As filed with the Securities and Exchange Commission on February 26, 1999
Registration Nos. 033-22925
and 811-5279
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. _____ / /
Post -Effective Amendment No. 18 /x/
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 20 /x/
CHARTER NATIONAL VARIABLE
ANNUITY ACCOUNT
(Exact Name of Registrant)
Charter National Life Insurance Company
(Name of Depositor)
8301 Maryland Avenue, St. Louis, Missouri 63105
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code: (314) 725-7575
Name and Address of Agent for Service: Copy to:
Richard G. Petitt Stephen E. Roth, Esq.
Charter National Life Insurance Company Sutherland Asbill & Brennan LLP
8301 Maryland Avenue 1275 Pennsylvania Avenue, N.W.
St. Louis, Missouri 63105 Washington, D.C. 20004-2415
Approximate Date of Proposed Public Offering:
As soon as practicable after effectiveness of the Registration
Statement
- -----------------------------------------------------------------------
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on ____________, pursuant to paragraph (b) of Rule 485
/ / 60 days after filing pursuant to paragraph (a) of Rule 485
/x/ on May 1, 1999, pursuant to paragraph (a) of Rule 485
Title of Securities Being Registered:
Units of Interest in the Separate Account under flexible payment
deferred
variable annuity contracts.
<PAGE>
Scudder Horizon Plan
Prospectus May 1, 1999
A No-Load Flexible Premium Deferred Variable Annuity
offered by
Charter National Life Insurance Company
through the
Charter National Variable Annuity Account
The Contract has 8 funding choices -- a general account (paying a guaranteed
minimum fixed rate of interest) and 7 subaccounts of the Charter National
Variable Annuity Account. Money you direct to a subaccount is invested
exclusively in a single portfolio of the Scudder Variable Life Investment Fund.
The 7 mutual fund portfolios we offer through the subaccounts under this
Contract are:
Scudder Variable Life Investment Fund
Money Market Portfolio
Bond Portfolio
Capital Growth Portfolio
Balanced Portfolio
Growth and Income Portfolio
oInternational Portfolio
oGlobal Discovery Portfolio
Variable annuity contracts involve certain risks, including possible loss of
principal.
o The investment performance of the portfolios in which the subaccounts
invest will vary.
o We do not guarantee how any of the portfolios will perform.
o The Contract is not a deposit or obligation of any bank, and no bank
endorses or guarantees the contract.
o Neither the U.S. Government nor any Federal agency insures your
investment in the contract.
Please read this prospectus carefully before investing and keep it for future
reference. It contains important information about the Scudder Horizon Plan
variable annuity contract.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
To learn more about the contract, you may want to look at the Statement of
Additional Information dated May 1, 1999, (the "SAI"). For a free copy of the
SAI, contact us at:
Charter National Life Insurance Co.
8301 Maryland Avenue
St. Louis, Missouri 63105
(800) 242-4402
Charter has filed the SAI with the U.S. Securities and Exchange Commission (the
"SEC") and has incorporated it by reference into this prospectus. The SAI's
table of contents appears at the end of this prospectus.
The SEC maintains an Internet website (http://www.sec.gov) that contains the
SAI, material incorporated by reference, and other information.
<PAGE>
Table of Contents
Definitions............................................................. 1
Summary................................................................. 4
Fee Table .............................................................. 9
Example ............................................................... 10
Financial Statements ................................................... 11
Calculation of Yields and Total Returns ................................ 12
Other Performance Data ................................................ 13
Charter and the Variable Account ....................................... 14
Charter National Life Insurance Company................................. 14
Purchase Agreement with Allstate ....................................... 14
Charter National Variable Annuity Account .............................. 14
Services Agreements with Allstate Life Insurance Company ............... 15
Scudder Variable Life Investment Fund .................................. 15
Addition, Deletion, or Substitution of Investments...................... 17
The Contract ........................................................... 18
Contract Application and Issuing the Contract........................... 18
Examination Period .................................................... 19
Return of Premium Plus or Minus Investment Experience .................. 19
Return of Premium ...................................................... 20
Payments ............................................................... 20
Initial Payment......................................................... 20
Additional Payments..................................................... 21
Automatic Investment Plan............................................... 21
Limitations on Payments ................................................ 21
Allocating Payments ................................................... 22
Transfers ............................................................. 23
Asset Rebalancing Option ............................................... 23
Dollar Cost Averaging ................................................. 25
Account Value ........................................................ 26
Unit Value ........................................................... 27
Investment Experience Factor ........................................... 28
Contract Ownership ..................................................... 29
Assignment of Contract ................................................. 29
State Exceptions ....................................................... 30
Access to Your Money ................................................... 31
Full and Partial Surrenders ............................................ 31
Systematic Withdrawals.................................................. 32
Annuity Payments ....................................................... 33
Annuity Income Options ................................................. 34
Maturity Date .......................................................... 36
Death Benefit........................................................... 36
Beneficiary Provisions ................................................. 37
Death of Owner ......................................................... 37
Employment-Related Benefit Plans ....................................... 38
Charges and Deductions.................................................. 38
Mortality and Expense Risk Charge ...................................... 39
Contract Administration Charge ......................................... 40
Records Maintenance Charge.............................................. 40
Premium Taxes .......................................................... 40
Other Taxes ........................................................... 41
Transfer Charges ....................................................... 41
Portfolio Charges....................................................... 41
Certain Federal Income Tax Consequences ................................ 42
Tax Status of the Contract ............................................. 42
Taxation of Non-Qualified Contracts..................................... 42
Diversification Requirements............................................ 42
Owner Control........................................................... 43
Required Distributions.................................................. 43
Non-Natural Person ..................................................... 43
Withdrawals ........................................................... 44
Penalty Tax on Certain Withdrawals...................................... 44
Annuity Payments ....................................................... 44
Taxation of Death Benefit Proceeds...................................... 45
Transfers, Assignments or Exchanges of a Contract ...................... 45
Withholding ........................................................... 45
Multiple Contracts .................................................... 45
Taxation of Qualified Contracts ........................................ 45
Other Tax Issues........................................................ 46
Our Income Taxes ....................................................... 46
Possible Tax Law Changes ............................................... 47
General Provisions ..................................................... 47
The Contract ........................................................... 47
Delay of Payment and Transfers ......................................... 48
Contract Expiration .................................................... 48
Misstatement of Age or Sex ............................................. 48
Nonparticipating Contract .............................................. 49
Notices and Inquiries................................................... 49
Records and Reports .................................................... 49
Year 2000 Disclosure ................................................... 49
Services Agreement .................................................... 50
Distribution of the Contract ........................................... 50
The General Account ................................................... 51
Voting Rights ......................................................... 53
Legal Proceedings ...................................................... 54
<PAGE>
Additional Information ................................................. 54
Table of Contents for Statement of Additional Information .............. 54
Condensed Financial Information ........................................ A-1
This Contract is not available in all states.
<PAGE>
Definitions
account value -- Your Contract's total value in the subaccounts and the
general account. The Contract refers to account value as "Accumulated Value."
age -- The annuitant's age on his or her birthday nearest to the Contract
Anniversary.
annuitant -- The person whose life is used to determine the duration and
amount of any annuity payments. If the annuitant dies before the Maturity Date,
we will pay a death benefit.
annuity payments -- After the Maturity Date, we promise to pay you an
income in the form of regular fixed annuity payments. The amount of the annuity
payments depends on the amount of money you accumulate in the Contract before
the Maturity Date and on the annuity income option you choose.
beneficiary -- The person(s) you select to receive the benefits of the
Contract if no Owner is living.
Contract Date --The date listed in the Contract that we use to determine
Contract years, Contract months, and Contract anniversaries. The Contract Date
is usually the same date as the Effective Date.
death benefit -- An amount we pay if the annuitant dies before the Maturity
Date. The death benefit is the greater of the account value or the Guaranteed
Death Benefit.
Declaration Period -- A period of time between 1 and 10 years during which
we will credit specified rates of interest on payments you allocate to the
general account.
Effective Date -- A date within two business days after we have received a
completed application and the full initial payment.
Fund -- The Scudder Variable Life Investment Fund, an open-end, diversified
management investment company in which the subaccounts invest.
general account -- The account containing all of Charter's assets, other
than those held in its separate accounts. Guaranteed Death Benefit -- The sum of
the payments you made, less any partial surrenders.
Home Office -- The principal office of Charter, located at 8301 Maryland
Avenue. St. Louis, Missouri 63105.
joint annuitant -- If you select annuity income option 2, you may designate
a joint annuitant. We will use the joint annuitant's life, in addition to the
annuitant's life, to determine the duration of the annuity payments.
joint owner -- A person sharing the privileges of ownership as stated in
the Contract. If a joint owner is named, Charter will presume ownership to be as
joint tenants with right of survivorship.
Maturity Date -- The date on which we will begin to pay annuity payments if
the annuitant is living.
monthly anniversary -- The same date in each month as the Contract Date.
net payment -- A payment less any applicable premium taxes.
Nonqualified Contract -- A Contract other than a Qualified Contract.
Owner (you, your) -- The person having the privileges of ownership stated
in the Contract, including the right to receive annuity payments if the
annuitant is living on the Maturity Date and the Contract is in force.
portfolio -- A separate investment portfolio of the Fund in which a
subaccount of the Variable Account invests.
Proof of Death -- One of the following: (i) a certified copy of a death
certificate, (ii) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death, or (iii) any other proof satisfactory
to Charter.
Qualified Contract -- A Contract issued in connection with a retirement
plan that qualifies for special Federal income tax treatment.
subaccount -- An investment division of the Variable Account. Each
subaccount invests exclusively in a single portfolio of the Fund. Unit Value --
The value of each unit of a subaccount. It is calculated each Valuation Period.
It is similar to the net asset value of a mutual fund.
Valuation Date -- Each day on which we value the assets in the subaccounts,
which is each day on which the New York Stock Exchange is open for trading.
Valuation Period -- The period that begins at the close of one Valuation
Date and ends at the close of the next Valuation Date.
Variable Account -- Charter National Variable Annuity Account, a separate
account composed of subaccounts which we established to receive and invest the
portion of net payments under the Contract that you do not allocate to our
general account.
<PAGE>
Summary
This summary answers certain basic questions you may have about the
Contract. More detailed information about the Contract appears later in this
Prospectus. Please read this Prospectus carefully.
1. Why should I purchase this Contract?
The Contract provides a way for you to invest on a tax-deferred basis in
the subaccounts of the Variable Account and in the general account. The Contract
is designed to enable you to accumulate money for retirement and other long-term
investment purposes. "Tax-deferred" means that earnings and appreciation on the
assets in your Contract are not taxed until you take money out by a full or
partial cash surrender or by annuitizing the Contract, or until we pay the death
benefit.
2. How can I purchase the Contract?
You may purchase the Contract from us (Charter National Life Insurance
Company) for a minimum payment of $2,500 ($2,000 for certain Qualified
Contracts). We do not deduct a commission or sales charge from any payment you
make. You may make additional payments under the Contract, subject to certain
conditions.
3. Can I use this Contract as an IRA?
Yes, the Contract is available to most individuals who wish to purchase an
IRA. It is also available to certain retirement plans and retirement accounts
that qualify for special Federal income tax treatment. We require that if you
desire to invest monies that qualify for different annuity tax treatment, then
you must purchase separate Contracts.
4. What annuity benefits are offered under the Contract?
The Contract allows you to receive fixed annuity payments under one of
three annuity income options. Annuity payments begin after the maturity date
provided the annuitant is living. The three annuity income options currently
available are: (i) life annuity with installment refund; (ii) joint and survivor
life annuity with installment refund; and (iii) installments for life.
Other annuity income options may be available on the Maturity Date. The
dollar amount of each annuity payment will be fixed on the Maturity Date and
guaranteed by us.
5. What investments are available under the Contract?
You may invest your money in any of the following portfolios of the Scudder
Variable Life Investment Fund by directing your payments into the corresponding
subaccounts:
Money Market o Bond
Capital Growth o Balanced
Growth and Income o International
Global Discovery
Each subaccount invests in Class A shares of its corresponding portfolio.
The assets of each portfolio are held separately from the assets of other
portfolios and each has separate investment objectives and policies. The
attached prospectus for the Fund more fully describes the portfolios. Scudder
Kemper Investments Inc. is the investment adviser for the portfolios.
Your investment in the subaccounts will fluctuate daily based on the
investment results of the portfolios in which you invest, and on the fees and
charges deducted. You bear the investment risk for amounts you invest in the
subaccounts.
6. What fixed rate options are available under the Contract?
You may allocate funds to the general account and receive a specified rate
of return. We will credit interest to your payments for the length of the
Declaration Period you choose at a guaranteed rate we specify in advance. We
offer Declaration Periods of 1 and 3 years. At the end of the Declaration
Period, you have the option to move funds into any available subaccount or into
another Declaration Period that has a new specified rate of interest that we
guarantee will be no less than 3.5%.
We guarantee interest, as well as principal, on money placed in the general
account.
7. What is the purpose of the Variable Account?
We established the Variable Account to invest the payments we receive under
our variable annuities, including this Contract. The Variable Account is divided
into subaccounts. Each subaccount invests exclusively in a portfolio of the
Fund. Under Missouri law, the assets in the Variable Account associated with the
Contract are not affected by, nor chargeable with, liabilities arising out of
any other business we conduct.
8. Can I transfer assets within the Contract?
Yes. You have the flexibility to transfer assets within the Contract. You
may transfer amounts among the subaccounts and from the subaccounts to the
general account at any time. You may also transfer amounts from the general
account to the subaccounts or within the general account at the end of a
Declaration Period.
We do not impose a charge for any transfers. In the future, we may impose a
transfer charge of $10 for the third and subsequent transfer requests made
during a Contract Year.
9. What are my expenses under the Contract?
On each Valuation Date, we deduct an administrative fee at an annual rate
of .30%, and a mortality and expense fee at an annual rate of .40%, from the
amount you have invested in each subaccount. These charges are not deducted from
the general account. We do not charge an annual maintenance fee, although the
Contract permits us to deduct a maximum fee of $40 in the future.
We will deduct state premium taxes, which currently range from 0% to 3.5%,
if your state requires us to pay premium taxes. We will deduct the taxes either
when we incur the tax or at a later time.
We do not deduct any surrender charges on full or partial surrenders.
The portfolios also deduct investment charges from amounts you have
invested in the portfolios through the subaccounts. These charges range from
0.__% to 0.__% annually, depending on the portfolio. See the prospectus for the
Fund and the Fee Table in this Prospectus.
10. Do I have access to my money in the Contract?
Yes. You may make a full or partial surrender of the Contract at any time
before the Maturity Date or the annuitant's death. No surrender charges apply.
For Qualified Contracts issued under Code Section 403(b), certain
restrictions will apply. You may also have to pay Federal income taxes and a
penalty tax on any money you take out of the Contract.
11. What is the death benefit?
If the annuitant dies before the Maturity Date, we pay you the greater of
the account value or the Guaranteed Death Benefit. If the owner of a
Nonqualified Contract dies before the Maturity Date and before the annuitant's
death, then we will pay the account value in a lump sum no later than 5 years
following the owner's death.
12. What are the Federal income tax consequences of investing in the
Contract?
The Contract's earnings are generally not taxed until you take them out.
For Federal tax purposes, if you take money out before the Maturity Date,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% Federal penalty tax on the
earnings. The annuity payments you receive after the Maturity Date are
considered partly a return of your original investment; that part of each
payment is not taxable as income. Different tax consequences may apply for a
Contract used in connection with a qualified plan.
13. Can the Contract be returned after I receive it?
Yes. You may return the Contract for a refund by returning the Contract to
our home office within 10 days after you receive it. The amount of the refund,
will generally be the initial payment, plus (or minus) gains (or losses) from
investing the payment in the subaccounts you selected on your application, plus
interest earned on amounts you allocated to the general account. In some states
you may have more than 10 days, or receive a different refund amount. See
"Examination Period" and "State Exceptions."
Fee Table
This Fee Table illustrates the current charges and deductions under the
Contract, as well as the Fund's fees and expenses for the 1998 calendar year.
The purpose of this table is to assist you in understanding the various cost and
expenses that you will bear directly and indirectly. The Fund has provided the
information pertaining to the Fund.
Contract Owner Transaction Expenses
Sales Load Imposed on Payments None
Deferred Sales Load None
Surrender Fee None
Transfer Charge (transfers made between subaccounts
and/or to the general account during a Contract Year) None
Annual Records Maintenance Charge None
Variable Account Annual Expenses (as a percentage of account value)
Mortality and Expense Risk Charge 0.40%
Contract Administration Charge 0.30%
--------------
Total Variable Account Annual Expenses 0.70%
Scudder Variable Life Investment Fund Annual Expenses (as a percentage of
average net assets for the 1998 calendar year)
Management Total Fees
Expenses
After Fee Other After Fee
Portfolio Waiver* Expenses Waiver*
- --------- --------------------- -------- -------
Money Market
Bond
Capital Growth
Balanced
Growth and Income
International
Global Discovery
* Scudder Kemper Investments, Inc. (the Adviser) voluntarily did not impose
part of its management fee in 1998 for the ____ Portfolio. Had the fee been
imposed, the management fee would have been 0.___ % and the ratio of operating
expenses to average net assets for the year ended 12/31/98, would have been
____% for the Global Discovery Portfolio. Example
The following example illustrates the expenses that you would pay on a $1,000
investment, assuming 5% annual return on assets, if you continued the Contract,
surrendered or annuitized at the end of each period:
Subaccount 1 Year 3 Years 5 Years 10 Years
Money Market
Bond
Capital Growth
Balanced
Growth and Income
International
Global Discovery
The fee table and example above are based upon the current level of charges
deducted under the Contract. In the future, we may increase the Mortality and
Expense Risk Charge to .70% per year, establish a Records Maintenance Charge of
up to $40 per year and impose a transfer charge of $10 for the third and each
subsequent transfer request made during a Contract Year. We currently have no
intention of changing our charges.
Neither the fee table nor the example reflects the deduction of any premium
tax.
Charter, as well as other insurance companies whose separate accounts
invest in the Fund, have agreed to reimburse the Fund to the extent that the
total operating expenses exceed .75% for each portfolio except for the
International and Global Discovery Portfolios, where total operating expenses
are to be reimbursed to the extent they exceed 1.50%.
You should not consider this example to represent past or future expenses,
performance or return. Actual expenses may be greater or less than those shown.
The assumed 5% annual return is hypothetical. Past or future annual returns may
be greater or less than the assumed return.
A financial history of each subaccount is included in Appendix A to this
Prospectus.
Financial Statements
The financial statements of Charter and the Variable Account are included
in the SAI.
<PAGE>
Calculation of Yields and Total Returns
We may periodically advertise yields and average annual total returns for
the subaccounts and the portfolios. These figures will be based on historical
earnings and are not intended to indicate future performance.
The yield of the Money Market subaccount refers to the annualized
investment income that an investment in the Subaccount generates over a
specified seven-day period. The effective yield of the Money Market subaccount
is calculated in a similar way but, when annualized, we assume that the income
earned by the investment has been reinvested. The effective yield will be
slightly higher than the yield because of the compounding effect of the assumed
reinvestment.
The yield of a subaccount (except the Money Market subaccount) refers to
the annualized income that an investment in the subaccount generates over a
specified thirty-day period.
The average annual total return of a subaccount assumes that an investment
has been held in the subaccount for certain periods of time including the period
measured from the date the subaccount began operations. We will provide the
average annual total return for each subaccount that has been in operation for
1, 5, and 10 years. The total return quotations will represent the average
annual compounded rates of return that an initial investment of $1,000 would
earn as of the last day of the 1, 5 and 10 year periods.
The yield and total return calculations are not reduced by any premium
taxes. Applying premium taxes will reduce the yield and total return of a
Contract.
For additional information regarding yield and total return calculations,
please refer to the SAI.
Other Performance Data
We may disclose other performance data, such as cumulative total return and
nonstandard total returns.
We may also present historic performance data for the portfolios since
their inception that is reduced by some or all of the fees and charges under the
Contract. Such adjusted historic performance includes data that precedes the
inception dates of the subaccounts, but is designed to show the performance that
would have resulted if the Contract had been available during that time.
We will only disclose non-standard performance data if we also disclose the
standard performance data. For additional information regarding the calculation
of other performance data, please refer to the SAI.
Advertising, sales literature, and other communications may compare the
expense and performance data for the Contract and each subaccount with other
variable annuities tracked by independent services such as Lipper Analytical
Services, Inc., Morningstar and the Variable Annuity Research Data Service.
These services monitor and rank the performance and expenses of variable annuity
issuers on an industry-wide basis. We may also make comparisons using other
indices that measure performance, such as Standard & Poor's 500 Composite or the
Dow Jones Industrial Average. Unmanaged indices may assume reinvestment of
dividends but do not deduct administrative and management costs and expenses.
We may report other information including the effect of tax-deferred
compounding on a subaccount's returns, illustrated by tables, graphs, or charts.
Tax-deferred compounding can lead to substantial long-term accumulation of
assets, if the portfolio's investment experience is positive. Sales literature,
advertisements or other reports may refer to A.M. Best's rating of Charter as an
insurance company.
Charter and the Variable Account
Charter National Life Insurance Company
Charter is a stock life insurance company incorporated under the laws of
the State of Missouri on December 7, 1955. Charter, with assets of $_____
billion as of December 31, 1998, principally engages in the offering of
insurance products on a direct marketed basis. We are authorized to conduct
business in 49 states, the District of Columbia and Puerto Rico. Our principal
offices are located at: 8301 Maryland Avenue, St. Louis, Missouri 63105, (800)
242-4402.
Charter is currently a wholly owned subsidiary of Leucadia National
Corporation ("Leucadia"), a New York corporation.
Purchase Agreement with Allstate
On December 21, 1998, Allstate Life Insurance Company ("Allstate")
announced that it has entered into an agreement with Leucadia to purchase
Charter. The transaction is subject to regulatory approvals and is expected to
close before July 1, 1999.
CNL, Inc. ("CNL") is the principal underwriter of the Contract. On
September 2, 1998, Leucadia, then sole owner of all of the stock of CNL, sold
all of its CNL stock to Allstate.
Charter National Variable Annuity Account
Charter established the Variable Account as a separate investment account
under the laws of the State of Missouri on May 15, 1987. The Variable Account
receives and invests the payments under the Contracts. We may offer other
variable annuities for which the Variable Account may receive and invest
payments.
Under Missouri law, that portion of the assets of the Variable Account
equal to the reserves and other contract liabilities connected with the account
shall not be chargeable with liabilities arising out of any other business we
may conduct. However, the assets of the Variable Account will be available to
cover the liabilities of our general account to the extent that Variable Account
assets exceed its liabilities arising under the variable annuity contracts it
supports. The obligations under the Contracts are obligations of Charter.
The Variable Account is divided into subaccounts. Each subaccount invests
exclusively in shares of one of the Fund's portfolios. Income, gains and losses
from each subaccount's assets are credited to or charged against such subaccount
without regard to income, gains or losses of any other subaccount or income,
gains, or losses arising out of our other business.
The Variable Account is registered with the Securities and Exchange
Commission ("SEC") as a unit investment trust under the 1940 Act and meets the
definition of a "separate account" under the Federal securities laws.
Registration with the SEC does not involve supervision of the management or
investment practices or policies of the Variable Account or Charter by the SEC.
Services Agreements with Allstate Life Insurance Company
On September 2, 1998, Charter and Leucadia entered into a coinsurance
agreement with Allstate reinsuring all of Charter's rights, liabilities and
obligations with respect to the Variable Account under the Contracts. On the
same date, Charter and Allstate entered into an administrative services
agreement under which Allstate or an affiliate will administer the Contracts.
Neither of these agreements will change the fact that Charter is primarily
liable to you under your Contract. At this time there have been no changes to
the address or phone numbers that you are currently using.
Scudder Variable Life Investment Fund
The Variable Account invests exclusively in shares of the Scudder Variable
Life Investment Fund (the "Fund"). The Fund is registered with the SEC under the
1940 Act as an open-end, diversified management investment company. Scudder
Kemper Investments, Inc. is the investment adviser to the mutual fund portfolios
available under the Contract.
In addition to the Variable Account, the Fund's shares are sold to variable
life insurance and variable annuity separate accounts of other insurance
companies, including an insurance company affiliated with us. Someday, it may be
disadvantageous for variable annuity separate accounts of other life insurance
companies, or for both variable life insurance separate accounts and variable
annuity separate accounts, to invest simultaneously in the Fund. But, currently
neither the Fund nor Charter foresees any such disadvantages to either variable
annuity owners or variable life insurance owners. The Fund's management intends
to monitor events in order to identify any material conflicts between or among
variable annuity owners and variable life insurance owners and to determine what
response, if any, they should take. In addition, if we believe that the Fund's
response to any of those events or conflicts insufficiently protects our Owners,
then we will take appropriate action.
The subaccounts invest exclusively in the Class A shares of following
portfolios of the Fund:
Money Market
Bond
Capital Growth
Balanced
Growth and Income
International
Global Discovery
Each portfolio represents, in effect, a separate mutual fund with its own
distinct investment objectives and policies. The income or losses of one
portfolio generally have no effect on another portfolio's investment
performance.
Scudder Kemper Investments. Inc. (the "Adviser"), an investment adviser
registered with the SEC under the Investment Advisers Act of 1940, as amended,
manages daily investments and business affairs of the Fund, subject to the
policies that the Funds' Trustees established. See the Fund's prospectus for
information regarding the Adviser's fees.
The general public may not purchase these underlying portfolios. Their
investment objectives and policies may be similar to other portfolios and mutual
funds managed by the same investment adviser that are sold directly to the
public. You should not expect that the investment results of the other
portfolios would be similar to those of the underlying portfolios.
There is no assurance that any portfolio will achieve its objective. The
Scudder Variable Life Investment Fund prospectus contains more detailed
information, including a description of the risks involved in investing in each
portfolio and a description of each portfolio's investment objective. A copy of
the Fund's prospectus is attached to this Prospectus. You should carefully read
the Fund's prospectus before investing in a Contract.
Addition, Deletion, or Substitution of Investments
From time to time, we may make certain changes in the Variable Account and
its investments. We may substitute shares of any portfolio for shares of another
portfolio of the Fund or another registered open-end management investment
company. We may do so if the shares of the portfolio are no longer available for
investment or if we decide that investment in any portfolio would be
inappropriate in view of the purposes of the Variable Account. We will not
substitute or eliminate the shares of a portfolio in which your Contract is
invested without prior approval of the SEC and we will notify you of our intent.
This will be done to the extent required by the 1940 Act.
We may add or delete subaccounts in our discretion when we decide that
marketing, tax, investment, or other conditions warrant such additions or
deletions. Each additional subaccount will purchase shares in a portfolio of the
Fund or in another mutual fund or investment vehicle. If we eliminate a
subaccount, then we will notify you and request that you reallocate the amounts
you have invested in the eliminated subaccount. If you do not provide us with
your desired reallocations, then we will reinvest the amounts in the eliminated
subaccount into the subaccount that invests in the Money Market Portfolio.
In the event of any such substitution, change, or elimination, we may, by
appropriate endorsement, change the Contracts as may be necessary or appropriate
to reflect such substitution, change, or elimination. Furthermore, if we deem it
to be in the best interests of persons having voting rights under the Contracts,
then the Variable Account may be: (i) operated as a management company under the
1940 Act or any other form permitted by law, (ii) de-registered under the 1940
Act, in the event such registration is no longer required, or (iii) combined
with one or more other separate accounts. To the extent applicable law permits,
we may transfer the assets of the Variable Account associated with the Contracts
to another separate account.
The Contract
The description of the Contract contained in this prospectus is qualified
in its entirety by reference to the contract for the Flexible Premium Variable
Deferred Annuity. We have filed a copy of the Contract as an exhibit to this
Registration Statement. It is available upon request from us.
Contract Application and Issuing the Contract
The Contract is available to individuals, certain retirement plans and
individual retirement accounts (IRA) that qualify for special Federal income tax
treatment, and individuals purchasing individual retirement annuities that
qualify for special Federal income tax treatment. The Contract is not available
for use as a "Tax-Sheltered Annuity" qualifying under Section 403(b) of the
Code.
If you purchase a Contract which qualifies as an IRA under Section 408(b),
you should be aware that the Code imposes certain restrictions on those
Contracts.
Before we issue a Contract, we must receive your properly completed
application and a minimum payment of $2,500 ($2,000 in the case of some
Qualified Contracts). We will mail you a Premium Receipt form if you request
one. You must name the annuitant in the Contract application. If the Contract
qualifies as an IRA under Section 408(b), then you must be the annuitant. We
reserve the right to decline an application for any reason. If we decline an
application, then we will refund the full initial payment.
After underwriting is completed and the Contract is delivered to you, the
Contract will be deemed to have commenced as of the Effective Date. The
Effective Date is a date within two business days after we receive a completed
application and the full initial payment. The Contract Date will be the same as
the Effective Date unless the Effective Date is the 29th, 30th, or 31st of the
month, in which case the Contract Date will be the 28th day of the same month.
We use the Contract Date to determine Contract Years, Contract Months, and
Contract Anniversaries.
Examination Period
You may cancel the Contract for a refund within 10 to 30 days after you
receive the Contract. Depending on the laws of the state of issue and your age,
we will refund the initial payment in one of the following methods. See your
Contract and the "State Exceptions" section of this prospectus for details.
Return of Premium Plus or Minus Investment Experience. In most states, if
you return the Contract, we will refund the initial payment, plus or minus gains
or losses from investing the payment in the subaccounts you chose on your
application, plus any interest earned on the amount you allocated to the general
account. We will calculate these refunds as of the date that we receive the
Contract. If you allocate all or part of the payment to the subaccounts, then
the amount of your refund may be more or less than the initial payment,
depending on the investment performance of your selected subaccounts. If you
allocate all of the payment to the general account, then we will always refund
an amount equal to or greater than the payment.
Return of Premium. If your state requires us to refund your premium to
you, then we will refund the greater of: (1) the initial payment, or (2) the
account value plus any amount deducted for taxes or charges from the initial
payment. We will calculate your refund as of the date we receive the Contract.
During the Examination Period, the portion of the initial payment you allocated
to the Variable Account will be invested in the Money Market subaccount. Once
the Examination Period expires, we will reallocate the account value to the
subaccounts you select.
Payments
You should make all checks or drafts payable as directed on the
application. You can also make payments by requesting on your application that
Scudder Investor Services, Inc. redeem shares in an existing Scudder mutual fund
account and apply the proceeds toward a payment.
Initial Payment. The minimum initial payment you must pay to purchase a
Contract is $2,500 ($2,000 in the case of some Qualified Contracts). The initial
payment is the only payment we require you to make under the Contract. When you
make the initial payment, you must specify whether it is for a purchase of a
Nonqualified or Qualified Contract.
If the initial payment is derived from an exchange or surrender of another
annuity contract, then we may require that you provide information about the
Federal income tax status of the previous annuity contract. If you desire to
invest monies qualifying for different annuity tax treatment under the Code,
then we will require you to purchase separate Contracts. Each separate Contract
requires a minimum initial payment of $2,500 ($2,000 in the case of some
Qualified Contracts). We reserve the right to waive the minimum initial payment
amount and accept less than $2,500.
If we receive a properly completed application with the initial payment,
then we will credit that payment to the Contract within two business days of
receiving the payment. We may deduct premium taxes from the payment before we
credit it to the Contract. If we receive an incomplete application, then we will
credit the payment within two business days of receiving the completed
application. If, for any reason, we do not credit the payment to your account
within five business days, then we will immediately return the payment to you.
You may, after receiving notice of our delay, specifically request that we do
not return the payment.
Additional Payments. You may make additional payments while the annuitant
is living and before the Maturity Date. Currently, there is no minimum
additional payment amount or maximum number of additional payments per Contract
Year. In the future, we may require that each additional payment be at least
$1,000 and limit the frequency of additional payments to a maximum of four per
Contract Year.
Additional payments must qualify for the same Federal income tax treatment
as the initial payment made under the Contract. If the Federal income tax
treatment of a payment will be different from that of the initial payment, then
we will not accept it. We will credit any additional payments to the Contract
upon receiving them at our home office.
Automatic Investment Plan. You may arrange to make regular investments ($50
minimum) into any of the subaccounts through automatic deductions from your
checking account. The Automatic Investment Plan cannot be used to allocate money
to the general account. Please call (800) 242-4402 for more information.
Limitations on Payments. We reserve the right to reject any initial
payment. We may require you to complete a financial questionnaire for payments
in excess of $250,000. If any additional payments would cause your total
payments to exceed $1,000,000, we may reject those payments. We will reject any
payment that would cause the account value in the general account to exceed
$500,000.
For Contracts that qualify as IRAs under Section 408(b) of the Code, the
total payments (including the initial payment) in any calendar year may not
exceed $2,000, unless the portion in excess of $2,000 qualifies as a rollover
amount or contribution under Section 402(c), 403(b)(8), or 408(d)(3) or other
applicable provisions of the Code.
Allocating Payments
You may allocate payments to one or more of the subaccounts, to the general
account, or to both. If you allocate any portion of a payment to the general
account, then you must specify the Declaration Period(s) to which you are
allocating those funds. You must specify the payment allocations in your
application. We will allocate the initial payment according to your
specifications, once we receive it at our home office.
You must make all allocations in whole percentages and they must total
100%. If the allocations do not total 100%, then we will recompute the
allocations proportionately by dividing the percentage in each subaccount you
selected, by the sum of the percentages you indicated. We will apply this new
percentage to the payment. The following example illustrates how we make this
recomputation:
Example
Indicated Actual
Allocation Allocation
---------- ------------ ----------
Subaccount#1 25% 25% / 105% = 24%
Subaccount#2 40% 40% / 105% = 38%
Subaccount#3 40% 40% / 105% = 38%
----- ------ ---
Total 105% 100%
We will allocate all payments at the time we credit such payments to your
Contract.
We will allocate any additional payments you make to the subaccounts and/or
the general account in the same proportion as the initial payment. You may
change the allocation percentages by sending us written notice. Once you make a
change in allocation, we will allocate all future payments in accordance with
your new allocation percentages. This will continue until you send us written
notice of any changes. However, if you have funds deducted from a checking
account under the Automatic Investment Plan option, then you must provide us
with written notice to change the allocation of future additional payments.
Transfers
Before the Maturity Date, you may transfer amounts among the subaccounts,
between the subaccounts and the general account, and between different
Declaration Periods in the general account.
You may transfer amounts from the general account to any of the subaccounts
and to different Declaration Periods in the general account only at the end of
the Declaration Period to which you allocated that amount. You may transfer
amounts from a subaccount to the general account at any time, as long as that
transfer would not cause your Contract's value in the general account to exceed
$500,000.
We do not impose a charge for any transfers. In the future, if you request
more than two transfers during a Contract Year, we may deduct $10 from each
subaccount from which you transfer funds.
You must request a transfer by sending us written notice or by telephone
(if you have a currently valid telephone transfer request form on file with us).
We employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. If we follow such procedures, then we will not be liable
for any losses due to unauthorized or fraudulent instructions. If we do not
follow those reasonable procedures, then we may be liable for such losses. The
procedures we follow for telephone transfers include confirming the correct
name, the contract number and the personal code for each telephone transfer.
We will deem transfers effective and determine values in connection with
transfers at the end of the Valuation Period during which we receive the
transfer request.
Asset Rebalancing Option. You may select the Asset Rebalancing Option if
you wish to maintain a particular percentage allocation among the subaccounts.
With Asset Rebalancing, we automatically reallocate the account value in the
subaccounts quarterly to your selected allocations. Over a period of time, this
method of investing may help you buy low and sell high although there can be no
assurance of this. This investment method does not assure profits and does not
protect against a loss in declining markets.
To elect the Asset Rebalancing Option, the account value in your Contract
must be at least $2,500 and we must receive a completed Asset Rebalancing Option
form at our home office. You must designate the subaccounts and the percentage
allocations that you want us to rebalance each quarter. The percentages must
total 100%. If you elect the Asset Rebalancing Option, then all the new money
you direct into the subaccounts will be included in the Asset Rebalancing
Option. You may not participate in Dollar Cost Averaging and Asset Rebalancing
at the same time. The general account is not available for the Asset Rebalancing
Option.
Selecting Asset Rebalancing will result in the transfer of funds to one or
more of the subaccounts on the date you specify. If you have specified, or we
receive the form on, the 29th, 30th or 31st, then we will consider the effective
date to be the first Valuation Date of the following month. If you do not
specify a date or if we receive the request after your specified date, then we
will transfer funds on the date we receive the Asset Rebalancing Option form and
on the quarterly anniversary of the applicable date thereafter. The amounts
transferred will receive the Unit Values for the subaccounts at the end of the
Valuation Date on which the transfers occur. If the effective date is not a
Valuation Date, then the transfer will occur on the next Valuation Date.
You may terminate this option at any time by sending us written notice. We
will automatically terminate this option if you request any transfers outside
the Asset Rebalancing program. If you wish to resume the Asset Rebalancing
Option after it has been canceled, then you must complete a new Asset
Rebalancing Option form and send it to our home office. We may discontinue,
modify, or suspend the Asset Rebalancing Option at any time.
Dollar Cost Averaging. Dollar Cost Averaging is a systematic method of
investing by which you purchase units in fixed dollar amounts so that the cost
is averaged over time. You may begin dollar cost averaging by authorizing us to
make periodic transfers from any one subaccount to one or more other
subaccounts. Amounts transferred will purchase units in those subaccounts at
that subaccount's Unit Value as of the Valuation Date on which the transfer
occurs. Since the value of the units will vary, the amounts transferred to a
subaccount will purchase more units when the Unit Value is low and fewer units
when the Unit Value is high. Similarly, the amounts transferred to a subaccount
will result in the liquidation of more units when the Unit Value is low and
fewer units when the Unit Value is high. Dollar Cost Averaging does not assure a
profit or protect against a loss in declining markets.
You may elect Dollar Cost Averaging if the account value in your Contract
is at least $2,500 and you send our home office a completed Dollar Cost
Averaging form. You must designate the frequency of the transfers, the
expiration date for the program, the subaccount from which to take the
transfers, the subaccounts to receive the funds, and the allocation percentages.
You may not participate in Dollar Cost Averaging and Asset Rebalancing at
the same time. The general account is not available for the Dollar Cost
Averaging Option.
After we receive a completed Dollar Cost Averaging form, we will transfer
your designated amounts from the subaccount from which to make transfers to your
chosen subaccounts. $50 is the minimum amount that you may transfer. Each
transfer occurs on your specified date. If you specify, or we receive the form
on the 29th, 30th or 31st, then we will consider the effective date to be the
first Valuation Date of the following month. If you do not specify a date, then
we will transfer the funds on the monthly, quarterly, semiannual or annual
anniversary, (whichever corresponds to your selected frequency), of the date
that we received your completed Dollar Cost Averaging form. The amounts
transferred will receive the Unit Values for the affected subaccounts at the end
of the Valuation Date on which the transfers occur. If the anniversary is not a
Valuation Date, then the transfer will occur on the next Valuation Date. Dollar
Cost Averaging will terminate when we have transferred the total amount elected,
or when the value in the subaccount from which transfers are made is
insufficient to support the requested transfer amount.
You may terminate this option at any time by sending us written notice.
When we receive written notice that you want to terminate Dollar Cost Averaging,
then we will stop all transfers, unless you instruct otherwise. You must
complete a new Dollar Cost Averaging option form and send it to our home office
if you wish to continue Dollar Cost Averaging after the expiration date you
specified, or the amount in the elected subaccount is depleted, or you canceled
the Dollar Cost Averaging option.
We may discontinue, modify, or suspend the Dollar Cost Averaging option at
any time.
Account Value
On the Effective Date, your account value equals your initial payment minus
any amounts we deducted for premium taxes. On any other day, your account value
equals:
your account value from the previous Valuation Date
increased by:
1. any additional net payments we receive,
2. any increase in the account value due to positive
investment results of the subaccounts you selected, and
3. any interest earned on your account value held in the
general account;
and reduced by:
4. any decrease in the account value due to negative
investment results of the subaccounts you selected,
5. a daily charge to cover our assumed mortality and expense
risks and the cost of administering the Contract, and
6. any amounts you withdrew from the Contract.
If we charge a records maintenance fee or transfer fee in the future, we will
deduct those amounts from your account value.
A Valuation Period is the period between successive Valuation Dates. It
begins at the close of business on each Valuation Date and ends at the close of
business on the next Valuation Date. A Valuation Date is each day that the New
York Stock Exchange (NYSE) is open for business.
You should expect your account value to change between the Valuation
Periods to reflect the investment experience of the subaccounts in which you
invest, any interest earned in the general account, and the deduction of
charges. Your Contract stops accumulating value after the Maturity Date.
Unit Value. Each subaccount has a distinct value ("Unit Value"). When you
allocate a payment or transfer an amount to a subaccount, we base the number of
units you purchase on the Unit Value of the subaccount at the end of the
Valuation Period during which you make the allocation. Units are redeemed in a
similar manner when you transfer amounts out of, or withdraw amounts from, a
subaccount.
For each subaccount, the Unit Value on a given Valuation Date is based on
the net asset value of a share of the corresponding portfolio in which such
subaccount invests. Each Valuation Period has a single Unit Value that applies
to each day in the Valuation Period and which is calculated as of the end of the
Valuation Period. The Unit Value for each subsequent Valuation Period is the
Investment Experience Factor (described below) for that Valuation Period
multiplied by the Unit Value for the immediately preceding Valuation Period.
Investment Experience Factor. The Investment Experience Factor measures a
subaccount's investment performance during a Valuation Period. An Investment
Experience Factor is calculated separately for each of the subaccounts. A
subaccount's Investment Experience Factor for a Valuation Period equals (a)
divided by (b), minus (c), where:
(a) is (i) the value of the net assets held in the subaccount at the
end of the Valuation Period; plus
(ii) the investment income and capital gains (realized or unrealized)
credited to the net assets of that subaccount during the Valuation
Period for which we determine the Investment Experience Factor; minus
(iii) the capital losses (realized or unrealized) charged against
those assets during the Valuation Period; minus
(iv) any amount charged against the subaccount for taxes or any amount
that we set aside during the Valuation Period as a provision for taxes
attributable to the operation or maintenance of that subaccount; and
(b) is the value of the net assets of that subaccount at the end of
the preceding Valuation Period; and
(c) is a charge to compensate us for certain administrative expenses
and mortality and expense risks that we assume in connection with the
Contracts.
Contract Ownership
You may designate a new Owner or joint owner at any time during the
annuitant's life. If you name a joint owner, then we will presume the ownership
to be as joint tenants with right of survivorship, unless you otherwise specify.
If any Owner dies before the annuitant and before the Maturity Date, then the
Owner's rights will belong to the joint owner, if any, or otherwise to the
beneficiary. The interest of any Owner or joint owner may be subject to the
rights of any assignee.
A new Owner or a joint owner may not be designated under a Contract that
qualifies as an individual retirement annuity under Section 408(b) of the Code.
An Owner's designation of a new Owner may be subject to Federal income tax.
You may designate a new Owner by sending us written notice. The change will
take effect as of the date you sign the written notice. We will not be liable
for any payment made or other action taken before we receive and record the
written notice.
Assignment of Contract
Except in the case of a Contract that qualifies as an individual retirement
annuity under Section 408(b) of the Code, you may assign all or a portion of
your right to receive annuity payments under the Contract or assign the Contract
as collateral security.
If you assign any portion of the right to receive annuity payments before
the Maturity Date, then the assignee is entitled to receive the assigned annuity
payments in a lump sum, as of the Maturity Date. If you assign any portion of
the right to receive the assigned annuity payments, after the Maturity Date,
then the assignee will receive the assigned annuity payments in accordance with
the annuity income option in effect on the Maturity Date. The assignee may not
select an annuity income option or change an existing annuity income option.
For a Qualified Contract, certain assignments may adversely affect the
qualification for special Federal income tax treatment of the underlying
retirement plan or individual retirement account. We urge potential purchasers
of Qualified Contracts to consult their tax advisers.
If you assign the right to receive annuity payments or assign the Contract
as collateral security, then your rights and those of any beneficiary will be
subject to the assignment. We are not responsible for the adequacy of any
assignment and will not be bound by the assignment until we receive satisfactory
written evidence of the assignment. In certain circumstances, an assignment will
be subject to Federal income tax.
State Exceptions
Contracts may vary according to the requirements of state insurance
departments. At the time of this prospectus' printing, the following state
variations were in effect:
Massachusetts and Montana Residents:
Massachusetts and Montana prohibit the use of actuarial tables that
distinguish between men and women in determining annuity benefits for annuity
contracts issued on the lives of residents. Therefore, Contracts offered on the
lives of Montana and Massachusetts residents will have annuity income options
which are based on actuarial tables that do not differentiate on the basis of
sex.
Iowa, Missouri, North Carolina, Oklahoma, South Carolina and Utah:
An Owner of a Contract issued in Iowa, Missouri, North Carolina, Oklahoma,
South Carolina and Utah who cancels the Contract within the Examination Period
will receive the greater of:
a full refund of the initial payment, or
the account value plus any amount deducted for taxes or charges
from the initial payment.
Washington:
An Owner of a Contract issued in Washington who cancels the Contract within
the Examination Period will receive a refund of the initial payment.
Access to Your Money
Full and Partial Surrenders
At any time before the Maturity Date, you may fully or partial surrender
the Contract, subject to certain conditions. If you surrender the Contract, you
will receive the full account value.
We do not deduct surrender charges from full or partial surrenders of the
Contract.
The minimum amount of a partial surrender is $500. The Contract must have
an account value of at least $2,500 after the partial surrender.
Your partial surrender request must specify the amount you want withdrawn
from each of the subaccounts and/or the general account. If you withdraw value
from the general account, we will deduct the requested amount proportionately
from each Declaration Period on a first-in, first-out basis within the
Declaration Period(s).
You must provide us with specific instructions about how we should withdraw
value from the subaccounts and/or the general account.
To make a partial surrender, you should send us a written request or call
us, if you have a valid telephone transfer request form on file with us. You may
make a full surrender only by sending us a written request. We will calculate
the account value payable to you upon a full or partial surrender at the price
next computed after we receive your surrender request.
If, when you make a surrender request, you have not provided us with a
written election, not to have Federal income taxes withheld, then we, by law,
must withhold taxes from the taxable portion of the surrender. A Federal penalty
tax may be assessed.
Systematic Withdrawals. We offer an option under which you may take partial
surrenders of the Contract by systematic withdrawals. You may elect to receive
systematic withdrawals before the Maturity Date by sending us a completed
Systematic Withdrawal form at our home office that includes the written consent
of any assignee or irrevocable beneficiary. You may designate the systematic
withdrawal amount as either a percentage of the account value or as a specified
dollar amount. You may designate that systematic withdrawals be made monthly,
quarterly, semiannually, or annually on a specific date. If you do not specify a
date, then the systematic withdrawal option will begin on the date we receive
the form. We will consider the effective date to be the first Valuation Date of
the following month if we receive the form on the 29th, 30th or 31st or if you
specify one of those dates.
Each systematic withdrawal must be at least $250. The systematic withdrawal
option will terminate if the amount to be withdrawn exceeds the account value or
would cause the account value to be below $2,500. If any portion of the
systematic withdrawal is to be withdrawn from the general account, then we will
deduct the requested amount proportionately from each Declaration Period on a
first-in, first-out basis within the Declaration Period(s).
Each systematic withdrawal will occur at the end of the Valuation Period
during which you scheduled a withdrawal. We deduct the systematic withdrawal
from your account value in the subaccounts and/or the general account, according
to your specifications.
You may terminate this option at any time by sending us written notice. We
will terminate this option if the amount to be withdrawn has caused the account
value to be below $2,500. If you wish to resume systematic withdrawals, then you
must send us a new Systematic Withdrawal form at our home office. We may
discontinue, modify, or suspend the systematic withdrawal option at any time.
You should carefully consider the tax consequences of a systematic withdrawal,
including a 10% penalty tax imposed on withdrawals made before you attain age 59
1/2.
Annuity Payments
If the annuitant is living on the Maturity Date and the Contract is in
force, then we will make fixed annuity payments to you under the annuity income
option you select. We will make the first annuity payment within seven days
after the Maturity Date.
The amount of the periodic annuity payments you receive depends upon:
(i) the account value you have accumulated on the Maturity Date,
(ii) the annuitant's age and sex (or, in the case of Annuity Income Option
2, the age and sex of the annuitant and the joint annuitant) on the
Maturity Date, and
(iii) the annuity income option you selected.
On the Maturity Date, we determine the dollar amount of each annuity
payment. That amount is fixed and will not change.
After the Maturity Date, the Contract no longer participates in the
Variable Account. If, at the time of an annuity payment, you have not provided
us with a written election not to withhold Federal income taxes, then we, by
law, must withhold such taxes from the taxable portion of such Annuity payment.
In addition, the Code provides that a Federal penalty tax may be imposed on
certain premature annuity payments.
We determine the amount of the monthly annuity payments under annuity
income options 1, 2, and 3, described below, by dividing the account value on
the Maturity Date by 1,000 and multiplying the result by the appropriate factor
contained in your Contract on the table for your selected annuity income option.
The appropriate factor is based on a guaranteed minimum annual interest rate of
3.5%. We determine this factor at the time of maturity, subject to current
market conditions.
Annuity Income Options
At any time before the Maturity Date, you may designate the annuity income
option under which we will pay annuity payments. If you do not select an annuity
income option by the Maturity Date, then we will make monthly annuity payments
to you under annuity income option 1.
If the account value is less than $2,500 or if it is insufficient to
produce monthly payments of at least $100, then no annuity income options will
be available unless we consent or as otherwise required by state law. In such
cases, we will pay the account value in a lump sum.
We may offer other annuity income option on the Maturity Date. We will
provide you with information concerning the availability of any additional
annuity income options before the time that you have to select an annuity income
option.
We currently offer the following annuity income options:
Option 1. Life Annuity with Installment Refund - We will make monthly annuity
payments to you for the longer of:
(i) the annuitant's life; or
(ii) until the sum of the monthly annuity payments equals the account value
on the Maturity Date.
If the Owner dies before the sum of the monthly annuity payments we paid equals
the account value on the Maturity Date, then we will pay the remaining annuity
payments to your designated beneficiary.
Option 2. Joint and Survivor Life Annuity with Installment Refund - We will make
monthly annuity payments to you for the longer of:
(i) either the annuitant's or the joint annuitant's life; or
(ii) until the sum of the monthly annuity payments made under the Contract
equals the account value on the Maturity Date.
If all Owners die before the sum of the monthly annuity payments we paid equals
the account value on the Maturity Date, then we will pay the remaining annuity
payments to your designated beneficiary.
If you select annuity income option 2, then you must designate a joint
annuitant. We will use the joint annuitant's life to determine the duration of
annuity payments under annuity income option 2. The age and sex of both the
annuitant and the joint annuitant determine the amount of the monthly annuity
payments under annuity income option 2. At any time before the Maturity Date,
you may select a different joint annuitant by sending us written notice. You may
not select a new joint annuitant after the Maturity Date.
Option 3. Installments for Life - We will make monthly annuity payments to you
for as long as the annuitant lives. Payments under this option will end with the
last payment made before the annuitant's death. Under this option it is possible
that you will receive only one annuity payment if the annuitant died before the
date of the second payment, two if he or she dies before the third annuity
payment date, etc.
For a Contract qualifying as an individual retirement annuity under Section
408(b) of the Code, you may not select an annuity income option with a Period
Certain that will guarantee annuity payments beyond the annuitant's life (or
life expectancy).
Maturity Date
The Maturity Date is the date on which annuity payments begin. You may
specify the Maturity Date in your application. You may change the Maturity Date
at any time during the annuitant's life by sending us a written request before
the currently scheduled Maturity Date.
The Maturity Date must be a Contract Anniversary that is not later than:
(i) the Contract Anniversary nearest the annuitant's 80th birthday; or
(ii) ten years from the next Contract Anniversary, whichever is later.
If you do not specify a Maturity Date, then the Maturity Date will be the later
of: (a) the 10th Contract Anniversary; or (b) the Contract Anniversary nearest
the annuitant's 80th birthday.
For a Qualified Contract, other than an IRA that satisfied Section 408(b)
of the Code, the selection of certain Maturity Dates may adversely affect
qualifying the underlying retirement plan for special Federal income tax
treatment. We urge potential purchasers of such Qualified Contracts to consult
their tax advisers.
For a Qualified Contract that is an IRA under Section 408(b) of the Code,
other than a Roth IRA, the minimum required distribution must be no later than
April 1 of the calendar year following the calendar year in which the annuitant
attains age 70 1/2.
Death Benefit
If the annuitant dies before the Maturity Date, then we will pay you a
death benefit as specified in the Contract. We do not pay a death benefit if the
annuitant dies on or after the Maturity Date.
If the annuitant dies before the Maturity Date, then we will pay you a lump
sum death benefit equal to the greater of:
(i) the account value; or
(ii) the sum of the payments you made, minus the sum of any partial
surrenders.
If the Owner is a natural person, then the Owner may elect to continue the
Contract and become the annuitant if the deceased annuitant was not an Owner. We
calculate the amount of the death benefit at the price next computed after we
receive Proof of Death for the annuitant. We will pay you within seven days of
receiving the Proof of Death, or as soon as we have sufficient information to
make the payment. If the deceased annuitant was an Owner, then we will in all
events pay the Death Benefit within five years of the date of the deceased
annuitant's death.
Beneficiary Provisions
If the beneficiary survives the Owner(s), then the beneficiary will receive
amounts payable under the Contract. If you do not specify a beneficiary, or if
no beneficiary survives you by 30 days, then your estate will receive any
remaining amounts payable under the Contract.
While the annuitant is living, you may change the beneficiary or
beneficiaries by sending us written notice. Once we receive the notice, we will
initiate the change as of the date you signed the written notice. We will not be
liable for any payment made or other action taken before we receive and record
such written notice at our home office. A beneficiary named irrevocably may not
be changed without written consent of such beneficiary. Any beneficiary's
interest is subject to the rights of any assignee.
Death of Owner
For a Nonqualified Contract in which any owner is a natural person, is not
the annuitant, and dies before the Maturity Date and before the annuitant's
death, the death benefit provisions described above do not apply.
In such circumstances, we will pay to the joint owner the account value in
a lump sum no later than five years following the date of the Owner's death. If
there is no joint owner, then we will pay the beneficiary. We calculate the
account value at the price next computed after we receive the Owner's Proof of
Death. If the joint owner or the beneficiary is the Owner's surviving spouse,
then he or she may elect to continue the Contract as if he or she were the
original Owner.
Employment-Related Benefit Plans
In 1983, the Supreme Court held in, Arizona Governing Committee v. Norris,
that optional annuity payments provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women on the basis of sex. This Contract contains annuity
payment rates for certain annuity income options that distinguish between men
and women. Accordingly, employers and employee organizations should consider, in
consultation with legal counsel, the impact of Norris, and Title VII generally,
on any employment-related insurance or benefit program for which they may
purchase a Contract.
Charges and Deductions
We do not deduct commissions or sales charges from your payments when you
invest in the Contract. Nor do we not take surrender charges upon full or
partial surrender of the Contract. We pay distribution expenses out of our own
funds.
We will deduct certain charges and deductions from your account value to
compensate us for providing the annuity payments, assuming certain risks in
connection with the Contract, and administering the Contract.
If there are profits from the fees and charges that we deduct under the
Contract, including but not limited to mortality and expense risk charges, then
we may use such profits to finance the distribution of the Contracts.
Mortality and Expense Risk Charge
We deduct a daily charge from your Contract's value in the subaccounts for
certain mortality and expense risks in connection with the Contracts. We
currently charge a daily rate of .000010997 of the value you have in each
subaccount. That charge corresponds to an annual rate of .40%. We reserve the
right to increase the Mortality and Expense Risk Charge to .70%. That charge
corresponds to a daily rate of .000019245, the maximum set forth in the
Contract.
The mortality and expense risk charge only applies during the period from
the Effective Date to the Maturity Date and is not imposed against the general
account. The Investment Experience Factor for each subaccount reflects this
charge.
Changes in actual mortality experience or actual expense do not affect the
account value or annuity payments. The mortality risks arise from the
contractual obligations to pay death benefit before the Maturity Date and to
make annuity payments for the annuitant's entire life (or, in the case of
annuity income option 2, the entire life of the annuitant and the joint
annuitant). Thus, we assure you that neither the annuitant's longevity (or, in
the case of annuity income option 2, the annuitant's and the joint annuitant's
longevity) nor a greater than expected improvement in life expectancy, will
adversely affect the annuity payments. This eliminates the risk of outliving the
funds accumulated for retirement in instances in which the Contract is purchased
to provide funds for retirement.
The expense risk is the risk that the actual expenses involved in
administering the Contracts, including Contract maintenance costs,
administrative costs, mailing costs, data processing costs, and costs of other
services may exceed the amount recovered from any administrative charges.
Contract Administration Charge
The Contract's administrative expenses include processing applications,
Contract changes, tax reporting, full and partial surrenders, death claims, and
initial and subsequent payments; preparing annual and semiannual reports to
Owners and regulatory compliance reports; and overhead costs.
We deduct a daily charge from your Contract's value in the subaccounts for
the administrative expenses we incur in connection with the Contract and the
Variable Account. We charge a daily rate of .000008248 of the value of net
assets you have in each subaccount. This charge corresponds to an annual rate of
.30%. The Contract Administration Charge only applies during the period from the
Effective Date to the Maturity Date and is not imposed against the general
account. The Investment Experience Factor for each subaccount reflects this
charge.
Records Maintenance Charge
Currently, we do not charge for records maintenance. The Contract permits
us to deduct a maximum amount of $40 from your account value at the beginning of
each Contract Year to reflect the cost of performing records maintenance for the
Contracts. If we imposed this charge, then we would deduct it proportionately
from each subaccount and each of the Declaration Period(s) in the general
account (on a first-in, first-out basis within each Declaration Period) in which
you have allocated funds. If we deducted a Records Maintenance Charge, then it
would apply only during the period from the Effective Date to the Maturity Date.
If you surrender the Contract during a Contract Year, then we would not prorate
it.
Premium Taxes
Most states and political subdivisions do not assess premium taxes. Where
state premium taxes are assessed, we will deduct the amount of tax due from each
payment at rates ranging from a minimum of 0.5% to a maximum of 3.5%. We will
deduct any premium taxes levied by political subdivisions from payments. Such
taxes are generally at rates of less than 1%.
If the premium tax exceeds 3.5% of the payment, we will accept the payment
only if you provide written authorization allowing us to deduct the applicable
premium tax from the account value.
Other Taxes
We currently do not charge the Variable Account for any Federal, state, or
local taxes other than premium taxes. If we decide to impose any such taxes on
the Variable Account, then we may deduct such taxes from amounts you have
invested in the Variable Account.
Transfer Charges
We do not charge for transfers among subaccounts. However, the Contract
permits us to deduct $10 from each subaccount for each transfer you make in
excess of two in a Contract Year.
We do not consider the followings to be transfers: (i) initial allocations
of payments, (ii) reallocations among the Declaration Periods within the general
account, or (iii) reallocations from the general account to any subaccounts at
the end of a Declaration Period.
We treat all transfer requests, made at the same time, as one request. We
may impose the transfer charge at any time.
Portfolio Charges
The portfolios deduct investment charges from amounts you have invested in
the portfolios. These charges range from 0.__% to 1.__% annually, depending on
the portfolio. For more information, see the Fund's prospectus.
Certain Federal Income Tax Consequences
The discussion set forth below is included for general purposes only.
Before making any payment you should consult your own tax adviser with any
questions regarding your own situation and as to the consequences of investment
in a contract under Federal and applicable state, local, and foreign tax laws.
The following is provided as general information. It is based on our
understanding of current Federal income tax laws and no representation is made
as to the likelihood that such laws, or their interpretation by the Internal
Revenue Service (IRS) will continue. The following is not intended as tax advice
to any individual or Qualified Plan.
The Statement of Additional Information (SAI) contains additional
information regarding the possible tax consequences of exchanges or surrenders.
Tax Status of the Contract
If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your contract is called a Qualified
Contract. If your annuity is independent of any formal retirement or pension
plan, it is termed a Nonqualified Contract. The tax rules applicable to
Qualified Contracts vary according to the type of retirement plan and the terms
and conditions of the plan.
Taxation of Nonqualified Contracts
Diversification Requirements. The Code requires that the investments of
each investment division of the separate account underlying the contracts be
"adequately diversified" in order for the contracts to be treated as annuity
contracts for Federal income tax purposes. It is intended that the Variable
Account, through the Fund and its portfolios, will satisfy these diversification
requirements.
Owner Control. In certain circumstances, owners of variable annuity
contracts have been considered for Federal income tax purposes to be the owners
of the assets of the separate account supporting their contracts due to their
ability to exercise investment control over those assets. When this is the case,
the contract owners have been currently taxed on income and gains attributable
to the Variable Account assets. There is little guidance in this area, and some
features of the Contract, such as the flexibility of an owner to allocate
premium payments and transfer amounts among the investment divisions of the
separate account, have not been explicitly addressed in published rulings. While
we believe that the Contract does not give an Owner investment control over
separate account assets, we reserve the right to modify the Contract as
necessary to prevent an Owner from being treated as the owner of the separate
account assets supporting the Contract.
Required Distributions. In order to be treated as an annuity contract for
Federal income tax purposes, section 72(s) of the Internal Revenue Code requires
any Nonqualified Contract to contain certain provisions specifying how your
interest in the Contract will be distributed in the event of the death of a
holder of the Contract. The Nonqualified Contracts contain provisions that are
intended to comply with these Code requirements, although no regulations
interpreting these requirements have yet been issued. We intend to review such
provisions and modify them if necessary to assure that they comply with the
applicable requirements, when such requirements are clarified by regulation or
otherwise.
Non-Natural Person. If a non-natural person (e.g., a corporation or a
trust) owns a Nonqualified Contract, the taxpayer generally must include, in
income, any increase in the excess of the accumulation value over the investment
in the Contract (generally, the premiums or other consideration paid for the
contract) during the taxable year. There are some exceptions to this rule and a
prospective owner that is not a natural person should discuss these with a tax
adviser.
The following discussion generally applies to Contracts owned by natural
persons.
Withdrawals. When a withdrawal from a Nonqualified Contract occurs, the
amount received will be treated as ordinary income, subject to tax up to an
amount equal to the excess (if any) of the accumulation value immediately before
the distribution over the Owner's investment in the Contract (generally, the
premiums or other consideration paid for the Contract, reduced by any amount
previously distributed from the Contract that was not subject to tax) at that
time. In the case of a surrender under a Nonqualified Contract, the amount
received generally will be taxable only to the extent it exceeds the Owner's
investment in the Contract.
Penalty Tax on Certain Withdrawals. In the case of a distribution from a
Nonqualified Contract, there may be imposed a Federal tax penalty equal to ten
percent of the amount treated as income. In general, however, there is no
penalty on distributions:
made on or after the taxpayer reaches age 59 1/2;
made on or after the death of an Owner;
attributable to the taxpayer's becoming disabled; or
made as part of a series of substantially equal periodic payments
for the life (or life expectancy) of the taxpayer.
Other exceptions may be applicable under certain circumstances and special
rules may be applicable in connection with the exceptions enumerated above. You
should consult a tax adviser with regard to exceptions from the penalty tax.
Annuity Payments. Although tax consequences may vary depending on the
payout option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an annuity payment is generally determined in a
manner that is designed to allow you to recover your investment in the contract
ratably on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the contract has
been fully recovered, however, the full amount of each annuity payment is
subject to tax as ordinary income.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a
contract because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (i) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the contract, or (ii) if distributed under a payout option, they are taxed in
the same way as annuity payments.
Transfers, Assignments or Exchanges of a Contract. A transfer or
assignment of ownership of a contract, the designation of an annuitant, the
selection of certain maturity dates, or the exchange of a contract may result in
certain tax consequences to you that are not discussed herein. An owner
contemplating any such transfer, assignment or exchange, should consult a tax
advisor as to the tax consequences.
Withholding. Annuity distributions are generally subject to withholding
for the recipient's Federal income tax liability. Recipients can generally
elect, however, not to have tax withheld from distributions.
Multiple Contracts. All annuity contracts that are issued by us (or our
affiliates) to the same owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in such
owner's income when a taxable distribution occurs.
Taxation of Qualified Contracts
Your rights under a qualified contract may be subject to the terms of the
retirement plan itself, regardless of the terms of the qualified contract.
Adverse tax consequences may result if you do not ensure that contributions,
distributions and other transactions with respect to the contract comply with
the law.
Individual Retirement Accounts (IRAs), as defined in Sections 219 and 408
of the Internal Revenue Code (Code), permit individuals to make annual
contributions of up to the lesser of $2,000 or 100% of their adjusted gross
income. The contributions may be deductible in whole or in part, depending on
the individual's income. Distributions from certain pension plans may be "rolled
over" into an IRA on a tax-deferred basis without regard to these limits.
Amounts in the IRA (other than nondeductible contributions) are taxed when
distributed from the IRA. A 10% penalty tax generally applies to distributions
made before age 59 1/2, unless certain exceptions apply.
Corporate pension and profit-sharing plans under Section 401(a) of the Code
allow corporate employers to establish various types of retirement plans for
employees, and self-employed individuals to establish qualified plans for
themselves and their employees. Adverse tax consequences to the retirement plan,
the participant or both may result if the contract is transferred to any
individual as a means to provide benefit payments, unless the plan complies with
all the requirements applicable to such benefits prior to transferring the
contract.
Other Tax Issues. Qualified Contracts have minimum distribution rules that
govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement, or consult a tax advisor for more
information about these distribution rules.
Distributions from Qualified Contracts generally are subject to withholding
for the Owner's Federal income tax liability. The withholding rate varies
according to the type of distribution and the Owner's tax status. The Owner will
be provided the opportunity to elect not to have taxes withheld from
distributions.
"Eligible rollover distributions" from section 401(a) plans are subject to
a mandatory federal income tax withholding of 20%. An eligible rollover
distribution is the taxable portion of any distribution from such a plan, except
certain distributions such as distributions required by the Code or
distributions in a specified annuity form. The 20% withholding does not apply,
however, if the Owner chooses a "direct rollover" from the plan to another
tax-qualified plan or IRA.
Our Income Taxes
At the present time, we make no charge for any Federal, state or local
taxes (other than the charge for state and local premium taxes) that we incur
that may be attributable to the investment divisions of the separate account or
to the contracts. We do have the right in the future to make additional charges
for any such tax or other economic burden resulting from the application of the
tax laws that we determine is attributable to the investment divisions of the
separate account or the contracts.
Under current laws in several states, we may incur state and local taxes
(in addition to premium taxes). These taxes are not now significant and we are
not currently charging for them. If they increase, we may deduct charges for
such taxes.
Possible Tax Law Changes
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the contract could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract.
We have the right to modify the contract in response to legislative changes
that could otherwise diminish the favorable tax treatment that annuity contract
owners currently receive. We make no guarantee regarding the tax status of any
contact and do not intend the above discussion as tax advice.
General Provisions
The Contract
The Contract, its endorsements, riders, and the Contract application
constitute the entire contract between Charter and the Owner. Only the
President, a Vice President, the Secretary, or an Assistant Secretary of Charter
is authorized to change or waive the terms of a Contract. Any change or waiver
must be in writing and signed by one of those persons.
Delay of Payment and Transfers
We will pay any amount due from the Variable Account for a full or partial
surrender, the death benefit, or the death of the owner of a Nonqualified
Contract, generally within seven days from the date we receive written notice.
We may be permitted to defer such payment, and transfers, if:
the NYSE is closed for other than usual weekends or holidays, or
trading on the Exchange is otherwise restricted;
an emergency exists as defined by the SEC or the SEC requires that
trading be restricted; or
the SEC permits a delay for the protection of Owners.
We anticipate that payments and transfers from the general account will
occur within seven business days after receipt of written notice. Pursuant to
state insurance law requirements, we reserve the right to defer payments to be
made from the general account for up to six months.
We may postpone any payment that is derived, all or in part, from any
amount paid to us by check or draft until we determine that such instrument has
been honored.
Contract Expiration
The Contract will expire and be of no effect when the account value is
insufficient to cover deductions for the mortality and expense risk charge, the
contract administration charge, any records maintenance charge, or transfer
charges.
Misstatement of Age or Sex
If the annuitant's age or sex (and/or the joint annuitant's age or sex, if
annuity income option 2 is selected) has been misstated on the application, then
we will recalculate the annuity payments to reflect the calculations that would
have been made had the annuitant's (and/or joint annuitant's) age and sex been
correctly stated.
Nonparticipating Contract
The Contract does not participate in our divisible surplus. The Contract
does not pay dividends.
Notices and Inquiries
Please send any written notice or request to:
Charter National Life Insurance Company
8301 Maryland Avenue
St. Louis, Missouri 63105.
Any notice or request must be on the form and contain the information we
require. This includes the Contract number and your full name and signature. Any
notice that we send you will be sent to the address shown in the application
unless we have on file a written notice of an address change. All inquiries
should include your Contract number and full name. If you need additional
information, you may call us at (800) 242-4402.
Records and Reports
At the end of each calendar quarter, Allstate, or its designee, on our
behalf, will send you, at your last known address of record, statements listing
the account value, additional payments, transfers, any charges, and any partial
surrenders made during the year. You will also be sent the Fund's annual and
semiannual reports.
Year 2000 Disclosure
Like all financial services providers, Charter, Allstate and Allstate's
affiliates utilize systems that may be affected by Year 2000 transition issues.
These parties rely on service providers including banks, custodians,
administrators and investment managers that also may be affected. Charter,
Allstate and Allstate's affiliates have developed and are in the process of
implementing a Year 2000 transition plan, and are confirming that its service
providers are also engaged. The resources that are being devoted to this effort
are substantial. It is difficult to predict with precision whether the amount of
resources ultimately devoted, or the outcome of these efforts, will have any
negative impact on Charter, Allstate and its affiliates. However, as of the date
of this prospectus, we do not anticipate that contract owners will experience
negative effects on their investment, or on the services we provide as a result
of Year 2000 transition implementation. Charter, Allstate and its affiliates
currently anticipate that their systems will be Year 2000 compliant on or about
December 1998, but there can be no assurance that Charter, Allstate or its
affiliates will be successful, or that interaction with other service providers
will not impair Charter, Allstate or its affiliates services at that time. [To
be updated.]
Services Agreement
On September 2, 1998, we entered into an administrative services agreement
("Services Agreement") with Allstate under which Allstate, or its designee,
provides the administrative services in connection with the Contracts and the
Variable Account on our behalf. Included among the services are premium payment
processing, all transfer, withdrawal or surrender requests, preparation of
records (including records of all purchases and redemption of the shares of each
portfolio) and reports relating to the Variable Account and the Contracts. In
addition Allstate is responsible for payment of all expenses in connection with
the Contract and Separate Account. Allstate's principal address is: 3100 Sanders
Road, Northbrook, Illinois 60062.
At this time you should continue to use the addresses and phone numbers set
forth in this prospectus.
Distribution of the Contract
The principal underwriter of the Contracts is CNL. CNL is wholly-owned by
Allstate. CNL is registered with the SEC as a broker-dealer under the Securities
Exchange Act of 1934, as amended (the " 1934 Act"), and is a member of the
National Association of Securities Dealers, Inc. The principal address of CNL is
8301 Maryland Avenue, St. Louis, Missouri 63105. For its services as principal
underwriter, we pay CNL, on a monthly basis, .50% of new and additional payments
for the Contracts. We have also entered into a general expense reimbursement
agreement with CNL for expenses incurred by CNL in connection with distribution
expenses relating to the offering of the Contracts and other variable annuity
and variable life insurance contracts that we issue. We paid commissions to CNL
for the sale of the Contracts totaling $__________ In 1998, $238,447.78 in 1997,
and $230,970.90 in 1996.
CNL has contracted with Scudder Investor Services, Inc. ("Scudder") for
Scudder's services in connection with the distribution of the Contracts. Scudder
is registered with the SEC as a broker-dealer under the 1934 Act and is a member
of the National Association of Securities Dealers, Inc. Individuals directly
involved in the sale of the Contracts are registered representatives of Scudder
and our licensed agents. The principal address of Scudder is Two International
Place, Boston, Massachusetts 02110-4103.
CNL is doing business under the following names in the states indicated:
CNL Insurance Marketing, Inc. in California, Florida, Minnesota, Montana, New
Hampshire, and New Jersey; CNL Insurance & Financial Services, Inc. in Illinois,
Kentucky, Maine, Maryland, Nevada, Rhode Island, and Utah; and CNL, Inc. of
Missouri in Vermont.
The Contracts will be offered to the public on a continuous basis. Both CNL
and Scudder reserve the right to discontinue the offering at any time.
The General Account
Payments you allocate or transfer to the general account become part of our
general account assets that support our annuity and insurance obligations. The
general account includes all of our assets, except those assets segregated in
separate accounts. According to the coinsurance agreement executed on September
2, 1998, between Charter and Allstate, the assets of the general account
attributable to the Contracts were transferred to Allstate. This agreement makes
it Allstate's responsibility to invest the assets of the general account,
subject to applicable law. Because of exemptive and exclusionary provisions in
the Federal securities laws, we have not registered interests in the general
account under the Securities Act of 1933 (the "1933 Act"), and the general
account is not registered as an investment company under the 1940 Act.
Accordingly, neither the general account nor any interest therein is subject to
the provisions of such statutes, and, as a result, the staff of the SEC has not
reviewed the disclosures in this prospectus relating to the general account.
However, disclosures about the general account may be subject to certain
generally applicable provisions of the Federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
We guarantee that we will credit interest to amounts you allocate to the
general account at an effective annual rate of at least 3.5% compounded monthly.
We may declare higher interest rates from time to time at our discretion. We
will credit the declared interest rate for a specific period of time called a
Declaration Period. A Declaration Period will not be less than one year or more
than 10 years. You may elect one or more Declaration Periods currently offered
when you allocate or transfer funds to the general account. At any one time,
your money held in a Declaration Period may be earning different declared
interest rates, if you allocated funds to that Declaration Period at different
times.
We cannot accept allocations to the general account that would increase
your Contract's value in the general account to over $500,000. We guarantee that
the value held in the general account will equal all amounts that you allocated
or transferred to the general account, plus any interest credited, less any
amounts that you surrendered or transferred from the general account, and less
any applicable charges. Amounts you allocate to the general account do not share
in the investment experience of the general account.
You may not allocate or transfer an amount from or within the general
account to the general account before the end of that amount's Declaration
Period. We will send notice to you 30 days before the expiration of a
Declaration Period and ask you how to reallocate the amounts in the expiring
Declaration Period. If we do not receive your instructions before the end of the
Declaration Period, then we will transfer your value in the expiring Declaration
Period to the Money Market Subaccount.
Voting Rights
We will vote the Fund's shares held in the Variable Account at regular and
special shareholder meetings of the Fund in accordance with instructions we
received from persons having voting interests in the subaccounts. If we
determine that the law permits us to vote the Fund's shares in our own right,
then we may elect to do so.
We will separately calculate the number of votes that you have the right to
instruct for each subaccount. We will determine the number of votes for each
subaccount, that you have the right to instruct, by dividing your Contract's
value in a subaccount by the net asset value per share of the corresponding
portfolio in which the subaccount invests. We count fractional shares. The
number of votes of a portfolio, that you have the right to instruct, will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the meeting of the Fund. Voting
instructions will be solicited by written communications before that meeting in
accordance with procedures established by the Fund.
We will vote the Fund's shares, for which we do not receive timely
instructions, in proportion to the voting instructions which we receive for all
of the variable annuity contracts (including the Contracts) that we issue and
are participating in that portfolio. We will also vote our shares that are not
attributable to variable annuity contracts in the same proportion.
Separate accounts of other insurance companies, including insurance
companies affiliated with us, may also invest premiums for variable life and
variable annuity contracts in the Fund. It is to be expected that Fund shares
held by those separate accounts will be voted according to the instructions of
the owners of those variable life and variable annuity contracts. This will
dilute the effect of the your voting instructions. We do not see any
disadvantages to this dilution.
Each person having a voting interest in a subaccount will receive proxy
material, reports, and other materials relating to the appropriate portfolio.
Legal Proceedings
The Company and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, we believe that at the present
time there are not pending or threatened lawsuits that are reasonably likely to
have a material adverse impact on the Variable Account or us.
Additional Information
A registration statement has been filed with the SEC under the Securities
Act of 1933, as amended, and the 1940 Act with respect to the Contract offered
hereby. This prospectus does not contain all of the information set forth in the
full registration statement. For instance, this prospectus only summarizes the
contents of the Contract and other legal instruments contained in the full
registration statement. For a complete statement of the terms of those
documents, please refer to the full registration statement as filed.
<PAGE>
Table of Contents for Statement of Additional Information
State Regulation of Charter
Certain Federal Income Tax Consequences of Certain
Exchanges and Surrenders
Safekeeping of the Variable Accounts Assets
Purchase and Services Agreement
Calculation of Yields And Total Returns
Money Market Subaccount Yields
Other Subaccount Yields
Total Returns
Effect of the Records Maintenance Charge on Performance Data
Other Performance Data
Cumulative Total Returns
Comparison of Performance and Expense Information
Legal Matters
Independent Accountants
Financial Statements
<PAGE>
Condensed Financial Information
The following condensed financial information is derived from the financial
statements of the Variable Account. You should read the data along with the
financial statements, related notes, and other financial information included in
the Statement of Additional Information.
The following table sets forth information regarding the subaccounts for a
Contract for the period from the commencement of business operations through
December 31, 1998.
Money Market Subaccount
Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
1998
1997 18.890 2,521,329
1996 18.074 2,615,942
1995 17.316 2,260,561
1994 16.507 3,197,824
1993 16.030 1,491,258
1992 15.740 1,380,156
1991 15.341 972,042
1990 14.606 989,667
1989 13.683 344,621
Bond Subaccount
Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- -----------------------
1998
1997 24.894 951,724
1996 22.979 764,803
1995 22.508 896,538
1994 19.181 690,782
1993 20.287 755,914
1992 18.179 631,581
1991 17.109 406,545
1990 14.653 210,921
1989 13.697 182,698
Capital Growth Subaccount
Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
1998
1997 45.649 2,923,166
1996 33.863 2,729,711
1995 28.388 2,884,663
1994 22.222 2,683,112
1993 24.773 2,351,022
1992 20.638 1,798,119
1991 19.514 933,120
1990 14.096 400,044
1989 15.389 227,343
Balanced Subaccount
Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
1998
1997 34.936 1,527,371
1996 28.326 1,490,127
1995 25.496 1,603,656
1994 20.270 1,426,280
1993 20.840 1,477,645
1992 19.531 1,243,891
1991 18.389 779,317
1990 14.592 492,406
1989 15.029 399,068
<PAGE>
International Subaccount
Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
1998
1997 33.560 2,251,880
1996 30.987 2,593,037
1995 27.188 2,869,930
1994 24.641 3,543,387
1993 25.027 2,767,700
1992 18.287 785,559
1991 19.003 446,099
1990 17.174 370,916
1989 18.830 107,751
Growth and Income Subaccount
Accumulation Unit Value Number of Accumulation
At End of Year Units at End of Year
----------------------- ----------------------
1998
1997 26.835 4,225,162
1996 20.713 3,491,709
1995 17.075 2,659,025
1994* 13.053 1,311,518
Global Discovery Subaccount
Accumulation Unit Value Number of Accumulation
at End of Year Units at End of Year
----------------------- ----------------------
1998
1997 14.648 986,445
1996* 13.126 1,025,244
* The Growth and Income Subaccount commenced operations on May 1, 1994. The
Global Discovery Subaccount commenced operations on May 1, 1996. The Unit Value
at commencement was 12.500.
<PAGE>
Statement of Additional Information
For the
Scudder Horizon Plan
a Flexible Premium Variable Deferred Annuity
Issued Through
Charter National Variable Annuity Account
Offered by
Charter National Life Insurance Company
(A Missouri Stock Company)
8301 Maryland Avenue
St Louis Missouri 63105
-----------
This Statement of Additional Information expands upon subjects discussed in
the current Prospectus for the Scudder Horizon Plan, a flexible premium variable
deferred annuity (the "Contract") offered by Charter National Life Insurance
Company.
You may obtain a copy of the Prospectus dated May 1, 1999, by calling (800)
225-2470 or writing to:
Scudder Investment Services, Inc.
Two International Place
Boston, Massachusetts 02110-4103
Terms used in the current Prospectus for the Contract are incorporated in
this Statement.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus for the Contract.
Dated May 1, 1999
<PAGE>
Table of Contents
State Regulation of Charter.................................................1
Certain Federal Income Tax Consequences
of Certain Exchanges and Surrenders.........................................1
Safekeeping of the Variable Account's Assets................................2
Purchase and Services Agreements............................................2
Calculation of Yields and Total Returns.....................................2
Money Market Subaccount Yields.....................................3
Other Subaccount Yields............................................4
Total Returns......................................................5
Effect of the Records Maintenance Charge on
Performance Data...................................................6
Other Performance Data .....................................................7
Cumulative Total Returns...........................................7
Comparison of Performance and Expense
Information........................................................8
Legal Matters...............................................................8
Independent Accountants ....................................................8
Financial Statements........................................................8
<PAGE>
In order to supplement the description in the Prospectus, this document
provides additional information about Charter and the Contract that may be of
interest to you.
State Regulation of Charter
We are a stock life insurance company organized under the laws of Missouri,
and is subject to regulation by the Missouri State Department of Insurance.
Quarterly statements are filed with the Missouri Director of Insurance covering
the operations and reporting on the financial condition of Charter.
Periodically, the Missouri Director of Insurance examines the financial
condition of Charter, which examination includes the liabilities and reserves of
the Variable Account and other separate accounts of which Charter is the
depositor.
In addition, we are subject to the insurance laws and regulations of all
the states in which it is licensed to operate. The availability of the Contract
and certain contract rights and provisions depends on state approval and/or
filing and review processes. Where required by state law or regulation, the
Contract will be modified accordingly.
Certain Federal Income Tax Consequences of
Certain Exchanges and Surrenders
Under Section 1035 of the Code, generally no gain or loss is recognized on
a qualifying exchange of an annuity contract for another annuity contract. A
direct exchange of an annuity contract for a Contract should qualify as an
exchange under Section 1035 of the Code. There are, however, certain exceptions
to this rule. Moreover, although the issue is not free from doubt, certain
surrenders under an annuity contract followed by an investment in the Contract
also may qualify as exchanges under Section 1035 of the Code. Due to the
uncertainty of the rules regarding the determination of whether a transaction
qualifies under Section 1035 of the Code, prospective purchasers are urged to
consult their own tax advisers.
In addition to being nontaxable events, certain exchanges qualifying under
Section 1035 of the Code may also result in a carry-over of the federal income
tax treatment of the old annuity contract to the new annuity contract. Due to
the complexity of the rules regarding the proper treatment of an exchange
qualifying under Section 1035 of the Code, however, prospective purchasers are
urged to consult their own tax advisers.
Safekeeping of the Variable Account's Assets
We hold the assets of the Variable Account. The assets are kept segregated
and held separate and apart from the general funds of Charter. We maintain
records of all purchases and redemptions of the shares of each Portfolio. A
blanket fidelity bond in the amount of $10,000,000 covers all of the officers
and employees of Charter.
<PAGE>
Purchase and Services Agreements
On September 2, 1998 Charter and Leucadia entered into a coinsurance
agreement ("the Agreement") with Allstate Life Insurance Company ("Allstate")
reinsuring all of Charter's rights, liabilities and obligations with respect to
the Variable Account under the Contract. On the same date, Charter and Allstate
entered into an administrative services agreement ("Services Agreement") under
which Allstate, or its designee, has agreed to provide the administrative
services in connection with the Contract and the Variable Account on behalf of
Charter. Included among such services are premium payment processing, all
transfer, withdrawal or surrender requests, prepare all records (including
records of all purchases and redemption of the shares of each portfolio) and
reports relating to the Variable Account and the Contract. As compensation for
its services, Allstate retains the charges deducted from Separate Account or
Contract Values. Allstate is responsible for payment of all expenses in
connection with the Contract and the Separate Account. Allstate's principal
address is 3100 Sanders Rd., Northbrook, Illinois 60062.
On December 21, 1998, Allstate announced that it has entered into an
agreement with Leucadia National Corporation, Charter's parent company, to
purchase Charter. The transaction is subject to regulatory approvals and is
expected to close by July 1, 1999.
CNL, Inc. ("CNL") is the principal underwriter of the Contract. On
September 2, 1998, Leucadia, then the sole owner of all of CNL's stock, sold all
of its CNL stock to Allstate. Allstate is now sole owner of CNL.
Calculation of Yields and Total Returns
From time to time, we may disclose yields, total returns and other
performance data pertaining to the Contracts for the Subaccounts in accordance
with the standards deemed by the Securities and Exchange Commission. Because of
the charges and deductions imposed under a Contract the yield for the
Subaccounts will be lower than the yield for their respective Portfolios. Also
because of differences in Variable Account charges for different variable
annuity contracts invested in the Variable Account, the yields, total returns
and other performance data for the Subaccounts will be different for the
Contract than for such other variable annuity contracts. The calculations of
yields, total returns and other performance data do not reflect the effect of
any premium tax that may be applicable to a particular Contract. Most states and
political subdivisions do not assess premium taxes. Where state premium taxes
are assessed, Charter will deduct the amount of tax due from each payment at
rates ranging from a minimum of .5% to a maximum of 3.5%. Any premium taxes
levied by political subdivisions will likewise be deducted from payments; such
taxes are generally at rates of less than 1%.
The performance data for periods prior to the date the Subaccounts
commenced operations is based on the performance of the Scudder Variable Life
Investment Fund's Portfolios and the assumption that the Subaccounts were in
existence for the same periods as the Fund's Portfolios with a level of charges
equal to those currently assessed against the Subaccounts. Portfolios and
Subaccounts commenced operations as indicated:
Subaccount/Portfolio Subaccount Portfolio
-------------------- ---------- ---------
Money Market October, 1988 July, 1985
Bond October, 1988 July, 1985
Balanced October, 1988 July, 1985
Capital Growth October, 1988 July, 1985
International October, 1988 May, 1987
Growth and Income May, 1994 May, 1994
Global Discovery May, 1996 May, 1996
Money Market Subaccount Yields
Based on the method of calculation described below, the Current Yield and
Effective Yield on amounts held in the Money Market Subaccount for the seven-day
period ending December 31, 1998, were as follows:
Current Yield = %
Effective Yield = %
The Current Yield is computed by determining the net change (exclusive of
realized gains and losses on the sale of securities and unrealized appreciation
and depreciation) at the end of the seven-day period in the value of a
hypothetical account under a Contract having a balance of 1 unit of the Money
Market Subaccount at the beginning of the period, dividing such net change in
account value by the value of the account at the beginning of the period to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects (i) net income from the
Portfolio attributable to the hypothetical account and (ii) charges and
deductions imposed under the Contract which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for the Administration Charge and the Mortality and Expense
Risk Charge. Current Yield is calculated according to the following formula:
Current Yield = ((NCS - ES) / UV) x (365 / 7)
We may also disclose the Effective Yield of the Money Market Variable Account
for the same seven-day period, determined on a compounded basis. The seven-day
Effective Yield is calculated by compounding the unannualized base period return
according to the following formula:
Effective Yield = (1 + ((NCS - ES)/UV))(365 / 7) -1
Where, for both formulas:
NCS = The net change in the value of the Portfolio (exclusive of realized gains
and losses on the sale of securities and unrealized appreciation and
depreciation and exclusive of income other than investment income) for the
seven-day period attributable to a hypothetical account having a balance of
one Subaccount unit under a Contract.
ES = Per unit expenses of the Subaccount for the Contracts for the seven-day
period.
UV = The unit value for a Contract on the first day of the seven-day period.
The Current and Effective Yield on amounts held in the Money Market
Subaccount normally will fluctuate on a daily basis. Therefore, the disclosed
yield for any given past period is not an indication or representation of future
yields or rates of return. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity, the types and quality of portfolio securities held, and the
operating expenses.
Other Subaccount Yields
Based on the method of calculation described below, for the thirty-day
period ending December 31, 1998, the Yield for the Bond Subaccount was as
follows:
Yield = %
The 30-Day Yield refers to income generated by the Bond Subaccount over a
specific 30-day period. Because the yield is annualized, the yield generated
during the 30-day period is assumed to be generated each 30-day period over a
12-month period. The yield is computed by: (i) dividing the net investment
income of the Portfolio attributable to the Subaccount units less Subaccount
expenses attributable to the Contracts for the period, by (ii) the maximum
offering price per unit on the last day of the period times the daily average
number of units outstanding for the period, by (iii) compounding that yield for
a 6-month period, and by (iv) multiplying that result by 2. Expenses
attributable to the Bond Subaccount for the Contracts include the Administration
Charge and the Mortality and Expense Risk Charge. The 30-Day Yield is calculated
according to the following formula:
30-Day Yield = 2 x ((((NI -ES) / (U x UV)) + 1)(to the power of 6)- 1)
Where:
NI = Net income of the portfolio for the 30-day period attributable
to the Subaccount's units.
ES = Expenses of the Subaccount for the Contracts for the 30-day period.
U = The average daily number of units outstanding attributable to the
Contracts.
UV = The unit value for a Contract at the close (highest) of the last
day in the 30-day period.
The 30-Day Yield on amounts held in the Bond Subaccount normally will
fluctuate over time. Therefore, the disclosed yield for any given past period is
not an indication or representation of future yields or rates of return. The
Bond Subaccount's actual yield is affected by the types and quality of portfolio
securities held by the Portfolio, and its operating expenses.
Total Returns
We may disclose Standard Average Annualized Total Returns ("Total Returns")
for one or more of the Subaccounts for various periods of time. One of the
periods of time will include the period measured from the date the Subaccount
commenced operations. When a Subaccount has been in operation for one, five and
ten years, respectively, the Total Returns for these periods will be provided.
Total Returns for other periods of time may, from time to time, also be
disclosed. Based on the method of calculation described below, the Average
Annual Total Returns for the Subaccounts for the periods ending December 31,
1998, were as follows:
<TABLE>
<CAPTION>
Inception of Inception of One Year Five Year Ten Year
Subaccount to Portfolio to Period Ending Period Ending Period Ending
Portfolio 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------- ----------------- ------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Money Market*
Bond
Balanced
Capital Growth
International
Growth and Income** N/A N/A
Global Discovery*** N/A N/A
</TABLE>
* The Yield quotations for the Money Market Subaccount quoted above more closely
reflect the current earnings of this subaccount than the total return
quotations.
** Five- and Ten-Year Average Annual Total Returns are not available for the
Growth and Income Subaccount as it began operations on May 1, 1994.
*** Five- and Ten-Year Average Annual Total Returns are not available for the
Global Discovery Subaccount as it began operations on May 1, 1996.
Total Returns for a Contract represent the average annual compounded rates
of return that would equate a single investment of $1,000 to the redemption
value of that investment as of the last day of each of the periods. The ending
date for each period for which Total Return quotations are provided will be for
the most recent month end practicable, considering the type and media of the
communication, and will be stated in the communication.
We will calculate Total Returns using Subaccount Unit Values which Charter
calculates on each Valuation Date based on the performance of the Subaccount's
underlying Portfolio, and the deductions for the Mortality and Expense Risk
Charge, the Contract Administration Charge and (for periods prior to January 25,
1991) the Records Maintenance Charge. The Records Maintenance Charge of $35 per
year per Contract was deducted at the beginning of each Contract Year. The Total
Return is calculated according to the following formula:
TR = (ERV / P )(to the power of 1/N) - 1
Where:
TR = The average annual total return net of Subaccount recurring
charges for the Contracts.
ERV = The ending redeemable value of the hypothetical account at the
end of the period.
P = A hypothetical single payment of $1,000. N = The number of years in
the period.
Effect of the Records Maintenance Charge on Performance Data
The Contract provides for a $40 Records Maintenance Charge to be deducted
annually at the beginning of each Contract Year. As a matter of current
practice, we are not deducting a Records Maintenance Charge. On performance
information prior to January 25, 1991, $35 was deducted annually at the
beginning of each Contract Year proportionately from each Subaccount based on
the value of the amounts in each Subaccount. For purposes of reflecting the
Records Maintenance Charge in yield and total return quotations, we converted
the $35 annual charge into a per dollar per day charge based on the average
Account Value of all Contracts on the last day of the period for which
quotations were provided and assumed that the charge would be applied to all
Contracts. The per dollar per day average charge was then adjusted to reflect
the basis upon which the particular quotation was calculated.
The assumed average Records Maintenance Charge did not, except in rare
instances, reflect its actual effect on a particular Contract.
<PAGE>
Other Performance Data
Cumulative Total Returns
Based on the method of calculation described below, the Cumulative Total
Returns for the Subaccounts for the periods ending December 31, 1998, were as
follows:
<TABLE>
<CAPTION>
Inception of Inception of One Year Five Year Ten Year
Subaccount to Portfolio to Period Ending Period Ending Period Ending
Subaccount 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------- ----------------- ------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C>
Money Market*
Bond
Balanced
Capital Growth
International
Growth and Income** N/A N/A
Global Discovery*** N/A N/A
</TABLE>
* Five- and Ten-Year Returns are not available for the Growth and Income
Subaccount as it began operations on May 1, 1994.
** Five- and Ten-Year Cumulative Total Returns are not available for the Global
Discovery Subaccount as it began operations on May 1, 1996.
We may disclose Cumulative Total Returns in conjunction with the standard
format described above. The Cumulative Total Returns will be calculated using
the following formula:
CTR = (ERV / P) - 1
Where:
CTR = The Cumulative Total Return net of Subaccount recurring charges
for the period.
ERV = The ending redeemable value of the hypothetical investment at
the end of the period.
P = A hypothetical single payment of $1,000.
We may also disclose yield and total returns for the Fund's Portfolios,
including such disclosure for periods prior to the date the Variable Account
commenced operations. For periods prior to the date the Variable Account
commenced operations, performance information for the Subaccounts will be
calculated based on the performance of the Fund's Portfolios and the assumption
that the Subaccounts were in existence for the same periods as those indicated
for the Funds Portfolios, with the level of Contract charges that were in effect
at the inception of the Subaccounts.
All non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed.
Comparison of Performance and Expense Information
Expenses and performance information for the Contract and each Subaccount
may be compared in advertising, sales literature, and other communications to
expenses and performance information of other variable annuity products tracked
by independent services such as Lipper Analytical Services, Inc. ("Lipper"),
Morningstar and the Variable Annuity Research Data Service ("V.A.R.D.S.") which
monitor and rank the performance and expenses of variable annuity issuers on an
industry-wide basis. From time to time, Charter may also compare using other
indices that measure performance, such as Standard & Poors 500 Composite ("S & P
500") or the Dow Jones Industrial Average ("Dow"). Unmanaged indices may assume
reinvestment of dividends that generally do not reflect deductions for
administrative and management cost and expenses.
Legal Matters
Sutherland Asbill & Brennan LLP, of Washington, D.C. has provided advice on
certain legal matters relating to the Federal Securities Laws. All matters of
Missouri law pertaining to the Contracts, including the validity of the Contract
and Charter's authority to issue the Contract under Missouri Insurance Law, have
been passed upon by John R. Petrowski, General Counsel of Charter National Life
Insurance Company.
Independent Accountants
The consolidated financial statements of Charter National Life Insurance
Company and Subsidiaries as of December 31, 1998 and 1997 and for each of the
three years in the period ended December 31, 1998 and the financial statements
of the Charter National Variable Annuity Account as of December 31, 1998 and for
each of the two years in the period ended December 31, 1998 included in this
Registration Statement have been included herein in reliance on the reports of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
said firm as experts in accounting and auditing.
Financial Statements
The financial statements of Charter, which are included in this Statement
of Additional Information, should be considered only as bearing on the ability
of Charter to meet its obligation under the Contract. They should not be
considered as bearing on the investment performance of the assets held in the
Variable Account.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B of this
Registration Statement.
(b) Exhibits
(1) -- Resolutions of the Board of Directors of Charter
National Life Insurance Company authorizing establishment
of the Variable Annuity Account.1/
(2) -- Not Applicable.
(3) (a) -- Form of Principal Underwriting Agreement between
Charter National Life Insurance Company on its own behalf
and on behalf of Charter National Variable Annuity Account,
and CNL, Inc. 1/
(b) -- Form of Expense Reimbursement Agreement between Charter
National Life Insurance Company and CNL, Inc. 1/
(c) -- Marketing and Solicitation Agreement dated as of
September 30, 1988 among Scudder Investor Services, Inc.,
Charter National Life Insurance Company, Charter National
Variable Annuity Account, and CNL, Inc. 1/
(d) -- Principal Underwriting Agreement - Schedule A. 1/
(4) (a) -- Form of Contract for the Flexible Premium Variable
Deferred Annuity. 1/
(b) -- State Variations in Contract Form. 1/
(c) -- General Account Endorsement. 1/
(d) -- Individual Retirement Provision ontract Rider. 1/
(e) -- Change in Ownership and Annuitant Contract Rider. 1/
(f) -- Charges Endorsement. 1/
(5) (a) -- Form of Application for the Flexible Premium Variable
Deferred Annuity. 1/
(b) -- State Variations of Application Form. 1/
(6) (a) -- Articles of Incorporation of Charter National Life
Insurance Company. 1/
(b) -- By-Laws of Charter National Life Insurance Company. 1/
--
(7) -- Not Applicable.
(8) (a) -- Participation Agreement dated September 3, 1993 between
Scudder Variable Life Investment Fund and Charter
National Life Insurance Company. 1/
(b) -- Reimbursement Agreement dated June 9, 1986 between
Scudder, Stevens & Clark Inc. and Charter National Life
Insurance Company. 1/
(c) -- Participating Contract and Policy Agreement and
Amendments thereto dated June 4, 1986 between Scudder
Investor Services, Inc. and CNL, Inc. 1/
(d) -- Amendment to Participating Contract and Policy Agreement
dated February 20, 1996. 1/
(e) -- Purchase Agreement dated February 11, 1998 between Charter
National Life Insurance Company, Leucadia National
Corporation and Allstate Life Insurance Company. 2/
(f) -- Form of Coinsurance Agreement between Charter National
Life Insurance Company and Allstate Life Insurance
Company. 2/
(g) -- Form of Administrative Services Agreement between Charter
National Life Insurance Company and Allstate Life
Insurance Company. 2/
(9) (a) -- Opinion and Consent of Counsel. 4/
(b) -- Written Consent of Sutherland Asbill & Brennan LLP. 4/
(c) -- Written Consent of John R. Petrowski, General Counsel of
Charter National Life Insurance Company. 4/
(10) -- Written Consent of Independent Accountants. 4/
(11) -- Not Applicable.
(12) -- Not Applicable.
(13) -- Schedule for Computation of Performance Data. 1/
(14) -- Not Applicable.
(15) -- Powers of Attorney. 3/
1/ Incorporated herein by reference to Registrant's Post-Effective
Amendment No. 15 to this Form N-4 Registration Statement filed with the
SEC via EDGARLINK on February 24, 1997 (File No. 33-22925).
2/ Incorporated herein by reference to Registrant's Post-Effective
Amendment No. 17 to this Form N-4 Registration Statement filed with the
SEC via EDGARLINK on April 24, 1998 (File No. 33-22925).
3/ Filed herewith.
4/ To be filed by subsequent amendment.
Item 25. Directors and Officers of the Depositor
Name and Principal Positions and Offices
Business Address With Depositor
- -------------------------- ------------------------------------------
Richard G. Petitt* Chairman of the Board, President,
Director, Chief Executive Officer and
Chief Operating Officer
John R. Petrowski** Vice President, General Counsel,
Corporate Secretary and Director
Rocco Nittoli** Vice President, Treasurer, Controller
and Director
Timothy C. Sentner *** Senior Vice President
Mark Hornstein *** Vice President and Director
James E. Jordan Director
9 West 57th St.
Suite 4000
New York, NY 10019
Laura Ulbrandt *** Assistant Secretary
Ian M. Cumming Director
Leucadia National Corporation
529 East South Temple
Salt Lake City, UT 84102
Barbara Lowenthal *** Vice President
Jesse Clyde Nichols III Director
Nichols Industries, Inc.
5001 E. 59th Street
Kansas City, MO 64130
Joseph S. Steinberg *** Director
Joseph A. Orlando *** Vice President and Director
*The principal business address is 3535 S.E. Doubleton Drive, Stuart, FL 34997.
**The principal business address is 335 Adams Street, Brooklyn, NY 11201.
***The principal business address is Leucadia National Corporation, 315 Park
Avenue South, New York, NY 10010.
Item 26. Persons Controlled By or Under Common Control With the Depositor or
Registrant
Charter is the depositor of Charter National Variable Account, a separate
account formed in connection with the sale of variable life insurance policies
by Charter. Charter also is the depositor of the Charter National Variable
Annuity Account formed in connection with the sale of variable annuity contracts
by Charter.
As described in the Prospectus, Charter is engaged in the insurance business.
Intramerica Life Insurance Company, a Charter subsidiary, offers the Contract to
residents of New York. Charter is a wholly owned subsidiary of Leucadia National
Corporation ("Leucadia"), a New York corporation. On December 21, 1998 Allstate
Life Insurance Company ("Allstate") announced that it entered into an agreement
National Corporation to purchase Charter National Life Insurance Company. The
transaction is subject to regulatory approvals and is expected to close by July
1, 1999.
CNL, Inc. ("CNL") is the principal underwriter of the Contracts. On September 2,
1998, Leucadia, then sole owner of all of the stock of CNL, sold all of its CNL
stock to Allstate.
Set forth below is certain information concerning each of the active persons
under common control with Charter (other than CNL), including state of
organization, percentage of voting securities owned or other basis of control
and principal business.
<TABLE>
<CAPTION>
Percent of
Jurisdiction Voting
of Securities Principal
Name Incorporation Owned* Business
- ----- ------------- ---------- ---------
<S> <C> <C> <C>
Centurion Ins. Co. New York 100% Insurance
WMAC Investment Corp. Wisconsin 100% Holding
Company
Bellpet, Inc. Delaware 100% Holding
Company
Baldwin-CIS L.L.C. Delaware 100% Investments
Conwed Corporation Delaware 100% Real Estate
Leucadia Film
Corporation Utah 100% Film
Products
Neward Corporation Delaware 100% Owner and
Operator of
Oil Wells
Rastin Investing Corp. Delaware 100% Investments
HSD Venture California 100% Real Estate
American Investment
Company Delaware 100% Holding
Company
Leucadia Aviation, Inc. Delaware 100% Aviation
LNC Investments, Inc. Delaware 100% Investments
The Sperry and
Hutchinson Co., Inc. New Jersey 100% Trading Stamps
Leucadia, Inc. New York 100% Manufacturing & Investments
College Life
Development Corp. Indiana 100% Real Estate
Phlcorp, Inc. Pennsylvania 100% Holding Company
Empire Insurance Co. New York 100% Insurance
American Investment
Bank, N.A. United States 100% Banking
Wedgewood Investments
L.L.C. Delaware 100% Investments
Leucadia Financial
Corporation Utah 100% Real Estate
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percent of
Jurisdiction Voting
of Securities Principal
Name Incorporation Owned* Business
- ----- ------------- ----------- ---------
<S> <C> <C> <C>
AIC Financial Corp. Delaware 100% Real Estate
Leucadia Cellars Ltd. Delaware 100% Investments
American Investment
Financial Utah 100% Thrift Loan
Allcity Insurance Co. New York 89.8% Insurance
Charter National Life
Insurance Company Missouri 100% Insurance
LUK-CP Administrative
Services, Inc. Delaware 100%
Administrator
LUK-CPG, Inc. Delaware 100% Holding
Company
LUK-CPH, Inc. Delaware 100% Holding
Company
Intramerica Life
Ins. Co. New York 100% Insurance
Leucadia Properties, Inc. Utah 100% Real Estate
Terracor II Utah 100% Real Estate
CPAX, Inc. Delaware 100% Holding
Company
Rosemary Beach Land Co. Florida 100% Real Estate
Rosemary Beach Cottage
Rental Co. Delaware 100% Real Estate Rental
Professional Data
Management, Inc. Indiana 100% Real Estate
Leucadia Investors, Inc. New York 100% Investments
Silver Mountain
Industries, Inc. Utah 100% Real Estate
Telluride Properties
Acquisition, Inc. Utah 100% Real Estate
Baldwin Enterprises,
Inc. Colorado 100% Holding Company
Commercial Loan Insurance
Company Wisconsin 100% Insurance
NSAC, Inc. Colorado 100% Real Estate
RERCO, Inc. Delaware 100% Finance
330 MAD. PARENT CORP. Delaware 100% Investments
WMAC Credit Insurance
Corp. Wisconsin 100% Insurance
CDS Devco, Inc. California 80% Investments
San Elijo Ranch, Inc. California 68% Real Estate
RRP, Inc. Colorado 100% Real Estate
CDS Holding Corporation Delaware 100% Holding Company
International Bottlers
L.L.C. Delaware 71% Holding Company
Pepsi International
Bottlers L.L.C. Delaware 71% Holding Company
LUK-REN, Inc. New York 100% Real Estate
Pine Ridge Associates,
L.P. Texas 75% Winery
Leucadia Bottling L.L.C. Utah 100% Holding Company
Leucadia Power Holdings,
Inc. Utah 100% Holding Company
</TABLE>
* Unless otherwise noted, voting securities are owned by Leucadia. A number of
subsidiaries of Leucadia are not included on this list. Taken together and
considered as a single subsidiary, they would not constitute a significant
subsidiary of Leucadia. More detailed information will be supplied upon request.
In addition, inactive companies are not included on this list.
Item 27. Number of Contract Owners
As of December 31, 1998 there were 10,060 owners of the flexible premium
variable deferred annuity, of which 210 were Non-qualified and 9,850 were
Qualified, issued by the Variable Account. As of December 31, 1998 there were
owners of the single premium variable deferred annuity, of which were
Non-qualified and were Qualified, issued by the Variable Account.
Item 28. Indemnification
Currently, there are no provisions or arrangements for indemnification of any
individual either by the Registrant or by Charter pursuant to its Articles of
Incorporation or By-Laws. However, Section 351.355 of the Missouri General and
Business Corporation Law, in brief, allows a corporation to indemnify any person
who is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action if he acted in good faith and in
a manner reasonably believed to be in or not opposed to the best interest of the
corporation. Where any person was or is a party or is threatened to be made a
party in an action or suit by or in the right of the corporation to procure a
judgment in its favor, indemnification may not be paid where such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the corporation, unless a court determines that the person is
fairly and reasonably entitled to indemnity. A corporation has the power to give
any further indemnity, to any person who is or was a director, officer, employee
or agent, provided for in the Articles of Incorporation or as authorized by any
by-law which has been adopted by vote of the shareholders, provided that no such
indemnity shall indemnify any person whose action was finally adjudged to have
been knowingly fraudulent, deliberately dishonest of the result of willful
misconduct.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to directors, officers, and controlling persons of Charter pursuant to
the foregoing statute, or otherwise, Charter has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the 1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by Charter of
expenses incurred or paid by a director, officer or controlling person of
Charter in successful defense or any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, Charter will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
Item 29. Principal Underwriter
CNL is the principal underwriter of the Charter National Variable Annuity
Account. CNL is also the principal underwriter for the Charter National Variable
Account, a separate account of Charter formed in connection with the
distribution of variable life insurance policies issued by Charter. And CNL is
principal underwriter for variable annuity contracts issued through the
Intramerica Variable Annuity Account.
Commissions in the amount of $_____ were paid on the Contracts to CNL during
Registrant's fiscal year ending 12/31/98.
<PAGE>
The directors and officers of CNL are as follows:
Name and Principal Positions and Offices
Business Address With Underwriter
- ------------------------------ ------------------------------------------
John R. Hunter* Director
Louis G. Lower, II* Director
Michael J. Velotta* Director and Assistant Secretary
Thomas J. Wilson, II* Director
A. Sales Miller* President
Karen C. Gardner* Vice President
Kathleen A. Urbanowicz* Vice President, Secretary and Chief
Compliance Officer
Terry R. Young* General Counsel and Assistant Secretary
James P. Zils* Treasurer
Robert N. Roeters* Assistant Vice President
Emma M. Kalaidjian* Assistant Secretary
Brenda D. Sneed* Assistant Secretary
Nancy M. Bufalino* Assistant Treasurer
*The principal business address is Allstate Life Insurance Company, 3100 Sanders
Road, Northbrook, Illinois 60062-7154.
Item 30. Location of Accounts and Records
All financial accounts and records required to be maintained by Section 31(a) of
the 1940 Act and the rules under it are maintained by Charter at its
Philadelphia Office. All Contract Owner accounts and documents required to be
maintained by Section 31(a) of the 1940 Act and the rules under it are
maintained by Charter at its Home Office.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
Charter National Life Insurance Company hereby represents that the fees and
charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by Charter National Life Insurance Company.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has duly caused this amended Registration
Statement to be signed on its behalf in the City of St. Louis and the State of
Missouri, on the 26th day of February, 1999.
Charter National Variable Annuity Account
(Registrant)
(Seal) By: Charter National Life Insurance Company
(Depositor)
Attest: /s/John R. Petrowski By: /s/Rocco Nittoli
-------------------- ----------------
John R. Petrowski Rocco Nittoli
Vice President and Vice President and
General Counsel Treasurer
As required by the Securities Act of 1933 this amended Registration
Statement has been signed by the following persons in their capacities on the
dates indicated.
Signature Title Date
* /s/ RICHARD G. PETITT Chairman of the Board 2/__/99
Richard G. Petitt President and Director
(Chief Executive Officer)
(Chief Operating Officer)
*/s/ROCCO NITTOLI Vice President, Treasurer, 2/__/99
Rocco Nittoli Controller and Director
*/s/IAN M. CUMMING Director 2/__/99
Ian M. Cumming
*/s/TIMOTHY C. SENTNER Senior Vice President 2/__/99
Timothy C. Sentner
*/s/JOHN R. PETROWSKI Vice President, General 2/__/99
John R. Petrowski Counsel, Corporate
Secretary and Director
*/s/LAURA ULBRANDT Assistant Secretary 2/__/99
Laura Ulbrandt
*/s/JESSE CLYDE NICHOLS, III Director 2/__/99
Jesse Clyde Nichols, III
*/s/MARK HORNSTEIN Vice President and 2/__/99
Mark Hornstein Director
*/s/JOSEPH S. STEINBERG Director 2/__/99
Joseph S. Steinberg
*/s/BARBARA LOWENTHAL Vice President 2/__/99
Barbara Lowenthal
*/s/JOSEPH A. ORLANDO Vice President and 2/__/99
Joseph A. Orlando Director
*/s/JAMES E. JORDAN Director 2/__/99
James E. Jordan
*Pursuant to Power of Attorney
(Seal) Date: February 26, 1999
Attest: /s/John R. Petrowski By: /s/Rocco Nittoli
-------------------- ----------------
John R. Petrowski Rocco Nittoli
Vice President and Vice President and
General Counsel Treasurer
<PAGE>
Exhibit List
Exhibit 15 Powers of Attorney
Exhibit 15
POWER OF ATTORNEY
We, the undersigned directors and officers of Charter National Life
Insurance Company, a Missouri stock life insurance company, hereby constitute
and appoint Richard G. Petitt, John R. Petrowski and Rocco Nittoli, and each of
them (with power to each of them to act alone), our true and lawful
attorneys-in-fact and agents, with full power to sign for us and in our names
and in the capacities indicated below, any and all amendments (including
post-effective amendments) to the Registration Statements filed with the
Securities and Exchange Commission for the purpose of registering Charter
National Variable Annuity Account, established by Charter National Life
Insurance Company on May 15, 1987 as a unit investment trust under the
Investment Company Act of 1940 and the variable annuity contracts issued by said
separate account under the Securities Act of 1933, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys-in-fact
and agents, to said Registration Statements and any and all amendments thereto.
Witness our hands on the date set forth below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature Date Signature Date
- ---------- ------- ---------- ----
/s/ Richard G. Petitt 2//99 /s/ Ian M. Cumming 2//99
- --------------------- ------------------
Richard G. Petitt Ian M. Cumming
/s/ Mark Hornstein 2//99 /s/ James E. Jordan 2//99
- ------------------ -------------------
Mark Hornstein James E. Jordan
/s/ John R. Petrowski 2//99 /s/ Rocco Nittoli 2//99
- --------------------- -----------------
John R. Petrowski Rocco Nittoli
/s/ Laura Ulbrandt 2//99 /s/Barbara Lowenthal 2//99
- ------------------ --------------------
Laura Ulbrandt Barbara Lowenthal
/s/ Jesse Clyde Nichols III 2//99 /s/ Joseph S. Steinberg 2//99
- --------------------------- -----------------------
Jesse Clyde Nichols III Joseph S. Steinberg
/s/ Joseph A. Orlando 2//99 /s/ Timothy C. Sentner 2//99
- --------------------- ----------------------
Joseph A. Orlando Timothy C. Sentner
</TABLE>
