Contract to any different annuity payment frequency upon which the Owner and the
Company may agree, by filing at the Home Office of the Company a written request
therefor which is satisfactory to the Company. Such change, either in
Beneficiary or in the frequency of annuity payments,
Page 8
FI-7M23a
Ex-53
<PAGE>
shall take effect when so filed. If any designated Beneficiary predeceases the
Annuitant, then the interest of that Beneficiary shall pass to the designated
surviving Beneficiary or, if more than one Beneficiary survives the Annuitant,
such interest shall pass to such surviving Beneficiaries in proportion to their
respective interests, unless otherwise previously specified by the Owner. If no
designated Beneficiary survives the Annuitant and no other designation is
provided, the Owner shall be the Beneficiary, if he survives the Annuitant;
otherwise, the Owner's estate shall be the Beneficiary.
13. ANNUITY UNIT VALUES-The value of an Annuity Unit for each Division was
established at $1.0000 on the date on which the first annuity payment based on
such Division was determined. On each subsequent Valuation Date, such value is
determined by multiplying the value of that Annuity Unit on the immediately
preceding Valuation Date by the product of (a) 0.9998404 raised to a power
corresponding to the number of days in the Valuation Period ending with such
Valuation Date (a factor which neutralizes the effect of the 6% annual interest
rate used in calculating the amount of the first payment), and (b) the Net
Investment Factor for the Division for the fourteenth day immediately preceding
the last day of the Valuation Period for which the value is being calculated.
(See Section 5 for a description of Net Investment Factor.)
The valuation of all assets in the Separate Account shall be determined in
accordance with the provisions of applicable laws, rules and regulations. The
method of determination by the Company of the value of an Annuity Unit will be
conclusive upon the Owner, any assignee, the Annuitant, and any Beneficiary.
14. DETERMINATION OF THE FIRST ANNUITY PAYMENT-The tables below show the dollar
amount of the first annuity payment for each $1,000 of proceeds applied. The
amount of proceeds applied to effect annuity payments will be equal to the
product of the value of an Accumulation Unit on the fourteenth day immediately
preceding the date on which the first annuity payment is due and the number of
Accumulation Units credited to the Contract as of the date on which the first
annuity payment is due, less any applicable Premium Tax Charge or Sales Charge.
Amounts shown for Single Life Annuity, Joint and Survivor Annuity and joint and
Two Thirds Survivor Annuity are based on the 1971 Individual Annuity Mortality
Table set back five years with interest at the rate of 6% per annum and assume
birth in the year 1920. Under these Annuity Options, the amount of each annuity
payment will depend upon the adjusted age of the Annuitant and the Joint
Annuitant, if any. The adjusted age is determined from the actual age nearest
birthday at the time the first annuity payment is due in the following manner:
Calendar Year of Birth Adjusted Age
Before 1920 Actual Age increased by 1
1920-1939 Actual Age
1940-1959 Actual Age decreased by 1
1960-1979 Actual Age decreased by 2
1980-1999 Actual Age decreased by 3
2000-2014 Actual Age decreased by 4
Amounts shown for the Fixed Period Annuity are based on interest at the rate of
6% per annum and the number of years in the Fixed Period.
The Company reserves the right to substitute any of the tables below to the
extent required by any law, rule or regulation concerning the use of sex-based
rate factors.
Page 9
Ex-54
<PAGE>
DOLLAR AMOUNT OF THE FIRST MONTHLY ANNUITY PAYMENT
WHICH IS PURCHASED WITH EACH $1,000 OF PROCEEDS APPLIED
Single Life Annuity
Options 1, 2 and 3
Option 1 Option 2 Option 3
Adjusted No Period Period Certain Unit
Age Certain 10 Years 15 Years 20 years Refund
50 5.75 5.71 5.67 5.61 5.65
51 5.80 5.76 5.72 5.65 5.69
52 5.86 5.81 5.76 5.69 5.74
53 5.92 5.87 5.81 5.73 5.79
54 5.98 5.93 5.86 5.78 5.84
55 6.05 5.99 5.91 5.82 5.89
56 6.12 6.05 5.97 5.87 5.95
57 6.20 6.12 6.03 5.91 6.01
58 6.28 6.19 6.09 5.96 6.07
59 6.36 6.26 6.15 6.01 6.14
60 6.45 6.34 6.22 6.07 6.21
61 6.55 6.42 6.28 6.12 6.28
62 6.65 6.50 6.36 6.18 6.36
63 6.75 6.59 6.43 6.23 6.44
64 6.86 6.69 6.51 6.29 6.53
65 6.98 6.79 6.59 6.34 6.63
66 7.11 6.90 6.67 6.40 6.73
67 7.25 7.01 6.76 6.46 6.83
68 7.39 7.13 6.85 6.52 6.95
69 7.55 7.25 6.94 6.57 7.07
70 7.72 7.38 7.03 6.62 7.20
71 7.90 7.52 7.13 6.68 7.34
72 8.11 7.67 7.23 6.73 7.48
73 8.33 7.83 7.32 6.77 7.64
74 8.56 7.99 7.42 6.82 7.81
75 8.82 8.16 7.52 6.85 7.99
Joint and Survivor Life Annuity
Option 4
Adjusted Age of Adjusted Age of Annuitant
Joint Annuitant
Age Age 55 Age 60 Age 62 Age 65 Age 67 Age 70 Age 75
50 5.42 5.49 5.52 5.55 5.57 5.61 5.65
55 5.52 5.63 5.67 5.72 5.76 5.81 5.88
57 5.57 5.69 5.73 5.80 5.84 5.90 5.99
60 5.63 5.77 5.83 5.92 5.97 6.05 6.17
62 5.67 5.83 5.90 6.00 6.06 6.16 6.30
65 5.72 5.92 6.00 6.12 6.20 6.32 6.51
70 5.81 6.05 6.16 6.32 6.44 6.62 6.91
Joint and Two-Thirds to Survivor Life Annuity
Option 5
Adjusted Age of joint Annuitant
Adjusted Age of Annuitant
Age Age 55 Age 60 Age 62 Age 65 Age 67 Age 70 Age 75
50 5.73 5.87 5.93 6.03 6.11 6.22 6.46
55 5.86 6.02 6.10 6.21 6.29 6.42 6.69
57 5.92 6.09 6.17 6.29 6.38 6.52 6.79
60 6.02 6.21 6.29 6.42 6.52 6.67 6.97
62 6.10 6.29 6.38 6.52 6.62 6.78 7.10
65 6.21 6.42 6.52 6.67 6.78 6.96 7.32
70 6.42 6.67 6.78 6.96 7.09 7.31 7.74
The dollar amount of the first monthly annuity payment for any age or
combination of ages not shown in the above tables will be calculated on the same
basis as the payments for those shown and may be obtained from the Company.
Page 10
FI-7M24a
Ex-55
<PAGE>
Fixed Period Annuity
Option 6
Number of First Monthly Number of First Monthly
Years Installment Years Installment
5 19.17 18 7.46
6 16.42 19 7.24
7 14.46 20 7.04
8 13.00 21 6.86
9 11.87 22 6.70
10 10.97 23 6.56
11 10.24 24 6.43
12 9.63 25 6.32
13 9.12 26 6.21
14 8.69 27 6.11
15 8.31 28 6.02
16 7.99 29 5.94
17 7.71 30 5.87
15. DETERMINATION OF THE AMOUNT OF ANNUITY PAYMENTS AFTER THE FIRST-The number
of Separate Account Annuity Units is determined by dividing the amount of the
first payment by the Separate Account Annuity Units value on the Valuation Date
coincident with or next following the date on which the first annuity payment is
due. Thereafter the number of Separate Account Annuity Units remains fixed,
unless Contract Value is transferred as described in Section 11. The dollar
amount of the second and each subsequent annuity payment is not predetermined
but may change from month to month. The actual amount of any such payment is
determined by multiplying the number of Annuity Units of the applicable Division
by the Annuity Unit Value of such Division on the Valuation Date coincident with
or next following the date on which such payments are due.
The Company guarantees that the dollar amount of each annuity payment after the
first shall not be adversely affected by the actual expenses which it incurs for
administration of the Contract or by variations in mortality experience from the
mortality assumptions on which the first annuity payment is based, except as
stated in Section 14.
16. THE CONTRACT-This Contract and the Application therefor constitute the
entire contract. All statements made by the Owner or Annuitant, or on their
behalf, shall be deemed representations and not warranties, and no such
statement shall be used in defense of a claim under this Contract unless it is
contained in the Application and a copy of the Application is attached to this
document when issued.
17. CONTROL-The Owner, during the lifetime of the Annuitant and without the
consent of any contingent Owner or Beneficiary, may assign or surrender this
Contract and may amend or modify it with the written consent of the Company,
subject to the provisions of Sections 18, 19 and 20.
18. ASSIGNMENT-No assignment of this Contract shall be binding on the Company
unless it is in writing and until it is filed with the Company at its Home
Office. The Company will assume no responsibility for the validity or
sufficiency of any assignment. Unless otherwise provided in the assignment, the
interest of any revocable Beneficiary shall be subordinate to the interest of
any assignee, whether the assignment was made before or after the designation of
the Beneficiary, and the assignee shall receive any sum payable to the extent of
his interest.
19. NON-TRANSFERABILITY OF OWNERSHIP-If this Contract is issued in conjunction
with a retirement plan qualified under the Internal Revenue Code, and
notwithstanding any other provisions of this Contract, the Owner may not change
the ownership of this Contract nor may this Contract be sold, assigned or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose to any person other than the Company, unless
the Owner is the trustee of any employee trust qualified under the Internal
Revenue Code, the custodian of a custodial account treated as such or the
employer under a qualified non-trusteed pension plan.
20. MODIFICATION OF CONTRACT-Only the President, a Vice President or a Secretary
of the Company has power on behalf of the Company to change, modify or waive the
provisions of this Contract. Any such action must be in writing. The Company
shall not be bound by any promise or representation
Page 11
Ex-56
<PAGE>
heretofore or hereafter made by or to any agent or person other than as
specified above. The Company reserves the right to amend this Contract at any
time, to the extent required by any applicable federal or state law.
21. INCONTESTABILITY-This Contract will be incontestable from the Date of Issue.
22. MISSTATEMENT OF AGE-If the age of the Annuitant has been misstated, any
amount payable shall be that which the Premiums paid would have purchased at the
correct age. Overpayments by the Company because of such misstatement, with
interest at 6% a year, compounded annually, will be charged against benefits
failing due after the adjustment. Underpayment by the Company because of such
misstatement will be paid, with interest at 6% a year, compounded annually, by
the Company immediately.
23. SETTLEMENT-Any payment by the Company under this Contract is payable at its
Home Office.
24. PROOF OF AGE AND SURVIVAL-The Company has the right to require satisfactory
proof of age or survival of the Annuitant(s) and that a payee is living when a
payment is contingent upon the payee's survival.
25. NONPARTICIPATING-This Contract is nonparticipating and will not share in the
surplus earnings of the Company.
26. OWNERSHIP OF THE ASSETS-The Company shall have exclusive and absolute
ownership and control of its assets, including all assets allocated to the
Separate Account.
Each Division is comprised of a particular class of Fund shares. The Company
provides Fund shares for the applicable Division(s) equal in amount to its
reserve obligations under the Contracts. The Company is the owner of all Fund
shares purchased. No person having the right to receive any payments hereunder
shall be entitled to receive Fund shares allocated to the Separate Account. All
Fund shares allocated to a Division will be held for the exclusive benefit of
persons entitled to receive benefits under variable annuity contracts issued by
the Company, for which that Division measures the contract value. The income, if
any, and gains or losses, realized or unrealized, on such Fund shares will be
allocated to the applicable Division and will be credited to or charged against
the amounts allocated to such Division without regard to the other income, gains
or losses on the assets allocated to any other Division. Dividends and capital
gains distributions received for a class of Fund shares allocated to a Division
will be reinvested in additional Fund shares at the net asset value of such
class and allocated to the applicable Division. No Division shall be chargeable
with the liabilities arising out of the Company's business valued with any other
Division; nor shall the Separate Account as a whole be chargeable with the
liabilities arising out of any other business which the Company may conduct.
Voting Rights and Reports-The Company will vote Fund shares allocated to a
Division by class, in accordance with instructions received from persons having
contract values determined by that Division. The Owner shall have the right to
instruct the Company as to how to vote the pro rata value of this Contract in a
Division. The Company will mail Fund proxy material to the Owner together with
an appropriate form which may be used to give voting instructions to the
Company. If instructions are not received by the Company in a timely manner as
specified in the voting instructions, the pro rata value of this Contract will
be voted by the Company in proportion to the instructions received by all
persons having contract values determined by such Division who furnish timely
instructions to the Company.
Substituted Securities-if any class of the Fund shares becomes unavailable for
purchase by the Company for allocation for any Division, or if in the judgment
of the Company further investment in such class is no longer appropriate in view
of the purposes of the Separate Account, (i) there may be substituted therefor
other shares or classes of shares of a registered investment company; or (ii)
Net Premiums received after a date specified by the Company may be used to
provide other shares of a registered investment company. In either event, prior
approval by the vote of a majority of the votes to be cast by persons having
their contract values determined by the affected Division will be obtained.
27. GENDER, USE OF PLURAL-Unless the context indicates otherwise, references to
the male gender in this Contract shall include the female gender and the
singular shall include the plural.
Page 12
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Ex-57
<PAGE>
Exhibit 4(c)
Form of Endorsement Conforming the Single Payment and Flexible
Payment Variable Annuity Contracts to the Requirements
of Section 72(s) of the Internal Revenue Code of 1954,
as Amended by Section 222(b) of the Tax Reform Act of 1984
ENDORSEMENT
Attached to and made a part of this
Contract as of the date of issue.
For the purpose of conforming this Contract to section 222(b) of the Tax Reform
Act of 1984 (adding a new section 72(s) to the Internal Revenue Code), this
Contract is amended as follows:
A. Applicable only where the Annuitant is the Owner of this Contract: If the
individual named in the Application as the Annuitant is the Owner of this
Contract, the terms of this part A will apply:
(1) The Annuitant, as named on the Schedule Page, will be the Owner of this
Contract, and will be referred to as the "Owner/Annuitant".
(2) Except as stated in part A(3), if the Owner/Annuitant dies prior to the
Retirement Date (Annuity Commencement Date), the proceeds to be paid upon such
death under this Contract will be paid by the Company within five years after
the death of the Owner/Annuitant. Such proceeds will be paid in one or more
payments to the Beneficiary named by the Owner/ Annuitant.
(3) If the Owner/Annuitant dies prior to the Retirement Date (Annuity
Commencement Date) and the Beneficiary is a natural person, the death proceeds
may be paid under this Contract:
(a) as provided in part A(2); or
(b) in payments over the life of such Beneficiary; or
(c) in payments over a period not to extend beyond the life expectancy of such
Beneficiary.
If an election is made to receive such proceeds in accordance with the
provisions of sub-parts (b) or (c), payments will start no later than:
(i) one year from the date of death of the Owner/Annuitant; or
(ii) such later date as prescribed by regulations issued by the Internal Revenue
Service.
(4) If the Owner/Annuitant dies:
(a) on or after the Retirement Date (Annuity Commencement Date); and
(b) while payments are being made under an Annuity Payout Option,
the remaining payments to be paid under the form of Annuity Payout Option will
be paid at least as rapidly as under the method of payment in effect as of such
date of death.
If no Annuity Payout Option is in effect at the date of death of the
Owner/Annuitant, the proceeds of this Contract will be paid in accordance with
the applicable provisions of parts A(2) or A(3) above.
(5) Neither the Owner/Annuitant nor a Beneficiary may elect an Annuity Payout
Option which is contrary to this part A.
B. Applicable only where the Owner is not the Annuitant: If the individual named
in the Application as the Annuitant is other than the Owner of this Contract,
the provisions of this part B will apply:
(1) Except as stated in part B(6), if the Owner dies:
(a) before the Annuitant; and
(b) prior to the Retirement Date (Annuity Commencement Date),
the Company will pay "Death Proceeds-Death of Owner" to the "Beneficiary-Death
of Owner" named as such by the Owner prior to his or her death.
Ex-58
<PAGE>
(2) If two or more individuals are named as the Owners of this contract (joint
Owners), the provisions of this part B will apply upon the death of the first of
such individuals to die. Following such death:
(a) the proceeds of this Contract will be paid in accordance with the provisions
of this Part B; and
(b) no benefits will be paid under this Contract (including this Endorsement)
upon the later death of any other joint Owner, on account of such individual's
status as a joint Owner.
The interests of each surviving joint Owner are subject to, and modified by, the
provisions of this part B.
FI-2P73
Ex-59
<PAGE>
(3) If "Death Proceeds-Death of Owner" are paid in accordance with the
provisions of part B(l), then no death benefit will be paid under this Contract
upon the death of the Annuitant prior to the Retirement Date (Annuity
Commencement Date).
If a death benefit is payable upon death of the Annuitant prior to the
Retirement Date (Annuity Commencement Date), no death benefit will be paid under
the provisions of part B(l).
(4) Except as stated in parts B(5) and B(6), "Death Proceeds-Death of Owner"
will be paid by the Company with in five years from the death of the Owner. Such
proceeds will be paid in one or more payments to the "Beneficiary-Death of
Owner".
(5) If the "Beneficiary-Death of Owner" is a natural person, the entire proceeds
of this Contract may be paid:
(a) as provided in part B(4); or
(b) in payments over the life of such Beneficiary; or
(c) in payments over a period not to extend beyond the life expectancy of such
Beneficiary.
If an election is made to receive such proceeds in accordance with the
provisions of sub-parts (b) or (c), payments will start no later than:
(i) one year from the date of death of the Owner; or
(ii) such later date as prescribed by regulations issued by the Internal Revenue
Service.
(6) Notwithstanding the provisions of part B(l):
(a) if the named "Beneficiary-Death of Owner" is the spouse of the Owner; and
(b) if such spouse survives the Owner,
then no "Death Proceeds-Death of Owner" shall be paid under this Contract upon
the death of such Owner. Following the death of the Owner, such spouse will
become the Owner of this Contract, and may exercise all rights and privileges
granted by this Contract to the Owner.
(7) Except as stated in part B(6), all provisions of this Contract (and the
Application) which name a contingent Owner, to take effect upon the death of the
Owner; and all provisions which state that a contingent Owner may exercise
ownership rights under this Contract, are hereby cancelled and annulled.
(8) If the Owner dies:
(a) on or after the Retirement Date (Annuity Commencement Date); or
(b) after the death of the Annuitant, while payments are being made under an
Annuity Payout Option,
any remaining payments to be paid under the form of Annuity Payout Option will
be paid at least as rapidly as under the method of payment in effect on the date
of death of the Owner. The remaining payments will be paid to the person
determined in accordance with the provisions of the Annuity Payout Option in
effect on the date of death of the Owner.
(9) Neither the Owner nor a Beneficiary may elect an Annuity Payout Option which
is contrary to this part B.
(10) For purposes of this part B, the term:
(i) "Annuitant" means only the person named in the Schedule Page of this
contract as the Annuitant.
(ii)"Beneficiary-Death of Owner" means the person or persons named by the Owner
to receive death proceeds to be paid under this Contract upon the death of the
Owner. Unless specified in a written request to the Company, the "Beneficiary-
Death of Owner" will be the same person(s) named by the Owner to receive death
proceeds upon the death of the Annuitant prior to the Retirement Date (Annuity
Commencement Date). The provisions of this Contract which deal with designation
of beneficiary and change of beneficiary will also apply to any designation or
change of designation of the "Beneficiary-Death of Owner".
Ex-60
<PAGE>
(iii) "Death Proceeds-Death of Owner" means the greater of:
(a) the Accumulation Value of this Contract determined on the Valuation Date
coincident with or next following the date due proof of death of the Owner's
death is received by the Company, less the amount of any applicable premium
taxes; or
(b) if the Owner's death occurs before his or her 75th birthday, the total
Premiums paid less the amount of any prior withdrawals.
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
/s/ROY F MITTE, President
Ex-61
<PAGE>
Exhibit 5(a)
Form of Application for Single Payment Variable Annuity Contract
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
ILCO INVESTORS LIFE INSURANCE
COMPANY SEPARATE ACCOUNT I
Make checks payable to: INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Send Variable Annuity Application and check to:
Investors Life Insurance Company of North America
P.O. Box 149138
Austin, TX 78714-9138
VARIABLE ANNUITY APPLICATION
1. DESIGNATED ANNUITANT. (If no Contract Owner is specified in 2 below, the
Designated Annuitant will be the Contract Owner)
a. PRINT FULL NAME:
b. SOC. SEC. NO.
c. ADDRESS:________________________________
(Street)
________________________________________
(City) (State) (Zip)
d. SEX: M F
e. BIRTH DATE:
f. MARRIED: Yes No AGE
2. CONTRACT OWNER. (Only complete if different from Designated Annuitant)
a. PRINT FULL NAME:
b. TAX I.D. NO.
OR SOC. SEC. NO.
c. ADDRESS:______________________________
(Street)
______________________________________
(City) (State) (Zip)
3. CONTINGENT OWNER. (May ONLY complete when owner and Designated Annuitant
differ)
a. PRINT FULL NAME:
b. SOC. SEC. NO.
c. ADDRESS:______________________________
(Street)
______________________________________
(City) (State) (Zip)
4. TYPE OF PLAN
(A) NON-QUALIFIED
(B) QUALIFIED (Indicate type below)
Keogh (HR-10)*
Deferred Compensation
IRA Rollover*
Corporate Pension
Or Profit Sharing*
Corporate
Distribution Annuity*
Deferred Compensation
(State/Municipal)
Public School
Systems D 403(b)*
Non-Profit 501(c)3
Organizations D 403(b)*
Ex-62
<PAGE>
*Includes Automatic Non-Transferability of Ownership Provision.
5. BENEFICIARY DESIGNATION (Instruction on Reverse) MUST be completed
6. Will the annuity applied for replace existing annuity or life insurance?
Yes No If yes, explain:
Ex-63
<PAGE>
7. CONSIDERATION ($3,000 Minimum)
Single Premium Amount: $
If this application is declined there shall be no liability on the
part of the Company and any sums submitted herewith shall be refunded.
8. Net purchase payments are to be allocated to the CIGNA Separate Account I
divisions as follows. A maximum of five funds may be chosen. (Use only full
percentages.)
.00%
.00%
.00%
.00%
.00%
100.00%
9. EXPECTED COMMENCEMENT AGE FOR ANNUITY PAYOUT:
Standard Age: 65
Other:
Annuity commencement age can be changed at option of owner, during the
Annuitants lifetime.
10. ANNUITY FORM Standard Annuity: Life Annuity with 120 guaranteed monthly
payments:
Other:
11. Home Office Endorsements: (Not allowed in Maryland and Pennsylvania)
I hereby represent my answers to the above questions to be correct and true to
the best of my knowledge and belief and agree that this Application shall be
part of any annuity contract issued by the Company.
I understand that annuity payments, cash values and surrender values under any
contract issued pursuant to this Application are based upon assets allocated to
Separate Account I and are variable in nature; thus, they are not guaranteed as
to their dollar amount. Receipt of a current variable annuity and applicable
mutual fund(s) prospectus is hereby acknowledged.
SIGNED AT:_______________________________ ON __________________________
(City) (State) (Date)
SIGNATURES: _____________________________ ___________________________
(Designated Annuitant) (Owner Purchasing Employer,
if applicable)
AGENT: Do you have a reason to believe the Contract applied for is to replace
existing annuities or insurance owned by the annuitant?
Yes No
If yes, I have complied with all state replacement requirements. Required
replacement forms and information must be submitted to the Company.
WITNESS: ________________________________ _____________________________
(Agent) Print Agent Name
Agent's Address: _____________________________________________
(Street) City) (State) (Zip)
Agent's Code Agent's Telephone: ( )
Broker/Dealer:
BENEFICIARY INSTRUCTIONS
1. The full name, age, relationship to the Annuitant and address of each
beneficiary should be shown.
2. A married woman should indicate her own given name, not that of her
husband. Example: Mary N. Jones, not Mrs. John B. Jones.
Ex-64
<PAGE>
3. Listed below are the most common types of beneficiary designations:
IF THE BENEFICIARY WORDING DESIRED IS NOT INDICATED
BELOW, PLEASE CONTACT THE INVESTORS LIFE INSURANCE
COMPANY OF NORTH AMERICA FOR ASSISTANCE.
Designation Proper Wording
ONE BENEFICIARY Jane Doe, wife of the Annuitant
TWO BENEFICIARIES John Doe, father of the Annuitant
and Anna Doe, mother of the Annuitant equally,
or to the survivor.
ONE PRIMARY AND ONE Jane Doe, wife of the Annuitant, if living;
CONTINGENT BENEFICIARY otherwise Richard Doe, son of the Annuitant.
ONE PRIMARY AND TWO OR Jane Doe, wife of the Annuitant, if living;
MORE CONTINGENT BENEFICIARIES otherwise Richard Doe, Mary Doe, and Robert Doe,
children of the Annuitant or the survivors,
equally, or the survivor.
ONE PRIMARY AND UNNAMED Jane Doe, wife of the Annuitant,
CHILDREN AS CONTINGENT if living; otherwise the children born
BENEFICIARIES (EXCEPT ADOPTED of the marriage of the Annuitant and said wife
CHILDREN) or the survivors, equally, or the survivor.
ONE PRIMARY AND ONE OR MORE Jane Doe, wife of the Annuitant, if living;
CHILDREN INCLUDING LEGALLY otherwise any children born of the marriage of
ADOPTED CHILDREN AS CONTINGENT or legally adopted by the Annuitant and said
BENEFICIARIES wife,or the survivors, equally, or the survivor.
Ex-65
<PAGE>
Exhibit 5(b)
Form of Application for Flexible Payment Variable Annuity Contract
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
ILCO INVESTORS LIFE INSURANCE COMPANY
SEPARATE ACCOUNT I
Makes checks payable to: INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
Send Application for Flexible Premium Variable Annuity and check to:
Investors Life Insurance Company of North America
P.O. Box 149138
Austin, Texas 78714-9138
FLEXIBLE PREMIUM VARIABLE ANNUITY APPLICATION
1. PROPOSED ANNUITANT. (Individual upon whose life Contract is issued.)
a. PRINT FULL NAME d. SOC. SEC. No.
________________________________ e. BIRTH DATE:
(First) (Middle Initial) (Last)
f. AGE:
b. ADDRESS________________________
(Street)
g. Single Married Separated
_______________________________ Divorced Widowed
(City) (State) (Zip)
C. SEX M F
2. PROPOSED OWNER. (Individual or entity who will own and control the
contract. Complete only if different than Proposed Annuitant.)
a. PRINT FULL NAME: d. TAXPAYER I.D. NO.
_________________________________ OR SOC. SEC. NO.
(First) (Middle Initial) (Last)
g. Single Married Separated
b. ADDRESS:_________________________ Divorced Widowed
(Street)
_________________________________
(City) (State) (Zip)
C. SEX M F
3. TYPE OF PLAN
(A) NON TAX-QUALIFIED
(B) TAX-QUALIFIED (Indicate type below).
Corporate Pension or Profit Sharing*
Keogh (HR-10)*
Non-Profit 501(c)3 Organizations-403(b)*
Public School Systems-403(b)*
Texas ORP-403(b)*
Deferred Compensation (State/
Municipal)
Individual Retirement Annuity
(IRA)
The Proposed Annuitant and/or
Owner hereby represent that
they have received, read, and
understand the IRA Disclosure
statement and Agree that the
Retirement Date will be no
later than age 70 1/2.
*Plan Includes Automatic Non-Transferability of Ownership Provision.
1
83FVAA01 F1-3D12a
Ex-66
<PAGE>
4. BENEFICIARY. (Individual or entity designated to receive proceeds of
contract, if any, upon Annuitants death. Print full name and relationship
to Annuitant. See Beneficiary Instructions on back page.)
a. PRIMARY: b. CONTINGENT:
5. PAYMENT INFORMATION
a. INITIAL PREMIUM PAYMENT: $
b. PLANNED SUBSEQUENT PREMIUM PAYMENTS: $ ($40.00 minimum).
c. PAYMENTS WILL BE REMITTED TIMES PER YEAR COMMENCING
(Number) (Date)
d. METHOD OF PAYMENT:
Voluntary Direct Pay
Salary Deduction (complete information below)*
List Bill Remittance (complete information below)*
Monthly Check-o-matic
(Must include authorization card and void check.)
*Employer/Retirement Plan Name:
Billing Address:___________________________________________
(Street) (City) (State) (Zip)
Employer/Retirement Plan must have on file with Investors Life
Insurance Company of North America a completed Agreement to Remit
Salary Deductions before this application can be accepted.
6. ALLOCATION OF PREMIUM PAYMENTS
.00% .00%
.00% .00%
.00% .00%
Must Total 100.00%
7. a. ANNUITY PAYOUT Retirement Date (Annuity Commencement Date): Contract
Anniversary after Proposed Annuitants Age 65 unless otherwise shown.
Other:
b. ANNUITY FORM Standard Annuity: Life Annuity with 120 guaranteed monthly
payments unless otherwise shown. Other:
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8. Is Proposed Owner employed by or registered with another National
Association of Securities Dealers, Inc. firm?
YES NO If Yes notice of this transaction may be provided to such
firm at the following address:
9. SUITABILITY. Applicants are urged to supply the following information so
that an informed decision regarding suitability can be made by the Agent.
If, however you desire not to answer these questions, please check below:
a. Annual Salary: $ e. Occupation:
b. Amount of Life Ins: $ f. Source of Retirement Income:
Social Security Other
c. Total Assets: $
g. Other Income
d. Total Debts: $
The Proposed Applicant declines to provide the above information.
10. Will the annuity applied for replace existing annuity or life insurance?
YES NO If Yes provide name of insurer and policy number:
11. HOME OFFICE ENDORSEMENTS: (Not allowed in Maryland, Pennsylvania, and West
Virginia)
I hereby represent my answers to the above questions to be correct and true to
the best of my knowledge and belief and agree that this Application shall be a
part of any annuity contract issued by the Company.
I understand that annuity payments, cash values and surrender values under any
contract issued pursuant to this Application are based upon assets allocated to
Separate Account I and are variable in nature; thus, they are not guaranteed as
to their dollar amount. Receipt of current prospectuses for Separate Account I
Flexible Premium Variable Annuity and PCM Trust are hereby acknowledged.
SIGNED AT: _______________________________________ ON _____________
(City) (State) (Date)
SIGNATURES:__________________________ ____________________________
(Proposed Annuitant) (Owner Purchasing Employer,
if applicable)
AGENT: Do you have reason to believe the Contract applied for is to replace
existing annuities or insurance owned by the annuitant? Yes No
If Yes, I have complied with all state replacement requirements. Required
replacement forms and information must be submitted to the Company.
WITNESS:_______________________________ ____________________________
(Agent) Print Agent Name
Agent's Business Address:____________________________________________
(Street) (City) (State) (Zip)
Agent's Code Agent's Business Telephone ( )
Broker/Dealer:
3 F1-3D12a
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BENEFICIARY INSTRUCTIONS
1. The full name, age, relationship to the Annuitant and address of each
beneficiary should be shown.
2. A married woman should indicate her own given name, not that of her
husband. Example: Mary N. Jones, not Mrs. John B. Jones.
3. Listed below are the most common types of beneficiary designations.
IF THE BENEFICIARY WORDING DESIRED I SNOT
INDICATED BELOW, PLEASE CONTACT THE
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
FOR ASSISTANCE.
Designation Proper Wording
ONE BENEFICIARY Jane Doe, wife of the Annuitant
TWO BENEFICIARIES John Doe, father of the Annuitant and
Anna Doe, mother of the Annuitant equally,
or to the survivor
ONE PRIMARY AND ONE CONTINGENT Jane Doe, wife of the Annuitant, if living;
BENEFICIARY otherwise Richard Doe, son of the Annuitant
ONE PRIMARY AND TWO OR MORE Jane Doe, wife of the Annuitant, if living;
CONTINGENT BENEFICIARIES otherwise Richard Doe, Mary Doe, and Robert
Doe, children of the Annuitant or the
survivors, equally, or the survivor.
ONE PRIMARY AND UNNAMED CHILDREN Jane Doe, wife of the Annuitant, if living;
AS otherwise CONTINGENT otherwise the children born of the marriage
BENEFICIARIES (EXCEPT ADOPTED of the Annuitant and said wife or the
CHILDREN) survivors, equally, or the survivor.
ONE PRIMARY AND ONE OR MORE Jane Doe, wife of the Annuitant, if living;
CHILDREN otherwise INCLUDING otherwise any children born of or legally
LEGALLY ADOPTED CHILDREN AS adopted by the Annuitant and said wife, or
CONTINGENT BENEFICIARIES the survivors, equally, or the survivor.
4 F1-3D12a
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<PAGE>
Exhibit 6
Certificate of Incorporation and By-Laws of
Investors Life Insurance Company of North America
ARTICLES OF INCORPORATION
OF
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
The undersigned, for the purpose of forming a corporation under the
Washington Business Corporation Act, hereby certifies and adopts the following
Articles of Incorporation:
ARTICLE 1. NAME
The name of this Corporation is INVESTORS LIFE INSURANCE COMPANY OF NORTH
AMERICA.
ARTICLE 2. SHARES
The total authorized number of shares of this Corporation is 40,000
shares, which shall consist of a single class of stock with a par value of
$80.00 each.
ARTICLE 3. REGISTERED OFFICE AND AGENT
The initial registered agent and registered office of this Corporation
are as follows:
Registered Agent
Washington Corporate
Services, Inc.
Registered Office, Street
and Mailing Address
2250 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104
ARTICLE 4. INCORPORATOR
The name and address of the incorporator is: William M. Wood, 2200 Columbia
Center, 701 Fifth Avenue, Seattle, Washington 98104.
ARTICLE 5. DIRECTORS
The number of directors of this Corporation shall be fixed by the
Bylaws and may be increased or decreased from time to time in the manner
specified therein. The Initial Board of Directors shall consist of ten (10)
directors, and the names and addresses of the persons who shall serve as
directors until the first annual meeting of shareholders and until their
successors are elected and qualified unless they resign or are removed are:
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Joseph Francis Crowe Michael Scott Mitte
Theodore Adam Fleron Roy Frank Mitte
James Martin Grace Dr. Eugene Edgar Payne
Dale Edwin Mitte Steven Paul Schmitt
Ali Razavi Jeffrey H. Demgen
c/o FIC Insurance Group
Austin Centre
701 Brazos Street #1400
Austin, Texas 78701-3232
ARTICLE 6. LIMITATION OF LIABILITY
A director of this Corporation shall not be personally liable to this
Corporation or its shareholders for monetary damages for conduct as a director,
except for:
a. Acts or omissions involving intentional misconduct by the
director or a knowing violation of law by the director;
b. Conduct violating RCW 23B.08.310 (which involves certain
distributions by the Corporation); or
c. Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is
not legally entitled.
If the Washington Business Corporation Act is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of this Corporation shall be
eliminated or limited to the fullest extent permitted by the Washington Business
Corporation Act, as so amended. Any repeal or modification of the foregoing
paragraph by the shareholders of this Corporation shall not adversely affect any
right or protection of a director of this Corporation with respect to any acts
or omissions of such director occurring prior to such repeal or modification.
ARTICLE 7. INDEMNIFICATION
This Corporation shall indemnify and advance expenses to its Directors,
Officers and Employees, as follows:
a. Directors and Officers. This Corporation shall indemnify its directors
and officers to the full extent permitted by the Washington Business
Corporation Act now or hereafter in force. However, such indemnity
shall not apply on account of: (1) acts or omissions of the director
or officer finally adjudged to be
2
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intentional misconduct or a knowing violation of law; (2) conduct of
the director finally adjudged to be in violation of RCW 23B.08.310; or
(3) any transaction with respect to which it was finally adjudged that
such director or officer personally received a benefit in money,
property, or services to which the director or officer was not legally
entitled.
This Corporation shall advance expenses for such persons pursuant to
the terms set forth in the Bylaws, or in a separate directors'
resolution or contract.
b. Employees Who Are Not Directors or Officers. This Corporation shall
indemnify and advance expenses to its employees who are not directors
or officers to the extent authorized by the Board of Directors or the
Bylaws, and consistent with the law.
c. Implementation. The Board of Directors may take such action as is
necessary to carry out these indemnification and expense advancement
provisions. The Board is expressly empowered to adopt, approve, and
amend from time to time such Bylaws, resolutions, contracts, or
further indemnification and expense advancement arrangements as may be
permitted by law, implementing these provisions. Such Bylaws,
resolutions, contracts, or further arrangements shall include but not
be limited to implementing the manner in which determinations as to
any indemnity or advancement of expenses shall be made.
d. Survival of Indemnification Rights. No amendment or repeal of this
Article shall apply to or have any effect on any right to
indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal.
ARTICLE 8. PREEMPTIVE RIGHTS
Preemptive rights shall not exist with respect to shares of stock or
securities convertible into shares of stock of this Corporation.
ARTICLE 9. CUMULATIVE VOTING
The shareholders of this Corporation shall not have the right to
cumulate their votes in the election of directors.
ARTICLE 10. PURPOSE
The Corporation is formed as stock insurer for all legal and
permissible purposes and in particular to act as a life, health, accident,
annuities and disability insurer.
3
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<PAGE>
ARTICLE 11. CONTINUATION
The Corporation is intended to be a continuation, by redomestication,
of Investors Life Insurance Company of North America, an insurer domiciled in
and a corporation of the Commonwealth of Pennsylvania. The Corporation will
maintain a Capital Account at $2,400,000 instead of $1,500,000 and is increasing
said Account to this amount by a transfer from the Gross Paid-In and Contributed
Surplus Account, and the adjustment of the par value from $50 to $80 per share.
The Corporation shall at its incorporation have 30,000 shares issued and
outstanding, and fully paid.
ARTICLE 12. BYLAWS
The Board of Directors of the Corporation shall have the authority to
adopt and amend its Bylaws.
ARTICLE 13. DURATION
The duration of the Corporation shall be perpetual.
ARTICLE 14. PRINCIPAL PLACE OF BUSINESS
The principal office of the Corporation shall be Seattle, Washington.
The undersigned incorporator hereby declares that I have examined the
foregoing and, to the best of my knowledge and belief, it is true, correct and
complete.
DATED this 18th day of November, 1992.
/s/William M. Wood
Incorporator
4
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<PAGE>
STATE OF WASHINGTON )
) SS.
COUNTY OF KING )
On this ________ day of ____________, 1992, before me personally appeared
WILLIAM M. WOOD, to me known to be the individual who executed the within and
foregoing instrument, and acknowledged said instrument to be his free and
voluntary act and deed, for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
Notary Public in and for the State
(NOTARY SEAL) of Washington, residing at
My Commission Expires:
5
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<PAGE>
CONSENT TO APPOINTMENT
AS REGISTERED AGENT
WASHINGTON CORPORATE SERVICES, INC., by and through its Vice President,
hereby consents to serve as Registered Agent, in the State of Washington, for
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA, a Washington corporation. The
undersigned understands that as agent for this Corporation, it will be its
responsibility to receive service of process in the name of this Corporation; to
forward all mail to this Corporation; and to immediately notify the office of
the Secretary of State in the event of its resignation or of any changes in the
address of the registered office of this Corporation for which it is agent.
DATED this 18th day of November, 1992.
WASHINGTON CORPORATE
SERVICES, INC.
By: /s/ Susan K. Beebe
Its Vice President
6
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<PAGE>
AMENDED AND RESTATED
BY-LAWS
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
A Corporation of the
State of Washington
Incorporated
December 10, 1992
A CONTINUATION OF
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
A Corporation of the
Commonwealth of Pennsylvania
Incorporated
June 18, 1963
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<PAGE>
BY-LAWS
TABLE OF CONTENTS
Page
ARTICLE I. MEETING OF SHAREHOLDERS..........................................1
Section 1.1 Time and Place.............................................1
Section 1.2 Record Date................................................2
Section 1.3 Shareholders' List For Meeting.............................3
Section 1.4 Notice.....................................................4
Section 1.5 Waiver of Notice...........................................6
Section 1.6 Quorum.....................................................6
Section 1.7 Proxies....................................................7
Section 1.8 Voting.....................................................7
Section 1.9 Adjournment................................................8
Section 1.10 Written Consent of Shareholders............................8
ARTICLE II. DIRECTORS.......................................................9
Section 2.1 General Powers.............................................9
Section 2.2 General Standard for Directors.............................9
Section 2.3 Number and Qualification..................................11
Section 2.4 Election and Term of Office...............................11
Section 2.5 Meetings..................................................12
Section 2.6 Presumption of Assent.....................................15
Section 2.7 Resignation and Removal...................................15
Section 2.8 Vacancies.................................................16
Section 2.9 Compensation..............................................16
Section 2.10 Committees................................................17
ARTICLE III. OFFICERS, AGENTS AND EMPLOYEES.................................19
Section 3.1 Enumeration...............................................19
Section 3.2 Terms.....................................................19
Section 3.3 Chairman of the Board.....................................20
Section 3.4 President.................................................20
Section 3.5 Chairman of the Executive Committee.......................20
Section 3.6 Executive Vice Presidents.................................20
Section 3.7 Senior Vice Presidents....................................21
Section 3.8 Vice Presidents...........................................21
Section 3.9 Secretary.................................................21
Section 3.10 Assistant Secretaries.....................................22
Section 3.11 Treasurer.................................................22
Section 3.12 Assistant Treasurers......................................23
Section 3.13 Powers....................................................23
Section 3.14 Compensation..............................................24
Section 3.15 Agents and Employees......................................24
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ARTICLE IV. STOCK...........................................................24
Section 4.1 Issuance of Certificates for Shares.......................24
Section 4.2 Registrars and Transfer Agents............................25
Section 4.3 Transfers.................................................25
Section 4.4 Record Dates..............................................26
Section 4.5 Lost Certificates.........................................26
ARTICLE V. BOOKS AND RECORDS...............................................27
Section 5.1 Minute Book, Books of Accounts, and Share Register........27
Section 5.2 Copies of Resolutions.....................................29
ARTICLE VI. FISCAL YEAR AND FINANCIAL STATEMENTS...........................29
Section 6.1 Fiscal Year...............................................29
Section 6.2 Financial Statements......................................29
ARTICLE VII. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES...........31
Section 7.1 Directors and Officers....................................31
Section 7.2 Employees Who Are Not Directors or Officers...............32
Section 7.3 Implementation............................................32
Section 7.4 Survival of Indemnification Rights........................33
ARTICLE VIII. MISCELLANEOUS..................................................33
Section 8.1 Execution of Obligations..................................33
Section 8.2 Contributions.............................................33
Section 8.3 Depositories..............................................33
ARTICLE IX. AMENDMENT......................................................34
Section 9.1 Amendment.................................................34
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<PAGE>
ARTICLE I. MEETINGS OF SHAREHOLDERS
Section 1.1 Time and Place
(a) All meetings of the shareholders shall be held at the Head Office and
corporate domicile of the Corporation, in Seattle, Kind County, Washington, or
at such other place or places as may be designated by the Board of Directors.
(b) The annual meeting of the shareholders shall be held during the month
of January, February, March or April in each year, as the Board of Directors may
designate.
(c) Special meetings of the shareholders may be held upon the call of the
Board of Directors, the Chairman of the Board, the Executive Committee of the
Board of Directors, the Vice Chairman or the President, and shall be called if
requested in writing by the holders of at least one-fifth of the Corporation's
outstanding shares of capital stock.
(d) If the foregoing place or time is made impossible by reason of
circumstances beyond the control of the Directors and Officers of the
Corporation, the meetings shall be held at such other place or time as the Board
may select and as shall be permitted by law.
Section 1.2 Record Date
The Board of Directors is authorized to determine the record date in order
to determine the shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to
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<PAGE>
vote, or to take any other action. If the Board has not determined a record
date, it shall be fixed as follows:
(a) If the Board of Directors has not fixed the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting, it shall be the day before the first notice is delivered
to shareholders.
(b) If the Board has not fixed the record date for determining shareholders
entitled to a share dividend, it shall be the date the Board of Directors
authorizes the share dividend.
(c) If the Board has not fixed the record date for determining shareholders
entitled to a distribution, other than one involving a purchase, redemption, or
other acquisition of the Corporation's shares, it shall be the date the Board
authorizes the distribution.
(d) If the Board has not fixed a record date for determining the
shareholders entitled to demand a special meeting, it shall be the date the
first shareholder signs the demand.
A record date may not be more than sixty (60) days before the meeting or
action requiring a determination of shareholders.
A determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record
5
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<PAGE>
date, which it must do if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
Section 1.3 Shareholders' List For Meeting
After fixing a record date for a meeting, an alphabetical list shall be
prepared of the names of all the Corporation's shareholders on the record date
who are entitled to notice of a shareholders' meeting. The list shall show the
address of and number of shares held by each shareholder.
The shareholders' list must be available for inspection by any
shareholders, beginning ten (10) days prior to the meeting and continuing
through the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held. A
shareholder, the shareholder's agent, or the shareholder's attorney is entitled
to inspect the list, during regular business hours and at the shareholder's
expense, during the period it is available for inspection. The Corporation shall
make the shareholder's list available at the meeting, and any shareholder, the
shareholder's agent, or the shareholder's attorney is entitled to inspect the
list at any time during the meeting or any adjournment. Refusal or failure to
prepare or make available the shareholders' list shall not affect the validity
of action taken at the meeting.
Section 1.4 Notice
Written notice of each shareholders' meeting stating the date, time, and
place and, in case of a special meeting, the purpose or purposes for which such
meeting is called, shall be given by
6
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<PAGE>
the Corporation not less than ten (10) (unless a greater period of notice is
required by law in a particular case) nor more than sixty (60) days prior to the
date of the meeting, to each shareholder of record to the shareholder's address
as it appears on the current record of shareholders of this Corporation.
Notice of a special meeting must include a description of the purpose or
purposes for which the meeting is called.
Written notice may be transmitted by mail, private carrier, or personal
delivery; telegraph or teletype; or telephone, wire or wireless equipment which
transmits a facsimile of the notice. Written notice is effective at the earliest
of the following:
(a) When received;
(b) five (5) days after its deposit in the U.S. mail if mailed with
first-class postage; or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee. Notwithstanding the previous sentence, written notice
by the Corporation to a shareholder is effective when mailed, if it is in
comprehensible form and if mailed with first-class postage and correctly
addressed to the shareholder's address shown on the on the Corporation's current
record of shareholders. If an annual or special shareholders' meeting is
adjourned to a different date,
7
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<PAGE>
time, or place, notice need not be given of the new date, time, and place if the
new date, time or place is announced at the meeting before adjournment. However,
if a new record date for the adjourned meeting is or must be fixed under Section
1.2 of this Article 1, notice of the adjourned meeting must be given under this
Section to persons who are shareholders as of the new record date.
Section 1.5 Waiver of Notice
A shareholder may waive any notice required to be given by these Bylaws, or
the Articles of Incorporation of this Corporation, or any provisions of the
Washington Business Corporation Act, as amended, before or after the meeting
that is the subject of such notice. A valid waiver is created by any of the
following three methods:
(a) In writing, signed by the shareholder entitled to the notice and
delivered to the Corporation for inclusion in its corporate records;
(b) Attendance at the meeting, unless the shareholder at the beginning of
the meeting objects to holding the meeting or transacting business at the
meeting; or
(c) Failure to object at the time of presentation of a matter not within
the purpose or purposes described in the meeting notice.
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Section 1.6 Quorum
At any meeting of shareholders, a majority in interest of all the shares,
represented by shareholders of record in person or by proxy, shall constitute a
quorum for action on that matter.
Once a share is represented at a meeting, other than to object to holding
the meeting or transacting business, it is deemed to be present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting
pursuant to Section 1.2 of this Article 1. At such reconvened meeting, any
business may be transacted which might have been transacted at the meeting as
original notified.
If a quorum exists, action on a matter is approved by a voting group if the
votes cast within the voting group favoring the action exceed the votes cast
within the voting group opposing the action, unless the Washington Business
Corporation act, as amended, the Articles of Incorporation or these Bylaws of
this Corporation, require a different vote.
Section 1.7 Proxies
Shareholders of record may vote at any meeting either in person or by proxy
executed in writing. A proxy is effective when received by the person authorized
to tabulate votes for the Corporation. A proxy is valid for eleven (11) months
unless a longer period is expressly provided in the proxy.
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<PAGE>
Section 1.8 Voting
Subject to the provisions of the laws of the State of Washington, and
unless otherwise provided in the Articles of Incorporation, each outstanding
share is entitled to one (1) vote on each matter voted on at a shareholders'
meeting.
Section 1.9 Adjournment
A majority of the shares represented at the meeting, even if less than a
quorum, may adjourn the meeting from time to time. At such reconvened meeting at
which a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 1.10 Written Consent of Shareholders
Any action which may be taken at a meeting of shareholders may be taken
without a meeting, if a consent or consents in writing setting forth the action
so taken shall be signed by all of the shareholders who would be entitled to
vote at a meeting for such purpose, and shall be filed with the Corporate
Secretary, or an Assistant Corporate Secretary, of the Corporation.
A shareholder may withdraw consent only be delivering a written notice of
withdrawal to the Corporation prior to the time that all consent are in the
possession of the Corporation.
Action taken by unanimous written consent of the shareholders is effective
when all consents are in possession of the Corporation, unless the consent
specifies a later effective date.
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<PAGE>
ARTICLE II. DIRECTORS
Section 2.1 General Powers
All corporate powers shall be exercised by or under authority of, and the
business and affairs of the Corporation shall be managed under the direction of,
a Board of Directors (at times referred to herein as the "Board"), except as
otherwise provided by its Articles of Incorporation.
In addition to the specific authority conferred by law, the Article of
Incorporation, these Bylaws, and the authority customarily attributed to their
office, the Directors shall have all authority permitted or required by law of
each jurisdiction in which the Corporation does business to the end that they
are fully empowered to make and execute all rules and decisions necessary or
proper for the efficient conduct of the affairs of the Corporation.
Section 2.2 General Standard for Directors
(a) A director shall discharge the duties of a director, including duties
as a member of a committee:
In good faith;
With the care an ordinarily prudent person in a like position would
exercise under similar circumstances; and
In a manner the director reasonably believes to be in the best interests of
the Corporation.
(b) In discharging the duties of a director, a director is entitled to rely
on information,
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opinions, reports, or statements, including financial statements and other
financial data, if prepared or presented by:
One or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters presented;
Legal counsel, public accountants, or other persons as to matters the
director reasonably believes are within the person's professional or expert
competence; or
A committee of the board of directors of which the director is not a member
if the director reasonably believes the committee merits confidence.
(c) A director is not acting in good faith if the director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
subsection (b) of this Section 3.2 unwarranted.
(d) A director is not liable for any action taken as a director, or any
failure to take any action, if the director performed the duties of the
director's office in compliance with this Section 3.2.
Section 2.3 Number and Qualification
There shall be such number of Directors, not less than seven nor more than
fifteen, as the
12
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<PAGE>
Board shall from time to time determine; except that if disqualifications,
deaths, disabilities or resignations at any time reduce the number of qualified
and able directors to less than a quorum of the Board as then established, the
size of the Board shall be automatically reduced, without need of Board action,
to the number of directors then qualified and able to serve, or to the minimum
permitted by law, whichever is greater. A director need not be a resident of the
State of Washington but at least three-fourths of the Directors shall be United
States or Canadian citizens.
Section 2.4 Election and Term of Office
(a) Directors shall be elected at the first annual shareholders' meeting
and at each annual meeting thereafter.
(b) The terms of the initial directors of the Corporation expire at the
first shareholders' meeting at which directors are elected.
(c) The terms of all other directors expire at the next annual
shareholders' meeting following their election.
(d) The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected.
(e) A decrease in the number of directors does not shorten an incumbent
director's term.
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(f) Despite the expiration of a director's term, each director shall
continue to serve until the director's respective successor is elected and
qualified or until there is a decrease in the number of directors.
Section 2.5 Meetings
(a) Regular meetings of the Board shall be held at such times and places as
the Board shall fix, and if so fixed, notices thereof need not be given. Special
meetings shall be called by the Corporate Secretary at the request of the
Chairman of the Board, the Vice Chairman, the President or the Executive
Committee, upon at least 12 hours in person or by mail, telephone or telefax.
The purpose of the meeting need not be given in the notice.
(b) A majority of the Directors in office shall be required to constitute a
quorum and all questions before the Board shall be decided by a majority of
those present.
(c) Any action which may be taken at a meeting of the Board of Directors,
or of any Committee thereof, may be taken without a meeting, if a consent or
consents in writing setting forth the action so taken shall be signed by all of
the Directors or the members of the Committee, as the case may be, and shall be
filed with the Corporate Secretary, or an Assistant Corporate Secretary, of the
Corporation. Action taken by unanimous written consent is effective when the
last director signs the consent, unless the consent specifies a later effective
date.
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(d) One or more Directors may participate in a meeting of the Board, or a
Committee thereof, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision of the
Bylaws shall constitute presence in person at such meeting.
(e) A director may waive notice of a special meeting of the Board of
Directors either before or after the meeting, and such waiver shall be deemed to
be the equivalent of giving notice. The waiver must be in writing, signed by the
director entitled to the notice and delivered to the Corporation for inclusion
in its corporate records. Attendance at or participation in a meeting shall
constitute waiver of any required notice to the director of the meeting, unless
the director at the beginning of the meeting, or promptly upon the director's
arrival, objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
(f) A majority of the directors present, even if less than a quorum, may
adjourn a meeting and continue it to a later time. Notice of the adjourned
meeting or of the business to be transacted there, other than by announcement at
the meeting at which the adjournment is taken, shall not be necessary. At an
adjourned meeting at which a quorum is present, any business may be transacted
which could have been transacted at the meetings as originally called.
Section 2.5 Presumption of Assent
A director who is present at a meeting of the Board of Directors when
action is taken is
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deemed to have assented to the action taken unless:
(a) The director objects at the beginning of the meeting, or promptly upon
the director's arrival, to holding it or transacting business at the
meeting;
(b) The director's dissent or abstention from the action is entered in the
minutes of the meeting; or
(c) The director delivers written notice of the director's dissent or
abstention to the presiding officer of the meeting before its
adjournment or to the Corporation within a reasonable time after
adjournment of the meeting.
The right of dissent or abstention is not available to a director who
votes in favor of the action taken.
Section 2.7 Resignation and Removal
(a) Any director of this Corporation may resign at any time by giving
written notice to the Board of Directors, the Chairman of the Board, the
President, or Secretary of this Corporation. Any such resignation is effective
when the notice is delivered, unless the notice specifies a later effective
date.
(b) A majority of the shareholders, at a special meeting called expressly
for that
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<PAGE>
purpose, may remove from office with cause one or more directors and elect their
successors. Sixty-seven percent of the shareholders, at a special meeting called
expressly for that purpose, may remove from office without cause one or more
directors and elect their successors.
Section 2.8 Vacancies
Unless otherwise provided by the Washington Business Corporation Act, as
amended, in the case of any vacancy in the Board of Directors, including a
vacancy resulting from an increase in the number of directors, the remaining
directors, whether constituting a quorum or not, or the shareholders, may fill
the vacancy. If the directors in office constitute fewer than a quorum of the
Board, they may fill the vacancy by the affirmative vote of a majority of all
the directors in office.
Section 2.9 Compensation
The Directors shall be entitled to such compensation for their services as
Directors and as members of Committees as may be determined from time to time by
the Board. Directors who are also employees are to entitled to compensation for
services as Directors or as members of Committees.
Section 2.10 Committees
(a) The Board of Directors shall be majority vote, at their annual meeting,
elect an Executive Committee composed of not less than three (3) nor more than
eleven (11) Directors and shall designate the Chairman of such committee. During
the intervals between meetings of
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the Board of Directors, such Executive Committee shall have and exercise all of
the powers and duties given, had, or possessed by the Board of Directors, and do
any matter and thing which the Board of Directors could do except:
(1) Authorize or approve a distribution except according to a general
formula or method prescribed by the Board of Directors;
(2) Approve or propose to shareholders action which the Washington
Business Corporation Act, as amended, requires to be approved by the
shareholders;
(3) Fill vacancies on the Board of Directors or on any of its committees;
(4) Amend the Articles of Incorporation;
(5) Adopt, amend, or repeal these Bylaws;
(6) Approve a plan of merger not requiring shareholder approval; or
(7) Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences,
and limitations on a class or series of shares, except that the Board
of Directors may authorize a committee, or a senior executive officer
of the Corporation, to do so within limits specifically prescribed by
the Board of Directors.
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<PAGE>
The Chairman of the Executive Committee shall preside at the meetings of
the Executive Committee. Said Committee may meet at stated times or on 24 hours
notice given by the Chairman of the Executive Committee, the Chairman of the
Board, or any two (2) of its members. Vacancies in the membership of the
Committee shall be filled by the remaining members. The Executive Committee
shall elect the officers of the Corporation and shall fix their salaries.
The Executive Committee shall keep regular minutes of its proceedings and
report the same to the Board when required.
(b) The Executive Committee may also establish such other committees, with
such authority and duties, as the Executive Committee may from time to time deem
advisable. Each such committee designated by the Executive Committee may make,
alter and repeal rules for the conduct of its business. In the absence of such
rules, each such committee shall conduct its business in the same manner as the
Board of Directors conducts its business.
ARTICLE III. OFFICERS, AGENTS AND EMPLOYEES
Section 3.1 Enumeration
The Executive Committee shall choose by ballot a President who shall be a
member of the Board, one or more Executive Vice Presidents, one or more Senior
Vice Presidents, one or more Vice Presidents, a Corporate Secretary, a
Treasurer, and one or more Assistant Corporate
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Secretaries, and Assistant Treasurers, and such other officers as they may deem
necessary for the proper conduct of the business of the Corporation. The
Executive Committee may also elect one of its members as Chairman. All elections
by the Executive Committee shall be reported to the Board of Directors at its
next regular meeting.
Section 3.2 Terms
The Executive Committee shall have the power at any time to employ or
remove by affirmative vote any officer or employee of the Corporation, any other
provision of these Bylaws to the contrary notwithstanding.
Section 3.3 Chairman of the Board
If there shall be a Chairman of the Board, he shall be a member of the
Board and, if present, preside at all meetings of the Board of Directors and of
the shareholders of the Corporation; he shall have general supervision over the
business and operations of the Corporation. He shall perform all duties incident
to the office of the Chairman of the Board.
Section 3.4 President
In the absence or disability of the Chairman of the Board, or if there
shall be no Chairman of the Board, the President shall perform all the duties of
the Chairman of the Board, and when so acting, shall have all the powers of, and
be subject to all the restrictions upon, the Chairman of the Board, and shall
perform such duties as from time to time may be assigned to him by the Executive
Committee or the Chairman of the Board.
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<PAGE>
Section 3.5 Chairman of the Executive Committee
Chairman of the Executive Committee shall preside at all meetings of the
Executive Committee, and he shall have such other powers and duties as may be
assigned to him by the Executive Committee.
Section 3.6 Executive Vice Presidents
The Executive Vice Presidents shall perform the duties assigned to Vice
Presidents and, in addition, such other duties as may be assigned from time to
time by the Executive Committee, the Chairman of the Board, or the President.
Section 3.7 Senior Vice Presidents
The Senior Vice Presidents shall perform the duties assigned to Vice
Presidents and, in addition, such other duties as may be assigned from time to
time by the Executive Committee, the Chairman of the Board, or the President.
Section 3.8 Vice Presidents
The Vice Presidents shall perform such duties as from time to time may be
assigned to them respectively by the Executive Committee, the Board, the
Chairman of the Board, or the President.
Section 3.9 Secretary
The Secretary shall record all the votes of the shareholders and of the
Directors and the
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minutes of the meetings of the shareholders, the Board of Directors and the
Executive Committee in a book or books to be kept for that purpose; he shall see
that notices of meetings of the Board, the Executive Committee, and shareholders
are given and that all records and reports are properly kept and filed by the
Corporation as required by law; he shall be the custodian of the seal of the
Corporation and shall see that it is affixed to all documents to be executed on
behalf of the Corporation under its seal; and, in general, he shall perform all
duties incident to the office of Secretary, and such other duties as may from
time to time be assigned to him by the Executive Committee, Board of Directors,
Chairman of the Board, or the President.
Section 3.10 Assistant Secretaries
In the absence or disability of the Secretary or when so directed by the
Secretary, any Assistant Secretary may perform all the duties of the Secretary,
and when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Secretary. The Assistant Secretaries shall perform such
other duties as from time to time may be assigned to them respectively by the
Executive Committee, the Board of Directors, the Chairman of the Board, the
President, or the Secretary.
Section 3.11 Treasurer
The Treasurer shall have charge of all receipts and disbursements of the
Corporation and shall have or provide for the custody of this funds and
securities; he shall have full authority to receive and give receipts for all
money due and payable to the Corporation, and to endorse checks, drafts and
warrants in it name and on its behalf and to give full discharge for the same;
22
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he shall deposit all funds of the Corporation, except such as may be required
for current use, in such banks or other places of deposit as the Executive
Committee or the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Executive
Committee, the Board of Directors, the Chairman of the Board, or the President.
Section 3.12 Assistant Treasurers
In the absence or disability of the Treasurer or when so directed by the
Treasurer, any Assistant Treasurer may perform all the duties of the Treasurer,
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the Treasurer. The Assistant Treasurers shall perform all
such other duties as from time to time may be assigned to them respectively by
the Executive Committee, the Board of Directors, the Chairman of the Board, the
President, or the Treasurer.
Section 3.13 Powers
In addition to the powers specified in the Articles of Incorporation and
Bylaws of the Corporation, each officer shall have the authority customarily
attributed to his office, and the authority customarily attributed by the law of
each jurisdiction in which the Corporation does business, to the end that he may
fully and efficiently perform his office according to law and under the
direction of the Executive Committee, the Board, the Committees of the Board,
the Chairman of the Board, or the President.
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<PAGE>
Section 3.14 Compensation
The compensation of all officers shall be fixed by the Executive Committee.
The appointment of an officer shall not of itself create contract rights.
Section 3.15 Agents and Employees
If authorized by the Executive Committee, the Chairman of the Board, the
President or any officer of the Corporation may appoint or employ such agents
and employees as shall be requisite for the proper conduct of the business of
the Corporation, and may fix their compensation and the conditions of their
employment, subject to removal by the appointing or employing person.
ARTICLE IV. STOCK
Section 4.1 Issuance of Certificates for Shares
No shares of this Corporation shall be issued unless authorized by the
Board of Directors. Such authorization shall include the maximum number of
shares to be issued, the consideration to be received, and a statement that the
Board considers the consideration to be adequate. Certificates for shares of the
Corporation shall be in such form as is consistent with the provisions of the
Washington Business Corporation Act, as amended, and shall state: (a) The name
of the Corporation and that the Corporation is organized under the laws of the
State of Washington; (b) The name of the person to whom issued; and (c) The
number and class of shares and the designation of the series, if any, which such
certificate represents.
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<PAGE>
Section 4.2 Registrars and Transfer Agents
The Corporation may, but until required by law need not, employ Registrars,
Transfer Agents, or both, for its stock, with such duties and for such
compensation as may be agreed with the Corporation, and approved by the Board.
Section 4.3 Transfers
Any stock certificates shall be transferable on the books of the
Corporation, at the pleasure of the holder in person or by duly authorized
attorney, upon production of satisfactory evidence of the legality of such
transfer, payment of all taxes payable in connection therewith, and surrender of
the certificate for the stock to be transferred.
Section 4.4 Record Dates
The Board may fix in advance as permitted by law and required by the
circumstances, dates as of which there shall be determined from the records of
the Corporation the shareholders entitled to vote at any meeting, to receive
payment of any dividend, to receive any allotments of rights in connection with
the Corporation's stock, or to exercise any other rights of shareholders.
Section 4.5 Lost Certificates
Upon application of the registered owner of a certificate for shares of the
Corporation's stock, or of the duly authorized representative of such owner,
accompanied by proof of its loss or destruction and by an agreement secured by
the bond of a corporate surety to indemnify the Corporation, its Registrars and
Transfer Agents, if any, against any damage arising out of the alleged loss or
the issuance to the
25
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<PAGE>
Applicant of a new certificate for such shares in the name of the registered
owner, such new certificates shall be issued if any Vice President of the
Corporation and its Corporate Secretary, or an Assistant Corporate Secretary,
shall be satisfied as to the sufficiency of the proof of loss or destruction and
as to the adequacy of such bond of indemnity, and shall so certify in writing
for the records of the Corporation and of its Registrars and Transfer Agents, if
any.
ARTICLE V. BOOKS AND RECORDS
Section 5.1 Minutes Book, Books of Accounts, and Share Register
The Corporation:
(a) Shall keep as permanent records minutes of all meetings of its
shareholders and the Board of Directors, a record of all actions taken by the
shareholders or the Board without a meeting, and a record of all actions taken
by a committee of the Board exercising the authority of the Board on behalf of
the Corporation;
(b) Shall maintain appropriate accounting records;
(c) Or its agent shall maintain a record of the shareholders of the
Corporation, in a form that permits preparation of a list of the names and
addresses of all shareholders, in alphabetical order by class of shares showing
the number and class of shares held by each; and
(d) Shall keep a copy of the following records at its principal office.
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<PAGE>
(1) The Articles or Restated Articles of Incorporation and all amendments
to them currently in effect;
(2) The Bylaws or Restated Bylaws and all amendments to them currently in
effect;
(3) The minutes of all shareholders' meetings, and records of all actions
taken by shareholders without a meeting, for the past three (3) years;
(4) Its financial statements for the past three (3) years, including
balance sheets showing in reasonable detail the financial condition of the
Corporation as of the close of each fiscal year, and an income statement showing
the results of its operations during each fiscal year prepared on the basis of
generally accepted accounting principles, or if not, prepared on a basis
explained therein;
(5) All written communications to shareholders generally within the past
three (3) years;
(6) A list of the names and business addresses of its current directors and
officers; and
(7) Its most recent annual report delivered to the Washington Secretary of
State.
Section 5.2 Copies of Resolutions
Any person dealing with the Corporation may rely upon a copy of any of the
records of the proceedings, resolutions, or votes of the Board of Directors or
shareholders, when certified by the
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<PAGE>
President or Secretary of the Corporation.
ARTICLE VI. FISCAL YEAR AND FINANCIAL STATEMENTS
Section 6.1 Fiscal Year
The fiscal year end of the Corporation shall be the calendar year unless
otherwise determined by resolution of the Board of Directors.
Section 6.2 Financial Statements
Not later than four months after the close of each fiscal year, and in any
event prior to the annual meeting of shareholders, the Corporation shall
prepare:
(a) A balance sheet showing in reasonable detail the financial condition of
the Corporation as of the close of its fiscal year; and
(b) An income statement showing the results of the Corporation's operation
during its fiscal year. Such statements may be consolidated or combined
statements of the Corporation and one or more of its subsidiaries, as
appropriate. If financial statements are prepared by the Corporation for any
purpose on the basis of generally accepted accounting principles, the annual
statements must also be prepared, and disclose that they are prepared, on that
basis. If financial statements are prepared only on a basis other than generally
accepted accounting principles, they must be prepared, and disclose that they
are prepared,
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<PAGE>
on the same basis as other reports and statements prepared by the Corporation
for the use of others.
Upon written request, the Corporation shall promptly mail to any
shareholder a copy of the most recent balance sheet and income statements. If
prepared for other purposes, the Corporation shall also furnish upon written
request a statement of sources and applications of funds, and a statement of
changes in shareholders' equity, for the most recent fiscal year.
If the annual financial statements are reported upon by a public
accountant, the accountant's report must accompany them. If not, the statements
must be accompanied by a statement of the President or the person responsible
for the Corporation's accounting records:
(a) Stating the person's reasonable belief whether the statements were
prepared on the basis of generally accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not prepared on a
basis of accounting consistent with the basis used for statements prepared for
the preceding year.
For purpose of this section, "shareholder" includes a beneficial owner
whose shares are held in a voting trust or by a nominee on the beneficial
owner's behalf.
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<PAGE>
ARTICLE VII. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 7.1 Directors and Officers
This Corporation shall indemnify its directors and officers to the full
extent permitted by the Washington Business Corporation Act now or hereafter in
force. However, such indemnity shall not apply on account of: (1) acts or
omissions of the director or officer finally adjudged to be intentional
misconduct or a knowing violation of law; (2) conduct of the director finally
adjudged to be in violation of RCW 23B.08.310; or (3) any transaction with
respect to which it was finally adjudged that such director or officer
personally received a benefit in money, property, or services to which the
director or officer was not legally entitled.
This Corporation shall advance expenses for such persons as authorized by
separate directors' resolutions or contracts.
Section 7.2 Employees Who Are Not Directors or Officers
This Corporation shall indemnify and advance expenses to its employees who
are not directors or officers to the extent authorized by the Board of Directors
and consistent with the law.
Section 7.3 Implementation
The Board of Directors may take such action as is necessary to carry out
these indemnification and expense advancement provisions. The Board is expressly
empowered to adopt, approve, and amend from time to tome such Bylaws,
resolutions, contracts, or further indemnification and expense advancement
30
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arrangement as may be permitted by law, implementing these provisions, Such
Bylaws, resolutions, contracts, or further arrangements shall include but not be
limited to implementing the manner in which determinations as to any indemnity
or advancement of expense shall be made.
Section 7.4 Survival of Indemnification Rights
No amendment or repeal of the Corporation's Articles or Bylaws shall apply
to or have any effect on any right to indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or repeal.
ARTICLE VIII. MISCELLANEOUS
Section 8.1 Execution of Obligations
The policies, contracts, documents, instruments, and other writings which
the Corporation is authorized to make and which require execution shall be
executed by such officers or employees as may be designated by the Board and in
accordance with the law applicable thereto.
Section 8.2 Contributions
The Board shall have the authority from time to time to make such
contributions as the Board in its discretion shall determine, for such public
and charitable purposes as are authorized under the laws of the State of
Washington.
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<PAGE>
Section 8.3 Depositories
The moneys and securities of the Corporation shall be kept safe in such
manner and in such palaces as the Board may approve.
ARTICLE IX. AMENDMENT
Section 9.1 Amendment
These Bylaws may be altered, amended, restated or repealed by a majority
vote of the Board at any regular or special meeting, if notice of the proposed
amendment is contained in the notice of the meeting, subject always to the power
of the shareholders to change such action.
The directors may not modify the Bylaws fixing their qualifications,
classifications, or term of office. ADOPTED by the Board of Directors December ,
1992.
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<PAGE>
Exhibit 8
Participation Agreement Between Investors Life Insurance Company
of North America, Putnam Capital Manager Trust and Putnam
Mutual Funds Corp. Filed with Post-Effective Amendment
No. 20 Dated April 14, 1995 and Filed Herewith in Order to
Comply with the Requirements of Reg. Sec. 232.303(a)(3),
Pertaining to the Electronic Submissions more than Three Years
after a Registrant's Edgar Phase-in Date
FUND PARTICIPATION AGREEMENT
Investors Life Insurance Company of North America ("Investors Life"), a
life insurance company domiciled in the State of Washington with its
administrative office at 701 Brazos Street, Austin, Texas 78701, Putnam Capital
Manager Trust, an open-end, management investment company registered under the
Investment Company Act of 1940, as amended, with its business office at One Post
Office Square, Boston, MA 02109 (the "Trust"), and Putnam Mutual Funds Corp.,
the principal underwriter of the shares of the Trust, with its principal office
at One Post Office Square, Boston, MA 02109 ("PMF"), hereby agree to an
arrangement whereby shares of the Trust shall be made available to serve as an
underlying investment medium for variable annuity contracts to be offered to the
public by Investors Life through a separate account (segregated asset account)
of Investors Life designated as Investors Life Insurance Company of North
America - Separate Account I (the "Separate Account") subject to the following
provisions:
1. Investors Life represents that it is a life insurance company
originally organized under Pennsylvania law; that it redomesticated to
the State of Washington in December 1992; that it established the
Separate Account in 1982, pursuant to the provisions of the
Pennsylvania Insurance Code and that it has registered the Separate
Account as a unit investment trust under the Investment Company Act of
1940, as amended ( the "Act"), to serve as an investment vehicle for
variable annuity contracts (the "Contracts") issued by Investors Life,
the value of such Contracts being based upon the investment
performance of the Separate Account, including certain variable
annuity contracts which may be considered periodic payment plan
certificates under the Act. The assets of the Separate Account are
held by Investors Life as reserves for the Contracts. The Contracts
provide for the allocation of net amounts received by Investors Life
thereunder to separate, independent divisions of the Separate Account
for investment in the shares of the portfolio series of the Trust
(each a "Fund") to serve as underlying investment media. The selection
of an underlying class of Fund shares is made by Investors Life based
upon the selection of Separate Account division(s) by the owner of the
applicable Contract, and may be changed from time to time, in
accordance with the terms of the Contracts.
2. The parties hereto acknowledge that, prior to the effective date of
this Agreement, the underlying investment vehicle for the Separate
Account was the CIGNA
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<PAGE>
Annuity Funds Group. On December 21, 1994, the Securities and Exchange
Commission (the "SEC") issued an Order Granting Exemptions (Release
No. IC-20792; File No. 812-8906) (the "Order"). The Order was granted
in connection with the Application submitted by Investors Life for an
order pursuant to section 26(b) and an exemption under Sections 6(c)
and 17(b) from Section 17(a) of the Act (the "Application"). The
Application was filed in order to obtain the approval of the SEC of
the substitution of shares of CIGNA Annuity Funds Group for shares of
the corresponding Fund, with the shares of such Fund to serve as the
underlying investment vehicle for the Separate Account. Investors Life
agrees that the Trust shall be the sole investment vehicle for the
Separate Account so long as this Agreement is in effect.
3. Each Fund's shares may be purchased and redeemed by Investors Life at
net asset value determined in accordance with the provisions of the
then current prospectus of the Trust. Investors Life may purchase or
redeem Trust shares by telephone, telex or other telecommunications
device before 12:00 noon (Eastern time) on any business day (defined
as any date on which the NYSE is open for trading and on which the
Trust calculates its net asset value pursuant to the rules of the
Securities and Exchange Commission), and such purchases or redemptions
shall be executed as of the next prior close of regular trading on
such Exchange, and Investors Life hereby warrants and represents to
the Trust that each of such purchases or redemptions will relate to
applicable selections of Separate Account divisions made under the
Contracts by Contract owners which were received and accepted by
Investors Life not later than such next prior close of regular trading
of such Exchange. Investors Life agrees to use its best efforts to
issue the Contracts, but is not obligated to issue the Contracts. The
Trust anticipates that it will make each class of its shares available
indefinitely for purchase by Investors Life hereunder, but reserves
the right to cease issuing shares if, in the judgment of the Trustees
of the Trust in accordance with the exercise of their fiduciary
obligations, doing so would be in the best interest of shareholders of
the Trust. Subject to the terms hereof, Trust shares shall be ordered
in such quantity and at such times as determined by Investors Life to
be necessary to meet the requirements of those Contracts for which the
Trust serves as an underlying investment vehicle. Orders for Trust
shares will be sent directly to the Trust or to such other entity as
shall be specified by the Trust. Payment shall be made by Investors
Life in federal funds on the day of placement of the order for shares
of a Fund. Payment for such
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shares shall be made payable to the Trust or its transfer agent. If
payment is not received by the Trust or its agent on the day of
placement of the order, the Trust may, without notice, cancel the
order for the affected Fund and require Investors Life to reimburse
the Trust for any loss suffered by the Trust resulting from such
failure to make timely payments. Trust shares sold hereunder shall be
registered under applicable securities laws and authorized for
issuance in accordance with applicable law.
4. The Trust will pay all expenses incident to the registration with the
Securities and Exchange Commission of shares of the Trust sold
hereunder and of complying with the next to last sentence of Section 6
hereof. The Trust or PMF shall pay for the cost of preparing and
delivering to Investors Life a prospectus of the Trust that may be
copied for use by Investors Life. If Investors Life desires to use a
printed version of the prospectus of the Trust. such printing shall be
at the expense of Investors Life. Investors Life shall not be
responsible for costs or expenses incurred in connection with the
registration or distribution of Trust shares pursuant to this
Agreement or otherwise. Investors Life shall pay all expenses incident
to the registration of the Contracts with the Securities and Exchange
Commission, the preparation and printing of prospectuses of the
Separate Account, the Statement of Additional Information of the
Separate Account, proxy statements of the Separate Account and
financial reports to contractholders of the Separate Account. Neither
the Trust nor PMF shall be responsible for costs or expenses of
distributing the Contracts pursuant to this Agreement or otherwise.
5. Investors Life and its agents shall make no representation concerning
the Trust or Trust shares except those contained in the then current
prospectus of the Trust or in current printed sales literature of the
Trust approved by the Trust or PMF, or otherwise approved by the Trust
or PMF in writing. The cost of preparing and printing any sales
literature pertaining to the Separate Account or the Trust shall be
borne by the party requesting such sales literature. Neither the Trust
nor PMF shall use any sales literature pertaining to the Separate
Account which has not been approved in writing by Investors Life.
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6. Administrative services to owners of and participants under Contracts
shall be the responsibility of Investors Life and shall not be the
responsibility of the Trust. The Trust understands and acknowledges
that its investment adviser or manager may from time to time share in
or reimburse Investors Life for the expense of such services, in the
sole discretion of such adviser or manager. At its own expense, the
Trust will furnish Investors Life sufficient copies of its proxy
material, reports to shareholders and other communications to
shareholders in such quantities as Investors Life shall reasonably
require for distribution to owners of and participants under the
Contracts. Investors Life shall pay the cost of any such distribution.
7. This Agreement may be terminated as to the issuance of shares of a
Fund in connection with the sale and issuance of new Contracts:
a. At the option of Investors Life, the Trust or PMF upon twelve
months' advance written notice to the others;
b. at the option of Investors Life if shares of a Fund are not
available for any reason to meet the requirements of the
Contracts. (Prompt notice of election to terminate shall be
furnished by Investors Life to the Trust);
c. at the option of the Trust, PMF or Investors Life, upon
institution of any adversary proceedings against any party hereto
or the Separate Account, relating to the Trust, the Separate
Account or the issuance and sale of the Contracts, by the
National Association of Securities Dealers, Inc., the Securities
and Exchange Commission or any other governmental or regulatory
body;
d. upon requisite vote of the Contract owners to substitute the
shares of another investment company for shares of a Fund in
accordance with the terms of the Contract(s). Investors Life will
give 90 days' advance written notice to the Trust and PMF of any
proposed vote to replace shares of a Fund;
e. in the event Trust shares are not registered, issued or sold in
conformance with Federal law or applicable state law, or such law
precludes the use of Trust shares as the underlying investment
medium of the Contracts. Prompt notice shall be given by
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affected party to the other parties in the event the conditions
of this provision occur.
f. with respect to any Fund, upon six months advance written notice
from PMF or the Trust to Investors Life, upon a decision by PMF
or the Trust to cease offering shares of the Fund for sale.
8. Termination as a result of any cause listed in the preceding paragraph
shall not affect the obligation of the Trust to furnish shares of the
affected Fund in connection with the Contracts then in force for which
shares of such Fund were or may serve as the underlying investment
medium, unless further sale of such shares is proscribed by law or the
Securities and Exchange Commission or other regulatory body.
9. Each notice required by this Agreement by either party shall be given
by wire and confirmed in writing to the other party hereto at:
Putnam Capital Manager Trust
One Post Office Square
Boston, MA 02109
Attention: President
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
Attention: President
Investors Life Insurance Company of North America
701 Brazos Street
Austin, Texas 78701
Attention: President
10. Neither this Agreement nor any of the rights, responsibilities or
obligations hereunder may be assigned by any party hereto.
11. This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
12. Investors Life will distribute all proxy materials furnished by the
Trust to owners or participants under the Contracts and will vote
Trust shares in accordance with instructions received from such owners
or
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<PAGE>
participants. Investors Life will vote Trust shares for which
instructions have not been received in the same proportion as Trust
shares for which such instructions have been received from such owners
or participants. Investors Life and persons under its control will in
no manner recommend action in connection with the solicitation of
proxies for Trust shares held in the Separate Account.
13. (a) Investors Life agrees to indemnify and hold harmless the Trust,
PMF, each person, if any, who controls the Trust or PMF within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act")
and each of any of their trustees, officers, employees and agents
against any costs, losses, claims, damages or liabilities (including
reasonable attorneys' fees and amounts paid in settlement thereof with
the written consent of Investors Life) to which the Trust or any such
trustee, officer, employee or agent may become subject, under the Act,
the 1933 Act or otherwise, insofar as such losses, claims, damages, or
liabilities (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, the prospectus or the Statement
of Additional Information for the Separate Account and the
Contracts (or any amendment or supplement thereto), or any
written sales literature for the Contracts prepared or
approved by Investors Life, 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, unless such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with written
information furnished to Investors Life by the Trust or PMF
expressly for use in the Registration Statement or
prospectus for the Separate Account and the Contracts (or
any amendment or supplement thereto) or such sales
literature;
(ii) arise out of or as a result of written statements or
representations (other than statements or representations
contained in the
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<PAGE>
Trust's Registration Statement or Prospectus, or in sales
literature for Trust shares not supplied by Investors Life,
or persons under its control) or wrongful conduct of
Investors Life or persons under its 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 Registration
Statement, Prospectus, or sales literature of the Trust or
any amendment thereof or supplement thereof or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon information furnished to
the Trust by or on behalf of Investors Life; or
(iv) arise out of or result from any breach of any representation
and/or warranty made by Investors Life in this Agreement or
arise out of or result from any other breach of this
Agreement by Investors Life.
(b) PMF agrees to indemnify and hold harmless Investors Life each
person, if any, who controls the Separate Account or Investors
Life within the meaning of Section 15 of the Securities Act of
1933 (the "1933 Act") and each of any of their directors,
officers, employees and agents against any costs, losses, claims,
damages or liabilities (including reasonable attorneys' fees and
amounts paid in settlement thereof with the written consent of
PMF) to which Investors Life or any such director, officer,
employee or agent may become subject, under the Act, the 1933 Act
or otherwise, insofar as such losses, claims, damages, or
liabilities (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, the prospectus or the Statement
of Additional Information for the Trust (or any amendment or
supplement thereto) or any written sales literature for the
Trust prepared or approved by PMF or the Trust, or arise out
of or are based upon the omission or the alleged omission to
state therein a
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<PAGE>
material fact required to be stated therein or necessary to
make the statements therein not misleading, unless such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with written
information furnished to the Trust by Investors Life
expressly for use in the Registration Statement, the
prospectus or the Statement of Additional Information for
the Trust (or any amendment or supplement thereto) or such
sales literature.
(ii) arise out of or as a result of written statements or
representations (other than statements or representations
contained in the Registration Statement or Prospectus of the
Separate Account, or in sales literature for the Contracts
not supplied by PMF or the Trust, or persons under their
control) or wrongful conduct of PMF or the Trust 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 Registration
Statement, Prospectus, or sales literature of the Separate
Account or any amendment thereof or supplement thereof or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or
omission was made in reliance upon information furnished to
Investors Life by or on behalf of PMF or the Trust; or
(iv) arise out of or result from any breach of any representation
and/or warranty made by PMF or the Trust in this Agreement
or arise out of or result from any other breach of this
Agreement by PMF or the Trust.
(c) Promptly after receipt by the party seeking indemnification (the
"indemnified party") of notice of the commencement of any action,
or the making of any claim for which indemnity may apply either
under sub-paragraph (a) or (b) of this Section, such party will,
if a claim in respect thereof is to be made, notify the party
obligated to make indemnification (the "indemnifying party") of
the
Ex-115
<PAGE>
commencement thereof; but the omission to so notify the
indemnifying party will not relieve the indemnifying party from
any liability which it may have to the indemnified party
otherwise than under this Agreement. In case any such action is
brought against the indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in such action and, to the
extent that it may wish to assume the defense thereof with
counsel satisfactory to the indemnified party, and after notice
from the indemnifying party of its election to assume the defense
thereof, the indemnifying party will not be liable to the
indemnified party under this Agreement for any legal or other
expenses subsequently incurred by the indemnified party in
connection with the defense thereof other than reasonable costs
of investigation.
(d) The obligations of the parties in this Section 13 shall survive
the termination of this Agreement.
14. (a) If the Trustees determine that an irreconcilable material conflict
between the interests of the contract owners of all separate accounts
investing in the Trust has arisen as a result of the following or for
any other reasons: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax
or securities law or regulations, or 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 owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners, the
Trust shall promptly inform Investors Life of such determination and
the implications thereof.
(b) Investors Life will report any potential or existing conflicts of
which it is aware to the Trustees. Investors Life will assist the
Trustees in carrying out their responsibilities under the Shared
Funding Exemption Order issued to the Trust by the SEC (File 812-8612)
(the "Shared Funding
Ex-116
<PAGE>
Exemption Order"), by providing the Trustees at least annually with
all reports, materials and other data reasonably necessary for the
Trustees to consider any issues raised. This includes, but is not
limited to, an obligation by Investors Life to inform the Trustees
whenever contract owner voting instructions are disregarded.
(c) If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict
exists, Investors Life shall to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees), take, at
Investors Life's expense, whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including:
(1) withdrawing the assets allocable to the Separate Account from the
Trust or any of its series and reinvesting such assets in a different
investment medium, including (but not limited to) another series 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 contract owners, or variable
contract owners of one or more insurance companies participating in
the Trust) 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.
(d) Without limiting the scope of paragraph 14(c)(1), above, if a material
irreconcilable conflict arises because of a decision by Investors Life
to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote,
Investors Life may be required, at the Trust's election, to withdraw
the Separate Account's investment in the Trust and terminate this
Agreement with respect to the Separate 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.
(e) To the extent not inconsistent with the Shared funding Exemption
Order, if a material irreconcilable conflict arises because a
particular
Ex-117
<PAGE>
state insurance regulator's decision applicable to Investors Life
conflicts with the majority of other state regulators, then Investors
Life will withdraw the Separate Account's investment in the Trust and
terminate this Agreement with respect to such Account within six
months after the Trustees inform Investors Life in writing that they
have 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 the foregoing six month
period, PMF and the Trust shall continue to accept and implement
orders by Investors Life for the purchase (and redemption) of shares
of the Trust in accordance with the terms of this Agreement.
(f) For purposes of this Agreement, a majority of the disinterested
Trustees shall determine whether any proposed action adequately
remedies any irreconcilable material conflict. Investors Life shall
not be required by Section 13(c) to establish a new Trust 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
material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any
material irreconcilable conflict and to the extent not inconsistent
with the Shared Funding Exemption Order, then Investors Life will
withdraw the Separate Account's investment in the Trust and terminate
this Agreement within six (6) months after the Trustees inform
Investors Life 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.
(g) 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 Investment Company Act of 1940 or the rules promulgated
thereunder with respect to mixed or shared funding (as defined in the
Shared Funding Exemption Order) on terms and conditions materially
different from those contained in the Shared Funding Exemption Order,
then (a) the Trust and/or Investors Life, as appropriate, shall take
such
Ex-118
<PAGE>
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; and (b) Section 14 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially
identical to such Section are contained in such Rule(s) as so amended
or adopted.
(h) Investors Life has reviewed the Shared Funding Exemption Order and
hereby assumes the obligations referred to therein which are required,
as conditions to such Order, to be assumed or undertaken by it. The
provisions of this Agreement shall be interpreted in a manner
consistent with the requirements of the Shared Funding Exemption
Order.
15. A copy of the Agreement and Declaration of Trust of PCM is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is
hereby given that this Agreement has been executed on behalf of PCM by an
officer of PCM as an officer and not individually, and the obligations of
PCM arising out of this Agreement are not binding upon any of the trustees,
officers, or shareholders of PCM individually but are binding only upon the
assets and property of PCM.
In Witness Whereof, the parties have executed this Agreement this 10th day of
April, 1995.
INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA
By:
Title:
PUTNAM CAPITAL MANAGER TRUST
By:
Title:
PUTNAM MUTUAL FUNDS CORP.
By:
Title:
Ex-119
<PAGE>
Exhibit 9
Opinion of Counsel as to the Legality of the Securities
April 20, 1999
Board of Directors
Investors Life Insurance Company
of North America
701 Brazos Street
Austin, Texas 78701
Gentlemen:
In my capacity as General Counsel of Investors Life Insurance Company of
North America ("Investors Life"), I have acted as counsel for Investors Life in
connection with the preparation of Post-Effective Amendment No. 25 to the
Registration Statement on Form N-4 under the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, ("Registration Statement")
filed by Investors Life and Investors Life Insurance Company of North America
Separate Account I ("Separate Account") with the Securities and Exchange
Commission. The Registration Statement covers a proposed public offering of an
indefinite amount of individual variable annuity contract interests ("Variable
Annuity Contracts").
In acting as General Counsel, I have made such examination of the law and
examined such records and documents as in my judgment have been deemed necessary
and appropriate to enable me to render the following opinion:
1. Investors Life has been duly organized under the laws of the Commonwealth
of Pennsylvania and redomesticated under the laws of the State of
Washington, and is a validly existing corporation which is licensed to
conduct a life insurance business, including the issuance of variable
annuities;
2. Separate Account is a separate account of Investors Life that has been
created and validly exists pursuant to the Washington insurance laws and
the regulations thereunder;
Ex-120
<PAGE>
Investors Life Insurance
Company of North America
Page 2
April 20, 1999
3. The corporate procedures for the offering and issuance of the Variable
Annuity Contracts have been followed, and all applicable state and local
law requirements relating to the Variable Annuity Contracts have been
complied with;
4. The Separate Account is duly registered as a unit investment trust under
the Investment Company Act of 1940;
5. Upon acceptance by Investors Life of an application for a Variable Annuity
Contract described in the Registration Statement and the required payment
from the duly authorized applicant, in accordance with the terms thereof as
described in the prospectus forming a part of the Registration Statement,
and upon its compliance with state and local requirements, there will be
created in the designated Variable Annuity Contract owner a legally issued,
fully paid and non-assessable contract enforceable by its terms against
Investors Life. The monetary value of such Contract, subject to applicable
charges, will be based upon a current pro rata interest in the Separate
Account assets held by Investors Life;
6. The offering of Variable Annuity Contracts covered by the Registration
Statement, when issued on or after the effective date thereof as declared
by the Securities and Exchange Commission, assuming that such Registration
remains substantially unchanged from that reviewed by me, will comply with
the Securities Act of 1933, as amended.
I hereby consent to the filing of the Opinion with the Registration
Statement, and you may use my name as General Counsel under the caption
"Legal Matters" in the prospectus which forms a part of the Registration
Statement.
Sincerely,
/s/ Theodore A. Fleron
Vice President &
General Counsel
Ex-121
<PAGE>
Exhibit 10(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 25 to the Registration
Statement on Form N-4 (No. 2-77712) of our report dated March 26, 1999 relating
to the statutory financial statements of Investors Life Insurance Company of
North America and of our report dated February 19, 1999 relating to the
financial statements of Investors Life Insurance Company of North America
Separate Account I, which appear in such Statement of Additional Information.
PricewaterhouseCoopers LLP
Dallas, Texas
April 27, 1999
Ex-122
<PAGE>
Exhibit 13
Schedule for Computation of Performance Returns.
Filed with Post-Effective Amendment No. 11 (Form N-4),
and Filed Herewith in Order to Comply with the Requirements
of Reg. Sec. 232.303(a)(3), Pertaining to the Electronic
Submissions more than Three Years after a Registrant's
Edgar Phase-in Date
MONEY MARKET DIVISION: Schedule for Computation of Performance Returns
Calculation of Current Yield and Effective Yield for 7 day period
ending December 31, 1988
ANNUALIZED CURRENT YIELD
MONEY MARKET FUND
b
Formula = [( 1 + a ) - 1 ] - c
---
7
a = Sum of daily dividend rates for last seven (7)days of year
b = Days of Year
c = M & E charge
Dividend Rates
12-30-88 one (1) day rate
12-29-88 one (1) day rate
12-28-88 one (1) day rate
12-27-88 four (4) day rate
Seven (7) day rate
a = .001806052
b = 365
c = .012
Exhibit (i)
Ex-123
<PAGE>
365
[ ( 1 + .001806052 ) -1 ] -.012
------------
7
365
[ ( 1 + .0002580 ) -1 ] -.012
365
[ ( 1.0002580 ) -1 ] -.012
[ ( 1.098730 ) -1 ] -.012
0.098730 -.012
=8.673
Exhibit (i) - Page 2
Ex-124
<PAGE>
YIELD for SINGLE and FLEXIBLE
PAYMENT CONTRACTS
( [ ( d/e x f ] x g ) - h
Policyholders
d = # of Money Market policyholders
e = # of CVA contracts
f = contract admin fee
g = # of days per year yield is based
h = annualized yield
d = 1397
e = 6657
f = $25.00 (singles), $30.00 (flexible)
g = 7\365
h =8.673
Exhibit (i) - Page 3
Ex-125
<PAGE>
Single Payment Contracts
Policyholders
----------------
1397
------ = 0.210 x $25.00 = 5.25
6657
5.25 x 7 = .100
---
365
8.673 - .100 = 8.573
Flexible Payment Contracts
Policyholders
-----------------
1397
------ = 0.210 x $30.00 = 6.3
6657
6.3 x 7 = .121
---
365
8.673 - .121 = 8.552
Exhibit (i) - Page 4
Ex-126
<PAGE>
EFFECTIVE ANNUALIZED YIELD
MONEY MARKET FUND
b
Formula = [ ( 1 + a ) - 1 ] - c
a = Sum of daily dividend rates for last seven (7) days of year
b = Days of Year
c = M & E charge
Dividend Rates
12-30-88 one (1) day rate 0.000452495
12-29-88 one (1) day rate 0.000226191
12-28-88 one (1) day rate 0.000225823
12-27-88 four (4) day rate 0.000901543
----------------
Seven (7) day rate 0.001806052
a = .001806052
b = 365
c = .012
365
[ ( 1 + .001806052 ) -1 ] -.012
365
[ ( 1.001806052 ) -1 ] -.012
[ ( 1.932150) -1] -.012
0.932150 - .012
=9.20
Exhibit (i)-Page 5
Ex-127
<PAGE>
YIELD for SINGLE AND FLEXIBLE
PAYMENT CONTRACTS
( [ ( d/e ) x f ] x g ) - h
Policyholders
d = # of Money Market policyholders
e = # of CVA contracts
f = contract admin fee
g = # of days per year yield is based
h = effective annualized yield
d = 1397
e = 6657
f = # $25.00 (single), $30.00 (flexible)
g = 7\365
h = 9.20
Exhibit (i) - Page 6
Ex-128
<PAGE>
Single Payment Contracts
Policyholders
-----------------
1397
----- = 0.210 x $25.0 = 5.25
6657
5.25 x 7 = .100
---
365
9.20 -.100 = 9.100
Flexible Payment Contracts
Policyholders
------------------
1397
----- = 0.210 x $30.00 = 6.30
6657
6.3 x 7 = .121
---
365
9.20 - .121 = 9.079
Exhibit (i) - Page 7
Ex-129
