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As filed with the Securities and Exchange Commission on April 29, 1997.
Registration No. 33-32199
811-5961
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Securities and Exchange Commission
Washington, D.C. 20549
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FORM N-4
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 11
and/or
Registration Statement Under The Investment Company Act Of 1940
Amendment No. 12
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CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
(Exact Name of Registrant)
CANADA LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
500 Mamaroneck Avenue
Harrison, New York 10528
(Address of Depositor's Principal Executive Office)
Depositor's Telephone Number: (914) 835-8400
Paul R. McCadam
500 Mamaroneck Avenue
Harrison, New York, 10528
(Name and Address of Agent for Service)
Copy to:
Stephen E. Roth, Esquire
Sutherland, Asbill, & Brennan, L.L.P.
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
----
x on May 1, 1997 pursuant to paragraph (b)
----
---- 60 days after filing pursuant to paragraph (a)(i)
---- on pursuant to paragraph (a)(i)
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---- 75 days after filing pursuant to paragraph (a)(ii)
---- on pursuant to paragraph (a)(ii) of Rule 485
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If appropriate check the following box:
---- this Post-Effective Amendment designates a new
effective date for a new effective date for a
previously filed Post-Effective Amendment.
Pursuant to Rule 24f-2(a)(1) under the Investment company Act of 1940, the
Registrant has registered an indefinite number of shares. The Registrant will
file a Rule 24f-2 Notice before June 30, 1997 for its most recent fiscal year
ended December 31, 1996.
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CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Showing Location In Part A (Prospectus) And
Part B (Statement of Additional Information) of Registration
Statement of Information Required By Form N-4
PART A
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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1. Cover Page Cover Page
2. Definitions DEFINITIONS
3. Synopsis SUMMARY
4. Condensed Financial Information CONDENSED FINANCIAL INFORMATION
5. General Description of Registrant,
Depositor and Portfolio Companies
a. Depositor THE COMPANY
b. Registrant The Variable Account
c. Portfolio Company The Fund
d. Fund Prospectus The Fund
e. Voting Rights VOTING RIGHTS
f. Administrators N/A
6. Deductions and Expenses Charges Against the Policy, Variable Account, & Fund
a. General Charges Against the Policy, Variable Account, & Fund
b. Sales Load % Charges Against the Policy, Variable Account, & Fund -
Surrender Charge
c. Special Purchase Plan N/A
d. Commissions DISTRIBUTION OF POLICIES
e. Expenses - Registrant Charges Against the Policy, Variable Account, & Fund
f. Fund Expenses Charges Against the Policy, Variable Account, & Fund -
Other Charges Including Investment Management Fees
g. Organizational Expenses N/A
7. General Description of Variable
Annuity Contracts
a. Persons With Rights DEFINITIONS - Owner, Joint Owner; Payment of
Proceeds; Payment Options; Partial Withdrawals; Other
Policy Provisions; VOTING RIGHTS
b. (i) Allocation of Premium Payments Premiums
(ii) Transfers Transfers; Payment of Benefits, Partial Withdrawals,
Cash Surrenders, & Transfers - Postponement
(iii) Exchanges N/A
c. Changes Reserved Rights
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d. Inquiries SUMMARY - Questions
8. Annuity Period Payment Options
9. Death Benefit Payment of Proceeds; Payment of Benefits, Partial
Withdrawals, Cash Surrenders, & Transfers -
Postponement; Payment Options
10. Purchases and Contract Value
a. Purchases Premiums
b. Valuation Variable Account Value
c. Daily Calculation Variable Account Value
d. Underwriter DISTRIBUTION OF POLICIES
11. Redemptions
a. - By Owners Payment of Proceeds - Proceeds on Surrender; Partial
Withdrawals; Payment of Benefits, Partial
Withdrawals, Cash Surrenders, & Transfers -
Postponement
- By Annuitant Payment of Proceeds - Proceeds on Death of Last
Surviving Annuitant Before Annuity Date or Maturity
Date; Payment Options
b. Texas ORP N/A
c. Check Delay Payment of Benefits, Partial Withdrawals, Cash
Surrenders, & Transfers - Postponement
d. Lapse Premiums - Termination
e. Free Look Ten Day Right to Examine the Policy
12. Taxes Charges Against the Policy, Variable Account, & Fund
- Taxes; FEDERAL TAX STATUS
13. Legal Proceedings LEGAL PROCEEDINGS
14. Table of Contents of the Statement
of Additional Information STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
PART B
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION
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15. Cover Page Cover Page
16. Table of Contents STATEMENT OF ADDITIONAL INFORMATION TABLE
OF CONTENTS
17. General Information and History See Prospectus - THE COMPANY; THE
VARIABLE ACCOUNT AND THE FUND
18. Services
a. Fees and Expenses of Registrant N/A
b. Management Contract N/A
c. Custodian SAFEKEEPING OF ACCOUNT ASSETS
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d. Independent Public Accountant EXPERTS
e. Assets of Registrant SAFEKEEPING OF ACCOUNT ASSETS
f. Affiliated Persons N/A
g. Principal Underwriter See Prospectus - DISTRIBUTION OF POLICIES
19. Purchase of Securities Being
Offered See Prospectus - DISTRIBUTION OF POLICIES
20. Underwriter See Prospectus - DISTRIBUTION OF POLICIES
21. Calculation of Performance Data CALCULATION OF YIELDS AND TOTAL RETURNS
22. Annuity Payments See Prospectus - Payment Options
23. Financial Statements FINANCIAL STATEMENTS
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PART A
INFORMATION REQUIRED TO BE IN THE PROSPECTUS
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CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NEW YORK 10528
(914) 835-8400
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PROSPECTUS
VARIABLE ANNUITY ACCOUNT 1
SINGLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
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This Prospectus describes the single premium variable deferred annuity policy
(the "policy") offered by Canada Life Insurance Company of New York ("we,"
"our," or "us"), a stock life insurance company domiciled in New York which is
a wholly-owned subsidiary of The Canada Life Assurance Company. The policy is
designed for use in connection with retirement plans which may or may not
qualify for special federal income tax treatment. The owner ("you") may
allocate net premiums when paid and policy value among the twenty-two
sub-accounts of the Canada Life of New York Variable Annuity Account 1 (the
"Variable Account") and the Fixed Account or both. The Fixed Account
guarantees a minimum fixed rate of interest for specified periods of time,
currently one year, three years, five years, seven years and ten years (each a
"Guarantee Period"). The Fixed Account is part of our general account and may
not be available in all states.
Assets of each sub-account are invested in a corresponding portfolio of Canada
Life of America Series Fund, Inc. ("CLASF"); Fidelity Investments Variable
Insurance Products Fund ("Fidelity VIP"); Fidelity Investments Variable
Insurance Products Fund II ("Fidelity VIP II"); Seligman Portfolios, Inc.
("Seligman"); Dreyfus Variable Investment Fund ("Dreyfus"); The Dreyfus
Socially Responsible Growth Fund, Inc. ("Dreyfus Socially Responsible"); The
Alger American Fund ("Alger American"); The Montgomery Funds III
("Montgomery"); or Berger Institutional Products Trust ("Berger Trust"). The
policy value prior to the annuity date, except for amounts in the Fixed
Account, will vary according to the investment performance of the portfolio of
the Funds in which your elected sub-accounts are invested. You bear the entire
investment risk on amounts allocated to the Variable Account. Except in the
case of the one year Guarantee Period, policy value and other values provided
by this policy, when based on the Fixed Account, are subject to a Market Value
Adjustment, the operation of which may result in downward adjustments of
amounts withdrawn, surrendered, or transferred, but net premiums and policy
value allocated to the Fixed Account are guaranteed to earn interest at an
annual rate of at least three percent.
This Prospectus sets forth basic information about the policy, the Variable
Account, and the Fixed Account that a prospective investor ought to know before
investing. Additional information about the policy and the Variable Account is
contained in the Statement of Additional Information, which has been filed with
the Securities and Exchange Commission. The Statement of Additional
Information is dated the same date as this Prospectus and is incorporated
herein by reference. The Table of Contents for the Statement of Additional
Information is included in this Prospectus. You may obtain a copy of the
Statement of Additional Information free of charge by writing or calling us at
the address or phone number shown above.
PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE REFERENCE. THIS
PROSPECTUS MUST BE ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE POLICIES AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
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AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE
NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
REINVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED.
*Policies issued prior to January 26, 1996 were issued as flexible premium
variable deferred annuity policies. Additional premium payments may be made
under such policies.
The date of this Prospectus is May 1, 1997.
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TABLE OF CONTENTS
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DEFINITIONS ............................................................. 6
SUMMARY ................................................................. 9
TABLE OF EXPENSES ....................................................... 15
CONDENSED FINANCIAL INFORMATION ......................................... 19
THE COMPANY ............................................................. 22
THE VARIABLE ACCOUNT AND THE FUNDS ...................................... 22
The Variable Account ................................................ 22
The Funds ........................................................... 23
Money Market .................................................... 23
Managed ......................................................... 24
Bond ............................................................ 24
Value Equity .................................................... 24
International Equity ............................................ 24
Capital ......................................................... 24
Fidelity VIP Growth ............................................. 24
Fidelity VIP High Income ........................................ 25
Fidelity VIP Overseas ........................................... 25
Fidelity VIP II Asset Manager .................................. 25
Fidelity VIP II Index 500 ....................................... 25
Seligman Communications and Information ......................... 25
Seligman Frontier ............................................... 26
Dreyfus Growth and Income ....................................... 26
Dreyfus Socially Responsible .................................... 26
Alger American Small Capitalization ............................. 27
Alger American Growth ........................................... 27
Alger American MidCap Growth .................................... 27
Alger American Leveraged AllCap ................................. 27
Montgomery Variable Series Emerging Markets ..................... 27
Montgomery Variable Series Growth Fund .......................... 28
Berger Institutional Products Trust ............................. 28
Reserved Rights ..................................................... 28
Change In Investment Policy ......................................... 28
The Fixed Account ................................................... 29
Guarantee Amount ................................................ 29
Guarantee Periods ............................................... 29
Market Value Adjustment ......................................... 30
DESCRIPTION OF ANNUITY POLICY ........................................... 31
Ten Day Right To Examine Policy ..................................... 31
Premiums ............................................................ 32
Initial Premium ................................................. 32
Additional Premiums ............................................. 32
Wire Transmittal Privilege ...................................... 32
Electronic Data Transmission
of Application Information..................................... 33
Net Premium Allocation .......................................... 33
Termination ..................................................... 33
Variable Account Value .............................................. 34
Units ........................................................... 34
Unit Value ...................................................... 34
Net Investment Factor ........................................... 34
Transfers ........................................................... 35
Transfer Privilege .............................................. 35
Telephone Transfer Privilege .................................... 35
Dollar Cost Averaging Privilege ................................. 35
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Restrictions on Transfers from Fixed Account .................... 36
Transfer Processing Fee ......................................... 36
Payment of Proceeds ................................................. 36
Proceeds ........................................................ 36
Proceeds on Annuity Date or Maturity Date ....................... 37
Proceeds on Surrender ........................................... 37
Proceeds on Death of Last Surviving Annuitant Before
Annuity Date or Maturity Date (The Death Benefit).............. 37
Proceeds on Death of Any Owner Before
or After Annuity Date or Maturity Date ........................ 39
Partial Withdrawals ................................................. 39
Systematic Withdrawal Privilege ................................. 40
Portfolio Rebalancing ............................................... 41
Loans ............................................................... 41
Payment of Benefits, Partial Withdrawals,
Cash Surrenders and Transfers - Postponement .................... 42
Charges Against the Policy, Variable
Account, and Funds .............................................. 43
Surrender Charge .............................................. 43
Policy Administration Charge .................................. 44
Daily Administration Fee ...................................... 44
Transfer Processing Fee ....................................... 44
Annualized Mortality and Expense Risk Charge .................. 44
Reduction or Elimination of Surrender Charges ................. 45
Reduction or Elimination of Policy Administration Charge ...... 45
Taxes ......................................................... 46
Other Charges Including Investment Advisory Fees ............. 46
Payment Options....................................................... 46
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Election of Options ........................................... 46
Description of Payment Options ................................ 47
Payment Dates ................................................. 47
Age and Survival of Payee ..................................... 47
Death of Payee ................................................ 47
Betterment of Income .......................................... 47
Other Policy Provisions ......................................... 47
Owner or Joint Owner .......................................... 47
Beneficiary ................................................... 48
Written Notice ................................................ 48
Periodic Reports .............................................. 48
Assignment .................................................... 48
Modification .................................................. 49
YIELDS AND TOTAL RETURNS ................................................ 49
TAX DEFERRAL ............................................................ 50
FEDERAL TAX STATUS ...................................................... 51
Introduction .................................................... 51
The Company's Tax Status ........................................ 51
Tax Status of the Policy ........................................ 52
Diversification Requirements .................................. 52
Required Distributions ........................................ 52
Taxation of Annuities ........................................... 53
In General .................................................... 53
Withdrawals/Distributions ..................................... 53
Annuity Payments .............................................. 54
Taxation of Death Benefit Proceeds ............................ 54
Penalty Tax on Certain Withdrawals ............................ 54
Transfers, Assignments, or Exchanges of a Policy ................ 54
Withholding ..................................................... 55
Multiple Policies ............................................... 55
Possible Tax Changes ............................................ 55
Taxation of Qualified Plans ..................................... 55
Individual Retirement Annuities and
Simplified Employee Pensions (SEP/IRAs) ................... 56
Minimum Distribution Requirements ("MDR") for IRA's .......... 56
Corporate and Self-Employed (H.R.10 and
Keogh) Pension and Profit-Sharing Plans ................... 57
Deferred Compensation Plans .................................. 57
Tax-Sheltered Annuity Plans ............................... 57
Other Tax Consequences ....................................... 57
DISTRIBUTION OF POLICIES ................................................ 58
LEGAL PROCEEDINGS ....................................................... 58
VOTING RIGHTS ........................................................... 58
FINANCIAL STATEMENTS .................................................... 59
STATEMENT OF ADDITIONAL INFORMATION - TABLE
OF CONTENTS ........................................................ 60
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DEFINITIONS
ANNUITANT: Any natural person whose life is used to determine the duration of
any payments made under a payment option involving life contingencies. The
term annuitant also includes any co-annuitant, a term used to refer to more
than one annuitant.
ANNUITY DATE: The date when the policy value will be applied under an annuity
payment option.
BENEFICIARY: The person to whom we will pay the proceeds payable on your death
or the death of the last surviving annuitant.
CASH SURRENDER VALUE: The policy value less: 1) any applicable surrender
charge; 2) the policy administration charge; and 3) any applicable market value
adjustment.
CO-ANNUITANT: A term used solely for the purpose of referring to more than one
annuitant. There is no other distinction between the terms annuitant and
co-annuitant. A co-annuitant: 1) is allowed but not required under a
non-qualified policy and 2) is not allowed under a qualified policy and any
designation of a co-annuitant under a qualified policy will be of no effect.
COMPANY: Canada Life Insurance Company of New York.
DUE PROOF OF DEATH: Proof of death that is satisfactory to us. Such proof may
consist of: 1) a certified copy of the death certificate; and/or 2) a certified
copy of the decree of a court of competent jurisdiction as to the finding of
death.
EFFECTIVE DATE: The date we accept your application and apply your initial
premium.
FIXED ACCOUNT: Part of our general account that provides a Guaranteed Interest
Rate for a specified Guarantee Period. This account is not part of and does
not depend on the investment performance of the Variable Account.
FUNDS: The Canada Life of America Series Fund, Inc.; Fidelity Investments
Variable Insurance Products Fund; Fidelity Investments Variable Insurance
Products Fund II; Seligman Portfolios, Inc.; Dreyfus Variable Investment Fund;
The Dreyfus Socially Responsible Growth Fund, Inc.; The Alger American Fund;
The Montgomery Funds III; and the Berger Trust.
GUARANTEE AMOUNT: Before the Annuity Date, the amount equal to that part of any
net premium allocated to or policy value transferred to the Fixed Account for a
designated Guarantee Period with a particular expiration date (including
interest thereon) less any withdrawals (including any applicable surrender
charges, any applicable Market Value Adjustment and any applicable premium tax
charge) or transfers (including any applicable Market Value Adjustments)
therefrom.
GUARANTEE PERIOD: A specific number of years for which we agree to credit a
particular effective annual rate of interest. We currently offer Guarantee
Periods of one, three, five, seven and ten years.
GUARANTEED INTEREST RATE: The applicable effective annual rate of interest that
we will pay on a Guarantee Amount. The Guaranteed Interest Rate will be at
least three percent per year.
HOME OFFICE: Our office at the address shown on page 1 of the Prospectus. This
is our mailing address.
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JOINT OWNER: A term used solely for the purpose of referring to more than one
owner. There is no other distinction between the terms owner and joint owner.
LAST SURVIVING ANNUITANT: The annuitant or co-annuitant that survives the
other.
MARKET VALUE ADJUSTMENT: A positive or negative adjustment that may apply to
any portion of a Guarantee Amount upon the surrender, withdrawal, or transfer
of such portion of the Guarantee Amount before the expiration of the Guarantee
Period applicable to that Guarantee Amount.
MATURITY DATE: The first day of the month after the last surviving annuitant's
85th birthday (90th birthday pending regulatory approval).
NET PREMIUMS: The premium paid less any premium tax deducted in the year the
premium is paid.
NONQUALIFIED POLICY: A policy that is not a "qualified" policy under the
Internal Revenue Code of 1986, as amended (the "Code"). See "FEDERAL TAX
STATUS".
OWNER: The owner is entitled to exercise all rights and privileges provided the
owner in the policy. The term owner also includes any joint owner.
PAC: Pre-authorized check, including electronic fund transfers.
POLICY: One of the single premium variable deferred annuity policies offered by
this Prospectus.
POLICY VALUE: The sum of the Variable Account value and the Fixed Account
value.
POLICY DATE, YEARS, MONTHS, and ANNIVERSARIES: Are measured from the policy
date shown in the "Policy Details" of the policy.
QUALIFIED POLICY: A policy that is issued in connection with plans that receive
special federal income tax treatment under sections 401, 403(a), 403(b), 408 or
457 of the Code. See "FEDERAL TAX STATUS".
SUB-ACCOUNT(S): The Variable Account is divided into twenty-two sub-accounts.
The assets of the sub-accounts are invested in the corresponding portfolios of
the Funds.
UNIT: A unit is a measurement used in the determination of the policy's
Variable Account value before the annuity date or maturity date.
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VALUATION DAY: Each day the New York Stock Exchange is open for trading.
VALUATION PERIOD: The period beginning at the close of business on a valuation
day and ending at the close of business on the next succeeding valuation day.
The close of business is when the New York Stock Exchange closes (usually at
4:00 p.m. Eastern Time).
VARIABLE ACCOUNT: The Canada Life of New York Variable Annuity Account 1.
WE, OUR, and US: Canada Life Insurance Company of New York.
WRITTEN NOTICE: See the "Written Notice" provision in the "Other Policy
Provisions" section of this Prospectus.
YOU or YOUR: The owner. See the definitions of "Owner" and "Joint Owner"
above.
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SUMMARY
TEN DAY RIGHT TO EXAMINE POLICY
You have ten days after you receive the policy to decide if the policy meets
your needs, and if the policy does not meet your needs to return the policy to
our Home Office. We will promptly return the policy value. When the policy is
issued as an Individual Retirement Annuity, during the first seven days of the
ten day period, we will return all premiums if this is greater than the amount
otherwise payable.
PREMIUMS
FOR POLICIES ISSUED ON OR AFTER JANUARY 26, 1996:
The minimum single premium is $5,000 ($2,000 if the Policy is an Individual
Retirement Annuity, but we reserve the right to lower or raise the minimum
premium for IRA's). No further premiums are payable. Our prior approval is
required before your total premium paid exceeds $1,000,000. You may allocate
your net premium among the sub-accounts of the Variable Account and the Fixed
Account. See "Premiums".
FOR POLICIES ISSUED PRIOR TO JANUARY 26, 1996:
The minimum initial premium is $5,000 ($2,000 if the policy is an Individual
Retirement Annuity, but we reserve the right to lower or raise the minimum
premium for IRA's). However, the minimum initial premium is $100 ($50 if the
policy is an Individual Retirement Annuity) if submitted with a pre-authorized
check ("PAC") agreement. You may make additional premium payments during any
annuitant's lifetime and before the annuity date or maturity date. The minimum
additional premium is $1,000, or $100 per month if paid by PAC (or $50 per
month if paid by PAC if the policy is an Individual Retirement Annuity). Our
prior approval is required before your total premiums paid exceed $1,000,000.
You may allocate your net premiums among the sub-accounts of the Variable
Account and the Fixed Account. See "Premiums".
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account consisting of twenty two
sub-accounts. The policy value before the annuity date or maturity date,
except for amounts in the Fixed Account, will vary according to the investment
performance of the portfolios of the Fund in which your elected sub-accounts
are invested. See "The Variable Account" on.
THE FUNDS
The assets of each sub-account are invested in the corresponding portfolio of
the Funds. The Funds currently offer twenty-two portfolios available for
investment under the policy: Money Market; Managed; Bond; Value Equity
(formerly known as Equity); International Equity; Capital; Fidelity VIP Growth;
Fidelity VIP High Income; Fidelity VIP Overseas; Fidelity VIP II Asset Manager;
Fidelity VIP II Index 500; Seligman Communications and Information; Seligman
Frontier; Dreyfus Growth and Income; Dreyfus Socially Responsible; Alger
9
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American Small Capitalization; Alger American Growth; Alger American MidCap
Growth; Alger American Leveraged AllCap; Montgomery Variable Series Emerging
Markets; Montgomery Variable Series Growth Fund; and Berger/BIAM IPT -
International Fund. The Funds are diversified, open-end investment companies.
See "The Funds".
THE FIXED ACCOUNT
The Fixed Account is not part of and does not depend on the investment
performance of the Variable Account. Under the Fixed Account you may allocate
all or a portion of net premium payments and transfer policy value among
several Guarantee Periods selected by you. We currently offer Guarantee
Periods with durations of one, three, five, seven, and ten years. If the
amount allocated or transferred remains in a Guarantee Period until the
expiration date of a Guarantee Period, its value will be equal to the amount
originally allocated or transferred, multiplied on an annually compounded
basis, by its Guaranteed Interest Rate. Except for the one year guarantee
period, any surrender, withdrawal, or transfer made before the expiration of a
Guarantee Period will be subject to a Market Value Adjustment that may increase
or decrease the Guarantee Amount (or portion thereof) being surrendered,
withdrawn or transferred. Because of this adjustment and for other reasons,
the amount payable upon surrender, withdrawal, or transfer may be more or less
than the Guarantee Amount at the time of the transaction. However, the Market
Value Adjustment will never reduce the earnings on amounts allocated to the
Fixed Account to less than three percent per year. The Market Value Adjustment
does not apply to amounts surrendered, withdrawn, or transferred from the one
year Guarantee Period (See "THE FIXED ACCOUNT - Market Value Adjustment").
TRANSFERS
You may transfer all or part of an amount in a sub-account or the Fixed Account
to another sub-account(s) or the Fixed Account, subject to certain
restrictions. See "Transfers".
DEATH BENEFIT
If we receive due proof of death of the last surviving annuitant before the
annuity date or maturity date ("such due proof"), we will pay the beneficiary a
death benefit.
THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED ON OR AFTER MAY 1, 1996 OR
SUCH LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE
JURISDICTION IN WHICH THE POLICIES ARE OFFERED:
If we receive such due proof during the first five years, the death benefit
is the greater of:
1. the premiums paid, less: a) any partial withdrawals, including
applicable surrender charges; and b) any incurred taxes; or
2. the policy value on the date we receive due proof of last
surviving annuitant's death.
If we receive such due proof after the first five policy years, the death
benefit is the greatest of:
1. item "1" above; or
2. item "2" above; or
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3. the policy value at the end of the most recent 5 policy
year period preceding the date we receive due proof of last
surviving annuitant's death, adjusted for any of the following
items that occur after such last 5 policy year period: a) less
any partial withdrawals, including applicable surrender charges;
b) less any incurred taxes; and c) plus any premiums paid. The
5 policy year periods are measured from the policy date (i.e., 5,
10, 15, 20, etc.).
If on the date the policy was issued, all annuitants were attained age 80
or less, then after any annuitant attains age 81, the death benefit is the
greater of items "1" or "2" above.
However, if on the date the policy was issued, any annuitant was attained
age 81 or more, then the death benefit is the policy value.
THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED FROM MAY 1, 1995 THROUGH
APRIL 30, 1996, OR SUCH LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE
OBTAINED IN THE JURISDICTIONS IN WHICH THE CONTRACTS ARE OFFERED.
If we receive such due proof during the first seven policy years, the death
benefit is the greater of:
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any incurred
taxes; or
2. the policy value on the date we receive due proof of
last surviving annuitant's death.
If we receive such due proof after the first seven policy years, the death
benefit is the greatest of:
1. item "1." above; or
2. item "2." above; or
3. the policy value at the end of the most recent 7 policy
year period preceding the date we receive due proof of last
surviving annuitant's death, adjusted for any of the following
items that occur after such last 7 policy year period: a) less
any partial withdrawals, including applicable surrender charges;
b) less any incurred taxes; and c) plus any premiums paid. The 7
policy year periods are measured from the policy date (i.e., 7,
14, 21, 28, etc.). No further step-ups in Death Benefit will
occur after the age of 80.
THE FOLLOWING APPLIES ONLY TO CONTRACTS ISSUED PRIOR TO MAY 1, 1995 OR SUCH
LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE
JURISDICTION IN WHICH THE CONTRACTS ARE OFFERED.
If we receive such due proof during the first five policy years, the
death benefit is the greater of:
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any incurred
taxes; or
2. the policy value on the date we receive due proof
of last surviving annuitant's death.
If we receive such due proof after the first five policy years, the death
benefit is the greatest of:
1. item "1" above; or
2. item "2" above; or
11
<PAGE> 17
3. the policy value at the end of the most recent 5 year
policy period preceding the date we receive due proof of last
surviving annuitant's death, adjusted for any of the following
items that occur after such last 5 year policy period: a) less any
partial withdrawals, including applicable surrender charges; b)
less any incurred taxes; and c) plus any premiums paid. The 5
year policy periods are measured from the policy date (i.e., 5,
10, 15, 20, etc.).
No death benefit is payable if the policy is surrendered before the last
surviving annuitant's death.
See "Proceeds on Death of Last Surviving Annuitant Before Annuity Date or
Maturity Date".
PARTIAL WITHDRAWALS AND CASH SURRENDERS
You may withdraw part or all of the cash surrender value at any time before the
earlier of the death of last surviving annuitant, the annuity date or maturity
date, subject to certain limitations. See "The Fixed Account", "Partial
Withdrawals" and "Proceeds on Surrender". Partial withdrawals and cash
surrenders may be subject to federal income tax, including a penalty tax. See
"FEDERAL TAX STATUS".
POLICY CHARGES
No deduction for a sales charge is made when premiums are paid. However, a
surrender charge (contingent deferred sales charge) will be deducted when
certain partial withdrawals and cash surrenders are made. For the purpose of
determining if any surrender charge applies and the amount of such charge,
partial withdrawals and surrenders are taken according to these rules from
policy value attributable to premiums or investment earnings in the following
order:
SURRENDER CHARGE
1. Up to 100% of positive investment earnings of each variable
sub-account available at the time the request is made, once a
policy year, PLUS .............................................. None
2. Up to 100% of current policy year's interest on the FIXED ACCOUNT at the
time the request for surrender/withdrawal is made, once a policy
year, PLUS...................................................... None
3. Up to 10% of total premiums STILL SUBJECT TO A SURRENDER CHARGE,
once a policy year, PLUS 100% of those premiums NOT SUBJECT TO A
SURRENDER CHARGE, available at any time......................... None
4. Premiums subject to a surrender charge:
For policies issued prior to May 1, 1995 or such later date
as applicable regulatory approvals are obtained in the jurisdiction
in which the contracts are offered: For 5 years from the date of
payment, each premium is subject to a 6% surrender charge. After the
5th year, no surrender charge will apply to such payment)..... 6%
For policies issued after April 30, 1995 or such later date as
applicable regulatory
12
<PAGE> 18
approvals are obtained:
<TABLE>
<CAPTION>
Policy Years Since Premium Was Paid
-------------------------------------
<S> <C>
Less than 1 .......................... 6%
At least 1, but less than 2........... 6%
At least 2, but less than 3........... 5%
At least 3, but less than 4........... 5%
At least 4, but less than 5........... 4%
At least 5, but less than 6........... 3%
At least 6, but less than 7........... 2%
At least 7............................ None
</TABLE>
See "Surrender Charge".
We deduct a policy administration charge of $30 for the prior policy year on
each policy anniversary. If the policy value on the policy anniversary is
$75,000 or more, we will waive the policy administration charge for the prior
policy year. We will also deduct this charge for the current policy year if
the policy is surrendered for its cash surrender value, unless the surrender
occurs on the policy anniversary. See "Policy Administration Charge".
At each valuation period, we also deduct a daily administration fee at an
effective annual rate of 0.15% from the assets of the Variable Account. See
"Daily Administration Fee".
The first 12 transfers during each policy year are free under our current
Company policy, which we reserve the right to change. Although the company
currently does not assess a transfer fee for the 13th and each additional
transfer in a policy year, we reserve the right to assess a $25 transfer fee.
See "Transfer Processing Fee".
We deduct a mortality and expense risk charge at each valuation period from the
assets of the Variable Account at an effective annual rate of 1.25%. This
charge is not made after the annuity date or maturity date, or against any
amounts in the Fixed Account. See "Annualized Mortality and Expense Risk
Charge".
No premium tax is currently payable under New York law. We reserve the right to
deduct any premium taxes payable in respect of future premiums in the event New
York law should change. See "Taxes".
Each portfolio of the Funds in which the Variable Account invests is
responsible for its own expenses. In addition, charges for investment advisory
services are charged daily from each portfolio of each fund. See "Other
Charges Including Investment Advisory Fees" and the attached "PROSPECTUSES FOR
THE FUNDS."
LOANS
The Company may offer a loan privilege to owners of policies issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA (Employee Retirement Income Security Act of 1974, as amended). If
offered, owners of such policies may obtain loans using the policy as the only
security for the loan, and the effective cost of a policy loan would be 2% per
year of the amount borrowed. See "Loans".
13
<PAGE> 19
ANNUITY DATE, MATURITY DATE AND PAYMENT OPTIONS
On the annuity date, we will apply the policy value under a Payment Option 1,
unless you have elected to receive the cash surrender value in a lump sum, or
pursuant to a mutually agreed upon payment option, Payment Option 2. Payments
under these payment options do not depend on the Variable Account's investment
performance. The proceeds we will pay on the maturity date is the policy
value. The payment options are: 1) Life Income; and 2) Mutual Agreement. See
"Payment Options".
OTHER POLICY PROVISIONS
For information concerning the owner, beneficiary, written notice, periodic
policy reports, assignment, and modification see "Other Policy Provisions".
FEDERAL TAX STATUS
For a brief discussion of our current understanding of the federal tax laws
concerning us and the annuity policies we issue see "Federal Tax Status".
QUESTIONS
We will be happy to answer your questions about the policy or our procedures.
Call or write to us at the phone number or address on page 1. All inquiries
should include the policy number, and the names of the owner and the annuitant.
14
<PAGE> 20
TABLE OF EXPENSES
EXPENSE DATA
The following information regarding expenses assumes that the entire policy
value is in the Variable Account:
<TABLE>
<S> <C>
POLICYOWNER TRANSACTION EXPENSES*
- ---------------------------------
Sales load on premiums.......................................................................................... None
Maximum contingent deferred sales charge as a percentage of amount surrendered
(10% of total premiums still subject to a surrender charge are free of any sales load
See "Policy Charges" ) ..................................................................................... 6%
Transfer fee
Current Policy - First 12 transfers each policy year .................................................... No fee
Each transfer thereafter ............................................................................... No fee**
POLICY ADMINISTRATION CHARGE.................................................................................... $30 per policy
- ----------------------------
(waived for the prior policy year if the policy value is $75,000 or more on the policy anniversary)
VARIABLE ACCOUNT ANNUAL EXPENSES
- --------------------------------
(as a percentage of account value)
Mortality and expense risk charges ......................................................................... 1.25%
Daily Administration Fee***................................................................................. 0.15%
----------
Total Variable Account annual expenses ..................................................................... 1.40%
==========
</TABLE>
FUND'S ANNUAL EXPENSES****
(as a percentage of average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL
MANAGEMENT AFTER EXPENSE ANNUAL
SUB-ACCOUNT FEES REIMBURSEMENT**** EXPENSES
----------- ---------- ----------------- --------
<S> <C> <C> <C>
Bond 0.50% 0.40% 0.90%
Capital 0.50% 0.40% 0.90%
Managed 0.50% 0.40% 0.90%
Money Market 0.50% 0.25% 0.75%
Value Equity 0.50% 0.40% 0.90%
Alger American Growth 0.75% 0.04% 0.79%
Alger American Leveraged AllCap 0.85% 0.24% 1.09%
Alger American MidCap Growth 0.80% 0.04% 0.84%
Alger American Small Capitalization 0.85% 0.03% 0.88%
Berger/BIAM IPT-International***** 0.00% 1.20% 1.20%
Dreyfus Growth and Income 0.75% 0.08% 0.83%
</TABLE>
15
<PAGE> 21
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL
MANAGEMENT AFTER EXPENSE ANNUAL
SUB-ACCOUNT FEES REIMBURSEMENT**** EXPENSES
----------- ---------- ----------------- --------
<S> <C> <C> <C>
Dreyfus Socially Responsible 0.72% 0.24% 0.96%
Fidelity VIP Growth 0.61% 0.08% 0.69%
Fidelity VIP High Income 0.59% 0.12% 0.71%
Fidelity VIP Overseas 0.76% 0.17% 0.93%
Fidelity VIP II Asset Manager 0.64% 0.10% 0.74%
Fidelity VIP II Index 500 0.13% 0.15% 0.28%
International Equity 0.80% 0.40% 1.20%
Montgomery Variable Series Emerging
Markets 0.23% 1.22% 1.45%
Montgomery Variable Series Growth 0.00% 0.01% 0.01%
Seligman Communications and Information 0.75% 0.12% 0.87%
Seligman Frontier 0.75% 0.17% 0.92%
</TABLE>
* In addition to the policyowner transaction expenses reflected in
the table, a Market Value Adjustment applies to the Guarantee Amount
subject to surrender, withdrawal, or transfer except during the 30 days
following the expiration of a Guarantee Period. Because of this
adjustment and for other reasons, the amount payable upon surrender,
withdrawal, or transfer may be greater or less than the Guarantee Amount
at the time of the transaction. The Market Value Adjustment, however,
will never reduce the earnings on amounts allocated to the Fixed Account
to less than three percent per year and does not apply to amounts
surrendered, withdrawn, or transferred from the one year Guarantee
Period.
** Although, the Company currently does not assess a transfer fee for
the 13th and each additional transfer in a policy year, we reserve the
right to assess a $25 transfer fee.
*** The Daily Administration Fee is imposed only under policies issued
after May 1, 1994, or such later date as applicable regulatory approvals
are obtained in the jurisdiction in which the policies are offered. We
do not assess the Daily Administration Fee under policies issued prior
to May 1, 1994.
**** We currently reimburse CLASF for expenses that exceed 0.40% of the
average daily net assets of Managed, Bond, Value Equity, Capital and
International Equity Portfolios, and 0.25% of the Money Market
Portfolio. Absent such reimbursement, the "Other Expenses" for the Money
Market Portfolio would have been 0.59%, for the Bond Portfolio 0.57%
and for the International Equity Portfolio 0.76%. "Other Expenses" for
the Managed, Value Equity, and Capital Portfolios did not exceed the
reimbursement level of 0.40%.
A portion of the brokerage commissions that certain Fidelity VIP and
Fidelity VIP II funds pay was used to reduce fund expenses. In addition,
certain funds have entered into arrangements with their custodian and
transfer agent whereby interest earned on uninvested cash balances was
used to reduce custodian and transfer agent expenses. Including these
reductions, the total operating expenses presented in the table would have
been 0.67% for VIP Growth Portfolio, 0.92% for VIP Overseas Portfolio, and
0.73% for VIP II Asset Manager Portfolio. Fidelity VIP II Index 500 fund
expenses were voluntarily reduced by the fund's investment adviser. Absent
16
<PAGE> 22
reimbursement, the management fee, other expenses, and total expenses
would have been 0.28%, 0.15%, and 0.43% respectively. Management of
Dreyfus Growth and Income and Dreyfus Socially Responsible, in their
sole discretion, may waive some or all of their fees and/or
voluntarily assume certain expenses for these Funds. For the fiscal
year ended December 31, 1996, a portion of the management fee for
Dreyfus Socially Responsible was waived. Without such fee waivers,
the Management Fees, Other Expenses and Total Annual Expenses would
have been 0.75%, 0.24% and 0.99%, respectively. There is no
guarantee that any fee waivers or expense reimbursements will
continue in the future.
The Manager of the Montgomery Variable Series Growth Fund has
agreed to reduce some or all of its management fees if necessary to
keep total annual operating expenses, expressed on an annualized
basis, for the Growth Fund at or below 1.50% of average net assets.
The Manager also may voluntarily reduce additional amounts to
increase the return to policyowners investing in the Montgomery
Variable Series Growth Fund. The Manager may terminate these
voluntary reductions at any time. Any reductions made by the Manager
in its fees are subject to reimbursement by the Montgomery Variable
Series Growth Fund within the following three years, provided the
Portfolio is able to effect such reimbursement and remain in
compliance with applicable expense limitations. The Management Fees,
Other Expenses and Total Annual Expenses absent voluntary waivers for
the Montgomery Variable Series Growth Fund were 1.0%, 5.98% and
6.98%; and 1.25%, 1.22%, and 2.47% for the Montgomery Variable Series
Emerging Markets Fund.
***** Berger/BIAM IPT-International management fees and expenses are
anticipated numbers as the fund was not in existence as of 12/31/96.
Management has voluntarily agreed to wave its management fee and
expects to voluntarily reimburse the fund for additional expenses in
excess of 1.20%.
See "Charges Against The Policy, Variable Account, And Funds,", and the Funds
Prospectus. In addition to the expenses listed above, premium taxes may be
applicable, which currently range between 0.5% to 3.5%, according to the
jurisdiction. In many jurisdictions, there is no tax at all.
17
<PAGE> 23
EXAMPLES
A policyowner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
1. If the policy is surrendered at the end of the applicable time period:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Bond $ 79 $ 121 $ 166 $ 278
Capital $ 79 $ 121 $ 166 $ 278
International Equity $ 82 $ 130 $ 181 $ 307
Managed $ 79 $ 121 $ 166 $ 278
Money Market $ 77 $ 117 $ 159 $ 263
Value Equity $ 79 $ 121 $ 166 $ 278
Alger American Growth $ 78 $ 118 $ 161 $ 267
Alger American Leveraged AllCap $ 81 $ 127 $ 176 $ 296
Alger American MidCap Growth $ 78 $ 119 $ 163 $ 272
Alger American Small Capitalization $ 79 $ 120 $ 165 $ 276
Berger/BIAM IPT - International $ 82 $ 130 $ 181 $ 307
Dreyfus Growth and Income $ 78 $ 119 $ 163 $ 271
Dreyfus Socially Responsible $ 79 $ 123 $ 169 $ 284
Fidelity VIP Growth $ 77 $ 115 $ 156 $ 257
Fidelity VIP High Income $ 77 $ 115 $ 157 $ 259
Fidelity VIP Overseas $ 79 $ 122 $ 168 $ 281
Fidelity VIP II Asset Manager $ 77 $ 116 $ 158 $ 262
Fidelity VIP II Index 500 $ 72 $ 102 $ 135 $ 214
Montgomery Variable Series Emerging Markets $ 84 $ 137 $ 193 $ 331
Montgomery Variable Series Growth $ 70 $ 94 $ 120 $ 185
Seligman Communications and Information $ 78 $ 120 $ 165 $ 275
Seligman Frontier $ 79 $ 122 $ 167 $ 280
</TABLE>
2. If the policy is annuitized or not surrendered at the end of the
applicable time period:
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Bond $ 25 $ 76 $ 130 $ 278
Capital $ 25 $ 76 $ 130 $ 278
International Equity $ 28 $ 85 $ 145 $ 307
Managed $ 25 $ 76 $ 130 $ 278
Money Market $ 23 $ 72 $ 123 $ 263
Value Equity $ 25 $ 76 $ 130 $ 278
Alger American Growth $ 24 $ 73 $ 125 $ 267
Alger American Leveraged AllCap $ 27 $ 82 $ 140 $ 296
Alger American MidCap Growth $ 24 $ 74 $ 127 $ 272
Alger American Small Capitalization $ 25 $ 75 $ 129 $ 276
</TABLE>
18
<PAGE> 24
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Berger/BIAM IPT - International $ 28 $ 85 $ 145 $ 307
Dreyfus Growth and Income $ 24 $ 74 $ 127 $ 271
Dreyfus Socially Responsible $ 25 $ 78 $ 133 $ 284
Fidelity VIP Growth $ 23 $ 70 $ 120 $ 257
Fidelity VIP High Income $ 23 $ 70 $ 121 $ 259
Fidelity VIP Overseas $ 25 $ 77 $ 132 $ 281
Fidelity VIP II Asset Manager $ 23 $ 71 $ 122 $ 262
Fidelity VIP II Index 500 $ 18 $ 57 $ 99 $ 214
Montgomery Variable Series Emerging Markets $ 30 $ 92 $ 157 $ 331
Montgomery Variable Series Growth $ 16 $ 49 $ 84 $ 185
Seligman Communications and Information $ 24 $ 75 $ 129 $ 275
Seligman Frontier $ 25 $ 77 $ 131 $ 280
</TABLE>
The examples represent expenses incurred in connection with a 7 year surrender
charge period. Policies issued with a 5 year maximum surrender charge period
would be subject to lower expenses.
The examples provided above assume that no transfer charges have been assessed.
The examples also reflect a policy administration charge of .14% of assets,
determined by dividing the total policy administration charges collected by the
total average net assets of the sub-accounts of the Variable Account.
THE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE
ASSUMED 5% ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESSER
THAN THE ASSUMED AMOUNT.
CONDENSED FINANCIAL INFORMATION
The following condensed financial information is derived from the financial
statements of the Variable Account. The data should be read in conjunction with
the financial statements, related notes and other financial information
included in the Statement of Additional Information. See the "FINANCIAL
STATEMENTS" section concerning financial statements contained in the Statement
of Additional Information.
The table below sets forth certain information regarding the sub-accounts for a
policy for the period from December 31, 1992 through December 31, 1996.
Accumulation Unit Values will not be provided for any date prior to the
inception of the Variable Account. As of December 31, 1996, the Montgomery
Variable Series Growth and Berger/BIAM IPT - International sub-accounts had not
commenced operations. Accordingly, condensed financial information is not
available for those sub-accounts.
19
<PAGE> 25
<TABLE>
<CAPTION>
ACCUMULATION
UNIT VALUE*
AS OF AS OF AS OF AS OF AS OF
SUB ACCOUNT 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
- ------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Bond** $ 15.49 $ 14.98 $ 12.98 $ 13.69 $ 12.57
Capital*** $ 15.53 $ 13.96 $ 10.54 $ 11.14 -
International Equity***** - - - - -
Managed** $ 17.30 $ 16.56 $ 13.75 $ 13.97 $ 13.07
Money Market** $ 12.30 $ 11.93 $ 11.50 $ 11.27
Value Equity** $ 18.33 $ 17.34 $ 14.21 $ 14.11 $ 13.56
Alger American Small Capitalization****** $ 40.97 - - - -
Alger American Growth****** $ 36.02 - - - -
Alger American Leveraged All Cap****** $ 19.01 - - - -
Alger American MidCap Growth****** $ 20.97 - - - -
Dreyfus Growth & Income****** $ 22.59 - - - -
Dreyfus Socially Responsible****** - - - - -
Fidelity VIP Growth**** $ 35.98 $ 31.96 $ 23.62 - -
Fidelity VIP High Income**** $ 30.71 $ 0.00 $ 22.97 - -
Fidelity VIP Overseas**** $ 18.52 $ 16.68 $ 15.33 - -
Fidelity VIP II Asset Manager**** $ 20.42 $ 18.12 $ 15.56 - -
Fidelity VIP II Index 500****** - - - - -
Montgomery Variable Series Emerging Markets****** - - - - -
Seligman Communications and Information***** $ 15.28 $ 14.23 - - -
Seligman Frontier ***** $ 16.96 $ 13.89 - - -
</TABLE>
* Accumulation Unit Values prior to 1994 do not reflect the .15%
Daily Administration Fee imposed after May 1, 1994. Accumulation
Unit Values for year ended 12/31/94 reflect the .15% Daily
Administration Fee.
** Commenced operations on December 4, 1989.
*** Commenced operations on May 1, 1993.
**** Commenced operations on May 1, 1994.
***** Commenced operations on May 1, 1995.
****** Commenced operations on May 1, 1996.
As of 12/31/96 there was no activity in the CLASF International Equity,
Dreyfus Socially Responsible, Fidelity VIP II Index 500 or Montgomery
Variable Series Emerging Markets funds.
20
<PAGE> 26
<TABLE>
<CAPTION>
NUMBER OF UNITS
OUTSTANDING AT
END OF PERIOD
AS OF AS OF AS OF AS OF *AS OF
SUB ACCOUNT 12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Bond 517 517 517 1,203 403
Capital 9,043 9,744 10,013 7,094 -
International Equity - - - - -
Managed 7,213 9,125 13,982 12,645 4,766
Money Market 9,097 193 195 4,393
Value Equity 5,790 5,798 6,262 8,387 1,017
Alger American Growth 336 - - - -
Alger American Leveraged All Cap 150 - - - -
Alger American MidCap Growth 500 - - - -
Alger American Small Capitalization 1,030 - - - -
Dreyfus Growth & Income 127 - - - -
Dreyfus Socially Responsible - - - - -
Fidelity VIP Growth 5,368 3,259 1,752 - -
Fidelity VIP High Income 1,506 0 1,206 - -
Fidelity VIP Overseas 2,014 63 594 - -
Fidelity VIP II Asset Manager 10,818 6,880 7,647 - -
Fidelity VIP II Index 500 - - - - -
Montgomery Variable Series Emerging Markets - - - - -
Seligman Communications and Information 25,672 18,611 - - -
Seligman Frontier 6,155 2,237 - - -
</TABLE>
* The number of accumulation units for CLASF decreased in 1991 and
1990 due to the transfer of seed money from the Variable Account to
our general account to meet California's insurance regulations.
This did not affect the seed money in the underlying Portfolio.
As of 12/31/96 there was no activity in the CLASF International Equity, Dreyfus
Socially Responsible, Fidelity VIP II Index 500 or Montgomery Variable Series
As of Emerging Markets funds.
21
<PAGE> 27
THE COMPANY
Canada Life Insurance Company of New York ("we," "our," and "us") is a stock
life insurance company with assets as of December 31, 1996 of approximately
$261 million. We were incorporated under New York law on June 7, 1971, and our
Home Office is located at 500 Mamaroneck Avenue, Harrison, New York 10528. We
currently are principally engaged in issuing and reinsuring annuity policies in
the state of New York.
We share our A.M. Best Company rating with our parent company, The Canada Life
Assurance Company. From time to time, we will quote this rating, our rating
from Standard & Poor's Rating Service, Duff & Phelps Inc., and/or Moody's
Investors Service for claims paying ability. These ratings address the
financial ability of these companies to meet their contractual obligations in
accordance with the terms of their insurance contracts. They do not take into
account deductibles, surrender or cancellation penalties, or timeliness of
claim payment, nor do they address the suitability of the policy for a
particular purchaser. Also, these evaluations do not refer to the ability of
these companies to meet non-policy obligations.
We are a wholly-owned subsidiary of The Canada Life Assurance Company, a
Canadian life insurance company headquartered in Toronto, Ontario, Canada, with
a U.S. home office in Atlanta, Georgia. The Canada Life Assurance Company:
commenced insurance operations in 1847, and has been actively operating in the
United States since 1889; and is one of the largest life insurance companies in
North America with consolidated assets as of December 31, 1996 of approximately
$23.2 billion (U.S. dollars).
Obligations under the policies are obligations of Canada Life Insurance Company
of New York.
We are subject to regulation and supervision by the New York Insurance Bureau,
as well as the applicable laws and regulations of all jurisdictions in which we
are authorized to do business.
THE VARIABLE ACCOUNT, THE FUNDS
AND FIXED ACCOUNT
THE VARIABLE ACCOUNT
We established the Canada Life of New York Variable Annuity Account 1 (the
"Variable Account") as a separate investment account on September 23, 1989
under New York law. Although we own the assets in the Variable Account, these
assets are held separately from our other assets and are not part of our
general account. The income, gains or losses, whether or not realized, from
the assets of the Variable Account are credited to or charged against the
Variable Account in accordance with the policies without regard to our other
income, gains or losses.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities that arise from any other business that we conduct and will be held
in the Variable Account. We have the right to transfer to our general account
any assets of the Variable Account which are in excess of such reserves and
other liabilities.
The Variable Account is registered with the Securities and Exchange Commission
(the "SEC") as a unit investment trust under the Investment Company Act of 1940
(the "1940 Act") and meets the definition of a "separate account" under the
federal securities laws. However, registration under the 1940 Act does not
involve the supervision by the SEC of the management or investment policies or
practices of the Variable Account.
22
<PAGE> 28
The Variable Account currently is divided into twenty-two sub-accounts with the
assets of each sub-account invested in shares of the corresponding portfolios
of the Funds described below.
THE FUNDS
The Variable Account invests in shares of CLASF, Fidelity VIP, Fidelity VIP II,
Seligman, Dreyfus, The Dreyfus Socially Responsible, Alger American, Montgomery
and Berger Trust. The Funds are management investment companies of the series
type with one or more investment portfolios. Each Fund is registered with the
SEC as an open-end, management investment company. Such registration does not
involve supervision of the management or investment practices or policies of
the Company or the portfolios by the SEC.
The Funds may, in the future, create additional portfolios that may or may not
be available as investment options under the policies. Each portfolio has its
own investment objectives and the income and losses for each portfolio are
determined separately for that portfolio.
The investment objectives and policies of each portfolio are summarized below.
THERE IS NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES.
More detailed information, including a description of risks and expenses, may
be found in the prospectuses for the Funds which must accompany or precede this
prospectus and which should be read carefully and retained for future
reference.
CANADA LIFE OF AMERICA SERIES FUND, INC.
The Canada Life of America Series Fund, Inc., ("CLASF") currently has six
portfolios: Money Market; Managed; Bond; Value Equity; International Equity;
and Capital.
CLASF is a diversified open-end investment company incorporated in Maryland.
CLASF has four portfolios which use the investment advisory services of CL
Capital Management, Inc., a Georgia corporation: Money Market; Managed; Bond;
and Value Equity. CLASF has one portfolio, the International Equity Portfolio,
which uses the sub-investment advisory services of Canada Life Investment
Management Limited, a Toronto, Ontario, Canada SEC-registered investment
adviser. CLASF also has one portfolio, the Capital Portfolio, which uses the
sub-investment advisory services of J. & W. Seligman & Co. Incorporated, an
unaffiliated investment manager that is a Delaware Corporation. CL Capital
Management, Inc. is a wholly owned subsidiary of Canada Life Insurance Company
of America. Canada Life Investment Management Limited is a subsidiary of The
Canada Life Assurance Company. The following is a brief description of the
investment objectives of each of the current portfolios of CLASF.
MONEY MARKET PORTFOLIO
The Money Market Portfolio seeks the highest possible level of current income
consistent with preservation of capital and liquidity by investing in money
market instruments maturing in thirteen months or less.
23
<PAGE> 29
MANAGED PORTFOLIO
The Managed Portfolio seeks as high a level of return as possible through
capital appreciation and income consistent with prudent investment risk and
preservation of capital, by investing in equities, fixed income debt
instruments and money market instruments.
BOND PORTFOLIO
The Bond Portfolio seeks as high a level of current income and capital
appreciation as is consistent with preservation of principal, by investing
primarily in fixed income debt instruments.
VALUE EQUITY PORTFOLIO
The Value Equity Portfolio seeks long-term growth and income by investing in
common stocks and other equity securities which are believed to have
appreciation potential.
INTERNATIONAL EQUITY PORTFOLIO
The International Equity Portfolio seeks long-term capital appreciation by
investing in equity or equity-type securities of companies located outside of
the United States.
CAPITAL PORTFOLIO
The Capital Portfolio seeks capital appreciation, not current income, by
investing in common stocks and securities convertible into or exchangeable for
common stocks, in common stock purchase warrants, in debt securities and in
preferred stocks believed to provide capital appreciation opportunities.
Since CLASF may be available to other separate accounts, including registered
separate accounts for variable annuity and variable life products, and
non-registered separate accounts for group annuity products of the Company,
Canada Life Insurance Company of America, and The Canada Life Assurance
Company, it is possible that material conflicts may arise between the interests
of the Variable Account and one or more other separate accounts investing in
CLASF. CLASF's board of directors will monitor events to identify any
irreconcilable material conflict. Upon being advised of such a conflict, we
will take any steps we believe necessary to resolve the matter, including
removing the assets of the Variable Account from one or more portfolios.
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Investments Variable Insurance Products Fund ("Fidelity VIP") acts
as one of the funding vehicles for the policy with three Portfolios available
under the policy: Fidelity VIP Growth; Fidelity VIP High Income; and Fidelity
VIP Overseas. Fidelity VIP is managed by Fidelity Management & Research
Company ("Investment Manager").
FIDELITY VIP GROWTH PORTFOLIO
The Fidelity VIP Growth Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security.
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<PAGE> 30
FIDELITY VIP HIGH INCOME PORTFOLIO
The Fidelity VIP High Income Portfolio seeks to obtain a high level of current
income by investment primarily in high yielding, lower-rated, fixed income
securities, while also considering growth of capital. Please refer to the
accompanying Fidelity prospectus for a description and explanation of the
unique risks associated with investing in high risk, high yielding, lower rated
fixed income securities.
FIDELITY VIP OVERSEAS PORTFOLIO
The Fidelity VIP Overseas Portfolio seeks long-term growth of capital primarily
through investments in foreign securities. This portfolio provides a means for
investors to diversify their own portfolios by participating in companies and
economies outside of the United States.
FIDELITY INVESTMENTS VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Investments Variable Insurance Products Fund II ("Fidelity VIP
II") acts as one of the funding vehicles for the policy with the VIP II Asset
Manager and VIP II Index 500 Portfolios available under the policy. Fidelity
VIP II is managed by Fidelity Management & Research Company ("Investment
Manager").
FIDELITY VIP II ASSET MANAGER PORTFOLIO
The Fidelity VIP II Asset Manager Portfolio seeks high total return with
reduced risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed-income instruments.
FIDELITY VIP II INDEX 500 PORTFOLIO
The Fidelity VIP II Index 500 Portfolio seeks a total return which corresponds
to that of the Standard & Poor's Composite Index of 500 Stocks.
SELIGMAN PORTFOLIOS, INC.
Seligman Portfolios, Inc. ("Seligman") currently has twelve portfolios, two of
which are available under the policy: Communications and Information; and
Frontier. Seligman is a diversified open-ended investment company incorporated
in Maryland which uses the investment management services of J. & W. Seligman
& Co. Incorporated, a Delaware corporation.
SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO
The investment objective of this Portfolio is to produce capital gain, not
income, by investing primarily in securities of companies operating in the
communications, information and related industries.
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<PAGE> 31
SELIGMAN FRONTIER PORTFOLIO
The investment objective of this Portfolio is to produce growth in capital
value; income may be considered but will be only incidental to the Portfolio's
investment objective. In general, securities owned are likely to be those
issued by small-to-medium-sized companies selected for their growth potential.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment company,
that is intended to be a funding vehicle for variable annuity and variable life
insurance contracts. One of the Fund's portfolios is available under this
policy, the Dreyfus Growth and Income Portfolio.
DREYFUS GROWTH AND INCOME PORTFOLIO
The Growth and Income Portfolio seeks long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The
Portfolio invests primarily in equity and debt securities and money market
instruments of domestic and foreign issuers. The proportion of the Portfolio's
assets invested in each type of security will vary from time to time in
accordance with The Dreyfus Corporation's assessment of economic conditions and
investment opportunities.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. ("Dreyfus Socially
Responsible") is an open-end, diversified, management investment company fund,
that is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies to be offered by the separate accounts of
various life insurance companies.
Dreyfus Socially Responsible seeks to provide capital growth by investing
principally in common stocks, or securities convertible into common stock, of
companies which, in the opinion of the Fund's management, not only meet
traditional investment standards, but also show evidence that they conduct
their business in a manner that contributes to the enhancement of the quality
of life in America. Current income is a secondary goal.
THE ALGER AMERICAN FUND
The Alger American Fund ("Alger American") is intended to be a funding vehicle
for variable annuity contracts and variable life insurance policies to be
offered by the separate accounts of certain life insurance companies; and its
shares may also be offered to qualified pension and retirement plans. Each
Portfolio has distinct investment objectives and policies. Further information
regarding the investment practices of each of the Portfolios is set forth
below.
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<PAGE> 32
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The investment objective of the Alger American Small Capitalization Portfolio
is long-term capital appreciation. Except during temporary defensive periods,
the Portfolio invests at least 65% of its total assets in equity securities of
companies that, at the time of purchase of the securities, have total market
capitalization within the range of companies included within the Russell 2000
Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes
are broad indexes of small capitalization stocks. The Portfolio may invest up
to 35% of its total assets in equity securities of companies that, at the time
of purchase, have total market capitalization outside this combined range, and
in excess of that amount (up to 100% of its assets) during temporary defensive
periods.
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio seeks long-term capital appreciation by
investing, except during temporary defensive periods, in a diversified,
actively managed portfolio of equity securities, primarily of companies, that,
at the time of purchase, have total market capitalization of $1 billion or
greater.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65%
of its total assets in equity securities of companies that, at the time of
purchase of the securities, have total market capitalization within the range
of companies included in the S&P MidCap 400 Index, updated quarterly. The
Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization
outside the range of companies included in the S&P MidCap 400 Index and in
excess of that amount (up to 100% of its assets) during temporary defensive
periods.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation by investing, except during temporary defensive periods, primarily
in a diversified, actively managed portfolio of equity securities. The
Portfolio may engage in leveraging (up to 33 1/3% of its assets) and options
and futures transactions, which are deemed to be speculative and which may
cause the Portfolio's net asset value to be more volatile than the net asset
value of a fund that does not engage in these activities.
THE MONTGOMERY FUNDS III
Shares of Montgomery Variable Series Emerging Markets Fund and Montgomery
Variable Series Growth Fund, portfolios of The Montgomery Funds III
("Montgomery"), an open-end investment company, are available under this
policy.
MONTGOMERY VARIABLE SERIES EMERGING MARKETS FUND
The investment objective of this portfolio is capital appreciation, which under
normal conditions it seeks by investing at least 65% of its total assets in
equity securities of companies in countries having emerging markets. For these
purposes, the portfolio defines an emerging market country as having an economy
that is or would be considered by the World Bank or the United Nations to be
emerging or developing.
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<PAGE> 33
MONTGOMERY VARIABLE SERIES GROWTH FUND
The investment objective of this portfolio is capital appreciation, which under
normal conditions it seeks by investing at least 65% of its total assets in the
equity securities of domestic companies. In addition to capital appreciation,
the Montgomery Variable Series Growth Fund emphasizes value.
BERGER INSTITUTIONAL PRODUCTS TRUST
Shares of the Berger/BIAM IPT-International Fund, a portfolio of Berger
Institutional Products Trust, an open-end investment company, are available
under this policy. The portfolio is advised by BBOI Worldwide LLC, which has
delegated daily management of the portfolio to Bank of Ireland Asset Management
(U.S.) Limited. The investment objective of the Berger/BIAM IPT-International
Fund is long-term capital appreciation. The portfolio seeks to achieve this
objective by investing primarily in common stocks of well established companies
located outside the United States. The portfolio intends to diversify its
holdings among several countries and to have, under normal market conditions,
at least 65% of the portfolio's total assets invested in the securities of
companies located in at least five countries, not including the United States.
RESERVED RIGHTS
We reserve the right to substitute shares of another portfolio of CLASF,
Fidelity VIP, Fidelity VIP II, Seligman, Dreyfus, Dreyfus Socially Responsible,
Alger American, Montgomery, or Berger Trust or shares of another registered
open-end investment company if, in the judgment of our management, investment
in shares of one or more portfolios is no longer appropriate for any legitimate
reason, including: a change in investment policy; or a change in the tax laws;
or the shares are no longer available for investment. We will obtain the
approval of the SEC before we make a substitution of shares, if such approval
is required by law.
When permitted by law, we also reserve the right to: create new variable
accounts; combine variable accounts, including the Canada Life of New York
Variable Annuity Account 1; remove, combine or add sub-accounts and make the
new sub-accounts available to policyowners at our discretion; add new
portfolios to CLASF; deregister the Variable Account under the 1940 Act if
registration is no longer required; make any changes required by the 1940 Act;
and operate the Variable Account as a managed investment company under the 1940
Act or any other form permitted by law.
If a change is made, we will send you a revised Prospectus and any notice
required by law.
CHANGE IN INVESTMENT POLICY
The investment policy of a sub-account of the Variable Account may not be
changed unless: the change is approved, if required, by the New York Insurance
Bureau; and a statement of such approval is filed, if required, with the
insurance department of the state in which the policy is delivered.
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<PAGE> 34
THE FIXED ACCOUNT
An owner may allocate some or all of the net premium payments and transfer some
or all of the policy value to the Fixed Account, which is part of our general
account and pays interest at declared rates (Guaranteed Interest Rates)
guaranteed for selected periods of time from one to ten years (Guarantee
Periods). The principal, after deductions, is also guaranteed. Since the
Fixed Account is part of the general account, we assume the risk of investment
gain or loss on this amount. All assets in the general account are subject to
our general liabilities from business operations. The Fixed Account may not be
available in all states.
Due to certain exemptive and exclusionary provisions, interests issued by us in
connection with the Fixed Account have not been registered under the Securities
Act of 1933 (the "1933 Act"), and neither the Fixed Account nor the general
account has been registered as an investment company under the 1940 Act.
Accordingly, neither the Fixed Account, nor the general account are generally
subject to regulation under the 1933 Act and the 1940 Act. Disclosures
relating to the interests in the Fixed Account, the Fixed Account, and the
general account, however, may be subject to certain generally applicable
provisions of the federal securities laws relating to the accuracy of
statements made in a registration statement.
GUARANTEE AMOUNT
The portion of the policy value allocated to the Fixed Account is the Guarantee
Amount which is credited with interest, as described below. The Guarantee
Amount reflects interest credited to the policy value in the Guarantee Periods,
net premium payments allocated to or policy value transferred to Guarantee
Periods and charges assessed in connection with the policy. The Guarantee
Amount is guaranteed to accumulate at a minimum effective annual interest rate
of 3%.
GUARANTEE PERIODS
From time to time we will offer to credit Guarantee Amount with interest at
specific guaranteed rates for specific periods of time. These periods of time
are known as Guarantee Periods. We may offer one or more Guarantee Periods of
one to ten years' duration at any time but will always offer a Guarantee Period
of one year. We currently offer Guarantee Periods of one, three, five, seven
and ten years. The interest rates available at any time will vary with the
number of years in the Guarantee Period but will always be equal to or greater
than an effective annual interest rate of 3%.
Guarantee Periods begin on the date as of which a net premium payment is
allocated to or a portion of the policy value is transferred to the Guarantee
Period, and end on the last calendar day of the month when the number of years
in the Guarantee Period elected (measured from the end of the calendar month in
which the amount was allocated or transferred to the Guarantee Period) has
elapsed.
Allocations of net premium payments and transfers of policy value to the Fixed
Account for a Guarantee Period may have different applicable Guaranteed
Interest Rates depending on the timing of such allocations or transfers. The
applicable Guaranteed Interest Rate does not change during a Guarantee Period.
If the allocated or transferred amount remains in the fixed rate interest
option until the end of the applicable Guarantee Period, its value will be
equal to the amount originally allocated or transferred, multiplied, on an
annually compounded basis, by its Guaranteed Interest Rate. If a Guarantee
Amount is surrendered, withdrawn, or transferred prior to the expiration of the
Guarantee Period, the Guaranteed Amount is subject to a Market Value
Adjustment, as described below, the application of which may result in the
payment of an amount greater or less than the Guarantee Amount at the time of
the transaction. The Market Value Adjustment, however, will never reduce the
earnings on amounts allocated to the fixed interest rate option to less than
three percent per year and does not apply to amounts surrendered, withdrawn, or
transferred from the one year Guarantee Period or to provide death, nursing
home, terminal illness benefits, and annuitization.
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During the 30 day period following the expiration of a Guarantee Period ("30
day window"), a policyowner may transfer the Guarantee Amount from the expiring
Guaranteed Period to another fixed interest rate option with a new Guarantee
Period or to a sub-account(s). A Market Value Adjustment will not apply if the
Guarantee Amount from the expired Guarantee Period is surrendered, withdrawn,
or transferred during the 30 day window. During the 30 day window, the
Guarantee Amount will accrue interest at an annual effective rate of 3% unless
the Guarantee Amount remains in the fixed account in which case you will
receive the interest rate in accordance with the Guarantee Period chosen.
Prior to the expiration date of any Guarantee Period, we will notify you of
the then currently available Guarantee Periods and the Guaranteed Interest
Rates applicable to such Guarantee Periods. A new Guarantee Period of the same
duration as the previous Guarantee Period will commence automatically on the
first day following the expired Guarantee Period, unless we receive Written
Notice prior to the expiration of the 30 day window of the owner's election of
a different Guarantee Period from among those being offered by us at that time,
or instructions to transfer all or a portion of the expiring Guarantee Amount
to a sub-account. If we do not receive such Written Notice and are not
offering a Guarantee Period of the same duration as the expiring Guarantee
Period or if the duration of the expiring Guarantee Period would, if renewed,
extend beyond the annuity date, if known, or maturity date, then a new
Guarantee Period of one year will commence automatically on the first day
following the expiration of the expired Guarantee Period.
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods that differ from those available when an owner's policy was
issued. We also reserve the right, at any time, to stop accepting net premium
payment allocations or transfers of policy value to a particular Guarantee
Period. Since the specific Guarantee Periods available may change
periodically, please contact our Home Office to determine the Guarantee Periods
currently being offered.
Owners allocating net premium payments and/or policy value to the Fixed Account
do not participate in the investment performance of assets of the Fixed
Account, and this performance does not determine the policy value attributable
to the Fixed Account or benefits relating thereto. The Fixed Account provides
values and benefits based only upon the net purchase payments and policy values
allocated thereto, the Guaranteed Interest Rate credited on such amounts, and
any charges or Market Value Adjustments imposed on such amounts in accordance
with the terms of the policy.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment reflects the relationship between: (i) the
Guaranteed Interest Rate being applied to the Guarantee Period from which the
Guarantee Amount is requested to be surrendered, withdrawn, or transferred; and
(ii) the current Guaranteed Interest Rate that we credit for a Guarantee Period
equal in duration to the Guarantee Period from which the Guarantee Amount will
be surrendered, withdrawn, or transferred. If a Guarantee Period of such
duration is not being offered, we will use the linear interpolation of the
Guaranteed Interest Rates for the Guarantee Periods closest in duration that
are available. Any surrender, withdrawal, or transfer of a Guarantee Amount is
subject to a Market Value Adjustment, unless the effective date of the
surrender, withdrawal, or transfer is within 30 days after the end of a
Guarantee Period or the surrender, withdrawal or transfer of a Guarantee Amount
is from the one year Guarantee Period. The Market Value Adjustment will be
applied after the deduction of any applicable policy administration charge or
transfer fee, and before the deduction of any applicable surrender charge or
charge for taxes on premium payments. The Market Value Adjustment, however,
will never invade principal nor reduce the earnings on amounts allocated to the
Fixed Account to less than 3% per year.
Generally, if the Guaranteed Interest Rate for the selected Guarantee Period is
lower than the Guaranteed Interest Rate currently being offered for new
Guarantee Periods of duration equal to the selected Guarantee Period as of the
date that the Market Value Adjustment is applied, then the application of the
Market Value Adjustment will result in the payment, upon surrender, withdrawal,
or transfer of an amount less than the Guarantee Amount (or portion thereof)
being surrendered, withdrawn, or transferred. Conversely, if the Guaranteed
Interest Rate for the selected Guarantee Period is higher than the
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<PAGE> 36
Guaranteed Interest Rate currently being offered for new Guarantee Periods of a
duration equal to the selected Guarantee Period as of the date that the Market
Value Adjustment is applied, then the application of the Market Value Adjustment
will result in the payment, upon surrender, withdrawal, or transfer of an amount
greater than the Guarantee Amount (or portion thereof) being surrendered,
withdrawn, or transferred.
The Market Value Adjustment is computed by multiplying the amount being
surrendered, withdrawn, or transferred, (the "Amount") by the Market Value
Adjustment Factor. The Market Value Adjustment Factor is calculated as
follows:
n/12
Market Value Adjustment Factor = Lesser of (a) (1 + i)
-------------- - 1
n/12
(1 +r + .005)
--------------
or (b) .05
where:
"i" is the Guaranteed Interest Rate currently being credited to the
"Amount";
"r" is the Guaranteed Interest Rate that is currently being offered for a
Guarantee Period of duration equal to the Guarantee Period for the
Guarantee Amount from which the "Amount" is taken; and
"n" is the number of months remaining to the expiration of the Guarantee
Period for the Guarantee Amount from which the "Amount" is taken.
The Market Value Adjustment, however, will never invade principal nor reduce
the earnings on amounts allocated to the Fixed Account to less than 3% per
year.
DESCRIPTION OF ANNUITY POLICY
TEN DAY RIGHT TO EXAMINE POLICY
You have ten days after you receive the policy to decide if the policy meets
your needs and if the policy does not meet your needs to return the policy to
our Home Office. We will promptly return the policy value. When the policy
is issued as an Individual Retirement Annuity, during the first seven days of
the ten day period, we will return all premiums if this is greater than the
amount otherwise payable.
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PREMIUMS
INITIAL PREMIUM
A prospective owner must submit a properly completed application along with a
check made payable to us for the initial premium. The minimum initial premium
is $5,000 ($2,000 if the Policy is an Individual Retirement Annuity, but we
reserve the right to lower or raise the minimum premium for IRAs). However,
for policies issued prior to January 26, 1996, the minimum initial premium is
$100 ($50 if the Policy is an Individual Retirement Annuity) when a prospective
owner has enclosed a completed pre-authorized check ("PAC") agreement for
additional premiums to be automatically withdrawn monthly from the owner's bank
account.
The application is subject to our underwriting standards. If the application
is properly completed and is accompanied by all the information necessary to
process it, including the initial premium, we will normally accept the
application and apply the initial net premium within two valuation days of
receipt at our Home Office. However, we may retain the premium for up to five
valuation days while we attempt to complete the processing of an incomplete
application. If this cannot be achieved within five valuation days, we will
inform the prospective owner of the reasons for the delay and immediately
return the premium, unless the prospective owner specifically consents to our
retaining the premium until the application is made complete. If the
prospective owner consents to our retaining the premium, we will apply the
initial net premium within two valuation days of when the application is
complete.
ADDITIONAL PREMIUMS
NO ADDITIONAL PREMIUMS ARE PAYABLE ON POLICIES ISSUED ON OR AFTER JANUARY 26,
1996.
The minimum additional premium is $600. However, the minimum additional
premium paid by PAC is $50 per month (We will apply additional net premiums as
of receipt at our Home Office).
You may make additional premium payments at any time during any annuitant's
lifetime and before the earlier of the annuity date or maturity date. Our
prior approval is required before we will accept an additional premium which,
together with the total of other premiums paid, would exceed $1,000,000. We
will give you a receipt for each additional premium payment.
WIRE TRANSMITTAL PRIVILEGE
If a written agreement between us and broker/dealers who use wire transmittals
is in effect, as a privilege to you we will accept transmittal of the initial
premium and, for policies issued prior to January 26, 1996, additional
premiums by wire order from the broker/dealer to our designated financial
institution. A copy of such transmittal must be simultaneously sent to our
Home Office via a telephone facsimile transmission that also contains the
essential information we require to begin application processing and/or to
allocate the net premium. We will normally apply the initial net premium
within two valuation days of receipt at our Home Office of the facsimile
transmission that contains a copy of the wire order and such required essential
information. We may retain such wire orders for up to five valuation days
while an attempt is made to obtain such required information that we do not
receive via such facsimile transmission. If such required information is not
obtained within five valuation days, we will inform the broker/dealer, on
behalf of the prospective owner, of the reasons for the delay and immediately
return the premium wired to us to the broker/dealer who will return the full
premium paid to the prospective owner, unless we receive within such five
valuation days the prospective owner's specific written consent to our
retaining the premium until we receive such required information via facsimile
transmission.
Our acceptance of the wire order and facsimile does not create a contractual
obligation with us until we receive and accept a properly completed original
application. If we do not receive a properly completed original application
within ten valuation days
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<PAGE> 38
of receipt of the initial premium via wire order, we will return the premium
wired to us to the broker/dealer who will return the full premium paid to the
prospective owner. If the allocation instructions in the properly completed
original application are inconsistent with such instructions contained in the
facsimile transmission, the policy value will be reallocated in accordance with
the allocation instructions in the application at the price which was next
determined after receipt of the wire order.
ELECTRONIC DATA TRANSMISSION OF APPLICATION INFORMATION
In certain states, we will also accept, by agreement with broker/dealers who
use electronic data transmissions of application information, wire transmittals
of initial premium payments from the broker-dealer to the Company for purchase
of the policy. Contact us to find out about state availability.
Upon receipt of the electronic data and wire transmittal, we will process the
information and allocate the premium payment according to the policyowner's
instructions. Based on the information provided, we will generate a policy and
a verification letter to be forwarded to the policyowner for signature.
During the period from receipt of the initial premium until the signed
verification letter is received, the policyowner may not execute any financial
transactions with respect to the policy unless such transactions are requested
in writing by the owner and signature guaranteed.
NET PREMIUM ALLOCATION
You elect in your application how you want your initial net premium to be
allocated among the sub-accounts and the Fixed Account. Any additional net
premiums (for policies issued prior to January 26, 1996) will be allocated in
the same manner, unless at the time of payment we have received your written
notice to the contrary. The total allocation must equal 100%.
We cannot guarantee that a sub-account or shares of a portfolio will always be
available. If an owner requests that all or part of a premium be allocated to
a sub-account at a time when the sub-account or underlying portfolio is not
available, we will immediately return that portion of the premium to you,
unless you specify otherwise.
TERMINATION
THE FOLLOWING APPLIES TO POLICIES ISSUED ON OR AFTER JANUARY 26, 1996:
- ----
We may pay you the policy value and terminate the policy if before the
annuity date the policy value is less than $2,000.
- ----
THE FOLLOWING APPLIES TO POLICIES ISSUED PRIOR TO JANUARY 26, 1996:
- ----
We may pay you the cash surrender value and terminate the policy if before
the annuity date or maturity date all of these events simultaneously exist:
- ----
1. you have not paid any premiums for at least two years;
2. the policy value is less than $2,000; and
3. the total premiums paid, less any partial withdrawals,
is less than $2,000.
We will mail you a notice of our intention to terminate this policy at least
six months in advance. The policy will automatically terminate on the date
specified in the notice, unless we receive an additional premium before the
termination date specified in the notice. This additional premium must be at
least the minimum amount specified in "Additional Premiums."
We will mail you a notice of our intention to terminate this policy at least
six months in advance. The policy will automatically terminate on the date
specified in the notice.
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VARIABLE ACCOUNT VALUE
The Variable Account value before the annuity date or maturity date is
determined by multiplying the number of units credited to this policy for each
sub-account by the current unit value of these units.
UNITS
We credit net premiums in the form of units. The number of units credited to
the policy for each sub-account is determined by dividing the net premium
allocated to that sub-account by the unit value for that sub-account at the end
of the valuation period during which we receive the premium at our Home Office.
We will credit units for the initial net premium on the effective date of the
policy. We will adjust the units for any transfers in or out of a sub-account,
including any transfer processing fee.
We will cancel the appropriate number of units based on the unit value at the
end of the valuation period in which any of the following events occur: the
policy administration charge of $30 is assessed; the date we receive and file
your written notice for a partial withdrawal or a cash surrender; the date of a
systematic withdrawal; the earlier of the annuity date or maturity date; or the
date we receive due proof of your death or last surviving annuitant's death.
UNIT VALUE
The unit value for each sub-account's first valuation period is set at a fixed
amount, generally $10. The unit value for each subsequent valuation period is
determined by multiplying the unit value at the end of the immediately
preceding valuation period by the net investment factor for the valuation
period for which the value is being determined.
The unit value for a valuation period applies to each day in that period. The
unit value may increase or decrease from one valuation period to the next.
NET INVESTMENT FACTOR
The net investment factor is an index that measures the investment performance
of a sub-account from one valuation period to the next. Each sub-account has a
net investment factor, which may be greater than or less than one.
The net investment factor for each sub-account for a valuation period equals 1
plus the rate of return earned by the relevant portfolio, adjusted for the
effect of taxes charged or credited to the sub-account and the mortality and
expense risk charge.
The rate of return of the relevant portfolio is equal to the fraction obtained
by dividing (a) by (b) where:
(a) is the net investment income and net gains, realized and
unrealized, credited during the current valuation period; and
(b) is the value of the net assets of the relevant portfolio at
the end of the preceding valuation period, adjusted for the net
capital transactions and dividends declared during the current
valuation period.
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TRANSFERS
TRANSFER PRIVILEGE
You may transfer all or a part of an amount in the sub-account(s) to another
sub-account(s) or to the Fixed Account, or transfer a part of an amount in the
Fixed Account to the sub-account(s), subject to these general restrictions and
the additional restrictions in "Restrictions on Transfers from Fixed Account":
1. the Company's minimum transfer amount, currently $250;
2. a transfer request that would reduce the amount in that
sub-account or the Fixed Account below $500 will be treated as a
transfer request for the entire amount in that sub-account or the
Fixed Account; and
3. transfers from the Fixed Account except from the one year
Guarantee Period may be subject to a Market Value Adjustment.
We cannot guarantee that a sub-account or shares of a portfolio will always be
available. If you request an amount in a sub-account or Fixed Account be
transferred to a sub-account at a time when the sub-account or underlying
portfolio is unavailable, we will not process your transfer request, and this
request will not be counted as a transfer for purposes of determining the
number of free transfers executed. The Company reserves the rights to change
its minimum transfer amount requirements.
TELEPHONE TRANSFER PRIVILEGE
You may direct us to act on transfer instructions given by telephone, subject
to our procedures, by initialing the authorization on the application or by
subsequently completing our administrative form. The authorization will
continue in effect until we receive your written revocation or we discontinue
this privilege. We reserve the right to change our procedures and to
discontinue this privilege.
We will employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. If we do not employ such reasonable procedures, we
may be liable for any losses due to unauthorized or fraudulent instructions.
These procedures may include, but are not limited to, possible recording of
telephone calls and obtaining appropriate personal security codes and contract
number before effecting any transfers.
DOLLAR COST AVERAGING PRIVILEGE ("DCA")
You may elect to have us automatically transfer specified amounts FROM ANY ONE
variable sub-account or the one year Guarantee Period under the Fixed Account
(either one a "disbursement" account) TO ANY OTHER variable sub-account(s) or
Guarantee Period under the Fixed Account on a periodic basis, subject to our
administrative procedures and the restrictions in "Transfer Privilege" above.
This privilege is intended to allow you to utilize "Dollar Cost Averaging," a
long-term investment method which provides for regular, level, investments over
time. We make no representation or guarantee that DCA will result in a profit
or protect against loss.
To initiate DCA, we must receive your written notice on our form. Once
elected, such transfers will be processed until the entire value of the
sub-account or the one year Guarantee Period under the Fixed Account is
completely depleted;
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<PAGE> 41
or we receive your written revocation of such monthly transfers; or we
discontinue this privilege. We reserve the right to change our procedures or to
discontinue the DCA privilege upon 30 days written notice to you.
RESTRICTIONS ON TRANSFERS FROM FIXED ACCOUNT
Other than transfers made pursuant to DCA, you may transfer an amount from a
Guarantee Period under the Fixed Account, subject to these additional
restrictions:
1. Transfers from a Guarantee Period other than the one year Guarantee
Period may be subject to a Market Value Adjustment.
2. Transfers from one Guarantee Period to another are prohibited other
than within the 30 day window.
Under our current procedures, the transfer will be made on the valuation date
that occurs on or next following the date we receive your transfer request at
our Home Office.
TRANSFER PROCESSING FEE
There is no limit to the number of transfers that you can make between
sub-accounts or to the Fixed Account. However, other than transfers made
pursuant to DCA, we only allow one transfer each year from the Guarantee
Periods under the Fixed Account (see "Restrictions on Transfers from Fixed
Account" above). The first 12 transfers during each policy year are free under
our current policy, which we reserve the right to change. Although, the Company
currently does not assess a transfer fee for the 13th and each additional
transfer in a policy year, we reserve the right to assess a $25 transfer fee.
For the purposes of assessing the fee, each transfer request (which includes a
written notice or telephone call, but does not include dollar cost averaging
automatic transfers) is considered to be one transfer, regardless of the number
of sub-accounts or the Fixed Account affected by the transfer. The processing
fee will be charged proportionately to the receiving sub-account(s) and/or the
Fixed Account.
PAYMENT OF PROCEEDS
PROCEEDS
Proceeds means the amount we will pay under your policy when the first of the
following events occurs: the annuity date or maturity date; or the policy is
surrendered; or we receive due proof of death of the last surviving annuitant
or any owner. We will pay any proceeds in a single sum that may be payable due
to death before the annuity date or maturity date, unless an election is made
for a payment option. See "Election of Options". The policy ends when we pay
the proceeds.
"Due Proof of Death" is proof of death that is satisfactory to us. Such proof
may consist of: 1) a certified copy of the death certificate; and/or 2) a
certified copy of the decree of a court of competent jurisdiction as to the
finding of death.
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<PAGE> 42
For any annuity benefit with payments of five years or more, such annuity
benefits at the time the policy value is applied under a payment option will
not be less than those that would be provided by the application of an amount
to purchase any single premium immediate annuity policy offered by us at the
time to the same class of annuitants. Such amount shall be the greater of the
cash surrender value or 95% of what the cash surrender value would be if there
were no surrender charge.
PROCEEDS ON ANNUITY DATE OR MATURITY DATE
If Payment Option 1 is in effect on the annuity date, the proceeds we will pay
is the policy value. See "Payment Options". If the proceeds are paid in a
lump sum on the annuity date, we will pay the cash surrender value.
An option may not be elected and we will pay the proceeds in a lump sum if the
amount to be applied under a payment option is less than $2,000 or any periodic
payment under the payment option would be less than $20.
You may change the annuity date, subject to these limitations:
1. we must receive your written notice at our Home Office at
least 30 days before the current annuity date;
2. the requested annuity date must be a date that is at least
30 days after we receive your written notice; and
3. the requested annuity date should be no later than the
maturity date
The proceeds on the Maturity Date will be the policy value. The Maturity Date
is the first day of the month after any annuitant's 85th birthday (90th
birthday pending regulatory approval).
PROCEEDS ON SURRENDER
If you surrender the policy before the annuity date, the proceeds we will pay
is the cash surrender value. The cash surrender value is the policy value,
less any applicable surrender charge, the policy administration charge and any
applicable Market Value Adjustment. The cash surrender value will be
determined on the date we receive your written notice for surrender and this
policy at our Home Office.
You may surrender the policy for its cash surrender value at any time before
the earlier of the death of last surviving annuitant, the annuity date or
maturity date. However, the surrender proceeds may be subject to a federal
income tax, including a penalty tax. See "Federal Tax Status".
You may elect to have the cash surrender value paid in a single sum or under a
payment option. See "Payment Options". The policy ends when we pay the cash
surrender value.
PROCEEDS ON DEATH OF LAST SURVIVING ANNUITANT BEFORE ANNUITY DATE OR MATURITY
DATE (THE DEATH BENEFIT)
If we receive due proof of death of the last surviving annuitant before the
annuity date or maturity date ("such due proof"), the proceeds we will pay to
the beneficiary is the death benefit.
THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED ON OR AFTER MAY 1, 1996 OR SUCH
LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED:
If we receive such due proof during the first five years, the death benefit
is the greater of:
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<PAGE> 43
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any incurred
taxes; or
2. the policy value on the date we receive due proof of
last surviving annuitant's death.
If we receive such due proof after the first five policy years, the death
benefit is the greatest of:
1. item "1" above; or
2. item "2" above; or
3. the policy value at the end of the most recent 5
policy year period preceding the date we receive due proof of
last surviving annuitant's death, adjusted for any of the
following items that occur after such last 5 policy year
period: a) less any partial withdrawals, including applicable
surrender charges; b) less any incurred taxes; and c) plus
any premiums paid. The 5 policy year periods are measured
from the policy date (i.e., 5, 10, 15, 20, etc.).
If on the date the policy was issued, all annuitants were attained age 80
or less, then after any annuitant attains age 81, the death benefit is the
greater of items "1" or "2" above. However, if on the date the policy was
issued, any annuitant was attained age 81 or more, then the death benefit
is the policy value.
THE FOLLOWING APPLIES ONLY TO POLICIES ISSUED FROM MAY 1, 1995 THROUGH
APRIL 30, 1996, OR SUCH LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE
OBTAINED IN THE JURISDICTIONS IN WHICH THE CONTRACTS ARE OFFERED.
If we receive such due proof during the first seven policy years, the death
benefit is the greater of:
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any incurred
taxes; or
2. the policy value on the date we receive due proof of
last surviving annuitant's death.
If we receive such due proof after the first seven policy years, the death
benefit is the greatest of:
1. item "1." above; or
2. item "2." above; or
3. the policy value at the end of the most recent 7
policy year period preceding the date we receive due proof of
last surviving annuitant's death, adjusted for any of the
following items that occur after such last 7 policy year
period: a) less any partial withdrawals, including applicable
surrender charges; b) less any incurred taxes; and c) plus any
premiums paid. The 7 policy year periods are measured from the
policy date (i.e., 7, 14, 21, 28, etc.). No further step-ups in
Death Benefits will occur after the age of 80.
THE FOLLOWING APPLIES ONLY TO CONTRACTS ISSUED PRIOR TO MAY 1, 1995 OR SUCH
LATER DATE AS APPLICABLE REGULATORY APPROVALS ARE OBTAINED IN THE
JURISDICTION IN WHICH THE CONTRACTS ARE OFFERED.
If we receive such due proof during the first five policy years, the death
benefit is the greater of:
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any incurred
taxes; or
2. the policy value on the date we receive due proof of
last surviving annuitant's death.
If we receive such due proof after the first five policy years, the death
benefit is the greatest of:
1. item "1" above; or
2. item "2" above; or
3. the policy value at the end of the most recent 5
policy year period preceding the date we receive due proof of
last surviving annuitant's death, adjusted for any of the
following items that occur after such last 5 policy year
period: a) less any partial withdrawals, including
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<PAGE> 44
applicable surrender charges; b) less any incurred taxes; and c)
plus any premiums paid. The 5 policy year periods are measured
from the policy date (i.e., 5, 10, 15, 20, etc.).
No death benefit is payable if the policy is surrendered before the last
surviving annuitant's death.
PROCEEDS ON DEATH OF ANY OWNER BEFORE OR AFTER ANNUITY DATE OR MATURITY DATE
If you are not the annuitant, and we receive due proof of your death before the
annuity date or maturity date we will pay the beneficiary the policy value as
of the date we receive due proof of your death. If you are the annuitant, and
we receive due proof of your death before the annuity date or maturity date we
will pay the beneficiary the death benefit described in "Proceeds on Death of
Annuitant Before Annuity Date or Maturity Date." If any owner dies before the
annuity date, Federal tax law requires the policy value be distributed within
five years after the date of such owner's death regardless of whether such
owner is or is not an annuitant, unless such owner's spouse is the designated
beneficiary, in which case the policy may be continued with the surviving
spouse as the new owner. All such distributions will be made in accordance
with the requirements of the Investment Company Act of 1940.
A "designated beneficiary" is the person designated by you as a beneficiary and
to whom the benefits of the policy pass by reason of an owner's death and must
be a natural person.
If any owner dies on or after the earlier of the annuity date or maturity date,
any remaining payments must be distributed at least as rapidly as under the
payment option in effect on the date of such owner's death.
The distribution requirements described above will be considered satisfied as
to any portion of the proceeds:
1. payable to or for the benefit of a designated beneficiary; and
2. which is distributed over the life (or period not exceeding
the life expectancy) of that beneficiary, provided that the
beneficiary is a natural person and such distributions begin
within one year of the owner's death.
If you are not a natural person, the primary annuitant as determined in
accordance with Section 72(s) of the Code (i.e., the individual the events in
the life of whom are of primary importance in effecting the timing or amount of
the payout under the policy) will be treated as an owner for purposes of these
distribution requirements, and any change in the primary annuitant will be
treated as the death of an owner.
PARTIAL WITHDRAWALS
You may withdraw part of the cash surrender value at any time before the
earlier of the death of the last surviving annuitant, the annuity date or
maturity date, subject to these limits:
1. the Company's minimum partial withdrawal, currently $250;
2. the maximum partial withdrawal is the amount that would
leave a cash surrender value of $5,000;
3. a partial withdrawal request which would reduce the amount
in a sub-account or a Guarantee Period under the Fixed Account
below $500 will be treated as a request for a full withdrawal of
the amount in that sub-account or a Guarantee Period; and
4. a partial withdrawal request for an amount exceeding $10,000
must be accompanied by a guarantee of the owner's signature by a
commercial bank, trust company, or savings and loan.
On the date we receive your written notice for a partial withdrawal at our Home
Office, we will withdraw the amount of the partial withdrawal from the policy
value, and we will then deduct any applicable surrender charge from the
remaining policy value. The Company reserves the right to change its minimum
partial withdrawal amount requirements.
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<PAGE> 45
You may specify the amount to be withdrawn from certain sub-accounts or
Guarantee Periods under the Fixed Account. If you do not provide this
information to us, we will withdraw proportionately from the sub-accounts and
the Guarantee Periods under the Fixed Account in which you are invested. If
you do provide this information to us, but the amount in the designated
sub-accounts and Guarantee Periods is inadequate to comply with your withdrawal
request, we will first withdraw from the specified sub-accounts and the
Guarantee Periods under the Fixed Account. The remaining balance will be
withdrawn proportionately from the other sub-accounts and the Guarantee Periods
in which you are invested.
Any partial or systematic withdrawal may be included in the owner's gross
income in the year in which the withdrawal occurs, and may be subject to
federal income tax, including a penalty tax equal to 10% of the amount treated
as taxable income, and the Code restricts certain distributions under
Tax-Sheltered Annuity Plans and other qualified plans. See "Federal Tax
Status".
SYSTEMATIC WITHDRAWAL PRIVILEGE ("SWP")
You may elect to withdraw a fixed-level amount from the sub-account(s) and the
Guarantee Period(s) under the Fixed Account on a monthly, quarterly, or
semi-annual basis beginning 30 days after the Effective Date, if we receive
your written notice on our form and the policy meets the Company's minimum
premium, currently $25,000, and in accordance with "Partial Withdrawals" above
(when surrender charges are applicable). No minimum is necessary when
Surrender Charges are not applicable. While Surrender Charges are applicable,
each year you may withdraw as follows:
1. Up to 100% of positive investment earnings of each variable
sub-account available at the time the SWP is executed/processed;
PLUS
2. Up to 100% of current policy year's interest on the FIXED
ACCOUNT available at the time the SWP is executed/processed; PLUS
3. Up to 10% of total premiums still subject to a surrender charge;
PLUS
4. Up to 100% of total premiums NOT SUBJECT TO A SURRENDER CHARGE.
NOTE: Withdrawals other than from the one year Guarantee Period will
be subject to a Market Value Adjustment.
When no Surrender Charges are applicable, the entire policy is available for
systematic withdrawal. The Systematic Withdrawal Privilege will end at the
earliest of the date: when the sub-account(s) and Guarantee Period(s) you
specified for these withdrawals has no remaining amount to withdraw; or the
cash surrender value is reduced to $5,000; or you elect to pay premiums by
pre-authorized check; or we receive your written notice to end this privilege;
or we elect to discontinue this privilege upon 30 days written notice to you.
Use of this privilege during a policy year counts as your first 10% free
withdrawal of total premiums under the "Surrender Charge" provision.
References to partial withdrawals in other provisions of this Prospectus
include systematic withdrawals. If applicable, a charge for premium taxes may
be deducted from each systematic withdrawal payment. The Company reserves the
right to change its minimum systematic withdrawal amount requirements.
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<PAGE> 46
PORTFOLIO REBALANCING ("REBALANCING")
Portfolio Rebalancing is an investment strategy in which, on a quarterly,
semi-annual or annual basis, your policy value in the sub-accounts only is
reallocated back to its original portfolio allocation, regardless of changes in
individual portfolio values from the time of the last Rebalancing. We make no
representation or guarantee that Rebalancing will result in a profit, protect
you against loss or ensure that you meet your financial goals.
To initiate Rebalancing, we must receive your written notice on our form.
Participation in Rebalancing is voluntary and can be modified or discontinued
at any time by you in writing on our form. Portfolio Rebalancing is not
available for amounts invested and earnings thereon in the Fixed Account.
Once elected, we will continue to perform Rebalancing until we are instructed
otherwise. We reserve the right to change our procedures or discontinue
offering Rebalancing upon 30 days written notice to you.
LOANS
The Company may offer a loan privilege to owners of policies issued in
connection with Section 403(b) qualified plans that are not subject to Title I
of ERISA. If offered, owners of such policies may obtain loans using the
policy as the only security for the loan. Loans are subject to provisions of
the Code and to applicable retirement program rules (collectively, "loan
rules"). Tax advisers and retirement plan fiduciaries should be consulted
prior to exercising loan privileges. Policy loans that satisfy certain
requirements with respect to loan amount and repayment are not treated as
taxable distributions. If these requirements are not satisfied, or if the
policy terminates while a loan is outstanding, the loan balance will be treated
as a taxable distribution and may be subject to penalty tax, and the treatment
of the policy under Section 403(b) may be adversely affected.
If loans are offered, the following will apply:
Under the terms of the policy, qualified policies have a maximum loan
value equal to 80% of the policy value, although loan rules may serve to
reduce such maximum loan value in some cases. The amount available for
a loan at any given time is the loan value less any outstanding debt.
Debt equals the amount of any loans plus accrued interest. Loans will
be made only upon written request from the owner. The Company will make
loans within seven days of receiving a properly completed loan
application (applications are available from the Company), subject to
postponement under the same circumstances that payment of withdrawals
may be postponed. See "Partial Withdrawals".
When an owner requests a loan, the Company will reduce the owner's
investment in the investment accounts and transfer the amount of the
loan to the loan account, a part of the Company's general account. The
owner may designate the investment accounts from which the loan is to be
withdrawn. Absent such a designation, the amount of the loan will be
withdrawn from the investment accounts in accordance with the rules for
making partial withdrawals. See "Partial Withdrawals". The policy
provides that owners may repay policy debt at any time. Under
applicable loan rules, loans generally must be repaid within five years,
repayments must be made at least quarterly and repayments must be made
in substantially equal amounts. When a loan is repaid, the amount of
the repayment will be transferred from the loan account to the
investment accounts. The owner may designate the investment accounts to
which a repayment is to be allocated. Otherwise, the repayment will be
allocated in the same manner as the owner's most recent premium (for
policies issued after April 30, 1995, or such later date as regulatory
approval is obtained) or most recent premium (for policies issued prior
to May 1, 1995, or such later date as regulatory approval is obtained).
On each policy anniversary, the Company will
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<PAGE> 47
transfer from the investment accounts to the loan account the amount by
which the debt on the policy exceeds the balance in the loan account.
The Company charges interest of 6% per year on policy loans. Loan
interest is payable in arrears and, unless paid in cash, the accrued
loan interest is added to the amount of the debt and bears interest at
6% as well. The Company credits interest with respect to amounts held
in the loan account at a rate of 4% per year. Consequently, the net
cost of loans under the policy is 2%. If on any date debt under a
policy exceeds the policy value, the policy will be in default. In such
case the owner will receive a notice indicating the payment needed to
bring the policy out of default and will have a thirty-one day grace
period within which to pay the default amount. If the required payment is
not made within the grace period, the policy will be foreclosed
(terminated without value).
The amount of any debt will be deducted from the minimum death benefit.
See "Proceeds on Death of Last Surviving Annuitant Before Annuity Date
or Maturity Date". In addition, debt, whether or not repaid, will have
a permanent effect on the policy value because the investment results of
the investments accounts will apply only to the unborrowed portion of
the policy value. The longer debt is outstanding, the greater the
effect is likely to be. The effect could be favorable or unfavorable.
If the investment results are greater than the rate being credited on
amounts held in the loan account while the debt is outstanding, the
policy value will not increase as rapidly as it would have if no debt
were outstanding. If investment results are below that rate, the policy
value will be higher than it would have been had no debt been
outstanding.
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS AND TRANSFERS -
POSTPONEMENT
We will usually pay any proceeds payable, amounts partially withdrawn, or the
cash surrender value within seven calendar days after:
1. we receive your written notice for a partial withdrawal or a
cash surrender; or
2. the date chosen for any systematic withdrawal; or
3. we receive due proof of your death or the death of the last
surviving annuitant.
However, we can postpone the payment of proceeds, amounts withdrawn, the cash
surrender value, or the transfer of amounts between sub-accounts if:
1. the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on the exchange is
restricted as determined by the SEC; or
2. the SEC permits by an order the postponement for the
protection of policyowners; or
3. the SEC determines that an emergency exists that would make
the disposal of securities held in the Variable Account or the
determination of the value of the Variable Account's net assets
not reasonably practicable.
If the cash surrender value payable at a surrender, partial withdrawal or in
a lump sum on the annuity date or maturity date is not mailed or delivered
within ten working days after we receive the documentation necessary to
complete the transaction, we will add interest from the date we receive the
necessary documentation, unless the amount of such interest is less than $25.
The rate of interest we will apply is the rate the company pays for dividends
on deposit in our whole life insurance portfolio. We guarantee that the
interest rate will never be less than 2.5%.
We have the right to defer payment of any partial withdrawal, cash surrender,
or transfer from the Fixed Account for up to six months from the date we
receive your written notice for a withdrawal, surrender or transfer.
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<PAGE> 48
CHARGES AGAINST THE POLICY, VARIABLE ACCOUNT, AND FUNDS
SURRENDER CHARGE
No deduction for a sales charge is made when premiums are paid. However, a
surrender charge (contingent deferred sales charge) will be deducted when
certain partial withdrawals and cash surrenders are made to at least
partially reimburse us for certain expenses relating to the sale of the
policy, including commissions to registered representatives and other
promotional expenses. A surrender charge may also be applied to the proceeds
paid on the annuity date, unless the proceeds are applied under Payment
Option 1.
For the purpose of determining if any surrender charge applies and the amount
of such charge, partial withdrawals and surrenders are taken according to
these rules from policy value attributable to premiums or investment earnings
in the following order:
<TABLE>
<CAPTION>
SURRENDER CHARGE
----------------
<S> <C>
1. Up to 100% of positive investment earnings of each variable
sub-account available at the time the request is made, once a policy
year, PLUS .................................................................... None
2. Up to 100% of current policy year's interest on the FIXED ACCOUNT at the
time the request for surrender/withdrawal is made, once a policy
year, PLUS .................................................................... None
3. Up to 10% of total premiums STILL SUBJECT TO A SURRENDER CHARGE,
once a policy year, PLUS ...................................................... None
4. Up to 100% of those premiums NOT SUBJECT TO A SURRENDER CHARGE,
available at any time.......................................................... None
5. Premiums subject to a surrender charge:
For policies issued prior to May 1, 1995 or such later date as applicable regulatory
approvals are obtained in the jurisdiction in which the contracts are offered
(For 5 years from the date of payment, each premium is subject to a 6% surrender
charge. After the 5th year, no surrender charge will apply to such payment) .. 6%
For policies issued after April 30, 1995 or such later date as applicable regulatory
approvals are obtained in the jurisdiction in which the contracts are offered:
Policy Years Since Premium Was Paid
-----------------------------------
..................................................................
Less than 1.................................................................. 6%
At least 1, but less than 2.................................................. 6%
At least 2, but less than 3.................................................. 5%
At least 3, but less than 4.................................................. 5%
At least 4, but less than 5.................................................. 4%
At least 5, but less than 6.................................................. 3%
At least 6, but less than 7.................................................. 2%
At least 7................................................................... None
</TABLE>
Any surrender charge will be deducted proportionately from the sub-account(s)
or the Guarantee Periods under the Fixed Account being surrendered or
partially withdrawn in relation to the amount(s) withdrawn. If the amount
remaining in a sub-account or a Guarantee Period after the withdrawal is
insufficient to cover the proportionate surrender charge deduction, the
balance of the surrender charge will be assessed proportionately from any
other sub-account and Guarantee Period in which you are invested.
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<PAGE> 49
POLICY ADMINISTRATION CHARGE
To cover the costs of providing certain administrative services attributable
to the policies and the operations of the Variable Account, including policy
records, communicating with policyowners, and processing transactions, we
deduct a policy administration charge of $30 for the prior policy year on
each policy anniversary. If the policy value on the policy anniversary is
$75,000 or more, we will waive the policy administration charge for the prior
policy year. We will also deduct this charge for the current policy year if
the policy is surrendered for its cash surrender value, unless the policy is
surrendered on a policy anniversary.
The charge will be assessed proportionately from any sub-accounts and the
Guarantee Periods under the Fixed Account in which you are invested. If the
charge is obtained from one of the sub-accounts, we will cancel the
appropriate number of units credited to this policy based on the unit value
at the end of the valuation period when the charge is assessed.
DAILY ADMINISTRATION FEE
At each valuation period, we deduct a daily administration fee at an
effective annual rate of 0.15% from the net assets of each sub-account of the
Variable Account. This daily administration fee is intended to reimburse us
for other administrative costs under the policies.
TRANSFER PROCESSING FEE
The first 12 transfers during each policy year are free under our current
policy, which we reserve the right to change. Although, the Company currently
does not assess a transfer fee for the 13th and each additional transfer in a
policy year, we reserve the right to assess a $25 transfer fee. For the
purposes of assessing the fee, each transfer request (which includes a
written notice or telephone call, but does not include dollar cost averaging
automatic transfers) is considered to be one transfer, regardless of the
number of sub-accounts or Guarantee Periods under the Fixed Account affected
by the transfer. The processing fee will be charged proportionately to the
receiving sub-account(s) and/or the Fixed Account. See "Transfers" for the
rules concerning transfers.
ANNUALIZED MORTALITY AND EXPENSE RISK CHARGE
The mortality risk we assume is the risk that annuitants may live for a
longer period of time than we estimated when we established our guarantees in
the policy. Because of these guarantees, each annuitant is assured that
their longevity will not have an adverse effect on the annuity payments they
receive. The mortality risk we assume also includes our guarantee to pay a
death benefit if the annuitant dies before the annuity date or maturity date.
The expense risk we assume is the risk that the surrender charges, policy
administration charges, daily administration fee, and transfer fees may be
insufficient to cover our actual future expenses.
The annual mortality and expense risk charge is deducted at each valuation
period from the assets of the Variable Account at an effective annual rate of
1.25% of the value of the net assets in the Variable Account. We guarantee
that the rate of this charge will never increase. This charge is not made
after the earlier of the annuity date or maturity date, and this
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<PAGE> 50
charge is not made against any Fixed Account value. This charge consists of
approximately 0.85% to cover the mortality risk, and approximately 0.40% to
cover the expense risk.
REDUCTION OR ELIMINATION OF SURRENDER CHARGES
The amount of the surrender charge on a policy may be reduced or eliminated
when some or all of the policies are to be sold to a group of individuals in
such a manner that results in savings of sales expenses. In determining
whether to reduce the surrender charge, the Company will consider certain
factors including the following:
1. The size and type of group to which the sales are to be made
will be considered. Generally, sales expenses for a larger group
are smaller than for a smaller group because of the ability to
implement large numbers of sales with fewer sales contacts.
2. The total amount of premiums to be received will be
considered. Per dollar sales expenses are likely to be less on
larger premiums than on smaller ones.
3. Any prior or existing relationship with the Company will be
considered. Policy sales expenses are likely to be less when
there is a prior or existing relationship because of the
likelihood of implementing more sales with fewer sales contacts.
4. The level of commissions paid to selling broker/dealers will
be considered. Certain broker/dealers may offer policies in
connection with financial planning programs offered on a fee for
service basis. In view of the financial planning fees, such
broker/dealers may elect to receive lower commissions for sales
of the policies, thereby reducing the Company's sales expenses.
If, after consideration of the foregoing factors, it is determined that there
will be a reduction in sales expenses, the Company will provide a reduction
in the surrender charge. The surrender charge will be eliminated when a
policy is issued to an officer, director, employee, or relative thereof of:
the Company; The Canada Life Assurance Company; J. & W. Seligman Co.
Incorporated; or any of their affiliates. In no event will reduction or
elimination of the surrender charge be permitted where such reduction or
elimination will be discriminatory to any person.
REDUCTION OR ELIMINATION OF POLICY ADMINISTRATION CHARGE
The amount of the policy administration charge on a policy may be reduced or
eliminated when some or all of the policies are to be sold to a group of
individuals in such a manner that results in savings of administration
expenses. In addition, if the policy value on the policy anniversary is
$75,000 or more, we will waive the policy administration charge for the prior
policy year. In determining whether to reduce or eliminate the
administration charges, the Company will consider certain factors including
the following:
1. The size and type of group to which administrative services
are to be provided will be considered.
2. The total amount of premiums to be received will be
considered.
If, after consideration of the foregoing factors, it is determined that there
will be a reduction or elimination of administration expenses, the Company
will provide a reduction in the policy administration charge. In no event
will reduction or elimination of the administration charge be permitted where
such reduction or elimination will be discriminatory to any person.
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TAXES
No premium tax is currently payable under New York law. We reserve the right
to deduct any premium taxes payable in respect of future premiums in the
event New York law should change.
When any tax is deducted from the policy value, it will be deducted
proportionately from the sub-accounts and the Guarantee Periods under the
Fixed Account in which you are invested.
We reserve the right to charge or provide for any taxes levied by any
governmental entity, including:
1. taxes that are against or attributable to premiums, policy
values or annuity payments; or
2. taxes that we incur which are attributable to investment
income or capital gains retained as part of our reserves under
the policies or from the establishment or maintenance of the
Variable Account.
OTHER CHARGES INCLUDING INVESTMENT ADVISORY FEES
Each portfolio is responsible for all of its operating expenses. In
addition, fees for investment advisory services are charged monthly from each
portfolio at an annual rate of the monthly net assets of the portfolio. The
Prospectus and Statement of Additional Information for each Fund provides
more information concerning the investment advisory fee, other charges
assessed against the portfolio(s) each Fund offers, and the investment
advisory services provided to such portfolio(s).
PAYMENT OPTIONS
The policy ends when we pay the proceeds on the earlier of the annuity date
or maturity date. On the annuity date, we will apply the policy value under
Payment Option 1, unless you have an election of a payment option on file at
our Home Office to receive the cash surrender value in a single sum, or to
receive a mutually agreed upon payment option (Payment Option 2). See
"Proceeds on Annuity Date or Maturity Date". We require the surrender of
your policy so that we may pay the cash surrender value or issue a
supplemental contract for the applicable payment option. The term "payee"
means a person who is entitled to receive payment under this section.
ELECTION OF OPTIONS
You may elect an option or revoke or change your election at any time before
the annuity date or maturity date while any annuitant is living. If an
election is not in effect at last surviving annuitant's death or if payment
is to be made in one sum under an existing election, the beneficiary may
elect one of the options. This election must be made within one year after
the last surviving annuitant's death and before any payment has been made.
An election of an option and any revocation or change must be made in a
written notice. It must be filed with our Home Office with the written
consent of any irrevocable beneficiary or assignee.
An option may not be elected and we will pay the proceeds in one sum if
either of the following conditions exist:
1. the amount to be applied under the option is less than
$2,000; or
2. any periodic payment under the election would be less than
$20.
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DESCRIPTION OF PAYMENT OPTIONS
Payment Option 1: Life Income
We will pay the proceeds in equal amounts at the beginning of each month,
during the payee's lifetime.
The amount of each payment will be determined from the tables in the policy
which apply to Payment Option 1, using the payee's age. Age will be
determined from the nearest birthday at the due date of the first payment.
Payment Option 2: Mutual Agreement
We will pay the proceeds according to other terms, if those terms are
mutually agreed upon.
PAYMENT DATES
The payment dates of the options will be calculated from the date on which
the proceeds become payable.
AGE AND SURVIVAL OF PAYEE
We have the right to require proof of age of the payee(s) before making any
payment. When any payment depends on the payee's survival, we will have the
right, before making the payment, to require proof satisfactory to us that
the payee is alive.
DEATH OF PAYEE
At the death of the payee, or the last survivor of the payees, any amount
remaining to be paid under this section will become payable in one sum,
unless specified otherwise.
BETTERMENT OF INCOME
The annuity benefits at the time the policy value is applied under a payment
option will not be less than those that would be provided by the application
of an amount defined in the policy to purchase any single premium annuity
policy offered by us at the time to the same class of annuitants. Such amount
will be the greater of the cash surrender value or 95% of what the cash
surrender value would be if there were no surrender charge.
OTHER POLICY PROVISIONS
OWNER OR JOINT OWNER
During any annuitant's lifetime and before the earlier of the annuity date or
maturity date, you have all the rights and privileges granted by the policy.
If you appoint an irrevocable beneficiary or assignee, then your rights will
be subject to those of that beneficiary or assignee.
During any annuitant's lifetime and before the earlier of the annuity date or
maturity date, you may name a new owner, joint owner or annuitant by giving
us written notice.
With respect to Qualified Policies generally, however, the contract may not
be assigned (other than to us), joint ownership is not permitted, and the
Owner must be the annuitant.
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BENEFICIARY
We will pay the beneficiary any proceeds payable on your death or the death
of the last surviving annuitant. During any annuitant's lifetime and before
the earlier of the annuity date or maturity date, you may name and change one
or more beneficiaries by giving us written notice. However, we will require
written notice from any irrevocable beneficiary or assignee specifying their
consent to the change.
We will pay the proceeds under the beneficiary appointment in effect at the
date of death. If you have not designated otherwise in your appointment, the
proceeds will be paid to the surviving beneficiary(ies) equally. If no
beneficiary is living when you die or the last surviving annuitant dies, or
if none has been appointed, the proceeds will be paid to you or to your
estate.
WRITTEN NOTICE
Written Notice must be signed by you, dated, and of a form and content
acceptable to us. Your written notice will not be effective until we receive
it at our Home Office. However, the change provided in your written notice
to name or change the owner or beneficiary will then be effective as of the
date you signed the written notice:
1. subject to any payments made or other action we take before
we receive and file your written notice; and
2. whether or not you or the last surviving annuitant are alive
when we receive and file your written notice.
PERIODIC REPORTS
We will mail you a report showing the following items about your policy:
1. the number of units credited to the policy and the dollar
value of a unit;
2. the policy value;
3. any premiums paid (for policies issued prior to January 26,
1996), withdrawals, and charges made since the last report; and
4. any other information required by law.
The information in the report will be as of a date not more than two months
before the date of the mailing. We will mail the report to you:
1. at least annually, or more often as required by law; and
2. to your last address known to us.
ASSIGNMENT
You may assign a nonqualified policy or an interest in it at any time before
the earlier of the annuity date or maturity date during any annuitant's
lifetime. An assignment must be in a written notice acceptable to us. It
will not be binding on us until we receive and file it at our Home Office.
We are not responsible for the validity of any assignment. Your rights and
the rights of any beneficiary will be affected by an assignment.
An assignment of a nonqualified policy may result in certain tax consequences
to the owner. See "Transfers, Assignment or Exchanges of a Policy".
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MODIFICATION
Upon notice to you, we may modify the policy, but only if such modification:
1. is necessary to make the policy or the Variable Account
comply with any law or regulation issued by a governmental agency
to which we are subject; or
2. is necessary to assure continued qualification of the policy
under the Code or other federal or state laws relating to
retirement annuities or variable annuity policies; or
3. is necessary to reflect a change in the operation of the Variable
Accounts; or
4. provides additional variable account and/or fixed
accumulation options.
In the event of any such modification, we may make any appropriate
endorsement to the policy.
YIELDS AND TOTAL RETURNS
From time to time, we may advertise yields, effective yields, and total
returns for the sub-accounts. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS
AND DO NOT INDICATE OR PROJECT FUTURE PERFORMANCE. Each sub-account may,
from time to time, advertise performance relative to certain performance
rankings and indices compiled by independent organizations. More detailed
information as to the calculation of performance information, as well as
comparisons with unmanaged market indices, appears in the Statement of
Additional Information.
Effective yields and total returns for the sub-accounts are based on the
investment performance of the corresponding portfolio of the Funds. The
Funds' performance in part reflects the Funds' expenses including any expense
reimbursement or fee waiver arrangements as previously described.
The yield of the Money Market Sub-Account refers to the annualized income
generated by an investment in the Sub-Account over a specified 7 day period.
The yield is calculated by assuming that the income generated for that 7 day
period is generated each 7 day period over a 52 week period and is shown as a
percentage of the investment. The effective yield is calculated similarly
but, when annualized, the income earned by an investment in the Sub-Account
is assumed to be reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed
reinvestment.
The yield of a sub-account (except the Money Market Sub-Account) refers to
the annualized income generated by an investment in the sub-account over a
specified 30 day or one month period. The yield is calculated by assuming
that the income generated by the investment during that 30 day or one month
period is generated each period over a 12 month period and is shown as a
percentage of the investment.
The total return of a sub-account refers to return quotations assuming an
investment under a policy has been held in the sub-account for various
periods of time including, but not limited to, a period measured from the
date the sub-account commenced operations. When a sub-account has been in
operation for 1, 5, and 10 years, respectively, the total return for these
periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a policy to the redemption value of that investment as of the last day
of each of the periods for which total return quotations are provided.
Average annual total return information shows the average percentage change
in the value of an investment in the sub-account from the beginning date of
the measuring period to
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the end of that period. This standardized version of average annual total
return reflects all historical investment results, less all charges and
deductions applied against the sub-account (including any surrender charge
that would apply if an Owner terminated the policy at the end of each period
indicated, but excluding any deductions for premium taxes).
We may, in addition, advertise total return performance information computed
on a different basis. We may present total return information computed on
the same basis as described above, except deductions will not include the
surrender charge. This presentation assumes that the investment in the
policy persists beyond the period when the surrender charge applies,
consistent with the long-term investment and retirement objectives of the
policy.
We may compare the performance of each sub-account in advertising and sales
literature to the performance of other variable annuity issuers in general or
to the performance of particular types of variable annuities investing in
mutual funds, or investment portfolios of mutual funds with investment
objectives similar to each of the sub-accounts. Lipper Analytical Services,
Inc. ("Lipper") and the Variable Annuity Research Data Service ("VARDS") are
independent services which monitor and rank the performances of variable
annuity issuers in each of the major categories of investment objectives on
an industry-wide basis. Other services or publications may also be cited in
our advertising and sales literature.
Lipper's rankings include variable life issuers as well as variable annuity
issuers. VARDS rankings compare only variable annuity issuers. The
performance analysis prepared by Lipper and VARDS each rank such issuers on
the basis of total return, assuming reinvestment of distributions, but do not
take sales charges, redemption fees or certain expense deductions at the
separate account level into consideration. In addition, VARDS prepares risk
adjusted rankings, which consider the effects of market risk on total return
performance. This type of ranking provides data as to which funds provide
the highest total return within various categories of funds defined by the
degree of risk inherent in their investment objectives.
We may also compare the performance of each sub-account in advertising and
sales literature to the Standard & Poor's composite index of 500 common
stocks, a widely used index to measure stock market performance. This
unmanaged index does not reflect any "deduction" for the expense of operating
or managing an investment portfolio. We may also make comparison to Lehman
Brothers Government/Corporate Bond Index, an index that includes the Lehman
Brothers Government Bond and Corporate Bond Indices. These indices are total
rate of return indices. The Government Bond Index includes the Treasury Bond
Index (public obligations of the U.S. Treasury) and the Agency Bond Index
(publicly issued debt of U.S. Government agencies, quasi-federal
corporations, and corporate debt guaranteed by the U.S. Government). The
Corporate Bond Index includes publicly issued, fixed rate, nonconvertible
investment grade dollar-denominated, SEC registered corporate debt. All
issues have at least a one-year maturity, and all returns are at market value
inclusive of accrued interest. Other independent indices such as those
prepared by Lehman Brothers Bond Indices may also be used as a source of
performance comparison.
We may also compare the performance of each sub-account in advertising and
sales literature to the Dow Jones Industrial Average, a stock average of 30
blue chip stock companies that does not represent all new industries. Other
independent averages such as those prepared by Dow Jones & Company, Inc. may
also be used as a source of performance comparison. Day-to-day changes may
not be reflective of the overall market when an average is composed of a
small number of companies.
TAX DEFERRAL
Under current tax laws any increase in policy value is generally not taxable
to you or any annuitant until received, subject to certain exceptions. See
"FEDERAL TAX STATUS". This deferred tax treatment may be beneficial to you
in building assets in a long-range investment program.
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We may also distribute sales literature or other information including the
effect of tax-deferred compounding on a sub-account's investment returns, or
returns in general, which may be illustrated by tables, graphs, charts or
otherwise, and which may include a comparison, at various points in time, of
the return from an investment in a policy (or returns in general) on a
tax-deferred basis (assuming one or more tax rates) with the return on a
currently taxable basis where allowed by state laws. All income and capital
gains derived from sub-account investments are reinvested and compound
tax-deferred until distributed. Such tax-deferred compounding can result in
substantial long-term accumulation of assets, provided that the investment
experience of the underlying portfolios of the Funds is positive.
FEDERAL TAX STATUS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
INTRODUCTION
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may
receive a distribution under the annuity policy we issue. Any person
concerned about these tax implications should consult a tax adviser before
initiating any transaction. This discussion is based upon general
understanding of the present Federal income tax laws. No representation is
made as to the likelihood of the continuation of the present Federal income
tax laws or of the current interpretation by the Internal Revenue Service.
Moreover, no attempt has been made to consider any applicable state or other
tax laws.
The policy may be purchased on a nonqualified tax basis ("Nonqualified
Policy") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Policy"). The Qualified Policy was
designed for use by individuals whose premium payments are comprised of
proceeds from and/or contributions under retirement plans which are intended
to qualify as plans entitled to special income tax treatment under Sections
401(a), 401(k), 403(a), 403(b), 408 or 457 of the Code. The ultimate effect
of Federal income tax on the amounts held under a policy, or annuity
payments, and on the economic benefit to the owner, any annuitant, or the
beneficiary depends on the type of retirement plan, on the tax and
employment status of the individual concerned and on our tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Policy with proceeds from a tax-qualified plan and receiving distributions
from a Qualified Policy in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Policies should seek legal and
tax advice regarding the suitability of a policy for their situation, the
applicable requirements, and the tax treatment of the rights and benefits of
a policy. The following discussion assumes that Qualified Policies are
purchased with proceeds from and/or contributions under retirement plans that
receive the intended special Federal income tax treatment.
THE COMPANY'S TAX STATUS
The Variable Account is not separately taxed as a "regulated investment
company" under Subchapter M of the Code. The operations of the Variable
Account are a part of and taxed with our operations. We are taxed as a life
insurance company under Subchapter L of the Code.
At the present time, we make no charge for any Federal, state or local taxes
(other than premium taxes) that we incur which may be attributable to the
Variable Account or to the policies. However, we do reserve the right to
make a charge in the future for any such tax or other economic burden
resulting from the application of the tax laws that we determine to be
properly attributable to the Variable Account or to the policies.
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TAX STATUS OF THE POLICY
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code provides that separate account investments
underlying a policy must be "adequately diversified" in accordance with
Treasury regulations in order for the policy to qualify as an annuity policy
under Section 72 of the Code. The Variable Account, through each portfolio
of CLASF, Fidelity VIP, Fidelity VIP II, Seligman, Dreyfus, Dreyfus Socially
Responsible, Alger American, Montgomery, and Berger Trust intends to comply
with the diversification requirements prescribed in regulations under Section
817(h) of the Code, which affect how the assets in the various divisions of
the Accounts may be invested. Although we do not have control over CLASF,
Fidelity VIP, Fidelity VIP II, Seligman, Dreyfus, Dreyfus Socially
Responsible, Alger American, or Montgomery in which the Variable Account
invests, we believe that each portfolio in which the Variable Account owns
shares will meet the diversification requirements and that therefore the
Policy will be treated as an annuity under the Code.
In certain circumstances, variable annuity policyowners may be considered the
owners, for Federal income tax purposes, of the assets of the separate
account used to support their policies. In those circumstances, income and
gains from the separate account assets would be includable in the variable
annuity policyowner's gross income. Several years ago, the IRS stated in
published rulings that a variable policyowner will be considered the owner of
separate account assets if the policyowner possesses incidents of ownership
in those assets, such as the ability to exercise investment control over the
assets. More recently, the Treasury Department announced, in connection with
the issuance of regulations concerning investment diversification, that those
regulations "do not provide guidance concerning the circumstances in which
investor control of the investments of a segregated asset account may cause
the investor, rather than the insurance company, to be treated as the owner
of the assets in the account." This announcement also stated that guidance
would be issued by way of regulations or rulings on the "extent to which
policyholders may direct their investments to particular sub-accounts without
being treated as owners of the underlying assets."
The ownership rights under the policy are similar to, but different in
certain respects from, those described by the IRS in rulings in which it was
determined that policyowners were not owners of separate account assets. For
example, the owner of the policy has the choice of more subdivisions to which
to allocate premiums and policy values than such rulings, has a choice of
investment strategies different from such rulings, and may be able to
transfer among subdivisions more frequently than in such rulings. These
differences could result in the policyowner being treated as the owner of the
assets of the Variable Account. In addition, we do not know what standards
will be set forth in the regulations or rulings which the Treasury Department
has stated it expects to issue. We therefore reserve the right to modify the
policy as necessary to attempt to prevent the policyowner from being
considered the owner of the assets of the Variable Account.
REQUIRED DISTRIBUTIONS
In addition to the requirements of Section 817(h) of the Code, in order to be
treated as an annuity policy for Federal income tax purposes, Section 72(s)
of the Code requires any Nonqualified Policy to provide that (a) if any owner
dies on or after the annuity commencement date but prior to the time the
entire interest in the Policy has been distributed, the remaining portion of
such interest will be distributed at least as rapidly as under the method of
distribution being used as of the date of that owner's death; and (b) if any
owner dies prior to the annuity commencement date, the entire interest in the
Policy will be distributed within five years after the date of the owner's
death. These requirements will be considered satisfied as to any portion of
the owner's interest which is payable to or for the benefit of a "designated
beneficiary" and which is distributed over the life of such "designated
beneficiary" or over a period not extending beyond the life expectancy of
that beneficiary, provided that such distributions begin within one year of
that owner's death. The owner's "designated
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beneficiary" is the person designated by such owner as a beneficiary and to
whom proceeds of the Policy passes by reason of death and must be a natural
person. However, if the owner's "designated beneficiary" is the surviving
spouse of the owner, the Policy may be continued with the surviving spouse
as the new owner.
The Nonqualified Policies contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, 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 requirements of Code Section 72(s) when clarified by regulation or
otherwise.
Other rules may apply to Qualified Policies [see "Minimum Distribution
Requirements ("MDR") for IRA's].
The following discussion assumes that the policies will qualify as annuity
contracts for Federal income tax purposes.
TAXATION OF ANNUITIES
IN GENERAL
Section 72 of the Code governs taxation of annuities in general. We believe
that an owner who is a natural person generally is not taxed on increases in
the value of a policy until distribution occurs by withdrawing all or part of
the accumulation value (e.g., partial withdrawal or surrenders) or as annuity
payments under the annuity option elected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the accumulation
value (and in the case of a Qualified Policy, any portion of an interest in
the qualified plan) generally will be treated as a distribution. The taxable
portion of a distribution (in the form of a single sum payment or an annuity)
is taxable as ordinary income.
The owner of any annuity policy who is not a natural person generally must
include in income any increase in the excess of the policy's accumulation
value over the policy's "investment in the contract" during the taxable year.
There are some exceptions to this rule and a prospective owner that is not a
natural person may wish to discuss these with a tax adviser.
The following discussion generally applies to policies owned by natural
persons.
WITHDRAWALS/DISTRIBUTIONS
In the case of a distribution under a Qualified Policy (other than a Section
457 plan), under Section 72(e) of the Code a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the
portion, if any, of any premium payments paid by or on behalf of any
individual under a Policy which was not excluded from the individual's gross
income. For policies issued in connection with qualified plans, the
"investment in the contract" can be zero. Special tax rules may be available
for certain distributions from Qualified Policies.
In the case of a withdrawal/distribution (e.g. surrender, partial withdrawal
of systematic withdrawal) under a Nonqualified Policy before the annuity
date, under Code Section 72(e) amounts received are generally first treated
as taxable income to the extent that the accumulation value immediately
before the withdrawal exceeds the "investment in the contract" at that time.
Any additional amount withdrawn is not taxable.
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ANNUITY PAYMENTS
Although tax consequences may vary depending on the annuity option elected
under an annuity policy, under Code Section 72(b), generally gross income
does not include that part of any amount received as an annuity under an
annuity policy that bears the same ratio to such amount as the investment in
the contract bears to the expected return at the annuity starting date. For
variable income payments, in general, the taxable portion (prior to recovery
of the investment in the contract) is determined by a formula which
establishes the specific dollar amount of each annuity payment that is not
taxed. The dollar amount is determined by dividing the "investment in the
contract" by the total number of expected periodic payments. For fixed
income payments (prior to recovery of the investment in the contract), in
general, there is no tax on the amount of each payment which represents the
same ratio that the "investment in the contract" bears to the total expected
value of the annuity payments for the term of the payments; however, the
remainder of each income payment is taxable. In all cases, after the
"investment in the contract" is recovered, the full amount of any additional
annuity payments is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a policy because of the death of an owner or
the last surviving annuitant. Generally, such amounts are includable in the
income of the recipient as follows:
1. if distributed in a lump sum, they are taxed in the same
manner as a full surrender of the policy; or
2. if distributed under a payment option, they are taxed in the
same manner as annuity payments.
For these purposes, the investment in the policy is not affected by an
owner or annuitant's death. That is the investment in the policy
remains the amount of any purchase payments paid which were not excluded
from gross income.
PENALTY TAX ON CERTAIN WITHDRAWALS
In the case of a distribution pursuant to a Nonqualified Policy, there may be
imposed a Federal penalty tax equal to 10% of the amount treated as taxable
income. In general, however, there is no penalty tax on distributions:
1. made on or after the taxpayer reaches age 59 1/2;
2. made on or after the death of an owner (or if the owner is
not an individual, the death of the primary annuitant);
3. attributable to the owner becoming disabled;
4. as part of a series of substantially equal periodic payments
(not less frequently than annually) for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and beneficiary;
5. made under an annuity policy that is purchased with a single
premium when the annuity starting date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during the
annuity period; and
6. made under certain annuities issued in connection with
structured settlement agreements.
Other tax penalties may apply to certain distributions under a Qualified
Policy, as well as to certain contributions, loans and other circumstances.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A POLICY
A transfer of ownership, the designation of an annuitant or other beneficiary
who is not also the owner, the designation of certain annuity starting dates,
or the exchange of a policy may result in certain tax consequences to the
owner that are not
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discussed herein. An owner contemplating any such transfer, assignment,
designation, or exchange of a policy should contact a tax adviser with respect
to the potential tax effects of such a transaction.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's Federal income tax liability at rates that vary according to
the type of distribution and the recipient's tax status. Recipients,
however, generally are provided the opportunity to elect not to have tax
withheld from distributions. Effective January 1, 1993, withholding is
mandatory for certain distributions from Qualified contracts.
MULTIPLE POLICIES
Section 72(e)(11) of the Code treats all nonqualified deferred annuity
policies entered into after October 21, 1988, that are issued by us (or our
affiliates) to the same owner during any calendar year as one annuity policy
for purposes of determining the amount includable in gross income under Code
Section 72(e). The effects of this rule are not yet clear; however, it could
affect the time when income is taxable and the amount that might be subject
to the 10% penalty tax described above. In addition, the Treasury Department
has specific authority to issue regulations that prevent the avoidance of
Section 72(e) through the serial purchase of annuity contracts or otherwise.
There may also be other situations in which the Treasury may conclude that it
would be appropriate to aggregate two or more annuity contracts purchased by
the same owner. Accordingly, a policyowner should consult a tax adviser
before purchasing more than one annuity contract.
POSSIBLE TAX CHANGES
In recent years, legislation has been proposed that would have adversely
modified the federal taxation of certain annuities. For example, one such
proposal would have changed the tax treatment of non-qualified annuities that
did not have "substantial life contingencies" by taxing income as it is
credited to the annuity. Although as of the date of this prospectus Congress
is not considering any legislation regarding the taxation of annuities, there
is always the possibility that the tax treatment of annuities could change by
legislation or other means (such as IRS regulations, revenue rulings, and
judicial decisions). Moreover, it is also possible that any legislative
change could be retroactive (that is, effective prior to the date of such
change).
TAXATION OF QUALIFIED PLANS
The policies are designed for use with several types of qualified plans. The
tax rules applicable to participants in these qualified plans vary according
to the type of plan and the terms and conditions of the plan itself. Special
favorable tax treatment may be available for certain types of contributions
and distributions. Adverse tax consequences may result from contributions in
excess of specified limits, distributions prior to age 59 1/2 (subject to
certain exceptions), distributions that do not conform to specified
commencement and minimum distribution rules, aggregate distributions in
excess of a specified annual amount, and in certain other circumstances.
Therefore, no attempt is made to provide more than general information about
the use of the policies with the various types of qualified retirement plans.
Policyowners, annuitants, and beneficiaries are cautioned that the rights of
any person to any benefits under these qualified retirement plans may be
subject to the terms and conditions of the plans themselves, regardless of
the terms and conditions of the policy, but we shall not be bound by the
terms and conditions of such plans to the extent such terms contradict the
policy, unless we consent. Some retirement plans are subject to distribution
and other requirements that are not incorporated in the administration of
the policies. Owners are responsible for determining that contributions,
distributions and other
55
<PAGE> 61
transactions with respect to the policies satisfy applicable law. Brief
descriptions follow of the various types of qualified retirement plans in
connection with which we will issue a policy. We will amend the policy as
instructed to conform it to the applicable legal requirements for such plan.
INDIVIDUAL RETIREMENT ANNUITIES AND SIMPLIFIED EMPLOYEE PENSIONS (SEP/IRAS)
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an "Individual Retirement Annuity" or
"IRA". These IRAs are subject to limits on the amount that may be
contributed, the persons who may be eligible and on the time when
distributions may commence. Also, distributions from certain other types of
qualified retirement plans may be "rolled over" on a tax-deferred basis into
an IRA. Sales of the policy for use with IRAs may be subject to special
requirements of the Internal Revenue Service.
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees, using an IRA for such purpose, if certain
criteria are met. Under these plans the employer may, within specified
limits, make deductible contributions on behalf of the employee to an IRA.
Employers intending to use the policy in connection with such plans should
seek advice.
Purchasers of a policy for use with IRAs will be provided with supplemental
information required by the Internal Revenue Service or other appropriate
agency. Such purchasers will have the right to revoke their purchase within
seven days of the earlier of the establishment of the IRA or their purchase.
Purchasers should seek competent advice as to the suitability of the policy
for use with IRAs. The Internal Revenue Service has not reviewed the Policy
for qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
policy comports with IRA qualification requirements.
MINIMUM DISTRIBUTION REQUIREMENTS ("MDR") FOR IRAS
The Code requires that minimum distribution from an IRA begin no later than
April 1 of the year following the year in which the owner attains age
70 1/2(Failure to do so results in a penalty of 50% of the amount not
withdrawn. This penalty is in addition to normal income tax. We will
calculate the MDR only for funds invested in this Policy and subject to our
administrative guidelines, including but not limited to: 1) minimum
withdrawal amount of $250; 2) while surrender charges are applicable, up to
10% of total premium plus 100% of any sub-account earnings and 100% of
current policy year's Fixed Account interest may be withdrawn; and 3) use of
MDR counts as the once a policy year free withdrawal.
As an administrative practice, we will calculate and distribute an amount from
an IRA using the method contained in the Code's minimum distribution
requirements. The annual distribution is determined by dividing the prior
December 31st value for the policy by a life expectancy factor. The factor
will be based on either your life or the life expectancies of your life and
your designated beneficiary, as directed by you, and based on tables found in
the IRS' regulations. Factors are redetermined for each year's distribution.
The value of the policy to be used in this calculation is the policy value on
the December 31st prior to the year for which each subsequent payment is
made. The life expectancy factor is determined by using the appropriate IRS
chart based on one of the following circumstances:
1. Your life expectancy (Single Life Expectancy);
2. Joint life expectancy between you and your designated beneficiary
(Joint Life and Last Survivor Expectancy); or
3. Your life expectancy and a non-spouse beneficiary more than 10
years younger than you (Minimum Distribution Incident Benefit
Requirement).
The Code Minimum Distribution Requirements also apply to distribution from
qualified plans other than IRA's. For qualified plans under section 401(a),
401(k), 403(a), 403(b), and 457, the code requires that distributions
generally must commence no later than the later of (i) April 1 of the
calender year in which the owner (or plan participant) reaches age 70 1/2
(ii)
56
<PAGE> 62
retirement, and must be made in a specified form or manner. If the plan
participant is a "5%" owner (as defined in the code), distributions generally
must begin no later than the date described in (i). You are responsible for
ensuring that distributions from such plans satisfy the Code minimum
distribution requirements.
CORPORATE AND SELF-EMPLOYED (H.R.10 AND KEOGH) PENSION AND PROFIT-SHARING
PLANS
Sections 401(a), 401(k) and 403(a) of the Code permit corporate employers to
establish various types of tax-favored retirement plans for employees. The
Self-Employed Individual Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R.10" or "Keogh", permits self-employed individuals also to
establish such tax-favored retirement plans for themselves and their
employees. Such retirement plans may permit the purchase of the policies in
order to accumulate retirement savings under the plans. Adverse tax
consequences to the plan, to the participant or to both may result if this
policy is assigned or transferred to any individual as a means to provide
benefit payments. Employers intending to use the policy in connection with
such plans should seek advice.
DEFERRED COMPENSATION PLANS
Section 457 of the Code provides for certain deferred compensation plans.
These plans may be offered with respect to service for state governments,
local governments, political subdivisions, agencies, instrumentalities and
certain affiliates of such entities, and tax exempt organizations. The plans
may permit participants to specify the form of investment for their deferred
compensation account. All distributions are taxable as ordinary income.
Except for certain governmental plans, all investments are owned by the
sponsoring employer and are subject to the claims of the general creditors of
the employer.
TAX-SHELTERED ANNUITY PLANS
Section 403(b) of the Code permits public school systems and certain
tax-exempt organizations specified in Section 501(c)(3) to make payments to
purchase annuity policies for their employees. Such payments are excludable
from the employee's gross income (subject to certain limitations), but may be
subject to FICA (Social Security) taxes. Under Code requirements, Section
403(b) annuities generally may not permit distribution of: 1) elective
contributions made in years beginning after December 31, 1988; 2) earnings on
those contributions; and 3) earnings on amounts attributed to elective
contributions held as of the end of the last year beginning before January 1,
1989. Under Code requirements, distributions of such amounts will be allowed
only: 1) upon the death of the employee; or 2) on or after attainment of age
59 1/2; or 3) separation from service; or 4) disability; or 5) financial
hardship, except that income attributable to elective contributions may not
be distributed in the case of hardship. With respect to these restrictions,
the Company is relying upon a no-action letter dated November 28, 1988, from
the staff of the SEC to the American Council of Life Insurance, the
requirements for which have been or will be complied with by the Company.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the Federal tax consequences
under these policies are not exhaustive and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further,
the Federal income tax consequences discussed herein reflect our
understanding of current law and the law may change. Federal estate and
state and local estate, inheritance, and other tax consequences of ownership
or receipt of distributions under a Policy depend on the individual
circumstances of each owner or recipient of the distribution. A tax adviser
should be consulted for further information.
57
<PAGE> 63
DISTRIBUTION OF POLICIES
The policies will be offered to the public on a continuous basis, and we do
not anticipate discontinuing the offering of the policies. However, we
reserve the right to discontinue the offering. Applications for policies are
solicited by agents who are registered representatives of Canada Life of
America Financial Services, Inc. ("CLAFS"). CLAFS is a wholly owned
subsidiary of Canada Life Insurance Company of America, a Michigan
corporation. CLAFS, a Georgia corporation organized on January 18, 1988, is
registered with the SEC under the Securities Exchange Act of 1934 as a
broker-dealer and is a member of the National Association of Securities
Dealers, Inc. The policies may also be sold through other broker/dealers
registered under the Securities Exchange Act of 1934 whose representatives
are authorized by applicable law to sell variable annuity policies. CLAFS
will pay distribution compensation to selling broker/dealers in varying
amounts which, under normal circumstances, is not expected to exceed 6.5% of
premium payments under the policies. We may from time to time pay additional
compensation pursuant to promotional contracts. In some circumstances, we may
provide reimbursement of certain sales and marketing expenses. CLAFS will pay
a promotional agent fee for providing marketing support for the distribution
of the contracts.
CLAFS acts as the principal underwriter, as defined in the Investment Company
Act of 1940, of the policies for the Variable Account pursuant to a
distribution agreement involving CLAFS and us. CLAFS is not obligated to
sell any specific number of policies. CLAFS principal business address is
6201 Powers Ferry Road, NW, Atlanta, Georgia.
LEGAL PROCEEDINGS
There are at present no legal proceedings to which the Variable Account is a
party or the assets of the Variable Account are subject. We are not involved
in any litigation that is of material importance in relation to our total
assets or that relates to the Variable Account.
VOTING RIGHTS
To the extent deemed to be required by law and as described in the
Prospectuses for the Funds, shares held in the Variable Account and in our
general account will be voted by us at regular and special shareholder
meetings in accordance with instructions received from persons having voting
interests in the corresponding sub-accounts. If however, the Investment
Company Act of 1940 or any regulation thereunder should be amended, or if the
present interpretation thereof should change, or if we determine that we are
allowed to vote the shares in our own right, we may elect to do so.
The number of votes which are available to you will be calculated separately
for each sub-account of the Variable Account, and may include fractional
votes. The number of votes attributable to a sub-account will be determined
by applying your percentage interest, if any, in a particular sub-account to
the total number of votes attributable to that sub-account. You hold a
voting interest in each sub-account to which the Variable Account value is
allocated. You only have voting interest prior to the annuity date or
maturity date.
The number of votes which are available to you will be determined as of the
date coincident with the date established for determining shareholders
eligible to vote at the relevant meeting. Voting instructions will be
solicited by written communication prior to such meeting in accordance with
established procedures.
58
<PAGE> 64
Shares as to which no timely instructions are received and shares held by us
in a sub-account as to which you have no beneficial interest will be voted in
proportion to the voting instructions which are received with respect to all
policies participating in that sub-account. Voting instructions to abstain
on any item to be voted upon will be applied to reduce the total number of
votes cast on such item.
Each person having a voting interest in a sub-account will receive proxy
materials, reports, and other material relating to the appropriate portfolio.
FINANCIAL STATEMENTS
Our balance sheets as of December 31, 1996 and 1995, and the related
statements of operations, accumulated surplus, and cash flows for each of the
three years in the period ended December 31, 1996, as well as the Report of
Independent Auditors and the Actuary's Report thereon, are contained in the
Statement of Additional Information. The Variable Account's statement of net
assets as of December 31, 1996, and the related statement of operations and
the statements of changes in net assets for the periods indicated therein, as
well as the Report of Independent Auditors, are contained in the Statement of
Additional Information.
The financial statements of the Company included in the Statement of
Additional Information should be considered only as bearing on the ability of
the Company to meet its obligations under the policies. They should not be
considered as bearing on the investment performance of the assets held in the
Variable Account.
59
<PAGE> 65
STATEMENT OF ADDITIONAL INFORMATION - TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL POLICY PROVISIONS
Contract .................................................................. 2
Incontestability .......................................................... 2
Misstatement of Age ....................................................... 2
Currency .................................................................. 3
Place of Payment .......................................................... 3
Non-Participation ......................................................... 3
Our Consent ............................................................... 3
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Yields ....................................................... 3
Other Sub-Account Yields................................................... 4
Total Returns ............................................................. 5
Effect of the Policy Administration Charge on Performance Data ............ 8
SAFEKEEPING OF ACCOUNT ASSETS...................................................... 8
STATE REGULATION................................................................. 8
RECORDS AND REPORTS ............................................................. 8
LEGAL MATTERS ................................................................... 8
EXPERTS ......................................................................... 9
OTHER INFORMATION ............................................................... 9
FINANCIAL STATEMENTS ............................................................ 9
</TABLE>
60
<PAGE> 66
Part B
Statement of Additional Information
<PAGE> 67
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NEW YORK 10528
PHONE: (914) 835-8400
================================================================================
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
VARIABLE ANNUITY ACCOUNT 1
SINGLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
- --------------------------------------------------------------------------------
This Statement of Additional Information contains information in addition to
the information described in the Prospectus for the single premium variable
deferred annuity policy (the "policy") offered by Canada Life Insurance Company
of New York. This Statement of Additional Information is not a Prospectus, and
it should be read only in conjunction with the Prospectuses for the policy;
Canada Life of America Series Fund, Inc.; Fidelity Investments Variable
Insurance Products Fund; Fidelity Investments Variable Insurance Products Fund
II; Seligman Portfolios, Inc.; Dreyfus Variable Investment Fund; The Dreyfus
Socially Responsible Growth Fund, Inc.; The Alger American Fund; The
Montgomery Funds III, and the Berger Trust Fund. The Prospectuses are dated
the same date as this Statement of Additional Information. You may obtain
copies of the Prospectuses by writing or calling us at our address or phone
number shown above.
The date of this Statement of Additional Information is May 1, 1997.
<PAGE> 68
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL POLICY PROVISIONS
Contract ........................................................ 2
Incontestability ................................................. 2
Misstatement Of Age .............................................. 2
Currency .........................................................
Place Of Payment ................................................. 3
Non-Participation ................................................ 3
Our Consent ...................................................... 3
CALCULATION OF YIELDS AND TOTAL RETURNS
Money Market Yields .............................................. 3
Other Sub-account Yields ......................................... 4
Total Returns ................................................... 5
Effect Of The Policy Administration Charge On Performance Data.... 8
SAFEKEEPING OF ACCOUNT ASSETS ......................................... 8
STATE REGULATION ...................................................... 8
RECORDS AND REPORTS ................................................... 8
LEGAL MATTERS ........................................................ 8
EXPERTS ............................................................... 9
OTHER INFORMATION ..................................................... 9
FINANCIAL STATEMENTS ................................................. 9
</TABLE>
ADDITIONAL POLICY PROVISIONS
CONTRACT
The entire contract is made up of the policy and the application for the
policy. The statements made in the application are deemed representations
and not warranties. We cannot use any statement in defense of a claim or
to void the policy unless it is contained in the application and a copy of
the application is attached to the policy at issue.
INCONTESTABILITY
We will not contest the policy after it has been in force during any
annuitant's lifetime for two years from the date of issue of the policy.
2
<PAGE> 69
MISSTATEMENT OF AGE
If the age of any annuitant has been misstated, we will pay the amount
which the proceeds would have purchased at the correct age.
If we make an overpayment because of an error in age, the overpayment plus
interest at 3% compounded annually will be a debt against the policy. If
the debt is not repaid, future payments will be reduced accordingly.
If we make an underpayment because of an error in age, any annuity
payments will be recalculated at the correct age, and future payments will
be adjusted. The underpayment with interest at 3% compounded annually
will be paid in a single sum.
CURRENCY
All amounts payable under the policy will be paid in United States
currency.
PLACE OF PAYMENT
All amounts payable by us will be payable at our Home Office at the
address shown on page one of this Statement of Additional Information.
NON-PARTICIPATION
The policy is not eligible for dividends and will not participate in our
divisible surplus.
OUR CONSENT
If our consent is required, it must be given in writing. It must bear the
signature, or a reproduction of the signature, of our President, Secretary
or Actuary.
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET YIELDS
We may, from time to time, quote in advertisements and sales literature
the current annualized yield of the Money Market Sub-account for a 7 day
period in a manner which does not take into consideration any realized or
unrealized gains or losses on shares of the Money Market Portfolio or on
its portfolio securities. This current annualized 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 7 day period in the value of a hypothetical account under a
policy having a balance of 1 unit of the Money Market Sub-account 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: 1) net income from the Portfolio
attributable to the hypothetical account; and 2) charges and deductions
imposed under the policy which are attributable to the hypothetical
account. The charges and deductions include the per unit charges for the
hypothetical account for: 1) the policy administration charge; 2) the
daily administration fee; and 3) the mortality and expense risk charge.
The yield calculation reflects an average per unit policy administration
charge of $30 per year per policy deducted at the end of each policy year.
Current Yield will be calculated according to the following formula:
Current Yield = ((NCS-ES)/UV) X (365/7)
Where:
<TABLE>
<S> <C> <C>
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) for the 7 day period
attributable to a hypothetical account having a balance of 1 Sub-account unit.
ES = per unit expenses of the Sub-account for the 7 day period.
UV = the unit value on the first day of the 7 day period.
</TABLE>
3
<PAGE> 70
The current yield for the 7 day period ended December 31, 1996 was 3.61%.
We may also quote the effective yield of the Money Market Sub-account for
the same 7 day period, determined on a compounded basis. The effective
yield is calculated by compounding the unannualized base period return
according to the following formula:
365/7
Effective Yield = (1+((NCS-ES)/UV)) - 1
Where:
<TABLE>
<S> <C> <C>
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) for the 7 day period
attributable to a hypothetical account having a balance of 1 Sub-account unit.
ES = per unit expenses of the Sub-account for the 7 day period.
UV = the unit value for the first day of the 7 day period.
</TABLE>
The effective yield for the 7 day period ended December 31, 1996 was
3.68%.
Because of the charges and deductions imposed under the policy, the yield
for the Money Market Sub-account will be lower than the yield for the
Money Market Portfolio.
The yields on amounts held in the Money Market Sub-account 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 Sub-Account's actual yield is affected
by changes in interest rates on money market securities, average portfolio
maturity of the Money Market Portfolio, the types and quality of portfolio
securities held by the Money Market Portfolio of the Fund, and the Money
Market Portfolio's operating expenses.
OTHER SUB-ACCOUNT YIELDS
We may, from time to time, quote in sales literature and advertisements
the current annualized yield of one or more of the (except the Money
Market Sub-account) for a policy for 30 day or one month periods. The
annualized yield of a sub-account refers to income generated by the
sub-account over a specific 30 day or one month period. Because the yield
is annualized, the yield generated by a sub-account during the 30 day or
one month period is assumed to be generated each period over a 12 month
period. The yield is computed by: 1) dividing the net investment income
of the portfolio attributable to the sub-account units less sub-account
expenses for the period; by 2) the maximum offering price per unit on the
last day of the period multiplied by the daily average number of units
outstanding for the period; by 3) compounding that yield for a 6 month
period; and by 4) multiplying that result by 2. Expenses attributable to
the sub-account include 1) the policy administration charge, 2) the daily
administration fee, and 3) the mortality and expense risk charge. The
yield calculation reflects a policy administration charge of $30 per year
per policy deducted at the end of each policy year. For purposes of
calculating the 30 day or one month yield, an average policy
administration charge per dollar of policy value in the Variable Account
is used to determine the amount of the charge attributable to the
sub-account for the 30 day or one month period as described below. The 30
day or one month yield is calculated according to the following formula:
6
Yield = 2 x ((((NI-ES)/(U x UV)) + 1) - 1)
Where:
NI = net income of the portfolio for the 30 day or one month period
attributable to the sub-account's units.
4
<PAGE> 71
ES = expenses of the sub-account for the 30 day or one month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the 30 day
or one month period.
Because of the charges and deductions imposed under the policies, the
yield for the sub-account will be lower than the yield for the
corresponding portfolio.
The yield on the amounts held in the sub-accounts 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 sub-account's actual yield is affected by the types and quality of
portfolio securities held by the portfolio, and its operating expenses.
Yield calculations do not take into account the surrender charge under the
policy. The surrender charge is equal to 6% of premiums paid during that
current policy year and the previous 4 policy years on certain amounts
surrendered or withdrawn under the policy as described in the Prospectus.
A surrender charge will not be imposed on the first withdrawal in any
policy year on an amount up to 10% of the premiums paid during that
current policy year and the previous 4 policy years, if the systematic
withdrawal privilege is not elected in that policy year.
TOTAL RETURNS
We may, from time to time, also quote in sales literature or
advertisements total returns, including average annual total returns for
one or more of the sub-accounts for various periods of time. We will
always include quotes of average annual total return for the period
measured from the date the sub-account commenced operations. When a
sub-account has been in operation for 1, 5, and 10 years, respectively,
the average annual total return for these periods will be provided.
Average annual total returns for other periods of time may, from time to
time, also be disclosed. Average annual total returns represent the
average annual compounded rates of return that would equate an initial
investment of $1,000 under a policy 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.
Average annual total returns will be calculated using sub-account unit
values which we calculate on each valuation day based on the performance
of the sub-account's underlying portfolio, and the deductions for the
mortality and expense risk charge, daily administration fee and the policy
administration charge of $30 per year per policy deducted at the end of
each policy year. For purposes of calculating total return, an average
per dollar policy administration charge attributable to the hypothetical
account for the period is used. The total return will then be calculated
according to the following formula:
1
1/N
TR = ((ERV/P)) - 1
Where:
<TABLE>
<S> <C>
TR = the average annual total return net of sub-account recurring charges.
ERV = the ending redeemable value of the hypothetical account at the end
of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>
The total returns assume that the maximum fees and charges are imposed for
calculations.
5
<PAGE> 72
Average annual total returns for the periods ending December 31, 1996 as
shown below for the sub-accounts were:
<TABLE>
<CAPTION>
FROM FUND
1 YEAR 5 YEAR 10 YEAR FUND INCEPTION
SUB-ACCOUNT* RETURN RETURN RETURN INCEPTION DATE
-------- --------- ------- --------- ---------
<C> <C> <C> <C> <C> <C>
Bond (2.27)% 4.75% *** 6.23% 12/04/89
Capital 5.55% ** *** 11.55% 04/23/93
International Equity 12.19% ** *** 10.17% 04/24/95
Managed (1.19)% 6.57% *** 7.91% 12/04/89
Money Market (2.33)% 1.68% *** 2.88% 12/04/89
Value Equity 0.05% 7.11% *** 8.81% 12/04/89
Alger American Growth 6.29% 14.64% *** 16.95% 01/08/89
Alger American MidCap Growth 4.86% ** *** 21.60% 05/03/93
Alger American Leveraged AllCap 5.00% ** *** 37.28% 01/25/95
Alger American Small Capitalization (2.74)% 9.03% *** 18.49% 09/20/88
Dreyfus Growth and Income 13.10% ** *** 23.53% 05/02/94
Dreyfus Socially Responsible 14.07% ** *** 16.76% 10/07/93
Fidelity VIP Growth 7.61% 13.17% 13.48% 13.11% 10/09/86
Fidelity VIP High Income 6.94% 12.96% 9.52% 10.33% 09/19/85
Fidelity VIP Overseas 6.14% 7.12% *** 6.20% 01/28/87
Fidelity VIP II Asset Manager 7.50% 9.25% *** 9.93% 09/06/89
Fidelity VIP II Index 500 15.63% ** *** 14.89% 08/27/92
Montgomery Variable Series
Emerging Markets (0.86)% ** *** (0.04)% 02/02/96
Seligman Communications and
Information 1.80% ** *** 18.98% 10/11/94
Seligman Frontier 16.71% ** *** 24.88% 10/11/94
</TABLE>
* The Inception Dates of the Sub-accounts are as follows: Money Market,
Managed, Bond and Value Equity, 12/4/89; Capital 5/1/93; Fidelity VIP
Growth, Fidelity VIP High Income, Fidelity VIP Overseas, and Fidelity VIP
II Asset Manager, 5/1/94; International Equity, Seligman Communications
and Information, and Seligman Frontier 5/1/95; Fidelity VIP II
Index 500, Dreyfus Growth and Income, Dreyfus Socially Responsible,
Alger American Small Capitalization, Alger American Growth, Alger
American MidCap Growth, Alger American Leveraged AllCap and
Montgomery Variable Series Emerging Markets, 5/1/96. These dates may
not coincide with the fund inception dates.
** These Sub-accounts invest in portfolios that have not been in
operation five years as of December 31, 1996, and accordingly, no
five year average annual total return is available.
*** These Sub-Accounts invest in portfolios that have not been in
operation ten years as of December 31, 1996, and accordingly, no ten
year average annual return is available.
As of December 31, 1996, the Montgomery Variable Series Growth Fund and
the Berger/BIAM IPT-International Fund sub-accounts had not commenced
operations. Accordingly, we have not provided average annual total return
information for those sub-accounts.
We may, from time to time, also quote in sales literature or
advertisements, total returns that do not reflect the surrender charge.
These are calculated in exactly the same way as average annual total
returns described above, except that the ending redeemable value of the
hypothetical account for the period is replaced with an ending value for
the period that does not take into account any charge on amounts
surrendered or withdrawn.
6
<PAGE> 73
Average annual total returns without a surrender charge for the periods
ended December 31, 1996 as shown below for the sub-accounts were:
<TABLE>
<CAPTION>
FROM FUND
1 YEAR 5 YEAR 10 YEAR FUND INCEPTION
SUB-ACCOUNT* RETURN RETURN RETURN INCEPTION DATE
------------ --------- ------ ------- --------- ---------
<S> <C> <C> <C> <C> <C>
CLASF Bond 3.13% 5.20% *** 6.23% 12/04/89
CLASF Capital 10.95% ** *** 12.45% 04/23/93
CLASF International Equity 17.59% ** *** 13.13% 04/24/95
CLASF Managed 4.21% 6.98% *** 7.91% 12/04/89
CLASF Money Market 3.07% 2.18% *** 2.88% 12/04/89
CLASF Value Equity 5.45% 7.52% *** 8.81% 12/04/89
Alger American Growth 11.69% 14.95% *** 16.95% 01/08/89
Alger American MidCap Growth 10.26% ** *** 22.32% 05/03/93
Alger American Leveraged AllCap 10.40% ** *** 39.34% 01/25/95
Alger American Small Capitalization 2.66% 9.41% *** 18.49% 09/20/88
Dreyfus Growth and Income 18.50% ** *** 24.71% 05/02/94
Dreyfus Socially Responsible 19.47% ** *** 17.73% 10/07/93
Fidelity VIP Growth 13.01% 13.49% 13.48% 13.16% 10/09/86
Fidelity VIP High Income 12.34% 13.29% 9.52% 10.39% 09/19/85
Fidelity VIP Overseas 11.54% 7.53% *** 6.31% 01/28/87
Fidelity VIP II Asset Manager 12.90% 9.62% *** 10.07% 09/06/89
Fidelity VIP II Index 500 21.03% ** *** 15.41% 08/27/92
Montgomery Variable Series
Emerging Markets 4.54% ** *** 5.36% 02/02/96
Seligman Communications and
Information 7.20% ** *** 20.58% 10/11/94
Seligman Frontier 22.11% ** *** 26.39% 10/11/94
</TABLE>
* The Inception Dates of the Sub-accounts are as follows: Money Market,
Managed, Bond and Value Equity, 12/4/89; Capital 5/1/93; Fidelity VIP
Growth, Fidelity VIP High Income, Fidelity VIP Overseas, and Fidelity VIP
II Asset Manager, 5/1/94; International Equity, Seligman Communications
and Information, and Seligman Frontier 5/1/95; Fidelity VIP II
Index 500, Dreyfus Growth and Income, Dreyfus Socially Responsible, Alger
American Small Capitalization, Alger American Growth, Alger American
MidCap Growth, Alger American Leveraged AllCap and Montgomery
Variable Series Emerging Markets, 5/1/96. These dates may not
coincide with the fund inception dates.
** These Sub-accounts invest in portfolios that have not been in operation
five years as of December 31, 1996, and accordingly, no five year average
annual total return is available.
*** These Sub-Accounts invest in portfolios that have not been in
operation ten years as of December 31, 1996, and accordingly, no ten
year average annual return is available.
7
<PAGE> 74
As of December 31, 1996, the Montgomery Variable Series Growth Fund and
the Berger/BIAM IPT-International Fund sub-accounts had not commenced
operations. Accordingly, we have not provided average annual total return
information for those sub-accounts.
EFFECT OF THE POLICY ADMINISTRATION CHARGE ON PERFORMANCE DATA
The policy provides for a $30 policy administration charge to be assessed
annually on each policy anniversary proportionately from any sub-accounts
or Fixed Account in which you are invested. If the policy value on the
policy anniversary is $75,000 or more, we will waive the policy
administration charge for the prior policy year. For purposes of
reflecting the policy administration charge in yield and total return
quotations, we will convert the annual charge into a per-dollar per-day
charge based on the average policy value in the Variable Account of all
policies on the last day of the period for which quotations are provided.
The per-dollar per-day average charge will then be adjusted to reflect the
basis upon which the particular quotation is calculated.
SAFEKEEPING OF ACCOUNT ASSETS
We hold the title to the assets of the Variable Account. The assets are
kept physically segregated and held separate and apart from our general
account assets and from the assets in any other separate account we have.
Records are maintained of all purchases and redemptions of portfolio
shares held by each of the sub-accounts.
Our officers and employees are covered by an insurance company blanket
bond issued by America Home Assurance Company to The Canada Life Assurance
Company, our parent Company, in the amount of $25 million. The bond
insures against dishonest and fraudulent acts of officers and employees.
STATE REGULATION
We are subject to the insurance laws and regulations of all the
jurisdictions where we are licensed to operate. The availability of
certain policy rights and provisions depends on state approval and/or
filing and review processes. The policies will be modified to comply with
the requirements of each applicable jurisdiction.
RECORDS AND REPORTS
We will maintain all records and accounts relating to the Variable
Account. As presently required by the Investment Company Act of 1940 and
regulations promulgated thereunder, reports containing such information as
may be required under the Act or by any other applicable law or regulation
will be sent to you semi-annually at your last address known to us.
LEGAL MATTERS
All matters relating to New York law pertaining to the policies, including
the validity of the policies and our authority to issue the policies, have
been passed upon by David A. Hopkins. Sutherland, Asbill & Brennan,
L.L.P. of Washington, D.C., has provided advice on certain matters
relating to the federal securities laws.
8
<PAGE> 75
EXPERTS
Our balance sheets as of December 31, 1996 and 1995, and the related
statements of operations, accumulated surplus, and cash flows for each of
the three years in the period ended December 31, 1996, included in this
Statement of Additional Information and Registration Statement as well as
the Variable Account's statement of net assets as of December 31, 1996,
and the related statement of operations and the statements of changes in
net assets for the periods indicated therein included in this Statement of
Additional Information and Registration Statement have been audited by
Ernst & Young, Chartered Accountants of Toronto, Canada as set forth in
their reports thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports given upon the
authority of such firm as experts in accounting and auditing.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities
Act of 1933 as amended, with respect to the policies discussed in this
Statement of Additional Information. Not all of the information set forth
in the registration statement, amendments and exhibits thereto has been
included in this Statement of Additional Information. Statements
contained in this Statement of Additional Information concerning the
content of the policies and other legal instruments are intended to be
summaries. For a complete statement of the terms of these documents,
reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The Variable Account's statement of net assets as of December 31, 1996,
and the statement of operations and the statements of changes in net
assets for the periods indicated therein, as well as the Report of
Independent Auditors and the Actuary's Report thereon, are contained
herein. Ernst & Young, Chartered Accountants, serve as independent
auditors for the Variable Account.
Our balance sheets as of December 31, 1996 and 1995, and the related
statements of operations, accumulated surplus, and cash flows for each of
the three years in the period ended December 31, 1996, as well as the
Report of Independent Auditors, are contained herein. The financial
statements of the Company should be considered only as bearing on our
ability to meet our obligations under the policies. They should not be
considered as bearing on the investment performance of the assets held in
the Variable Account.
9
<PAGE> 76
FINANCIAL STATEMENTS
CANADA LIFE OF NEW YORK
VARIABLE ANNUITY ACCOUNT 1
DECEMBER 31, 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 77
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
FINANCIAL STATEMENTS
December 31, 1996
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors ............................................ 1
Audited Financial Statements
Statement of Net Assets ................................................... 2
Statement of Operations ................................................... 7
Statements of Changes in Net Assets ....................................... 12
Notes to Financial Statements ............................................. 20
</TABLE>
<PAGE> 78
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Canada Life Insurance Company of New York
We have audited the accompanying statement of net assets of CANADA LIFE OF NEW
YORK VARIABLE ANNUITY ACCOUNT 1 ("Variable Annuity Account 1") as at December
31, 1996 and the related statement of operations and changes in net assets for
the periods indicated therein. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of Variable Annuity Account 1 as at December
31, 1996, and the results of its operations for the year then ended, and the
changes in its net assets for each of the years ended December 31, 1996 and
December 31, 1995 in accordance with accounting principles generally accepted in
the United States.
Toronto, Canada
February 14, 1997
/s/ Ernst & Young
Chartered Accountants
1
<PAGE> 79
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF NET ASSETS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
CLASF SERIES
------------
MONEY MARKET MANAGED BOND EQUITY CAPITAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS
Investment in Canada
Life of America Series
Fund, Inc. at market
[Note 3] $ 111,831 $ 114,815 $ 7,635 $ 96,986 $ 130,554
Dividends receivable 286 12,462 428 10,815 12,275
Due from (to) Canada Life
Insurance Company of New
York [Note 6] (201) (2,456) (71) (1,227) (1,736)
Receivable (payable) for
investments sold
(purchased) (31) (40) 14 (423) (680)
--------------------------------------------------------------------------------
Net assets $ 111,885 $ 124,781 $ 8,006 $ 106,151 $ 140,413
================================================================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability
reserve $ 111,885 $ 124,781 $ 8,006 $ 106,151 $ 140,413
--------------------------------------------------------------------------------
Net assets $ 111,885 $ 124,781 $ 8,006 $ 106,151 $ 140,413
================================================================================
NUMBER OF UNITS OUTSTANDING 9,097 7,213 517 5,790 9,043
================================================================================
NET ASSET VALUE PER UNIT $ 12.2991 $ 17.2995 $15.4855 $ 18.3335 $ 15.5273
================================================================================
</TABLE>
See accompanying notes.
2
<PAGE> 80
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY VIP SERIES
-------------------
ASSET MANAGER GROWTH HIGH INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS
Investment in Fidelity VIP
at market [Note 3] $ 226,925 $ 226,783 $ 46,259 $ 41,242
Dividends receivable -- -- -- --
Due from (to) Canada Life
Insurance Company of New York [Note 6] (5,978) (6,166) 20 (4,129)
Receivable (payable) for
investments sold (purchased) (91) (27,489) (29) 194
------------------------------------------------------------------
Net assets $ 220,856 $ 193,128 $ 46,250 $ 37,307
==================================================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability reserve $ 220,856 $ 193,128 $ 46,250 $ 37,307
------------------------------------------------------------------
Net assets $ 220,856 $ 193,128 $ 46,250 $ 37,307
==================================================================
NUMBER OF UNITS OUTSTANDING 10,818 5,368 1,506 2,014
==================================================================
NET ASSET VALUE PER UNIT $ 20.4156 $ 35.9777 $30.7105 $18.5236
==================================================================
</TABLE>
See accompanying notes.
3
<PAGE> 81
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
SELIGMAN PORTFOLIOS SERIES
--------------------------
COMMUNICATIONS AND
INFORMATION FRONTIER
SUB-ACCOUNT SUB-ACCOUNT
----------------------------------
<S> <C> <C>
NET ASSETS
Investment in Seligman
Portfolios, Inc. at market [Note 3] $386,044 $ 103,727
Dividends receivable -- --
Due from (to) Canada Life
Insurance Company of New York [Note 6] 4,021 (1,029)
Receivable (payable) for
investments sold (purchased) 2,256 1,712
---------------------------------
Net assets $392,321 $ 104,410
=================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability reserve $392,321 $ 104,410
---------------------------------
Net assets $392,321 $ 104,410
=================================
NUMBER OF UNITS OUTSTANDING 25,672 6,155
=================================
NET ASSET VALUE PER UNIT $15.2821 $ 16.9634
=================================
</TABLE>
See accompanying notes.
4
<PAGE> 82
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ALGER AMERICAN SERIES
---------------------
SMALL LEVERAGED
CAPITALIZATION GROWTH MIDCAP ALLCAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS
Investment in Alger
at market [Note 3] $ 44,182 $ 11,777 $ 10,494 $ 2,856
Dividends receivable -- -- -- --
Due from (to) Canada Life
Insurance Company of New York [Note 6] (2,393) 326 (782) (14)
Receivable (payable) for
investments sold (purchased) 409 -- 774 10
------------------------------------------------------------------
Net assets $ 42,198 $ 12,103 $10,486 $ 2,852
==================================================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability reserve $ 42,198 $ 12,103 $10,486 $ 2,852
------------------------------------------------------------------
Net assets $ 42,198 $ 12,103 $10,486 $ 2,852
==================================================================
NUMBER OF UNITS OUTSTANDING 1,030 336 500 150
==================================================================
NET ASSET VALUE PER UNIT $40.9689 $36.0208 $20.9720 $19.0133
==================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 83
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
DREYFUS SERIES
--------------
GROWTH AND INCOME ALL SERIES
SUB-ACCOUNT COMBINED
----------------------------------
<S> <C> <C>
NET ASSETS
Investments in Canada Life of America Series
Fund, Inc., Fidelity VIP, Seligman Portfolios,
Inc.,Alger & Dreyfus at market [Note 3] $ 2,872 $ 1,564,982
Dividends receivable -- 36,266
Due from (to) Canada Life
Insurance Company of New York [Note 6] 14 (21,801)
Receivable (payable) for
investments sold (purchased) (17) (23,431)
----------------------------------
Net assets $ 2,869 $ 1,556,016
==================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability reserve $ 2,869 $ 1,556,016
----------------------------------
Net assets $ 2,869 $ 1,556,016
==================================
NUMBER OF UNITS OUTSTANDING 127
==================================
NET ASSET VALUE PER UNIT $22.5906
==================================
</TABLE>
See accompanying notes.
6
<PAGE> 84
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CLASF SERIES
------------
MONEY MARKET MANAGED BOND EQUITY CAPITAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS):
Dividend income $492 $ 12,462 $ 428 $ 10,815 $12,275
Less mortality & expense risk charges
and other adjustments [Note 6] 183 2,075 99 1,438 3,896
-----------------------------------------------------------------------
Net investment income (loss) 309 10,387 329 9,377 8,379
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net unrealized appreciation
(depreciation) on investments and
foreign currency -- (5,453) (64) (3,623) 1,398
Net realized gain (loss) on
investments and foreign currency -- 783 (4) (29) 2,526
-----------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and
foreign currency -- (4,670) (68) (3,652) 3,924
-----------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $309 $ 5,717 $ 261 $ 5,725 $12,303
=======================================================================
</TABLE>
See accompanying notes.
7
<PAGE> 85
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY VIP SERIES
-------------------
ASSET MANGER GROWTH HIGH INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS):
Dividend income $ 8,193 $ 7,472 $ 1 $ 76
Less mortality & expense risk charges
and other adjustments [Note 6] 8,792 8,677 260 4,592
-----------------------------------------------------------------
Net investment income (loss) (599) (1,205) (259) (4,516)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net unrealized appreciation
(depreciation) on investments and
foreign currency 16,398 12,130 2,759 3,523
Net realized gain (loss) on investments
and foreign currency 2,243 721 40 942
-----------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 18,641 12,851 2,799 4,465
-----------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 18,042 $ 11,646 $ 2,540 $ (51)
=================================================================
</TABLE>
See accompanying notes.
8
<PAGE> 86
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SELIGMAN PORTFOLIOS SERIES
--------------------------
COMMUNICATIONS AND
INFORMATION FRONTIER
SUB-ACCOUNT SUB-ACCOUNT
----------------------------------
<S> <C> <C>
NET INVESTMENT INCOME (LOSS):
Dividend income $ -- $13,059
Less mortality & expense risk charges
and other adjustments [Note 6] 4,467 4,100
----------------------------------
Net investment income (loss) (4,467) 8,959
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net unrealized appreciation
(depreciation) on investments and
foreign currency 33,977 380
Net realized gain (loss) on investments
and foreign currency (9) 1,330
----------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 33,968 1,710
----------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 29,501 $10,669
==================================
</TABLE>
See accompanying notes.
9
<PAGE> 87
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ALGER AMERICAN SERIES*
----------------------
SMALL LEVERAGED
CAPITALIZATION GROWTH MIDCAP ALLCAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET INVESTMENT INCOME (LOSS):
Dividend income $ -- $ 336 $ -- $ --
Less mortality & expense risk charges
and other adjustments [Note 6] 811 10 841 14
--------------------------------------------------------------------
Net investment income (loss) (811) 326 (841) (14)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net unrealized appreciation
(depreciation) on investments and
foreign currency (1,555) (309) 1,042 (30)
Net realized gain (loss) on investments
and foreign currency (408) (4) 6 --
--------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency (1,963) (313) 1,048 (30)
--------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $(2,774) $ 13 $ 207 $(44)
====================================================================
</TABLE>
See accompanying notes.
*For the period May 1, 1996 (commencement of operations) to December 31, 1996.
10
<PAGE> 88
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DREYFUS SERIES*
---------------
GROWTH
AND INCOME ALL SERIES
SUB-ACCOUNT COMBINED
----------------------------
<S> <C> <C>
NET INVESTMENT INCOME (LOSS):
Dividend income $ 297 $65,906
Less mortality & expense risk charges
and other adjustments [Note 6] 4 40,259
----------------------------
Net investment income (loss) 293 25,647
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net unrealized appreciation
(depreciation) on investments and
foreign currency (320) 60,253
Net realized gain (loss) on investments
and foreign currency -- 8,137
----------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency (320) 68,390
----------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ (27) $94,037
============================
</TABLE>
See accompanying notes.
*For the period May 1, 1996 (commencement of operations) to December 31, 1996.
11
<PAGE> 89
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
CLASF SERIES
------------
MONEY MARKET MANAGED BOND EQUITY CAPITAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 309 $ 10,387 $ 329 $ 9,377 $ 8,379
Unrealized appreciation
(depreciation) on investments
and foreign currency -- (5,453) (64) (3,623) 1,398
Net realized gain (loss) on
investments and foreign currency -- 783 (4) (29) 2,526
----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations
and foreign currency 309 5,717 261 5,725 12,303
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions [Note 5] 109,273 (32,059) -- (135) (7,919)
----------------------------------------------------------------------------
Net increase (decrease) in net
assets arising from capital
transactions 109,273 (32,059) -- (135) (7,919)
----------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 109,582 (26,342) 261 5,590 4,384
NET ASSETS, BEGINNING OF YEAR 2,303 151,123 7,745 100,561 136,029
----------------------------------------------------------------------------
NET ASSETS, END OF YEAR $111,885 $ 124,781 $ 8,006 $ 106,151 $ 140,413
============================================================================
</TABLE>
See accompanying notes.
12
<PAGE> 90
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIDELITY VIP SERIES
-------------------
ASSET MANAGER GROWTH HIGH INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (599) $ (1,205) $ (259) $ (4,516)
Unrealized appreciation
(depreciation) on investments
and foreign currency 16,398 12,130 2,759 3,523
Net realized gain (loss) on
investments and foreign currency 2,243 721 40 942
-----------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations
and foreign currency 18,042 11,646 2,540 (51)
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions [Note 5] 78,148 77,326 43,710 36,307
-----------------------------------------------------------------------
Net increase (decrease) in net
assets arising from capital
transactions 78,148 77,326 43,710 36,307
-----------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 96,190 88,972 46,250 36,256
NET ASSETS, BEGINNING OF YEAR 124,666 104,156 -- 1,051
-----------------------------------------------------------------------
NET ASSETS, END OF YEAR $ 220,856 $ 193,128 $ 46,250 $ 37,307
=======================================================================
</TABLE>
See accompanying notes.
13
<PAGE> 91
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
SELIGMAN PORTFOLIOS SERIES
--------------------------
COMMUNICATIONS
AND INFORMATION FRONTIER
SUB-ACCOUNT SUB-ACCOUNT
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (4,467) $ 8,959
Unrealized appreciation
(depreciation) on investments and
foreign currency 33,977 380
Net realized gain (loss) on
investments and foreign currency (9) 1,330
---------------------------------
Net increase (decrease) in net
assets resulting from operations
and foreign currency 29,501 10,669
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions [Note 5] 97,920 62,676
---------------------------------
Net increase (decrease) in net
assets arising from capital
transactions 97,920 62,676
---------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 127,421 73,345
NET ASSETS, BEGINNING OF YEAR 264,900 31,065
---------------------------------
NET ASSETS, END OF YEAR $ 392,321 $104,410
=================================
</TABLE>
See accompanying notes.
14
<PAGE> 92
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ALGER AMERICAN SERIES*
----------------------
SMALL LEVERAGED
CAPITALIZATION GROWTH MIDCAP ALLCAP
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ (811) $ 326 $ (841) $ (14)
Unrealized appreciation
(depreciation) on investments
and foreign currency (1,555) (309) 1,042 (30)
Net realized gain (loss) on
investments and foreign currency
(408) (4) 6 --
---------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations
and foreign currency
(2,774) 13 207 (44)
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions [Note 5] 44,972 12,090 10,279 2,896
---------------------------------------------------------------------
Net increase (decrease) in net
assets arising from capital
transactions 44,972 12,090 10,279 2,896
---------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 42,198 12,103 10,486 2,852
NET ASSETS, BEGINNING OF YEAR -- -- -- --
---------------------------------------------------------------------
NET ASSETS, END OF YEAR $ 42,198 $ 12,103 $ 10,486 $ 2,852
=====================================================================
</TABLE>
See accompanying notes.
*For the period May 1, 1996 (commencement of operations) to December 31, 1996.
15
<PAGE> 93
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DREYFUS SERIES*
---------------
GROWTH
AND INCOME ALL SERIES
SUB-ACCOUNT COMBINED
---------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 293 $ 25,647
Unrealized appreciation
(depreciation) on investments and
foreign currency (320) 60,253
Net realized gain (loss) on
investments and foreign currency
-- 8,137
---------------------------------
Net increase (decrease) in net
assets resulting from operations
and foreign currency (27) 94,037
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions [Note 5] 2,896 538,380
---------------------------------
Net increase (decrease) in net
assets arising from capital
transactions 2,896 538,380
---------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 2,869 632,417
NET ASSETS, BEGINNING OF YEAR -- 923,599
---------------------------------
NET ASSETS, END OF YEAR $ 2,869 $1,556,016
=================================
</TABLE>
See accompanying notes..
*For the period May 1, 1996 (commencement of operations) to December 31, 1996.
16
<PAGE> 94
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
CLASF SERIES
------------
MONEY MARKET MANAGED BOND EQUITY CAPITAL
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 83 $ 20,366 $ 539 $ 17,321 $ 3,068
Unrealized appreciation
(depreciation) on
investments and foreign currency -- 5,745 494 (4,467) 29,571
Net realized gain (loss)
on investments and foreign
currency -- 7,399 (4) 7,001 2,934
-----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations and foreign currency 83 33,510 1,029 19,855 35,573
CAPITAL TRANSACTIONS:
Net increase (decrease) from
unit transactions [Note 5] (30) (74,787) -- (8,349) (5,163)
-----------------------------------------------------------------------------
Net increase (decrease) in net
assets arising from capital
transactions (30) (74,787) -- (8,349) (5,163)
-----------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 53 (41,277) 1,029 11,506 30,410
NET ASSETS, BEGINNING OF YEAR 2,250 192,400 6,716 89,055 105,619
-----------------------------------------------------------------------------
NET ASSETS, END OF YEAR $ 2,303 $ 151,123 $ 7,745 $ 100,561 $ 136,029
=============================================================================
</TABLE>
See accompanying notes.
17
<PAGE> 95
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
FIDELITY VIP SERIES
-------------------
ASSET HIGH
MANAGER GROWTH INCOME OVERSEAS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 916 $ (247) $ 1,737 $ (37)
Unrealized appreciation
(depreciation) on
investments and foreign currency 16,083 13,472 156 269
Net realized gain (loss)
on investments and foreign
currency 923 1,842 2,535 415
---------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from
operations and foreign currency 17,922 15,067 4,428 647
CAPITAL TRANSACTIONS:
Net increase (decrease) from
unit transactions [Note 5] (13,227) 47,201 (32,509) (8,814)
---------------------------------------------------------------------
Net increase (decrease) in net
assets arising from capital
transactions (13,227) 47,201 (32,509) (8,814)
---------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 4,695 62,268 (28,081) (8,167)
NET ASSETS, BEGINNING OF YEAR 119,971 41,888 28,081 9,218
---------------------------------------------------------------------
NET ASSETS, END OF YEAR $ 124,666 $ 104,156 $ -- $$1,051
=====================================================================
</TABLE>
See accompanying notes.
18
<PAGE> 96
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
SELIGMAN PORTFOLIOS SERIES
--------------------------
COMMUNICATIONS
AND INFORMATION* FRONTIER** ALL SERIES
SUB-ACCOUNT SUB-ACCOUNT COMBINED
----------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 20,577 $ 1,291 $ 65,614
Unrealized appreciation
(depreciation) on investments and
foreign currency (47,768) 380 13,935
Net realized gain (loss) on
investments and foreign currency (81) 2 22,966
----------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations
and foreign currency (27,272) 1,673 102,515
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions [Note 5] 292,172 29,392 225,886
----------------------------------------------------------
Net increase (decrease) in net
assets arising from capital
transactions 292,172 29,392 225,886
----------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET
ASSETS 264,900 31,065 328,401
NET ASSETS, BEGINNING OF YEAR -- -- 595,198
----------------------------------------------------------
NET ASSETS, END OF YEAR $ 264,900 $31,065 $923,599
==========================================================
</TABLE>
See accompanying notes.
* For the period from June 22, 1995 (date of initial investment in Seligman
Portfolios, Inc.) to December 31, 1995.
** For the period from August 1, 1995 (date of initial investment in Seligman
Portfolios, Inc.) to December 31, 1995.
19
<PAGE> 97
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. ORGANIZATION
Canada Life of New York Variable Annuity Account 1 ("Variable Annuity Account
1") was established on September 13, 1989 as a separate investment account of
Canada Life Insurance Company of New York ("CLNY") to receive and invest premium
payments under variable annuity policies issued by CLNY. Variable Annuity
Account 1 is registered as a unit investment trust under the Investment Company
Act of 1940, as amended. The assets of the Variable Annuity Account 1 are
invested in either the shares of Canada Life of America Series Fund, Inc. (the
"Series Fund"), a diversified, open-end, management investment company or in
Fidelity Investments Variable Insurance Products Fund ("Fidelity"), a
Massachusetts Business Trust organized as an open-end, diversified management
investment company, in Seligman Portfolios, Inc. ("Seligman"), a diversified,
open-end, management investment company, in Dreyfus Variable Investment Fund
("Dreyfus"), a diversified, open-end management investment company, or in Alger
American Fund ("Alger"), a diversified, open-end, management investment company.
Variable Annuity Account 1 commenced operations on December 4, 1989, with the
exception of the CLASF Capital Series which commenced operations on April 23,
1993, the Fidelity Series which commenced operations on May 1, 1994, the
Seligman Portfolio Series which commenced operations on May 1, 1995, the Alger
American Series, and the Dreyfus Series which commenced operations on May 1,
1996.
The assets of Variable Annuity Account 1 are the property of CLNY. The portion
of Variable Annuity Account 1 assets applicable to the policies will not be
charged with liabilities arising out of any other business CLNY may conduct.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Investments in shares of the Series Fund, Fidelity, Seligman, Alger and Dreyfus
are valued at the reported net asset values of the respective Sub-account
portfolios. Realized gains and losses are computed on the basis of average cost.
The difference between cost and current market value of investments owned is
recorded as an unrealized gain or loss on investments.
20
<PAGE> 98
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
The accounting records of the Variable Annuity Account 1 are maintained in U.S.
dollars. The Fidelity VIP Series Overseas Sub-account and Dreyfus Growth and
Income Sub-account contain investment securities and other assets and
liabilities denominated in foreign currency that are translated into U.S.
dollars at the prevailing rates of exchange at the end of the period. Purchases
and sales of investment securities, income and expenses are translated into U.S.
dollars at the rate of exchange prevailing on the respective dates of such
transactions.
Net realized gains and losses on foreign currency transactions represent net
gains and losses from sales and maturities of investments in foreign securities
usually denominated in foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amount of net investment income accrued and the U.S.
dollar amount actually received. The effects of changes in foreign currency
exchange rates on investments in securities are included with the net realized
and unrealized gain or loss on investment securities.
DIVIDENDS
Dividends are recorded on the ex-dividend date and reflect the dividends
declared by the Series Fund, Fidelity, Seligman, Alger and Dreyfus from their
accumulated net investment income and net realized investment gains. Dividends
in the Money market Sub-account are declared daily and paid quarterly. Dividends
in all other Sub-accounts are declared and paid annually. Dividends paid to the
Variable Annuity Account 1 are reinvested in additional shares of the respective
Sub-accounts at the net asset value per share.
FEDERAL INCOME TAXES
Variable Annuity Account 1 is not taxed separately because the operations of
Variable Annuity Account 1 will be included in the Federal income tax return of
CLNY, which is taxed as a "life insurance company" under the provisions of the
Internal Revenue Code.
21
<PAGE> 99
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
3. INVESTMENTS
The investments held by Variable Annuity 1 as at December 31, 1996 are shown in
the following table. For display purposes the number of shares shown has been
rounded to eliminate fractional shares.
<TABLE>
<CAPTION>
NUMBER MARKET MARKET
OF SHARES PRICE VALUE COST
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Sub-account 11,183 $10.0001 $ 111,831 $ 111,831
Managed Sub-account 9,731 11.7989 114,815 120,315
Bond Sub-account 737 10.3596 7,635 8,120
Equity Sub-account 7,463 12.9956 96,986 103,485
Capital Sub-account 9,355 13.9555 130,554 103,344
Asset Manager Sub-account 13,404 16.9296 226,925 197,008
Growth Sub-account 7,283 31.1387 226,783 198,513
High Income Sub-account 3,695 12.5194 46,259 43,497
Overseas Sub-account 2,189 18.8405 41,242 37,651
Communications and Information Sub-account 26,279 14.6902 386,044 399,835
Frontier Sub-account 6,925 14.9786 103,727 102,967
Small Capitalization Sub-account 1,080 40.9096 44,182 45,737
Growth Sub-account 343 34.3352 11,777 12,086
MidCap Sub-account 492 21.3293 10,494 9,452
Leveraged AllCap Sub-account 148 19.2999 2,856 2,886
Growth and Income Sub-account 147 19.5374 2,872 3,192
-----------------------------
$1,564,982 $1,499,919
=============================
</TABLE>
22
<PAGE> 100
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. SECURITY PURCHASES AND SALES
The aggregate cost of purchases for the year ended December 31, 1996 is
presented below:
<TABLE>
<CAPTION>
AGGREGATE COST
OF PURCHASES
--------------
<S> <C>
Money Market Sub-account $156,296
Managed Sub-account 23,827
Bond Sub-account 639
Equity Sub-account 19,188
Capital Sub-account 7,299
Asset Manager Sub-account 104,305
Growth Sub-account 129,753
High Income Sub-account 44,362
Overseas Sub-account 59,838
Communications and Information Sub-account 125,555
Frontier Sub-account 95,807
Small Capitalization Sub-account 81,129
Growth Sub-account 12,230
MidCap Sub-account 10,278
Leveraged AllCap Sub-account 2,895
Growth and Income Sub-account 3,192
--------
$876,593
========
</TABLE>
23
<PAGE> 101
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. SECURITY PURCHASES AND SALES (CONTINUED)
The proceeds from sales of investments for the year ended December 31, 1996 are
presented below:
<TABLE>
<CAPTION>
PROCEEDS OF SALES
-----------------
<S> <C>
Money Market Sub-account $ 46,876
Managed Sub-account 33,976
Bond Sub-account 96
Equity Sub-account 1,492
Capital Sub-account 12,007
Asset Manager Sub-account 20,419
Growth Sub-account 19,722
High Income Sub-account 936
Overseas Sub-account 24,124
Communications and Information Sub-account 36,846
Frontier Sub-account 24,720
Small Capitalization Sub-account 34,985
Growth Sub-account 140
MidCap Sub-account 833
Leveraged AllCap Sub-account 10
Growth and Income Sub-account --
--------
$257,182
========
</TABLE>
24
<PAGE> 102
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
The following table represents a summary of changes from unit transactions
attributable to contract holders for the periods indicated. The Small
Capitalization, Growth, MidCap, Leveraged AllCap and Growth and Income
portfolios commenced operations May 1, 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
UNITS AMOUNT
----------------------------
<S> <C> <C>
CLASF SERIES
- ------------
MONEY MARKET SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 8,785 $ 109,303
Terminated contracts and net transfers out (3) (30)
----------------------------
8,782 109,273
MANAGED SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 5 75
Terminated contracts and net transfers out (1,917) (32,134)
----------------------------
(1,912) (32,059)
BOND SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in -- --
Terminated contracts and net transfers out -- --
----------------------------
-- --
EQUITY SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 4 75
Terminated contracts and net transfers out (12) (210)
----------------------------
(8) (135)
CAPITAL SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 164 2,381
Terminated contracts and net transfers out (741) (10,300)
----------------------------
(577) (7,919)
FIDELITY VIP SERIES
- -------------------
ASSET MANAGER SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 4,967 96,042
Terminated contracts and net transfers out (917) (17,894)
----------------------------
4,050 78,148
</TABLE>
25
<PAGE> 103
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
UNITS AMOUNT
----------------------------
<S> <C> <C>
FIDELITY VIP SERIES (CONTINUED)
- -------------------------------
GROWTH SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 3,362 114,162
Terminated contracts and net transfers out (1,062) (36,836)
------------------
2,300 77,326
HIGH INCOME SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 1,526 44,325
Terminated contracts net transfers out (20) (615)
------------------
1,506 43,710
OVERSEAS SUB-ACCOUNT
Accumulated Units:
Contract purchases and net transfers in 3,504 59,599
Terminated contracts and net transfers out (1,338) (23,292)
------------------
2,166 36,307
SELIGMAN PORTFOLIO SERIES
COMMUNICATIONS AND INFORMATION SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 9,001 125,020
Terminated contracts and net transfers out (1,941) (27,100)
------------------
7,060 97,920
FRONTIER SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 5,469 84,152
Terminated contracts and net transfers out (1,367) (21,476)
------------------
4,102 62,676
ALGER AMERICAN SERIES
- ---------------------
SMALL CAPITALIZATION SUB-ACCOUNT (FROM MAY 1, 1996)
Accumulation Units:
Contract purchases and net transfers in 1,034 45,112
Terminated contracts net transfers out (3) (140)
------------------
1,031 44,972
</TABLE>
26
<PAGE> 104
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
UNITS AMOUNT
----------------------------
<S> <C> <C>
ALGER AMERICAN SERIES (CONTINUED)
- ---------------------------------
GROWTH SUB-ACCOUNT (FROM MAY 1, 1996)
Accumulated Units:
Contract purchases and net transfers in 340 12,230
Terminated contracts and net transfers out (4) (140)
------------------
336 12,090
MIDCAP SUB-ACCOUNT (FROM MAY 1, 1996)
Accumulation Units:
Contract purchases and net transfers in 500 10,279
Terminated contracts and net transfers out -- --
------------------
500 10,279
LEVERAGED ALLCAP SUB-ACCOUNT (FROM MAY 1, 1996)
Accumulation Units:
Contract purchases and net transfers in 150 2,896
Terminated contracts and net transfers out -- --
------------------
150 2,896
DREYFUS SERIES
- --------------
GROWTH AND INCOME SUB-ACCOUNT (FROM MAY 1, 1996)
Accumulation Units:
Contract purchases and net transfers in 127 2,896
Terminated contracts and net transfers out -- --
------------------
127 2,896
Net increase from unit transactions $ 538,380
=========
</TABLE>
27
<PAGE> 105
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
UNITS AMOUNT
----------------------------
<S> <C> <C>
CLASF SERIES
- ------------
MONEY MARKET SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in -- $ --
Terminated contracts and transfers out (3) (30)
--------------------
(3) (30)
MANAGED SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 82 1,217
Terminated contracts and transfers out (4,939) (76,004)
--------------------
(4,857) (74,787)
BOND SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in -- --
Terminated contracts and transfers out -- --
--------------------
-- --
EQUITY SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 1,600 26,908
Terminated contracts and transfers out (2,064) (35,257)
--------------------
(464) (8,349)
CAPITAL SUB-ACCOUNT
Accumulation Units:
Contract Purchases and net transfers in 769 8,794
Terminated contracts and net transfers out (1,038) (13,957)
--------------------
(269) (5,163)
FIDELITY VIP SERIES
- -------------------
ASSET MANGER SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in -- --
Terminated contracts and net transfers out (768) (13,227)
--------------------
(768) (13,227)
</TABLE>
28
<PAGE> 106
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
UNITS AMOUNT
----------------------------
<S> <C> <C>
FIDELITY VIP SERIES (CONTINUED)
- -------------------------------
GROWTH SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 1,702 53,789
Terminated contracts and net transfers out (195) (6,588)
--------------------
1,507 47,201
HIGH INCOME SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in -- --
Terminated contracts and net transfers out (1,206) (32,509)
--------------------
(1,206) (32,509)
OVERSEAS SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 63 966
Terminated contracts and net transfers out (594) (9,780)
--------------------
(531) (8,814)
SELIGMAN PORTFOLIO SERIES
- -------------------------
COMMUNICATIONS AND INFORMATION SUB-ACCOUNT
(FROM JUNE 22, 1995)
Accumulation Units:
Contract purchases and net transfers in 18,782 294,672
Terminated contracts and net transfers out (170) (2,500)
--------------------
18,612 292,172
FRONTIER SUB-ACCOUNT (FROM AUGUST 1, 1995)
Accumulation Units:
Contract purchases and net transfers in 2,237 29,392
Terminated contracts and net transfers out -- --
--------------------
2,237 29,392
Net increase from unit transactions $225,886
========
</TABLE>
29
<PAGE> 107
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
6. MORTALITY AND EXPENSE RISK (M AND E) CHARGES AND OTHER ADJUSTMENTS
CLNY assumes mortality and expense risks related to the operations of Variable
Annuity Account 1 and deducts a charge equal to an effective annual rate of
1.25% of the net asset value of each of the Sub-accounts at the end of each
valuation period. The net investment income for the Sub-accounts was adjusted by
$(23,947) for outstanding transactions at December 31, 1996.
7. NET ASSETS
Net assets in each Sub-account as at December 31, 1996 consisted of the
following:
<TABLE>
<CAPTION>
NET NET
ACCUMULATED ACCUMULATED REALIZED UNREALIZED
SUB- UNIT M AND E INVESTMENT GAIN ON GAIN ON
ACCOUNT TRANSACTION CHARGES INCOME INVESTMENTS INVESTMENTS COMBINED
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Money Market $ 111,112 $ (587) $ 1,360 -- -- $ 111,885
Managed 76,620 (9,361) 52,971 $10,051 $ (5,500) 124,781
Bond 6,311 (483) 3,153 (490) (485) 8,006
Equity 76,095 (5,774) 34,426 7,903 (6,499) 106,151
Capital 94,740 (6,032) 19,458 5,037 27,210 140,413
Asset Manager 185,848 (8,775) 10,718 3,148 29,917 220,856
Growth 163,502 (9,306) 8,085 2,577 28,270 193,128
High Income 39,484 (579) 2,008 2,575 2,762 46,250
Overseas 36,921 (4,693) 131 1,357 3,591 37,307
Communications
and Information 390,092 (5,549) 21,659 (90) (13,791) 392,321
Frontier 92,068 (4,180) 14,430 1,332 760 104,410
Small capital 44,972 (811) -- (408) (1,555) 42,198
Growth 12,090 (10) 336 (4) (309) 12,103
MidCap 10,279 (841) -- 6 1,042 10,486
Leveraged AllCap 2,896 (14) -- -- (30) 2,852
Growth and
Income 2,896 (4) 297 -- (320) 2,869
----------------------------------------------------------------------
$1,345,926 $(56,999) $169,032 $32,994 $ 65,063 $1,556,016
======================================================================
</TABLE>
8. UNIT VALUE
Unit Values as reported are calculated as total net assets divided by total
units for each Sub-account which may be made up of more than one underlying
portfolio series.
30
<PAGE> 108
FINANCIAL STATEMENTS
CANADA LIFE INSURANCE COMPANY OF
NEW YORK
December 31, 1996
With Auditors' Report
<PAGE> 109
ACTUARY'S REPORT
To the Shareholder, Directors and Policyholders of Canada Life Insurance Company
of New York.
I have made the valuation of policy benefit liabilities of Canada Life Insurance
Company of New York for its balance sheets at December 31, 1996 and 1995, and
its statements of operations for the years ended December 31, 1996, 1995 and
1994.
In my opinion:
(i) The actuarial reserves are computed in accordance with
accepted actuarial standards consistently applied, meet the
requirements of the Insurance Law and regulation of the State
of New York, and are at least as great as the minimum
aggregate amounts required by the State of New York; and
(ii) The policy benefit liabilities, when considered in light of
the assets held by the Company with respect to such
liabilities, make adequate provision for the anticipated cash
flows required by the contractual obligations of the Company
under the terms of its policies.
/s/ K.T. Ledwos
Atlanta, Georgia --------------------------
February 14, 1997 K.T. Ledwos, FSA, MAAA
Actuary
<PAGE> 110
CANADA LIFE INSURANCE COMPANY OF NEW YORK
FINANCIAL STATEMENTS
December 31, 1996
CONTENTS
<TABLE>
<S> <C>
Auditors' Report .......................................................... 1
Audited Financial Statements
Balance Sheets - Statutory Basis .......................................... 3
Statements of Operations - Statutory Basis ................................ 4
Statements of Accumulated Surplus - Statutory Basis ....................... 5
Statements of Cash Flows - Statutory Basis ................................ 6
Notes to Financial Statements - Statutory Basis ........................... 8
Supplemental Schedule of Selected Statutory-Basis Financial Data .......... 27
Note to Supplemental Schedule of Selected Statutory-Basis Financial Data .. 30
</TABLE>
<PAGE> 111
REPORT OF INDEPENDENT AUDITORS
To the Shareholder, Directors and Policlyholders of
Canada Life Insurance Company of New York
We have audited the accompanying statutory-basis balance sheets of CANADA LIFE
INSURANCE COMPANY OF NEW YORK as of December 31, 1996 and 1995, and the related
statutory-basis statements of operations, accumulated deficit, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
As described in Note 2 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York, which practices
differ from generally accepted accounting principles. The variances between such
practices and generally accepted accounting principles are also described in
Note 2. The effects on the financial statements of these variances are not
reasonably determinable but are presumed to be material.
In our report dated February 9, 1996, we expressed an opinion that the 1995
financial statements of the Company fairly present, in all material respects,
financial position, results of operations, and cash flows in conformity with
generally accepted accounting principles for mutual life insurance companies and
with reporting practices prescribed or permitted by the Insurance Department of
the State of New York. As described in Note 2, the accompanying statutory-basis
financial statements are no longer considered to be prepared in conformity with
generally accepted accounting principles. Accordingly, our present opinion on
the 1995 financial statements, as presented in the following paragraph, is
different from that expressed in our previous report.
1
<PAGE> 112
REPORT OF INDEPENDENT AUDITORS (CONTINUED)
In our opinion, because of the effects of the matter described in the second
preceding paragraph, the financial statements referred to above do not present
fairly, in conformity with generally accepted accounting principles, the
financial position of Canada Life Insurance Company of New York at December 31,
1996 and 1995, or the results of its operations or its cash flows for each of
the three years in the period ended December 31, 1996.
Also, in our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Canada Life Insurance
Company of New York at December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York.
Toronto, Canada
February 14, 1997 /s/ Ernst & Young
Chartered Accountants
2
<PAGE> 113
CANADA LIFE INSURANCE COMPANY OF NEW YORK
BALANCE SHEETS - STATUTORY BASIS
[in thousands of dollars]
except per share values
<TABLE>
<CAPTION>
AS AT DECEMBER 31 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS [note 3]
Bonds, at amortized cost less write-downs [fair value - 1996 - $147,774;
1995 - $134,787] .................................................... $142,002 $125,398
Mortgage loans, at amortized cost less write-downs ..................... 79,900 74,785
Preferred stocks, at cost [fair value - 1996 - $21; 1995 - $23] ........ 15 16
Common stocks, at fair value [cost - 1996 - $4,442; 1995 - $4,487] ..... 8,336 7,728
Policy loans ........................................................... 12,264 12,165
Short-term investments, at cost ........................................ 5,495 3,200
Cash and interest-bearing deposits ..................................... 2,027 985
- ----------------------------------------------------------------------------------------------
TOTAL CASH AND INVESTMENTS ............................................. 250,039 224,277
Deferred premiums and premiums in the course of collection ............. 2,798 2,326
Investment income due and accrued ...................................... 3,581 3,035
Other assets [including federal tax recoverable] ....................... 1,315 1,875
Assets held in separate accounts [note 6] .............................. 3,258 925
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS ........................................................... $260,991 $232,438
==============================================================================================
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES
Actuarial reserves ..................................................... $226,890 $205,615
Benefits in course of payment and provision for unreported claims ...... 389 316
Policyholders' amounts left on deposit at interest ..................... 3,764 4,096
Provisions for future policy dividends ................................. 2,539 2,287
- ----------------------------------------------------------------------------------------------
POLICY BENEFIT LIABILITIES ............................................. 233,582 212,314
Interest maintenance reserve ........................................... 469 272
Amounts payable to parent company [note 6[b]] .......................... 1,245 414
Unallocated amounts .................................................... 396 421
Miscellaneous liabilities
[including provision for outstanding taxes and expenses] ............. 4,764 2,196
Asset valuation reserve ................................................ 3,069 3,034
Liabilities from separate accounts ..................................... 3,258 925
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES ...................................................... 246,783 219,576
- ----------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS [note 9]
Capital stock
Authorized and issued:
100,000 common shares at a par value of $10 per share ............. 1,000 1,000
Paid-in surplus ........................................................ 2,850 2,850
Accumulated surplus .................................................... 10,358 9,012
- ----------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS .............................................. 14,208 12,862
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL AND SURPLUS .............................. $260,991 $232,438
==============================================================================================
</TABLE>
See accompanying notes
3
<PAGE> 114
CANADA LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS - STATUTORY BASIS
[in thousands of dollars]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES
Premiums for insurance and annuity considerations [note 6] $37,423 $ 23,045 $ 36,707
Considerations for supplementary contract
and dividends left on deposit 1,006 262 841
Net investment income [note 3[a]] 18,793 18,109 16,816
Other income 11 9 248
Adjustments on reinsurance ceded 1,946 (476) (479)
- -------------------------------------------------------------------------------------------
TOTAL REVENUES 59,179 40,949 54,133
- -------------------------------------------------------------------------------------------
EXPENDITURES
Death benefits, disability benefits and matured
endowments on insurance 1,687 1,486 1,836
Annuity benefits 13,802 12,861 11,348
Surrender benefits 7,074 4,352 5,065
Payments on supplementary contracts and
dividends left on deposit 745 765 590
Interest on policy or contract funds 469 132 86
Dividends to policyholders 2,706 2,377 2,182
- -------------------------------------------------------------------------------------------
TOTAL PAYMENTS TO POLICYHOLDERS AND BENEFICIARIES 26,483 21,973 21,107
Increase in actuarial reserves 20,772 11,274 25,468
Commissions to agents 2,847 2,128 2,790
General insurance expenses 4,891 3,994 4,052
Taxes, licenses and fees 556 632 475
Other disbursements 276 160 29
Transfers to separate accounts 2,103 217 155
- -------------------------------------------------------------------------------------------
TOTAL EXPENDITURES 57,928 40,378 54,076
- -------------------------------------------------------------------------------------------
Income from operations before federal income
taxes and net realized capital gains 1,251 571 57
Provision for federal income taxes [note 4] 599 534 479
- -------------------------------------------------------------------------------------------
Income (loss) from operations before
net realized capital gains 652 37 (422)
Net realized capital gains [note 3[b]] 476 187 230
- -------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1,128 $ 224 $ (192)
===========================================================================================
</TABLE>
See accompanying notes
4
<PAGE> 115
CANADA LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF ACCUMULATED SURPLUS - STATUTORY BASIS
[in thousands of dollars]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
ACCUMULATED SURPLUS, BEGINNING OF YEAR $ 9,012 $ 8,195 $ 9,160
Net income (loss) 1,128 224 (192)
Change in net unrealized capital gains (losses) 665 1,691 (490)
Change in surplus on account of:
Non-admitted assets (239) 425 (433)
Actuarial valuation basis (172) (193) 400
Asset valuation reserve (35) (929) (249)
Provision for postretirement benefits [note 11] -- (401) --
Adjustment for gain in currency exchange (1) -- (1)
- -----------------------------------------------------------------------------------
ACCUMULATED SURPLUS, END OF YEAR $ 10,358 $ 9,012 $ 8,195
===================================================================================
</TABLE>
See accompanying notes
5
<PAGE> 116
CANADA LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS - STATUTORY BASIS
[in thousands of dollars]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Premiums, policy proceeds, and other considerations
received $ 39,668 $ 22,247 $ 36,931
Net investment income received 16,964 16,953 15,757
Benefits paid (23,721) (19,952) (18,260)
Insurance expenses (paid) (8,445) (6,780) (7,123)
Dividends paid to policyholders (2,440) (2,145) (2,039)
Federal income taxes paid (599) (534) (141)
Net (increase) in policy loans (99) (241) (249)
Net transfers (to) Separate Accounts (2,130) (219) (155)
Other income received net of other expenses -- -- 686
- ------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 19,198 9,329 25,407
PROCEEDS FROM SALES, MATURITIES, OR
REPAYMENTS OF INVESTMENTS
Bonds 49,924 45,262 39,234
Preferred stocks 1 1 --
Common stocks 3,690 2,070 3,220
Mortgage loans 3,812 3,759 5,227
Real estate 536 273 530
Miscellaneous proceeds 122 73 --
- ------------------------------------------------------------------------------------------------
Total investments proceeds 58,085 51,438 48,211
Taxes paid (received) on capital gains (losses) 517 520 (317)
- ------------------------------------------------------------------------------------------------
NET PROCEEDS FROM SALES, MATURITIES, OR REPAYMENTS OF
INVESTMENTS 57,568 50,918 48,528
OTHER CASH PROVIDED
Other sources 4,360 1,406 --
- ------------------------------------------------------------------------------------------------
Total other cash provided 4,360 1,406 --
- ------------------------------------------------------------------------------------------------
TOTAL CASH PROVIDED 81,126 61,653 73,935
- ------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 117
CANADA LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS - STATUTORY BASIS (CONTINUED)
[in thousands of dollars]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
COST OF INVESTMENTS ACQUIRED
Bonds 64,961 48,700 63,367
Common stocks 2,592 1,101 2,498
Mortgage loans 9,682 7,725 7,065
Real estate 31 15 97
Miscellaneous applications 59 437 73
- -------------------------------------------------------------------------------
TOTAL COST OF INVESTMENTS ACQUIRED 77,325 57,978 73,100
OTHER CASH APPLIED
Other applications, net 464 2,424 3,754
- -------------------------------------------------------------------------------
Total other cash applied 464 2,424 3,754
- -------------------------------------------------------------------------------
TOTAL CASH USED 77,789 60,402 76,854
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS 3,337 1,251 (2,919)
CASH AND SHORT-TERM INVESTMENTS
Beginning of year 4,185 2,934 5,853
- -------------------------------------------------------------------------------
END OF YEAR $ 7,522 $ 4,185 $ 2,934
===============================================================================
</TABLE>
See accompanying notes
7
<PAGE> 118
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. ORGANIZATION
Canada Life Insurance Company of New York ["Company"] was incorporated on June
7, 1971 in the State of New York and is a wholly-owned subsidiary of The Canada
Life Assurance Company ["Parent"], a mutual life and accident and health
insurance company. The Company is licensed to sell individual and group life,
health, and investment products in the State of New York.
2. BASIS OF ACCOUNTING
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Insurance Department of the
State of New York, which practices differ from generally accepted accounting
principles ("GAAP"). Prescribed statutory accounting practices include state
laws, regulations, and general administrative rules, as well as a variety of
publications of the National Association of Insurance Commissioners ("NAIC").
Permitted statutory accounting practices encompass all accounting practices that
are not prescribed; such practices may differ from state to state, may differ
from company to company within a state, and may change in the future. The NAIC
is currently in the process of recodifying statutory accounting practices, the
result of which is expected to constitute the only source of "prescribed"
statutory accounting practices. Accordingly, that project, which is expected to
be completed in 1997, will likely change, to some extent, prescribed statutory
accounting practices, and may result in changes to the accounting practices that
the Company uses to prepare its statutory financial statements. The impact of
any such changes on the Company's statutory surplus cannot be determined at this
time and could be material. The Company currently follows only prescribed
accounting practices.
The 1995 financial statements presented for comparative purposes were previously
described as also being prepared in accordance with GAAP for mutual life
insurance companies. Pursuant to FASB Interpretation 40, Applicability of
Generally Accepted Accounting Principles to Mutual Life Insurance and Other
Enterprises ("FIN 40"), as amended, which is effective for 1996 annual financial
statements, financial statements based on statutory accounting practices can no
longer be described as prepared in conformity with GAAP. Furthermore, financial
statements prepared in conformity with statutory accounting practices for
periods prior to the effective date of FIN 40 are not considered GAAP
presentations when presented in comparative form with financial statements for
periods subsequent to the effective date. Accordingly, the 1995 financial
statements are no longer considered to be presented in conformity with GAAP.
In January 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 120, Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration
Participating Contracts. This Statement extends the requirements of FASB
Statements No. 60, Accounting and Reporting by Insurance Enterprises; No. 97,
Accounting and Reporting by Insurance Enterprises for Certain Long-Duration
Contracts and for Realized Gains and Losses from the Sale of Investments; and
No. 113, Accounting and Reporting for Reinsurance of Short-Duration and
Long-Duration Contracts, to mutual life insurance enterprises. Also, in January
1995, the AICPA issued Statement of Position 95-1, Accounting for Certain
Insurance Activities of Mutual Life Insurance Enterprises.
8
<PAGE> 119
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. BASIS OF ACCOUNTING (CON'T)
This Statement of Position (SOP) provides accounting guidance for certain
participating insurance contracts of mutual life insurance enterprises. Both
Statement No. 120 and SOP 95-1 are effective for financial statements issued for
fiscal years beginning after December 15, 1995. The Company has not implemented
these pronouncements.
The more significant variances from GAAP are as follows:
Investments: Investments in bonds are reported at amortized cost based on
their NAIC rating; for GAAP, such fixed maturity investments would be
designated at purchase as held-to-maturity, trading, or available-for-sale.
Held-to-maturity fixed investments would be reported at amortized cost, and
the remaining fixed maturity investments are reported at fair value with
unrealized holding gains and losses reported in operations for those
designated as trading and as a separate component of shareholders' equity
for those designated as available-for-sale.
Changes between cost and admitted asset amounts of investment real estate
are credited or charged directly to unassigned surplus rather than to a
separate surplus account.
Valuation allowances, if necessary, are established for mortgage loans
based on (1) the difference between the unpaid loan balance and the
estimated fair value of the underlying real estate when such loans are
determined to be in default as to scheduled payments and (2) a reduction of
the maximum percentage of any loan to the value of the security at the time
of the loan, exclusive of insured, guaranteed or purchase money mortgages,
to 75%, where necessary. Under GAAP, valuation allowances would be
established when the Company determines it is probable that it will be
unable to collect all amounts (both principal and interest) due according
to the contractual terms of the loan agreement. The initial valuation
allowance and subsequent changes in the allowance for mortgage loans are
charged or credited directly to unassigned surplus, rather than being
included as a component of earnings as would be required for GAAP.
Under a formula prescribed by the NAIC, the Company defers the portion of
realized capital gains and losses on sales of fixed income investments,
principally bonds and mortgage loans, attributable to changes in the
general level of interest rates and amortizes those deferrals into income
on a straight-line basis over the remaining period to maturity based on
groupings of individual securities sold in five-year bands. That net
deferral is reported as the "Interest Maintenance Reserve" in the
accompanying balance sheets. Realized capital gains and losses are reported
in income net of federal income tax and transfers to the interest
maintenance reserve. The "Asset Valuation Reserve" is determined by an NAIC
prescribed formula and is reported as a liability rather than unassigned
surplus. Under GAAP, realized capital gains and losses would be reported in
the income statement on a pretax basis in the period that the asset giving
rise to the gain or loss is sold and valuation allowances would be provided
when there has been a decline in value deemed other than temporary, in
which case, the provision for such declines would be charged to earnings.
Policy Acquisition Costs: The costs of acquiring and renewing business are
expensed when incurred. Under GAAP, acquisition costs related to
traditional life insurance and certain long-duration
9
<PAGE> 120
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. BASIS OF ACCOUNTING (CON'T)
accident and health insurance, to the extent recoverable from future policy
revenues, would be deferred and amortized over the premium-paying period of
the related policies using assumptions consistent with those used in
computing policy benefit reserves. For investment products, to the extent
recoverable from future gross profits, deferred policy acquisition costs
are amortized generally in proportion to the present value of expected
gross profits from surrender charges and investment, mortality, and expense
margins.
Nonadmitted Assets: Certain assets designated as "nonadmitted" as defined
by regulatory authorities, such as negative IMR, are excluded from the
accompanying balance sheets and are charged directly to unassigned surplus.
Benefit Reserves: Certain policy reserves are calculated based on
statutorily required interest and mortality assumptions rather than on
estimated expected experience or actual account balances as would be
required under GAAP.
Federal Income Taxes: Deferred federal income taxes are not provided for
differences between the financial statement amounts and tax bases of assets
and liabilities.
Policyholder Dividends: Policyholder dividends are recognized when declared
rather than over the term of the related policies.
The effects of the foregoing variances from GAAP on the accompanying
statutory-basis financial statements have not been determined, but are presumed
to be material.
A summary of the significant accounting practices employed by the Company is as
follows:
[a] Assets included in the balance sheets are "admitted assets" as defined
by regulatory authorities. Certain assets such as furniture and
fixtures are charged against accumulated surplus at the date of
acquisition.
[b] Bonds are stated at values prescribed by the NAIC, as follows. Bonds
not backed by other loans are principally stated at amortized cost.
Loan-backed bonds and structured securities are valued at amortized
cost using the interest method including anticipated prepayments.
Prepayment assumptions are obtained from dealer surveys or internal
estimates and are based on the current interest rate and economic
environment. The retrospective adjustment method is used to value all
such securities. Mortgage loans are carried at amortized cost less
principal repayments. Real estate is carried at the lower of current
market value or cost less depreciation, which is computed on the
straight-line basis over the estimated useful lives of the properties.
Common stocks are carried at fair value and preferred stocks are
carried at cost. Gains and losses resulting from sales of investment
securities are recognized using an average cost basis. Unrealized
capital gains and losses are reflected as a direct credit or charge to
the surplus or deficit of the Company.
[c] Policy loans are carried at their unpaid balance and are fully secured
by the cash surrender value of the policies on which the respective
loans are made.
10
<PAGE> 121
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. BASIS OF ACCOUNTING (CON'T)
[d] Actuarial reserves represent the amount required, in addition to future
premiums, annuity considerations and interest, to provide for future
payments under insurance and annuity contracts.
Reserves for annual premium life insurance contracts issued prior to
1977 are determined on the net level premium method using primarily the
1941 CSO and 1958 CSO [IPC] mortality tables with assumed interest
rates ranging from 2% to 3 1/2%. Reserves for life insurance contracts
issued between 1977 and 1988 are determined by a modification of the
Commissioners' Reserve Valuation Method using primarily the 1958 CSO
[IPC] and 1958 CSO [CONT] mortality tables with assumed interest rates
ranging from 2 1/2% to 5 1/2%. Reserves for life insurance contracts
issued after 1988 use the 1980 CSO [CONT] mortality tables with assumed
interest rates ranging from 4% to 5.5%.
Reserves for individual payout annuity contracts are determined using
primarily the 1971 Individual Annuity Mortality and the 1983 "A"
mortality tables with interest rates ranging from 6% to 11 1/4%.
Reserves for individual non-participating accumulator annuities in the
general account are calculated according to the Commissioners' Annuity
Reserve Valuation Method (CARVM) with interest rates ranging from 4% to
8 1/4%.
Changes in actuarial reserves due to changes in valuation assumptions
are shown as adjustments to accumulated surplus.
[e] Premiums and annuity considerations paid annually are recorded as
income on the policy anniversary date. Premiums and annuity
considerations collected on other than an annual basis are included in
income as they become receivable.
[f] Income taxes are provided based on an estimate of the amount currently
payable which may not bear a normal relationship to pre-tax income
because of timing and other differences in the calculation of taxable
income.
[g] Separate accounts are maintained to receive and invest premium payments
under individual variable annuity policies issued by the Company. The
assets and liabilities of the separate accounts are clearly
identifiable and distinguishable from other assets and liabilities of
the Company, and the contractholder bears the investment risk. Separate
account assets are reported at fair value. The operations of the
separate accounts are not included in the accompanying financial
statements.
[h] Annual policyholder dividends are calculated using either the
contribution method or a modified experience premium method. These
methods distribute the aggregate divisible surplus among policies in
the same proportion as the policies are considered to have contributed
to divisible surplus. A proportion of earnings and surplus is allocated
to participating policies based on various allocation bases.
11
<PAGE> 122
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. BASIS OF ACCOUNTING (CONT'D)
[i] For the purposes of the statements of cash flows, cash refers to demand
deposits with banks and other financial institutions.
[j] The Company utilizes derivative instruments where appropriate in the
management of its asset/liability matching and to hedge against
fluctuations in interest rates and foreign exchange rates. Gains and
losses resulting from these instruments are included in income on a
basis consistent with the underlying assets or liabilities that have
been hedged. Options are valued at amortized cost and futures are
valued at initial margin deposit adjusted by changes in market value.
Both items are reported as other assets.
[k] The preparation of statutory-basis financial statements requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
[l] Certain amounts in the accompanying financial statements for 1995 have
been reclassified to conform with 1996 financial statement
presentation.
[m] The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and interest-bearing deposits, short-term investments and policy loans: The
carrying amounts reported in the balance sheets for these items approximate
their fair values.
Investment securities: Fair values for investment securities are based on quoted
market prices, where available. For securities not actively traded, fair values
are estimated using values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting expected future cash
flows using a current market rate applicable to the yield, credit quality, and
maturity of the investments.
Mortgage loans: The fair values for mortgage loans are estimated based on
discounted cash flow analyses, using interest rates currently being offered for
similar loans to borrowers.
Derivative Instruments: The Company utilizes derivative instruments limited to
contracts to buy or sell U.S. Treasury securities used to hedge specific asset
and liability interest rate risks. Fair values for the Company's interest rate
futures contracts and options that have not settled are based on current
settlement values.
Investment contracts: Fair values for the Company's liabilities under
investment-type insurance contracts are estimated using discounted liability
calculations, adjusted to approximate the effect of current market interest
rates for the assets supporting the liabilities.
12
<PAGE> 123
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. INVESTMENTS
[a] Additional information with respect to net investment income is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
- --------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Interest and dividends on fixed maturities $10,145 $ 9,653 $ 8,857
Income on real estate 47 17 27
Dividends on equity securities 165 145 183
Amortization of interest maintenance reserve 189 132 78
Interest on:
Mortgage loans 7,730 7,536 7,167
Policy loans 722 704 651
Short-term investments 264 388 236
Other income 28 28 --
- --------------------------------------------------------------------------------
19,290 18,603 17,199
Less investment expenses 497 494 383
- --------------------------------------------------------------------------------
NET INVESTMENT INCOME $18,793 $18,109 $16,816
================================================================================
</TABLE>
[b] Summary of realized capital gains (losses):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
- -------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Realized capital gains (losses):
Fixed maturities $ 440 $ 1,146 $(1,613)
Equity securities 1,053 775 353
Mortgage loans (264) (62) --
Real estate 27 31 108
Derivative instruments 122 (359) --
- -------------------------------------------------------------------------------
1,378 1,531 (1,152)
Income tax benefit (expense) (517) (521) 317
Transfer from (to) interest maintenance reserve (385) (823) 1,065
- -------------------------------------------------------------------------------
NET REALIZED CAPITAL GAINS $ 476 $ 187 $ 230
===============================================================================
</TABLE>
13
<PAGE> 124
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. INVESTMENTS (CONT'D)
Proceeds from sales and maturities of fixed maturity investments for the years
ended December 31, 1996, 1995 and 1994 were $49,924,000, $45,262,000 and
$39,234,000, respectively. Gross gains of $809,000, $1,679,000 and $809,000 and
gross losses of $369,000, $534,000 and $2,422,000, respectively, were realized
on those sales for the years ended December 31, 1996, 1995 and 1994. Gross gains
of $1,122,000, $933,000 and $537,000 and gross losses of $69,000, $158,000 and
$184,000, respectively, were realized on sales of equity securities for the
years ended December 31, 1996, 1995 and 1994.
[c] The amortized cost, carrying value, gross unrealized gains, gross
unrealized losses and fair values of fixed maturity investments by
security type are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------------------------------------------------------------
GROSS GROSS
AMORTIZED CARRYING UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES FAIR VALUE
- ---------------------------------------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C> <C> <C>
United States Government
agencies and authorities $ 62,281 $ 62,281 $4,711 $ (66) $ 66,926
Foreign governments -- -- -- -- --
Public utilities 12,118 11,949 165 (12) 12,102
Mortgage-backed securities 9,796 9,796 -- -- 9,796
All other corporate bonds 57,976 57,976 1,003 (29) 58,950
- ---------------------------------------------------------------------------------------------------------------
TOTAL FIXED MATURITIES $142,171 $142,002 $5,879 $(107) $147,774
===============================================================================================================
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------------------------
GROSS GROSS
AMORTIZED CARRYING UNREALIZED UNREALIZED
COST VALUE GAINS LOSSES FAIR VALUE
- ---------------------------------------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C> <C> <C>
United States Government
agencies and authorities $ 51,763 $ 51,763 $8,227 $ (6) $ 59,984
Foreign governments 88 88 -- -- 88
Public utilities 11,722 11,551 330 -- 11,880
Mortgage-backed securities 9,772 9,772 -- -- 9,772
All other corporate bonds 52,225 52,224 940 (102) 53,063
- ---------------------------------------------------------------------------------------------------------------
TOTAL FIXED MATURITIES $125,570 $125,398 $9,497 $(108) $134,787
===============================================================================================================
</TABLE>
14
<PAGE> 125
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. INVESTMENTS (CONT'D)
Differences between the amortized cost and carrying value for fixed maturity
securities are due to the NAIC statutory requirement for fixed maturity
securities in default that the carrying value be set at the lower of amortized
cost or fair value.
Unrealized gains and losses on fixed maturities are based on NAIC required fair
values. For the years ended December 31, 1996, 1995 and 1994, there were changes
in net unrealized gains and losses on fixed maturities of $(3,617,000),
$9,417,000 and $(5,246,000), respectively. These unrealized gains and losses are
not reflected in the accompanying financial statements. The Company's investment
policy, generally, is to hold fixed maturity investments until maturity.
However, under certain circumstances where there are changes in business or
financial conditions, individual securities may be liquidated prior to maturity.
[d] The carrying value and the NAIC fair value of fixed maturity
investments by maturity date are shown below. Mortgage-backed
securities were included in the various categories in accordance with
their scheduled maturity table.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
CARRYING VALUE FAIR VALUE
- ---------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C>
1 year or less $ 4,018 $ 4,027
Over 1 year through 5 years 26,634 26,812
Over 5 years through 10 years 40,589 40,978
Over 10 years 70,761 75,957
-------------------------
$142,002 $147,774
=========================
</TABLE>
[e] Unrealized capital gains and losses, resulting from carrying marketable
equity securities at fair value in the accompanying financial
statements, are recorded directly in surplus. The changes in the
unrealized gains (losses) on marketable equity securities were
$653,000, $1,077,000 and $(445,000) for the years ended December 31,
1996, 1995 and 1994, respectively. The accumulated gross unrealized
gains and accumulated gross unrealized losses on marketable equity
securities were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Accumulated gross unrealized gains $3,912 $3,250 $2,259
Accumulated gross unrealized losses (18) (9) (95)
---------------------------------------
Net unrealized gains $3,894 $3,241 $2,164
=======================================
</TABLE>
15
<PAGE> 126
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. INVESTMENTS (CONT'D)
[f] The carrying value and fair value of the Company's investments in
mortgage loans and policy loans were as follows at December 31, 1996:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
-----------------------------
[in thousands of dollars]
<S> <C> <C>
Commercial mortgages $ 80,089 $86,569
Residential mortgages 3 3
Write-downs on mortgage loans (192) --
-------------------------
79,900 86,572
-------------------------
Policy loans $ 12,264 $12,264
=========================
</TABLE>
The Company's distribution of mortgage loans by property type and by the ten
most significant states follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
AMOUNT PERCENT
-------------------------
[in thousands of dollars]
<S> <C> <C>
PROPERTY TYPE
Apartments and townhomes $ 31,892 39.9 %
Residential 3 0.0 %
Retail 24,531 30.7 %
General office buildings 8,562 10.7 %
Industrial and warehouse 12,640 15.8 %
Other 2,464 3.1 %
Write-downs on mortgage loans (192) (0.2)%
-------------------------
Total $ 79,900 100.0 %
=========================
<CAPTION>
DECEMBER 31, 1996
-------------------------
AMOUNT PERCENT
-------------------------
[in thousands of dollars]
<S> <C> <C>
STATE
California $ 15,386 19.3 %
Pennsylvania 9,245 11.6 %
Ohio 8,929 11.2 %
Illinois 6,413 8.0 %
New York 5,004 6.3 %
Michigan 4,824 6.0 %
New Jersey 4,295 5.4 %
Minnesota 3,821 4.8 %
Oregon 3,467 4.3 %
Maryland 3,271 4.1 %
Other 15,437 19.2 %
Write-downs on mortgage loans (192) (0.2)%
-------------------------
Total $ 79,900 100.0 %
=========================
</TABLE>
16
<PAGE> 127
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. INVESTMENTS (CONT'D)
The mortgage loans are typically collateralized by the related
properties, and the loan to value ratios at the date of loan
origination generally do not exceed 75%. The Company's exposure to
credit loss in the event of non-performance by the borrowers, assuming
that the associated collateral proved to be of no value, is represented
by the outstanding principal and accrued interest balances of the
respective loans. Increases of $192,000, $0 and $62,000 and decreases
of $202,000, $62,000 and $0, respectively, were made to the mortgage
loan loss reserve for the year ended 1996, 1995 and 1994.
No investment in any persons or their affiliates exceeded 10% of
capital and surplus as of December 31, 1996 and 1995.
The maximum and minimum lending rates for commercial mortgage loans
during 1996 was 9.125% and 7.375%, respectively.
Fire insurance is required on all properties covered by mortgage loans
at least equal to the excess of the loan over the maximum loan which
would be permitted by law without the buildings.
At December 31, 1996, the Company held one mortgage with a carrying
value of $621,735 on which interest of $148,180 was more than one year
overdue. At December 31, 1995, the Company held mortgages with a
carrying value of $621,735 on which interest of $146,674 was more than
one year overdue. During 1996, the Company did not reduce interest
rates on any outstanding mortgage loans. At December 31, 1996, the
Company had no mortgage loans that were converted to loans that require
payments of principal or interest be made based upon the cash flows
generated by the property serving as collateral for the loans or that
have a diminutive payment requirement. At December 31, 1996, the
Company had no outstanding amounts which had been advanced by the
Company. Except as noted above at December 31, 1996, the Company had no
prior liens outstanding on mortgage loans.
Due and accrued income was excluded from investment income on mortgage
loans where due and unpaid was more then three months. The total amount
excluded as of December 31, 1996 was $148,180. There was no amount
excluded for 1995.
17
<PAGE> 128
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. INVESTMENTS (CONT'D)
[g] The following tables represent a summary of investments held as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
AMORTIZED COST FAIR VALUE CARRYING VALUE
------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Fixed maturities [note 3[c]] $142,171 $147,774 $142,002
Preferred stocks 15 21 15
Common stocks 4,442 8,336 8,336
Mortgage loans on real estate 80,092 87,001 79,900
Policy loans 12,264 12,264 12,264
Short-term investments 5,495 5,495 5,495
------------------------------------------
Total investments $244,479 $260,891 $248,012
==========================================
<CAPTION>
DECEMBER 31, 1995
-----------------
AMORTIZED COST FAIR VALUE CARRYING VALUE
------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Fixed maturities [note 3[c]] $125,570 $134,787 $125,398
Preferred stocks 16 23 16
Common stocks 4,487 7,728 7,728
Mortgage loans on real estate 74,986 85,245 74,785
Policy loans 12,165 12,165 12,165
Short-term investments 3,200 3,200 3,200
------------------------------------------
Total investments $220,424 $243,148 $223,292
==========================================
</TABLE>
[h] The carrying amounts and fair values of the Company's liabilities for
investment type insurance contracts (included with actuarial reserves
liability in the balance sheet) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31 1996 1995
----------- ---------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
----- ----- ----- -----
[in thousands of dollars]
<S> <C> <C> <C> <C>
Investment contracts $24,976 $24,626 $16,342 $14,273
</TABLE>
18
<PAGE> 129
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
4. FEDERAL INCOME TAXES
The statutory federal income tax provision amount at the statutory rate of 34%
differs from the effective tax provision amount as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
----------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Computed income taxes at statutory rate $425 $194 $ 19
Increase (decrease) in income taxes resulting from:
Policyholder dividends 86 71 17
Actuarial reserves 385 230 306
Prior year income tax under (over) provision (29) 111 (181)
Deferred acquisition cost tax 232 65 220
Accrual of bond discount (298) - -
Other (202) (137) 98
----------------------------
$599 $534 $479
============================
</TABLE>
As of December 31, 1996 and 1995, the federal income taxes receivable were
$999,000 and $1,588,000, respectively.
During 1996, 1995 and 1994, the Company made cash payments on behalf of federal
income taxes of $525,000, $2,116,000 and $850,000, respectively.
5. PARTICIPATING INSURANCE
Participating insurance accounted for 78%, 76% and 75% of total ordinary
insurance in force, and premium income from ordinary life participating policies
amounted to 96%, 96% and 96% of total life insurance premiums during 1996, 1995
and 1994, respectively.
19
<PAGE> 130
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
6. RELATED PARTY TRANSACTIONS
[a] REINSURANCE
Various reinsurance agreements exist between the Company and its Parent,
primarily in the form of yearly renewable term treaties for life insurance, and
modified coinsurance for annuities. Currently all ceding premiums are reinsured,
with the Parent only. Premiums ceded by the Company during 1996 were $4,184,000
[1995 - $1,495,000, 1994 - $1,339,000]. These reinsurance transactions, however,
do not relieve the Company of its primary obligation to its policyholders.
Information regarding premiums is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
[in thousands of dollars]
Percentage Percentage Percentage
of Total of Total of Total
1996 Premiums 1995 Premiums 1994 Premiums
---- -------- ---- -------- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Direct premiums $ 41,607 111.2% $ 24,324 105.6% $ 37,615 102.5%
Assumed premiums -- -- 216 .9% 431 1.2%
Ceded premiums (4,184) (11.2)% (1,495) (6.5)% (1,339) (3.7)%
----------------------------------------------------------------------------------------
Net premiums for
insurance and
annuity contracts $ 37,423 100.0% $ 23,045 100.0% $ 36,707 100.0%
========================================================================================
</TABLE>
Direct premiums above represent premiums earned from sales of individual and
group life, health and investment products.
20
<PAGE> 131
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
6. RELATED PARTY TRANSACTIONS (CONT'D)
Information regarding life insurance in force is as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------
[in millions of dollars]
Percentage of Percentage
Total of Total
1996 In Force 1995 In Force
---- -------- ---- --------
<S> <C> <C> <C> <C>
Direct life insurance in force $1,020,325,000 270.8 % $924,216,000 236.5 %
Ceded life insurance in
force (643,492,000) (170.8)% (533,402,000) (136.5)%
--------------------------------------------------------------
Total life insurance in force $ 376,833,000 100.0 % $390,814,000 100.0 %
==============================================================
</TABLE>
[b] OTHER
In addition to the reinsurance agreements mentioned above, the Company and its
Parent have an agreement to provide services for each other. For the years ended
December 31, 1996, 1995 and 1994, the net cost of these services to the Company
amounted to $1,909,000, $1,611,000 and $1,618,000, respectively. As of December
31, 1996 and 1995, the amounts payable to the Parent were $1,245,000 and
$414,000, respectively.
[c] SEPARATE ACCOUNTS
The Company's non-guaranteed separate variable accounts represent primarily
funds invested in variable annuity policies issued by the Company. The assets of
these funds are invested in either shares of Canada Life of America Series Fund,
Inc., an affiliated diversified, open-ended management investment company or in
shares of four unaffiliated management investment companies.
21
<PAGE> 132
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
6. RELATED PARTY TRANSACTIONS
[c] SEPARATE ACCOUNTS (CONT'D)
Information regarding the separate accounts of the Company is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995
-------------------------
[in thousands of dollars]
<S> <C> <C>
Premiums, considerations, or deposits received $2,149 $353
Liabilities, including reserves, subject to discretionary
withdrawal, at market value with current surrender charges 3,258 925
</TABLE>
[d] SEPARATE ACCOUNT RECONCILIATION
A reconciliation of the amounts transferred to and from the separate accounts is
presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1996 1995 1994
--------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Transfers as reported in the Summary
of Operations of the Separate
Accounts Statements:
Transfers to separate accounts $2,149 $353 $217
Transfers from separate accounts 47 136 58
--------------------------------
Net transfers to (from) separate
accounts 2,102 217 159
Reconciling Adjustments:
(a) Gains/losses transferred 1 0 (4)
--------------------------------
Transfers as reported in the
Summary of Operations of the
Life, Accident & Health Annual
Statement $2,103 $217 $155
================================
</TABLE>
22
<PAGE> 133
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
7. REINSURANCE
In addition to the reinsurance ceded to the Parent described in note 6, the
Company had until September 1995 assumed business from the Serviceman's Group
Life Insurance (SEGLI) program. The premiums assumed on this business for 1995
were $217,000.
8. ACTUARIAL RESERVES
Certain reserving practices for life and annuity reserves are as follows:
[a] The Company waives deduction of deferred fractional premium upon death
of the insured for all issues and returns any portion of the final
premium beyond the date of death from 1980 and later issues. For 1980
and later issues, the Company's reserves are calculated on continuous
basis to reflect the above practice. For issues prior to 1980, annual
premium is assumed in the reserve calculation and for policies with
premium frequency other than annual, the Company holds a separate NDDFP
reserve which is the present value of a death benefit of half of the
gross premium for the balance of the policy premium paying period.
Some policies promise a surrender value in excess of the reserve as
legally computed. This excess is calculated on a policy by policy
basis.
[b] Policies issued at premium corresponding to ages higher than the true
ages are valued at the rated-up ages. Policies providing for payment at
death during certain periods of an amount less than the full amount of
insurance, being policies subject to liens, are valued as if the full
amount is payable without any deduction. For policies, issued with, or
subsequently subject to, an extra premium payable annually, an extra
reserve is held. The extra premium reserve is 45% of the gross extra
premium payable during the year if the policies are rated for reasons
other than medical impairments. For medical impairments, the extra
premium reserve is calculated at the excess of the reserve on rated
mortality over that on standard mortality.
[c] At the end of the year, the Company had $254,000,000 of insurance in
force for which the gross premiums are less than the net premiums
according to the standard of valuation set by the State of New York.
[d] The Tabular Interest has been determined from the basic data for the
calculation of policy reserves.
[e] The Tabular Interest on funds not involving life contingencies was
determined by formula.
[f] There were no significant "Other Increases."
23
<PAGE> 134
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
8. ACTUARIAL RESERVES (CON'T)
Withdrawal characteristics of annuity actuarial reserves and deposit liabilities
as at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
AMOUNT % OF TOTAL
------ ----------
<S> <C> <C>
Subject to discretionary withdrawal with adjustment
- with market value adjustment -- --
- at book value less surrender charge $ 21,974,635 13.9%
------------ -----
Subtotal 21,974,635 13.9%
Subject to discretionary withdrawal without adjustment
- at book value (minimal or no charge adjustment) 4,538,821 2.9%
Not subject to discretionary withdrawal provision 131,903,204 83.2%
------------ -----
Total annuity actuarial reserves and deposit fund liabilities (gross) 158,416,660 100.0%
------------ -----
Less: reinsurance --
------------
Total annuity actuarial reserves and deposit fund liabilities (net) $158,416,660
============
</TABLE>
In March 1995 the NAIC adopted Actuarial Guideline 33 [AG 33] which codified the
basic interpretation of CARVM and applies to all individual annuities issued on
or after January 1, 1981. The effective date of AG 33 was December 31, 1995. AG
33 required that the reserve held be the greatest actuarial present value of any
possible future cash value or other benefit. A three year phase-in period was
allowed to recognize any reserve increase as a result of implementation of AG
33. The Company implemented AG 33 effective December 31, 1995, and recognized a
decrease in surplus of $170,000 and $233,000 in 1996 and 1995, respectively. The
Company anticipates a decrease in surplus of an additional $170,000 in 1997 to
complete the phase in of AG 33.
24
<PAGE> 135
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
9. MINIMUM CAPITAL AND SURPLUS AND OTHER REGULATORY
REQUIREMENTS
Under applicable New York insurance law, the Company is required to maintain a
minimum capital of $1,000,000 and a surplus at least equal to fifty percent of
such capital.
In accordance with statutory requirements, bonds carried at a value of $349,000
and $349,000 were on deposit with insurance regulatory authorities as of
December 31, 1996 and 1995, respectively.
10. DERIVATIVE INSTRUMENTS
The Company is party to various derivative instruments limited to contracts to
buy or sell U.S. Treasury securities used to hedge specific asset and liability
interest rate risks. Management actively monitors the use and level of these
instruments to ensure that credit and liquidity risks are maintained within
pre-approved levels. Futures are valued at initial margin deposit adjusted for
unrealized gains and losses. The Company has also entered into a currency swap
to hedge its position in a Canadian equity investment. The currency swap is
valued at replacement value as at December 31, 1996.
The notional amounts and the carrying amounts of outstanding derivative
instruments are as follows:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT FAIR VALUE CARRYING VALUE
DECEMBER 31 DECEMBER 31 DECEMBER 31
1996 1995 1996 1995 1996 1995
--------------------------------------------------------------------------------
[in thousands of dollars] [in thousands of dollars] [in thousands of dollars]
<S> <C> <C> <C> <C> <C>
Futures (government bonds) $300 -- $320 -- $321 --
Currency swaps 503 -- (43) -- 553 --
</TABLE>
The Company's investment in derivative instruments may subject it to market risk
which is associated with adverse movements in the underlying interest rates,
equity prices and commodity prices. Since the Company's investment in derivative
instruments is confined to hedging activities, market risk is minimal.
11. POSTRETIREMENT BENEFITS
In addition to pension benefits, the Company provides certain health care and
life insurance benefits ("postretirement benefits") for retired employees.
Substantially all employees may become eligible for these benefits if they reach
retirement age while working for the company.
25
<PAGE> 136
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
11. POSTRETIREMENT BENEFITS (CONT'D)
December 31, 1996
In 1995, in accordance with guidance from the NAIC Accounting Policies and
Procedures manual, the Company changed its method of accounting for the costs of
its retirement benefit plans to an accrual method, and elected to recognize the
transition obligation for retirees and fully eligible or vested employees in
statutory surplus in the current year. The cumulative effect of recognizing this
obligation for unfunded prior years postretirement benefits was a decrease to
surplus of $401,000 at January 1, 1995.
Postretirement benefit cost for the year ended December 31, 1996, was $209,000.
Postretirement benefit cost includes the expected cost of postretirement
benefits for newly eligible or vested employees, interest cost, gains and losses
arising from differences between actuarial assumptions and actual experience.
The Company made contributions to the plans of $25,000 in 1996, as claims were
incurred.
At December 31, 1996, the postretirement benefit obligation for retirees and
other fully eligible or vested plan participants was fully funded. The estimated
cost of the benefit obligation for active employees was $275,000. The discount
rate used in determining the accumulated postretirement benefit obligation was
7.35% and the health care cost trend rate was 10%, graded to 6% over 20 years.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the postretirement
benefit obligation as of December 31, 1996, by $60,000 and the estimated
eligibility cost and interest components of net periodic postretirement benefit
cost for 1996 by $8,000.
26
<PAGE> 137
CANADA LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL SCHEDULE OF SELECTED STATUTORY-BASIS FINANCIAL DATA
DECEMBER 31, 1996
<TABLE>
<CAPTION>
(000's)
-------
<S> <C>
Investment income earned:
U.S. Government bonds $ 3,775
Other bonds (unaffiliated) 6,370
Preferred stocks (unaffiliated) 1
Common stocks (unaffiliated) 164
Mortgage loans 7,730
Real estate 47
Premium notes, policy loans and liens 722
Short-term investments 264
Derivative instruments 1
Aggregate write-ins for investment income 27
-------
Gross investment income $19,101
=======
Mortgage loans - book value:
Residential mortgages $ 3
Commercial mortgages 80,089
-------
Total mortgage loans $80,092
=======
Mortgage loans by standing - book value:
Good standing $79,470
=======
Interest overdue more than three months, not in foreclosure $ 622
=======
</TABLE>
27
<PAGE> 138
CANADA LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL SCHEDULE OF SELECTED STATUTORY-BASIS FINANCIAL DATA (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
(000's)
--------
<S> <C>
Bonds and short-term investments by class and maturity:
Bonds by maturity - statement value:
Due within one year less $ 9,513
Over 1 year through 5 years 26,634
Over 5 years through 10 years 40,589
Over 10 years through 20 years 45,166
Over 20 years 25,595
--------
Total by maturity $147,497
========
Bonds and short-term investments by class - statement value:
Class 1 $118,641
Class 2 26,463
Class 3 753
Class 4 654
Class 5 672
Class 6 314
--------
Total by class $147,497
========
Total by bonds publicly traded $100,329
========
Total by bonds privately placed $ 47,168
========
Preferred stocks - statement value $ 15
========
Common stocks - market value $ 8,336
========
Short term investments - book value $ 5,495
========
Collar, swap and forward agreements open - statement value $ 553
========
Futures contracts open - current value $ 320
========
Cash on deposit $ 2,027
========
</TABLE>
28
<PAGE> 139
CANADA LIFE INSURANCE COMPANY OF NEW YORK
SUPPLEMENTAL SCHEDULE OF SELECTED STATUTORY-BASIS FINANCIAL DATA (CONTINUED)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
(000's)
--------
<S> <C>
Life insurance in force:
Ordinary $374,478
========
Group life $ 6,769
========
Amount of accidental death insurance in force
under ordinary policies $ 13,927
========
Life insurance policies with disability provisions in force:
Ordinary $ 592
========
Group life $ 6,553
========
Supplementary contracts in force:
Ordinary - not involving life contingencies income payable $ 128
========
Ordinary - involving life contingencies income payable $ 435
========
Annuities:
Ordinary:
Immediate - amount of income payable $ 12,450
========
Deferred - not fully paid - account balance $ 16,965
========
Group:
Amount of income payable $ 2,156
========
Fully paid - account balance $ 1,361
========
Accident and health insurance - premiums in force:
Ordinary $ 15
========
Group $ 6,135
========
Deposit funds and dividend accumulations:
Dividend accumulations - account balance $ 54,674
========
Claim payments 1996:
Group accident and health
Prior to 1992 $ 41
========
Other accident and health
Prior to 1992 $ 9
========
</TABLE>
29
<PAGE> 140
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTE TO SUPPLEMENTAL SCHEDULE OF SELECTED STATUTORY
BASIS FINANCIAL DATA
DECEMBER 31, 1996
Note - Basis of Presentation
The accompanying schedule presents selected statutory-basis financial data as of
December 31, 1996 and for the year then ended for purposes of complying with
paragraph 9 of the Annual Audited Financial Reports in the General section of
the National Association of Insurance Commissioners' Annual Statement
Instructions and agrees to or is included in the amounts reported in Canada Life
Insurance Company of New York's 1996 Statutory Annual Statement as filed with
New York Insurance Department.
30
<PAGE> 141
PART C
OTHER INFORMATION
<PAGE> 142
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) Resolution of the Board of Directors of Canada Life Insurance
Company of New York authorizing establishment of the Variable Account
1.
(2) Not applicable.
(3) (a) Form of Distribution Agreement
(b) Form of Selling Agreement
(4) (a) Form of Annuity Policy
(b) Riders and Endorsements
(5) Form of Application
(6) (a) Certificate of Incorporation of Canada Life Insurance Company
of New York.
(b) By-Laws of Canada Life Insurance Company of New York
(c) Amendment to the By-Laws of Canada Life Insurance Company
of New York passed by the Board on November 19, 1993.
(7) Not applicable
8) (a)(a) Participation Agreement Between Canada Life Series Fund and
Canada Life of New York
(a)(b) Participation Agreement Between Dreyfus Corporation and Canada
Life of New York
(a)(c) Participation Agreement Between Montgomery Asset Management, L.P.
and Canada Life of New York
(a)(d) Participation Agreement Between Fred Alger and Company, Inc. and
Canada Life of New York
(a)(e) Participation Agreement Between Fidelity Distributors Corporation
and Canada Life of New York
(a)(f) Participation Agreement Among Berger Institutional Products Trust
and Canada Life Insurance Company of New York
(b) Service Agreement
(9) Opinion and Consent of Counsel
(10) (a) Consent of Counsel
(b) Consent of Independent Counsel
(c) Consent of Independent Auditors
(11) No financial statements were ommited from Item 23.
(12) Not applicable
(13) Not applicable
<PAGE> 143
Item 25. Directors and Officers of the Depositor
<TABLE>
<CAPTION>
Name and Principal
Business Address Positions and Offices with Depositor
------------------ ------------------------------------
<S> <C>
David A. Nield (1) Chairman and Director
D. Allen Loney (2) President and Director
Paul R. McCadam (3) Vice-President and Chief Operating Officer
Mary L. Craft (2) Director of Administration
Dr. Robert W. Lund (2) Medical Director
Donald K. Cooper (3) Director of Marketing
William S. McIlwaine (2) Director of Group Sales
Don D. Myers (2) Accounting Officer
Gary M. Haddow (2) Administrative Officer
Kenneth T. Ledwos (2) Actuary
Sergio Benedetti (2) Marketing Actuary
Janet G. Deskins(2) Marketing Actuary
John W. Pratt (2) Actuarial Associate
M. G. Libenson(1) Internal Auditor
David A. Hopkins (2) Secretary
Roy W. Linden (1) Assistant Secretary
George N. Isaac (1) Treasurer
Edward P. Ovsenny (1) Assistant Treasurer
Brian J. Lynch (1) Assistant Treasurer
Wendy M. Michaud (3) Chief Underwriter
Gordon N. Farquhar (4) Director
Christopher T. Green (5) Director
Alfred F. Kelly (6) Director
William E. Kelly (7) Director
William B. Morris (9) Director
Harry Van Benschoten (10) Director
Julius Vogel (11) Director
Robert R. Beck (3) Regional Director of Marketing
Kevin A. Phelan (1) Assistant Treasurer
Henry A. Rachfalowski (1) Treasurer
David M. Weingartner (3) Director of Marketing
</TABLE>
(1) The business address is 330 University Avenue, Toronto, Ontario, Canada M5G
1R8.
(2) The business address is 6201 Powers Ferry Road, NW, Suite 600, Atlanta, GA,
USA 30339.
(3) The business address is 500 Mamaroneck Avenue, Harrison, New York, USA
10528.
(4) The business address is 43 Meadow Avenue, Weekapaug, Rhode Island, USA
02891
(5) The business address is 1000 Cathedral Place, 298 Main Street, Buffalo, New
York, USA 14202.
(6) The business address is 232 Crestwood Avenue, Tuckahoe, New York, USA 10707
(7) The business address is 320 Park Avenue, New York, New York, USA 10022.
(8) The business address is 4 Glenellen Drive East, Toronto, Ontario, Canada
M8Y 2G5
(9) The business address is 9 West 57th Street, New York, New York, USA 10019
(10) The business address is 105 Seminary Street, New Canaan, Connecticut, USA
06840
(11) The business address is 72 Colt Road, Summit, New Jersey, USA 07901
<PAGE> 144
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
<TABLE>
<CAPTION>
PERCENT OF PRINCIPAL
NAME JURISDICTION VOTING SECURITIES OWNED BUSINESS
- ---- --------------- ----------------------- --------
<S> <C> <C> <C>
The Canada Life Assurance Company Canada Mutual Company Life and Health
Insurance
Adason Properties Limited Canada Ownership of all voting securities Property Management
through Canada Life
Canada Life Irish Operations England Ownership of all voting securities Life and Health
Limited through Canada Life Insurance
Canada Life Unit Trust Managers England Ownership of all voting securities Unit Trust Management
Limited through Canada Life Irish
Operations
Canada Life Mortgage Services Ltd. Canada Ownership of all voting securities Mortgage Portfolios
through Canada Life
The CLGB Property Company Limited England Ownership of all voting securities Real Estate Investment
through Canada Life Irish Operations
CLASSCO Benefit Services Limited Canada Ownership of all voting securities Administrative
through Canada Life Services
Canada Life Casualty Insurance Canada Ownership of all voting securities Property and Casualty
Company through Canada Life Insurance Insurance
Canada Life Investment Management Canada Ownership of all voting securities Investment Counseling
Limited through Canada Life
Sherway Centre Limited Canada Ownership of all voting securities Real Estate Broker
through Canada Life
The Canada Life Assurance Company Rep. of Ireland Ownership of all voting securities Life and Health
of Ireland Limited through Canada Life Irish Operations Insurance
Canlife - IBI Investment Services Rep. of Ireland Ownership of 50% of voting Unit Trust Management
Limited securities through Canada Life Ass.
(Ireland) Limited and 50% by the
Investment Bank of Ireland
Canada Life Financial Services England Ownership of all voting securities Life Insurance
Company Limited through Canada Life Irish Operations
F.S.D. Investments Ltd. Rep. of Ireland Ownership of all voting securities Unit Fund Sales and
through Canada Life Assurance Management
(Ireland) Limited
Canada Life Insurance Company of US Canada Life Life and Health
America Insurance
Canada Life of America Financial Georgia Ownership of all voting securities Broker Dealer
Services Inc. through CLICA
Canada Life of America Series Maryland Ownership of all voting securities Mutual Fund
Fund, Inc. through CLICA
CLMS Realty Ltd. Canada 99% of the common shares and 100% Realtor
of the convertible preference
shares are owned by Canada Life
</TABLE>
<PAGE> 145
<TABLE>
<CAPTION>
PERCENT OF PRINCIPAL
NAME JURISDICTION VOTING SECURITIES OWNED BUSINESS
- ---- --------------- ----------------------- --------
<S> <C> <C> <C>
Canada Life Pension & Annuities Rep. of Ireland Ownership of all voting securities Life Assurance
(Ireland) Limited through Canada Life Assurance
(Ireland) Limited
CLAI Limited Rep. of Ireland Ownership of all voting securities Holding, Service,
through Canada Life Ireland Management, and
Holdings Limited Investment Company
The Canada Life Assurance Rep. of Ireland Ownership of all voting securities Life Insurance,
(Ireland) Limited through CLAI Limited and the Canada Pension, and Annuity
Life Assurance Company of Ireland
CL Capital Management, Inc. Georgia Ownership of all voting securities Investment Advisor
through CLICA
Canada Life Capital Corporation Canada Ownership of all voting securities External Sources of
Inc. through Canada Life Capital
Canada Life Securing Corporation Canada Ownership of all voting securities Holding Company
Inc. through Canada Life
The Canada Life Group (UK) Limited England Ownership of all voting securities Holding Company
through Canada life
Canada Life Holdings (UK) Limited England The Canada Life Group (UK) Limited Holding Company
The Canada Life Assurance Company England The Canada Life Group (UK) Limited Life and Health
of Great Britain Limited Insurance
Canada Life Management (UK) England The Canada Life Group (UK) Limited Unit Trust Sales &
Limited Management
Canada Life Group Services (UK) England The Canada Life Group (UK) Limited Administrative
Limited Services
Canada Life Trustee Services (UK) England The Canada Life Group (UK) Limited Trustee Services
Limited
Canada Life Ireland Holdings Ireland Canada Life Irish Operations Limited Holding Company
Limited
</TABLE>
<PAGE> 146
Item 27. Number of Policy Owners
As of December 31, 1996 there are 22 owners of Nonqualified Policies
and 43 owners of Qualified Policies.
Item 28. Indemnification
In addition to any indemnification to which a person may be entitled to under
common law or otherwise, each person who is or was a director, an officer, or
an employee of this Corporation, or is or was serving at the request of the
Corporation as a director, an officer, a partner, a trustee, or an employee of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprises, whether profit or not, shall be indemnified by the
Corporation to the fullest extent permitted by the laws of the State of
Michigan as they may be in effect from time to time. This Corporation may
purchase and maintain insurance on behalf of any such person against any
liability asserted against and incurred by such person in any such capacity or
arising out of his or her status as such, whether or not the corporation would
have power to indenmify such person against such liability under the laws of
the State of Michigan.
In addition, Sections 5241 and 5242 of the Michigan Insurance Code generally
provides that a corporation has the power (and in some instances the
obligation) to indemnify a director, officer, employee or agent of the
corporation, or a person serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another corporation or
other entity (the "indemnities") against reasonably incurred expenses in a
civil, administrative, criminal or investigative action, suit or proceeding if
the indemnitee acted in good faith in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation or its
shareholders or policyholders (or, in the case of a criminal action, if the
indemnitee had no reasonable cause to believe his or her conduct was unlawful).
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
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 the registrant of expenses
incurred or paid by a director, officer or controlling person in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinon of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions 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
Canada Life of America Financial Services, Inc. (CLAFS) is the principal
underwriter of the Policies as defined in the Investment Company act of 1940.
The following table provides certain information with respect to each director
and officer of CLAFS.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
------------------ -----------------------------------
<S> <C>
D.A. Loney** Chairman and Director
D.A. Hopkins** Secretary
D.V. Rough* Treasurer
F. D'Ambra** President and Director
</TABLE>
<PAGE> 147
<TABLE>
<S> <C>
R.W. Linden* Assistant Secretary
K.T. Ledwos* Administrative Officer and Director
K.J. Fillman** Administrative Officer
D.D. Myers** Accounting Officer
B. Smith** Administrative Officer
</TABLE>
- -------------------
* The business address is 330 University Avenue, Toronto, Ontario, Canada
M5G1RS.
** The business address is 6201 Powers Ferry Road, N.W., Suite 600, Atlanta,
Georgia 30339.
Item 30. Location of Accounts and Records
All accounts and records required to be maintained by Section 31(a)
of the 1940 Act and the rules under it are maintained by CLNY at its
Home Office at 500 Mamaroneck Avenue, Harrison, New York 10528 and at
6201 Powers Ferry Rd., N.W., Atlanta, GA 30339.
Item 31. Management Services
<PAGE> 148
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings
(a) Registrant undertakes that it will file a post effective
amendment to this registration statement as frequently as necessary
to ensure that the audited financial statements in the registration
statement are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (1) as part
of any application to purchase a contract offered by the prospectus,
a space that an applicant can check to request a Statement of
Additional Information, or (2) a post card or similar written
communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statment of Additional
Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made
available under this Form promptly upon written or oral request to
CLICA at the address or phone number listed in the Prospectus.
(d) Depositor undertakes to preserve on behalf of itself and
Registrant the books and records required to be preserved by such
companies pursuant to Rule 31a-2 under the Investment Company Act of
1940 and to permit examination of such books and records at any time
or from time to time during business hours by examiners or other
representatives of the Securities and Exchange Commission, and to
furnish to said Commission at its principal office in Washington,
D.C., or at any regional office of said Commission specified in a
demand made by or on behalf of said Commission for copies of books
and records, true, correct, complete, and current copies of any or
all, or any part, of such books and records.
(e) The Registrant is relying on a letter issued by the staff of
the Securities and Exchange Commission to the American Council of
Life Insurance on November 28, 1988 (Ref. No. IP-6-88) stating that
it would not recommend to the Commission that enforcement action be
taken under Section 22(e), 27(c)(1), or 27(d) of the Investment
Company Act of 1940 if the Registrant, in effect, permits
restrictions on cash distributions from elective contributions to the
extent necessary to comply with Section 403(b)(11) of the Internal
Revenue Code of 1986 in accordance with the following conditions:
(1) include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration
statement, including the prospectus, used in connection with the
offer of the policy;
(2) include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales literature
used in connection with the offer of the policy;
(3) instruct sales representatives who may solicit individuals to
purchase the policies specifically to bring the redemption
restrictions inmposed by Section 403(b)(11) to the attention of such
individuals;
<PAGE> 149
(4) Obtain from each owner who purchases a Section 403(b) policy,
prior to or at the time of such purchase, a signed statement
acknowledging the owner's understanding of (i) the redemption
restrictions imposed by Section 403(b)(11), and (ii) the investment
alternatives available under the employer's Section 403(b)
arrangement, to which the owner may elect to transfer his or her
policy value.
The Registrant is complying, and shall comply, with the provisions of
paragraphs (1) - (4) above.
(f) "Canada Life Insurance Company of New York hereby represents
that fees and charges deducted under the policy, in the aggregate,
are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by Canada Life
Insurance Company of New York".
<PAGE> 150
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933, and has caused this Post-Effective Amendment
Number 11 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and the State of New York on this
24th day of April, 1997.
CANADA LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE ANNUITY ACCOUNT 1
By /s/ D. A. Loney
-----------------------------------------
D. A. Loney, President
Canada Life Insurance Company of New York
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By /s/ D. A. Loney
-----------------------------------------
D. A. Loney, President
As required by the Securities Act of 1933, this Post-Effective Amendment
Number 11 has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ D. A. Nield Chairman and Director 04/24/97
----------------------------
D. A. Nield
/s/ D. A. Loney President and Director 04/24/97
----------------------------
D. A. Loney
/s/ G. N. Farquhar Director 04/24/97
----------------------------
G. N. Farquhar
/s/ C. T. Greene Director 04/24/97
----------------------------
C. T. Greene
</TABLE>
<PAGE> 151
<TABLE>
<S> <C> <C>
/s/ A. F. Kelly Director 04/24/97
----------------------------
A. F. Kelly
/s/ W. E. Kelly Director 04/24/97
----------------------------
W. E. Kelly
/s/ W. B. Morris Director 04/24/97
----------------------------
W. B. Morris
/s/ H. Van Benschoten Director 04/24/97
----------------------------
H. Van Benschoten
/s/ J. Vogel Director 04/24/97
----------------------------
J. Vogel
</TABLE>
<PAGE> 152
EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT
1 Resolution of the Board of Directors of Canada Life Insurance Company of
New York (CLNY) Authorizing Establishment of the Variable Account 1
3 (a) Form of Distribution Agreement
3 (b) Form of Selling Agreement
4 (a) Form of Annuity Policy
4 (b) Riders and Endorsements
5 Form of Application
6 (a) Certificate of Incorporation of Canada Life Insurance Company of New
York.
6 (b) By-Laws of Canada Life Insurance Company of New York
6 (c) Amendment to By-Laws of Canada Life Insurance Company of New York
8) (a)(a) Participation Agreement Between Canada Life Series Fund and Canada
Life of New York
(a)(b) Participation Agreement Between Dreyfus Corporation and Canada Life
of New York
(a)(c) Participation Agreement Between Montgomery Asset Management, L.P. and
Canada Life of New York
(a)(d) Participation Agreement Between Fred Alger and Company, Inc. and
Canada Life of New York
(a)(e) Participation Agreement Between Fidelity Distributors Corporation and
Canada Life of New York
(a)(f) Participation Agreement Among Berger Institutional Products Trust
and Canada Life Insurance Company of New York
(b) Service Agreement
9 Opinion and Consent of Counsel
10 (a) Consent of Counsel
10 (b) Consent of Independent Counsel
10 (c) Consent of Independent Auditors
13 Sample Performance Data Calculatiion
<PAGE> 1
EXHIBIT 1
RESOLUTION OF THE BOARD OF DIRECTORS OF CANADA LIFE INSURANCE COMPANY OF NEW
YORK (CLNY) AUTHORIZING ESTABLISHMENT OF THE VARIABLE ACCOUNT.
<PAGE> 2
EXTRACT from the Minutes of the Meeting of the Board of Directors of Canada Life
Insurance Company of New York held on the 13th day of September, 1989.
VARIABLE ANNUITY ACCOUNT 1
1. RESOLVED, that the Board of Directors of Canada Life Insurance
Company of New York ("Company"), pursuant to the provisions of Section
4240 of the New York Insurance Law and Regulation 47 thereunder, hereby
establishes a separate account designated "Canada Life of New York
Variable Annuity Account 1" (hereinafter "Variable Annuity Account 1")
for the following use and purposes, and subject to such conditions as
hereinafter set forth;
2. FURTHER RESOLVED, that Variable Annuity Account 1, is established
for the purpose of providing for the issuance by the Company of separate
account annuity and/or variable annuity contracts ("Contracts") and shall
constitute a separate account into which are allocated amounts paid to or
held by the Company under such Contracts. The form of such Contracts
shall be kept on file at the Home Office of the Company;
3. FURTHER RESOLVED, that the income, gains, and losses, whether or
not realized, from assets allocated to Variable Annuity Account 1 shall,
in accordance with the Contracts, be credited to or charged against such
account without regard to other income, gains, or losses of the Company;
4. FURTHER RESOLVED, that the portion of the assets of Variable
Annuity Account 1 equal to the reserves and other contract liabilities
with respect to Variable Annuity Account 1 shall not be chargeable with
liabilities arising out of any other business the Company may conduct;
5. FURTHER RESOLVED, that Variable Annuity Account 1 shall be divided
into Investment Subaccounts, each of which shall invest in the shares of
a designated series of Canada Life of America Series Fund, Inc., or such
other investment company as the Board of Directors may from time to time
designate, and net premiums under the Contracts shall be allocated to the
eligible Investment Subaccounts set forth in the Contracts in accordance
with instructions from owners of the Contracts.
6. FURTHER RESOLVED, that the initial Investment Subaccounts shall be
as follows, each of which shall invest in an equivalent series of the
designated Investment Company:
Money Market
Equity
Bond
Managed
7. FURTHER RESOLVED, that the Board of Directors expressly reserves
the right to add, combine, or remove any Investment Subaccount of
Variable Annuity Account 1 as it may hereafter deem necessary or
appropriate:
<PAGE> 3
8. FURTHER RESOLVED, that any two of the Officers of the Company, are
hereby authorized to transfer cash from time to time between the
Company's general account and Variable Annuity Account 1 as deemed
necessary or appropriate and consistent with the terms of the Contract
and any applicable laws and regulations;
9. FURTHER RESOLVED, that the Board of Directors of the Company
reserves the right to change the designation of Variable Annuity Account
1 hereafter to such other designation as it may deem necessary or
appropriate;
10. FURTHER RESOLVED, that any two of the Officers of the Company with
such assistance from the Company's independent certified public
accountants, chartered accountants, legal counsel and independent
consultants or others as they may require, are hereby authorized and
directed to take all action necessary to: (a) register Variable Annuity
Account 1 as a unit investment trust under the Investment Company Act of
1940, as amended; (b) register the Contracts in such amounts, which may
be an indefinite amount, as the said officers of the Company shall from
time to time deem, appropriate under the Securities Act of 1933; and (c)
take all other actions which are necessary in connection with the
offering of said Contracts for sale and the operation of Variable Annuity
Account 1 in order to comply with the Securities Act of 1933, the
Securities Exchange Act of 1934, the Investment Company Act of 1940, and
other applicable federal laws, including the filing of any amendments to
registration statements, any supplements, any undertakings, any requests
for "no action" letters, and any applications for exemptions, and any
amendments thereto, from the Investment Company Act of 1940 or other
applicable federal laws as the said officers of the Company shall deem
necessary or appropriate;
11. FURTHER RESOLVED, that any two of the Officers of the Company, are
hereby authorized and empowered to prepare, execute, and cause to be
filed with the Securities and Exchange Commission on behalf of Variable
Annuity Account 1 and by the Company as sponsor and depositor a
Notification of Registration under the Investment Company Act of 1940, on
Form N-8A and a Registration Statement on Form N-4 under the Securities
Act of 1933 and the Investment Company Act of 1940, and any other forms
as may be designated from time to time for such purposes, and any and all
amendments to the foregoing on behalf of Variable Annuity Account 1 and
the Company and on behalf of and as attorneys-in-fact for the principal
executive officer, the principal financial officer, the principal
accounting officer, and/or any other officer of the Company;
<PAGE> 4
12. FURTHER RESOLVED, that the signature of any Director or Officer of
the Company required by law to affix his or her signature to a
registration statement under the Investment Company Act of 1940 or
Securities Act of 1933, or any amendments thereof, may be affixed by said
Director or Officer personally or by an attorney-in-fact duly constituted
in writing by said Director or Officer to sign his or her name thereto;
13. FURTHER RESOLVED, that Alfred F. Kelly, President and Walter A.
Mahon, Assistant Secretary or either of them are duly appointed as agents
for service under any such registration statement, duly authorized to
receive communications and notices from the Securities and Exchange
Commission with respect thereto;
14. FURTHER RESOLVED, that any two of the Officers of the Company are
hereby authorized on behalf of Variable Annuity Account 1 and on behalf
of the Company to take any and all action that they may deem necessary or
advisable in order to offer and sell the Contracts, including any
registrations, filings, and qualifications both of the Company, its
officers, agents and employees, and of the Contracts, under the insurance
and securities laws of New York and any of the states of the United
States of America and other jurisdictions, and in connection therewith to
prepare, execute, deliver, and file all such applications, plans of
operation, reports, covenants, resolutions, applications for exemptions,
consents to service of process, and other papers and instruments as may
be required under such laws, and to take any further action which the
said officers or legal counsel of the Company may deem necessary or
desirable (including entering into whatever agreements and contracts may
be necessary) in order to maintain such registrations or qualifications
for as long as the said officers or legal counsel deem it to be in the
best interests of Variable Annuity Account 1 and the Company;
15. FURTHER RESOLVED, that any two of the Officers of the Company are
hereby authorized in the names and on behalf of Variable Annuity Account
1 and the company to execute and file irrevocable written consents on the
part of Variable Annuity Account 1 and of the Company to be used in such
states (including New York) wherein such consents to services of process
may be requisite under the insurance of securities laws therein in
connection with said registration or qualification of the Contracts and
to appoint the appropriate state official, or such other person as may be
allowed by said insurance or securities laws, agent of Variable Annuity
Account 1 and of the Company for the purpose of receiving and accepting
process;
<PAGE> 5
16. FURTHER RESOLVED, that any two of the Officers of the Company are
hereby authorized to establish procedures under which the Company
will provide voting rights for owners of the Contracts with respect to
securities owned by Variable Annuity Account 1 insofar as such rights are
required by any applicable law;
17. FURTHER RESOLVED, that any two of the Officers of the Company are
hereby authorized to execute such agreement or agreements as they may
deem necessary and appropriate with Canada Life of America Financial
Services, Inc., or with any other qualified entity under which such
entity will be appointed principal underwriter and distributor of the
Contracts;
18. FURTHER RESOLVED, that it is the policy of Variable Annuity
Account 1 to invest in the shares of Canada Life of America Series Fund,
Inc. or such other investment company as the Board of Directors may from
time to time designate;
19. FURTHER RESOLVES, that because it is expected that Variable
Annuity Account 1 will invest solely in the securities issued by one or
more investment companies registered under the Investment Company Act of
1940, any two of the Officers of the Company are hereby authorized to
execute whatever agreement or agreements may be necessary or appropriate
to enable such investments to be made;
20. FURTHER RESOLVED, that any two of the Officers of the Company are
hereby authorized to execute and deliver such agreements and other
documents and do such acts and things as may be deemed necessary or
desirable to carry out the foregoing resolutions and the intent and
purposes thereof.
STANDARDS OF SUITABILITY
RESOLVED, that the Canada Life Insurance Company of New York ("the
Company") hereby establishes the following Standards of Suitability: "No
recommendation shall be made to an applicant to purchase a separate
account or a variable annuity contract and no such contract shall be
issued in the absence of reasonable grounds to believe that the purchase
of such contract is suitable for such applicant on the basis of the
information furnished after reasonable inquiry of such applicant
concerning the applicant's investment objectives, financial situation and
needs, and any other information known to the Company or to the agent
making the recommendation.
I hereby certify that the foregoing is a correct extract from the Minutes of the
Meeting above referred to.
DATED at Toronto, Province of Ontario this 4th day of October, 1989.
----------------------------------
Assistant Secretary
<PAGE> 1
EXHIBIT 3 (a)
FORM OF DISTRIBUTION AGREEMENT
<PAGE> 2
DISTRIBUTION AGREEMENT
AGREEMENT made this ___ day of ______, 1989 by and between Canada Life of
America Financial Services, Inc., a Georgia corporation (the "Distributor") and
Canada Life Insurance Company of New York, a New York Corporation (the
"Company").
WITNESSETH:
WHEREAS, the Company and the Canada Life of New York Variable Annuity Account 1
(the "Account"), a separate investment account established pursuant to Section
4240 of the New York Insurance Law, and a registered investment company under
the Investment Company Act of 1940 (the "1940 Act"), propose to offer for sale
in the State of New York certain variable annuity policies (the "Policies")
which may be deemed to be securities under the Securities Act of 1933 (the
"1933 Act") and New York law;
WHEREAS, the distributor is registered as a broker-dealer with the Securities
and Exchange Commission (the "SEC") under the Securities Exchange Act of 1934
(the "1934 Act") and is a member of the National Association of Securities
Dealers, Inc. (the "NASD");
WHEREAS, the parties desire to have the Distributor act as principal
underwriter for the Account and assume full responsibility for the securities
activities of any "person associated" (as that term is defined in Section
3(a)(18) of the 1934 Act) with the Distributor and engaged directly or
indirectly in the variable annuity operation (the "associated persons");
WHEREAS, the parties desire to have the Company perform certain services in
connection with the sale of the policies;
NOW THEREFORE, in consideration of the covenants and mutual promises herein
contained, the Distributor and the Company agree as follows:
1. The Distributor will act as the principal underwriter during the term
of this Agreement for the sale of Policies in the State of New York. The
Distributor will be under no obligation to effectuate any particular amount of
sales of Policies or to promote or make sales, except to the extent the
Distributor deems advisable.
2. The Distributor will assume full responsibility for the securities
activities of, and for securities law compliance by, the associated persons,
including, as applicable, compliance with the NASD Rules of Fair Practice and
Federal and state laws and regulations. The Distributor, directly or through
the Company as its agent, will (a) make timely filings with the SEC, NASD, and
any other regulatory authorities of any sales literature or
<PAGE> 3
materials relating to the Account, as required by law to be filed, (b) make
available to the Company copies of any agreements or plans intended for use in
connection with the sale of the of the Policies in sufficient number and in
adequate time for clearance by the appropriate regulatory authorities before
they are used, and it is agreed that the parties will use their best efforts to
obtain such clearance by the appropriate regulatory authorities before they are
used, and it is agreed that the parties will use their best efforts to obtain
such clearance as expeditiously as reasonably possible, and (c) train the
associated persons, use its best efforts to train them to complete
satisfactorily any and all applicable NASD and state qualification
examinations, register the associated persons as its registered representatives
before they engage in securities activities, and supervise and control them in
the performance of such activities.
3. The Company retains the right to accept or reject policy applications.
The Company shall review and approve all advertising pertaining to the
Policies. The Distributor shall not give any information or make any
representations concerning the Policies unless such information or
representations are contained in the registration statement and the pertinent
prospectus filed with the Securities and Exchange Commission, or are contained
in sales or promotional materials approved by the Company.
4. As between the Company and the Distributor, the Company will, except as
otherwise provided in this Agreement, bear the cost of all services and
expenses, including but not restricted to legal services and expenses and
registration, filing of other fees, in connection with (a) registering and
qualifying the Account, the Policies, and (to the extent requested by the
Distributor) the associated persons with Federal and state regulatory
authorities and the NASD and (b) printing and distributing all registration
statements and prospectuses (including amendments), Policies, notices, periodic
reports, proxy solicitation material, sales literature and advertising filed or
distributed in connection with the sales of the Policies.
5. The Company will, in connection with the sale of the Policies, pay all
amounts (including the sales commissions described in the prospectus for the
Policies) due to the sales representatives or to those broker-dealers who have
entered into sales agreements with the Distributor, and the Distributor shall
have no interest whatsoever in, nor any obligation to pay such amounts.
6. The Distributor, directly or through the Company as its agent, will (a)
maintain and preserve in accordance with Rules 17a-3 and 17a-4 under the 1934
Act, all books and records required to be maintained in connection with the
offer and sale of the Policies being distributed pursuant to this Agreement,
which books and records shall remain the property of the Dis-
<PAGE> 4
tributor and shall be subject to inspection by the Securities and Exchange
Commission in accordance with Section 17(a) of the 1934 Act, and by the NASD,
and (b) upon or prior to completion of each transaction for which a
confirmation for each such transaction reflecting the facts of the transaction.
All books and records maintained by or on behalf of the Account pursuant to
Section 31 of the 1940 Act and Rules 31a-1 and 31a-2 thereunder are the property
of the Account. In the event of termination, all such records shall be
returned to the Account free from any claims or retention of rights by the
Distributor. Such books and records shall be available to properly constituted
governmental authorities as required by state law and/or regulation. The
Distributor shall keep confidential and shall not disclose any such books or
records obtained pursuant to this Agreement except as expressly required by
state or Federal law and/or regulations.
7. The Distributor will execute such papers and do such acts and things as
shall from time to time be reasonably requested by the Company for the purpose
of (a) maintaining the registration of the Policies under the 1933 Act and the
Account under the 1940 Act, and (b) qualifying and maintaining qualification of
the Policies for sale under the applicable laws of the State of New York.
8. The Company undertakes to guarantee the performance of all of the
Distributor's obligations, imposed by Section 27(f) of the 1940 Act and
paragraph (b) of Rule 27d-2 adopted by the SEC under that Act, to make refunds
of charges required of the principal underwriter of Policies issued in
connection with the Account.
9. Each party hereto shall advise the other promptly of (a) any action of the
SEC or any authorities of any state or territory, of which it has knowledge,
affecting registration or qualification of the Account or the Policies, or the
right to offer the Policies for sale, and (b) the happening of any event
which makes untrue any statement in the registration statement or prospectus,
or which requires the making of any change in the registration statement or
prospectus in order to make the statements therein not misleading.
10. The Company shall not be liable to the Distributor for any action taken or
omitted by it, or any of its officers, agents or employees, in performing their
responsibilities under this Agreement in good faith and without gross
negligence, willful misfeasance or reckless disregard of such responsibilities.
11. The Distributor shall not be liable to the Company for any action taken
or omitted by it, or any of its officers, agents or employees, in performing
their responsibilities under this Agreement in good faith and without
negligence.
12. As compensartion for the Distributor's assuming the expenses and
performing the services to be assumed and performed by it
<PAGE> 5
pursuant to this Agreement, the Distributor shall receive from the Company such
amounts and at such times as may from time to time be agreed upon by the
Distributor and the Company.
13. As compensation for its services performed and expenses incurred under
this Agreement, the Company will receive all amounts charged as "Sales Charges"
under the Policies. It is understood that the Company assumes the risk that
the above compensation for its services may not prove sufficient to cover its
actual expenses in connection therewith.
14. The Distributor and the Company shall be free to render similar services
to others, including, without implied limitations, such other separate
investment accounts as are now or hereafter established by the Company, so long
as the services of the Distributor and Company hereunder are not impaired or
interfered with thereby.
15. It is understood that any Policyholder or agent of the Account may be a
policyholder, shareholder, director, officer, employee or agent of, or be
otherwise interested in, the Distributor, any affiliated person of the
Distributor, any organization in which the Distributor may have an interest or
any organization which may have an interest in the Distributor; that the
Distributor, any such affiliated person or any such organization may have an
interest in the Account; and that the existence of any such dual interest shall
not affect the validity hereof or of any transaction hereunder except as may
otherwise be provided in the articles of incorporation or by-laws of the
Distributor or by specific provisions of applicable law.
16. This Agreement shall become effective as of the date of its execution,
shall continue in full force and effect until terminated, may be amended at any
time by mutual agreement of the parties hereto, and may be terminated at any
time without penalty on sixty days written notice by either party to the other.
In the event of termination of this Agreement, the Distributor is responsible
for notifying the NASD.
17. Notwithstanding any provision herein, the Company retains ultimate
responsibility and authority for the direction and control of the services
provided herein. This Agreement shall not relieve the Company from any
responsibilities or obligations imposed upon its variable life insurance
business by law or regulation.
18. The Distributor will not assign its responsibilities under this Agreement
except with the written consent of the Company.
19. For the purpose of this Agreement, the term "affiliated persons" shall
have its respective meaning defined in the 1940
<PAGE> 6
Act subject, however, to such exemptions as may be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS THEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
CANADA LIFE OF AMERICA
FINANCIAL SERVICES, INC.
By:
--------------------------------
President
CANADA LIFE INSURANCE COMPANY
By:
--------------------------------
President
<PAGE> 1
EXHIBIT 3 (B)
FORM OF SELLING AGREEMENT
<PAGE> 2
CANADA LIFE INSURANCE COMPANY OF NEW YORK
Home Office
500 Mamaroneck Avenue
Harrison, NY 10528
SELLING AGREEMENT
AGREEMENT by and between Canada Life Insurance Company of New York
(CLNY), a New York Corporation and Canada Life of America Financial Services,
Inc. (CLAFS), a Georgia Corporation, a registered broker-dealer with the
Securities and Exchange Commission under the Securities Act of 1934 (the 1934
Act), and a member of the National Association of Securities Dealers, Inc.
(NASD);
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Selling Broker-Dealer), also a registered broker-dealer under the 1934 Act and
member of the NASD: and
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(General Agent).
I. INTRODUCTION
WHEREAS, CLNY has issued certain annuity contracts, and these Contracts
are registered under the Securities Act of 1933 (the 1933 Act) (Contracts or
Contracts collectively); and
WHEREAS, CLNY has authorized CLAFS as principal underwriter to enter
into agreements, subject to the consent of the CLNY, with Selling Broker-Dealers
and General Agents for the distribution of the Contracts; and
WHEREAS, Selling Broker-Dealer and General Agent wish to participate in
the distribution of the Contracts;
NOW THEREFORE, in consideration of the promises and the Mutual covenants
hereinafter contained, the parties hereto agree as follows:
II. APPOINTMENT
Subject to the terms and conditions of this Agreement, CLNY and CLAFS
hereby appoint _________________________________ as Selling Broker-Dealer and
_____________________________________ as General Agent for the solicitation of
applications for the purchase of the Contracts, and Selling Broker-Dealer and
General Agent accept such appointment.
1
<PAGE> 3
III. AUTHORITY AND DUTIES OF GENERAL AGENT
A. Licensing and Appointment of Producers
General Agent is authorized to appoint Producers to solicit sales of
the Contracts. General Agent warrants that all Producers appointed by General
Agent pursuant to this Agreement shall not solicit nor aid, directly or
indirectly, in the solicitation of any application for any Contract until that
Producers is fully licensed under New York insurance law and, in connection with
securities regulated Contracts, is a fully registered representation of Selling
Broker-Dealer. General Agent shall prepare and transmit the appropriate
licensing and appointment forms to CLNY. General Agent shall pay all fees to
state insurance regulatory authorities in connection with obtaining necessary
licenses and appointments for Producers. All fees payable to regulatory
authorities in connection with the initial CLNY appointment of producers who
already possess necessary insurance licenses shall be paid by General Agent.
Any renewal license fees due after the initial appointment shall be paid by
General Agent. General Agent shall periodically provide CLNY with a list of
all Producer appointed by General Agent and the jurisdictions where such
Producers are licensed to solicit sales of the contracts. General Agent agrees
to fulfill all requirements set forth in the General Letter or Recommendation
attached as Exhibit A in conjunction with the submission of licensing and
appointment papers for all applicants as Producers submitted by General Agent.
B. Rejection of Producer
CLAFS, or CLNY may, by written notice to General Agent, refuse to
permit any Producer the right to solicit applications for the sale of any of the
Contracts, require General Agent to cause any Producer to cease such
solicitations or sales and cancel the appointment of any Producer.
C. Supervision of Producers
General Agent shall supervise any Producers appointed pursuant to this
Agreement to solicit sales of the Contracts and bear responsibility for all acts
and omissions of each Producer. General Agent shall comply with and exercise all
responsibilities required by applicable federal and state law and regulations.
General Agent shall not be responsible for those supervisory responsibilities
belonging to Selling Broker-Dealer under applicable securities laws which
include, but are not limited to, supervising and training Producers in their
capacity as registered representatives. Nothing contained in this Agreement or
otherwise shall be deemed to make any Producer appointed by General Agent an
employee or agent of CLNY or CLAFS. If the act or omission of a Producer or any
other employee of General Agent is the proximate cause of any claim, damage or
liability (including reasonable attorneys' fees) to CLNY or CLAFS, General Agent
shall be responsible and liable therefor
Before a producer is permitted to sell the Contracts, General Agent,
Selling Broker-Dealer and Producer shall have entered into a written agreement
pursuant to which: 1) Producer is appointed a Producer of General Agent and a
registered representative of Selling Broker-Dealer, 2) Producer agrees that his
or her selling activities relating to securities regulated contracts shall be
under the supervision and control of Selling Broker Dealer and his or her
selling activities relating to insurance regulated Contracts shall be under the
supervision and control of general Agent; and 3) that Producer's right to
continue to sell such Contracts is subject to his or her continued compliance
with such agreement and any procedures, rules or regulations implemented by
Selling Broker-Dealer or General Agent.
2
<PAGE> 4
IV. AUTHORITY AND DUTIES OF SELLING BROKER-DEALER
A. Supervision of Registered Representatives
Selling Broker-Dealer agrees that it has full responsibility for the
training and supervision of all persons, including Producers of General Agent,
associated with Selling Broker-Dealer who are engaged directly or indirectly in
the offer or sale of securities regulated Contracts. All such persons shall be
subject to the control of Selling Broker-Dealer with respect to their securities
regulated activities Broker-Dealer shall: 1) train and supervise Producers, in
their capacity as registered representatives in the sale of securities regulated
Contracts; 2) use its best efforts to cause such Producers to qualify under
applicable federal and state laws to engage in the sale of securities regulated
Contracts when required; 3) provide CLNY, to their satisfaction with evidence of
Producers' qualifications to sell securities regulated Contracts, and 4) notify
CLNY if any of such Producers ceases to be a registered representative of
Selling Broker-Dealer. Selling Broker-Dealer agrees that a Producer must be a
registered representative of Selling Broker-Dealer before engaging in the
solicitation of any securities regulated Contracts and have entered into the
written agreement more fully described in Section III, Paragraph C. CLNY and
CLAFS shall not have any responsibility for the supervision of any registered
representative or any other employee or affiliate of Selling Broker-Dealer. If
the act or omission of a registered representative or any other employee or
affiliate of Selling Broker-Dealer is the proximate cause of any claim, damage
or liability (including reasonable attorneys' fees) to CLNY or CLAFS, Selling
Broker-Dealer shall be responsible and liable therefore.
Selling Broker-Dealer shall fully comply with the requirements of the
National Association of Securities Dealers, Inc. and of the Securities Exchange
Act of 1934 and all other applicable federal or state laws. Selling
Broker-Dealer shall establish such rules and procedures as may be necessary to
cause diligent supervision of the securities activities of the Producers. Upon
request by CLNY or CLAFS, Broker-Dealer shall furnish such records as may be
necessary to establish diligent supervision.
V. AUTHORITY AND DUTIES OF GENERAL AGENT
AND SELLING BROKER-DEALER
A. Contracts
The securities and insurance regulated Contract(s) issued by CLNY to
which this Agreement applies are listed in Schedule I which may be amended from
time to time by CLNY. CLNY, in its sole discretion with prior or concurrent
written notice to Selling Broker-Dealer and General Agent, may suspend
distribution of any Contracts. CLNY also has the right to amend any Contract(s)
at any time.
B. Securing Application
Each application for a Contract shall be made on an application form
provided by CLNY, and all payments collected by Selling Broker-Dealer, General
Agent or any registered representative and Producer shall be remitted promptly
in full, together with such application form and any other required
documentation, directly to CLNY at the address indicted on such application or
to such other address as may be designated. Selling Broker-Dealer and General
Agent shall review all such applications for completeness. Check or money order
in payment of such Contracts should be made payable to the order of "Canada
Life Insurance Company of New York". All applications are subject to acceptance
or rejection by CLNY in its sole discretion.
3
<PAGE> 5
C. Receipt of Money
All money payable in connection with any of the Contract(s), whether as
premium, purchase payment or otherwise and whether paid by or on behalf of any
contract owner or anyone else having interest in the Contracts, is the property
of CLNY and shall be transmitted immediately in accordance with the
administrative procedures of CLNY without any deduction or offset for any reason
including, but not limited to, any deduction or offset for compensation claimed
by Selling Broker-Dealer or General Agent, unless there has been a prior
arrangement for net wire transmissions between CLNY and Selling Broker-Dealer or
General Agent
D. Notice of Producer's Noncompliance
Selling Broker-Dealer shall notify CLAFS and General Agent in the event
a Producer fails or refuses to submit to the supervision of Selling
Broker-Dealer or General Agent in accordance with this Agreement, the agreement
between Selling Broker-Dealer, General Agent and Producer referred to in Section
III Paragraph C and Section IV, Paragraph A, or otherwise fails to meet the
rules and standards imposed by Selling Broker-Dealer or its registered
representatives or General Agent or its producers. Selling Broker-Dealer or
General Agent shall also immediately notify such Producer that he or she no
longer authorized to sell the Contracts, and both Selling Broker-Dealer and
General Agent shall take whatever additional action may be necessary to
terminate the sales activities of such Producer relating to the Contracts.
E. Sales Promotion, Advertising and Prospectuses
No sales promotion materials, circulars, documents or any advertising
relating to any of the Contracts shall be used by Selling Broker-Dealer, General
Agent or any Producers unless the specific item has been approved in writing by
CLAFS and CLNY prior to use. Selling Broker-Dealer shall be provided, without
any expense to Selling Broker-Dealer, with prospectuses and other material
determined to be necessary for use relating to securities regulated Contracts.
Nothing in these provisions shall prohibit Selling Broker-Dealer or General
Agent from advertising life insurance and annuities on a generic basis.
VI COMPENSATION
A. Commissions and Fees
Commissions and fees payable to Selling Broker-Dealer or General Agent
in connection with the securities regulated Contracts shall be paid on behalf of
CLAFS by CLNY to Selling Broker-Dealer or General Agent, or as otherwise
directed or required by law Commissions and fees payable to Selling
Broker-Dealer, General Agent or Producer in connection with the insurance
regulated Contracts shall be paid by CLNY to Selling Broker-Dealer or General
Agent, or as otherwise directed or required by law. Selling Broker-Dealer or
General Agent, as applicable, shall pay Producer. CLAFS will provide Selling
Broker-Dealer and General Agent with a copy of CLNY's current Contracts,
Commissions and Fee Schedule. Unless otherwise provided in the Contracts,
Commissions and Fee Schedule, commissions will be paid as a percentage of
premiums or purchase payments (collectively, Payments) received in cash or other
legal tender and accepted by CLNY on applications obtained by the various
Producers appointed by General Agent hereunder. Upon termination of this
Agreement, all compensation to the Selling Broker-Dealer and General Agent
hereunder shall cease.
4
<PAGE> 6
However, Selling Broker-Dealer and General Agent shall be entitled to receive
compensation for all new and additional premium payments which are in process at
the time of termination, and shall continue to be liable for any chargebacks
pursuant to the provisions of said Contracts, Commissions and Fee Schedule, or
for any other amounts advanced by or otherwise due CLAFS or CLNY hereunder.
B. Time of Payment
CLNY will pay any commissions due General Agent hereunder no later than
within fifteen (15) days after the end of the calendar month in which Payments
upon which such commission is based are accepted by CLNY.
C. Amendment of Schedules
CLAFS and CLNY may, upon at least ten (10) days' prior written notice
to Selling Broker-Dealer and General Agent, change the Contracts, Commissions
and Fee Schedule by written amendment of such Schedule. Any such change shall
apply to compensation due on applications received by CLNY after the effective
date of such notice.
D. Prohibition Against Rebates
CLAFS or CLNY may terminate this agreement if Selling Broker-Dealer,
General Agent or any Producer of General Agent rebates, offer to rebate or
withholds any part of any Payments on the Contract. If Selling Broker-Dealer,
General Agent or any Producer of General Agent shall at any time induce or
endeavor to induce any owner of any Contract issued hereunder to discontinue
payments or to relinquish any such Contract, except under circumstances where
there is reasonable grounds for believing the Contract is not suitable for such
person, any and all compensation due Selling Broker-Dealer or General Agent
hereunder shall cease and terminate.
E. Indebtedness and Right of Set Off
Nothing contained in this Agreement shall be construed as giving
Selling Broker-Dealer or General Agent the right to issue and indebtedness on
behalf of CLNY or CLAFS. Selling Broker-Dealer and General Agent hereby
authorize CLNY as agent of CLAFS to set off liabilities of Selling Broker-Dealer
and General Agent to CLNY or CLAFS against any and all amounts otherwise payable
to Selling Broker-Dealer as General Agent
VII GENERAL PROVISIONS
A. Waiver
Failure of any party to insist upon strict compliance with any of the
conditions of this Agreement shall not be construed as a waiver of any of the
conditions, but the same shall remain in full force and effect. No waiver of any
of the provisions of this Agreement shall be deemed to be, or shall constitute,
a waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.
5
<PAGE> 7
B. Limitations
No party other than CLNY shall have the authority to: 1) make, alter or
discharge any Contract issued by CLNY; 2) waive any forfeiture or extend die
time of making any Payments; or 3) enter into any proceeding in a court of law
or before a regulatory agency in the name of or on behalf of CLNY. No party
other than CLAFS, shall have the authority to; 1) alter the forms or substitute
other forms in place of those prescribed by CLAFS; or 2) enter into any
proceeding in a court of law or before a regulatory agency in the name of or on
behalf of CLAFS.
C. Fidelity Bond and Other Liability Coverage
Selling Broker-Dealer and General Agent hereby assign any proceeds
received from a fidelity bonding company, error and omissions or other liability
coverage to CLNY or CLAFS as their interest may appear, to the extent of their
loss due to activities covered by the bond, policy or other liability coverage.
If there is any deficiency amount, whether due to a deductible or otherwise,
Selling Broker-Dealer or General Agent shall promptly pay such amount on demand
Selling Broker-Dealer and General Agent hereby indemnify and hold harmless CLNY
and CLAFS from any such deficiency and from the costs of collection thereof
(including reasonable attorneys' fees).
D. Binding Effect
This Agreement shall be binding on and shall inure to the benefit of
the parties to it and their respective successors and assigns provided that
neither Selling Broker-Dealer nor General Agent may assign this Agreement or any
rights or obligations hereunder without the prior written consent of CLNY and
CLAFS.
E. Regulations
All parties agree to observe and comply with the existing laws and
rules or regulations of applicable local, state, or federal regulatory
authorities and with those which may be enacted or adopted during the term of
this Agreement regulating the business contemplated hereby in any jurisdiction
in which the business described herein is to be transacted.
F. Indemnification
1) CLAFS agrees to indemnify and hold harmless Selling Broker-Dealer
and General Agent, their officers, directors and employees, against any and all
losses, claims, damages, or liabilities to which they may become subject under
the 1933 Act, and 1934 Act, or other federal or state statutory law or
regulations, at common law or otherwise insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact or any
omission or alleged omission to state a material fact required to be stated or
necessary to make the statements made not misleading in the registration
statement for the Contracts or for the shares of Canada Life of America Series
Fund, Inc. (Fund) files pursuant to the 1933 Act, or any prospectus included
as a part thereof, as form time to time amended and supplemented.
6
<PAGE> 8
CLAFS agrees to indemnify and hold harmless Selling Broker-Dealer and General
Agent, their officers, directors and employees, against any and all losses,
claims, damages or liabilities to which they may become subject under the 1933
Act, the 1934 Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
or actions in respect thereof arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission to state a material fact required to be stated or necessary to
make the statement made not misleading in any advertisement or sales literature
approved in writing by CLNY and CLAFS pursuant to Section V, Paragraph E, of
this Agreement.
2) Selling Broker-Dealer and General Agent agree to indemnify and hold
harmless CLAFS, CLNY and any wholesaling organization, their officers, directors
and employees against any and all losses, claims, damages or liabilities to
which they may become subject under the 1933 Act, the 1934 Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims damages or liabilities (or actions in respect thereof)
arise out of or are based upon:
a) any oral or written misrepresentation by Selling Broker-Dealer or General
Agent or their officers, directors, employees or agents unless such
misrepresentation is contained in the registration statement for the Contracts
or Fund Shares, any prospectus included as a part thereof, as from time to time
amended and supplemented, or any advertisement or sales literature approved in
writing by CLNY and CLAFS pursuant to Section V, Paragraph E, of this Agreement,
or b) the failure of Selling Broker-Dealer or General Agent or their officers,
directors, employees or agents to comply with any applicable provisions of the
Agreement.
G. Notices
All notices or communications shall be sent to the address shown in
this Agreement, or to such other address shown in this Agreement, or to such
other address as the party may request, by giving written notice to the other
parties.
H. Governing Law
The Agreement shall be construed in accordance with and governed by the
laws of the state of New York.
J. General Agent as Broker-Dealer
If Selling Broker-Dealer and General Agent are the same person or legal
entity, such person or legal entity shall have the rights and obligations
hereunder of both Selling Broker-Dealer and General Agent and this Agreement
shall be binding and enforceable by and against such person or legal entity in
both capacities.
K. Complaints and Investigations
General Agent, Selling Broker-Dealer CLNY and CLAFS agree to cooperate
fully in the event of any regulatory investigation, inquiry or proceeding,
judicial proceeding, or customer complaint involving the Contracts. In
furtherance of the foregoing: 1) each party will notify all other parties of any
such investigation, inquiry, proceeding or complaint involving the Contracts or
affecting the ability of a party to perform pursuant to this Agreement within
10 days of obtaining knowledge of the same; and 2) in the case of a customer
complaint, the involved parties will consult with each other prior to sending
any written response with respect to such complaint.
7
<PAGE> 9
L. Termination
This Agreement may be terminated, without cause, by any party upon
thirty (30) days' prior written notice; and may be terminated, for cause, by any
party immediately; and shall be terminated if CLAFS or Selling Broker-Dealer
shall cease to be a registered broker-dealer under the Securities Exchange Act
of 1934 and a member of the NASD.
M. Address for Notice
Address for Canada Life Insurance Company of New York
500 Mamaroneck Avenue
Harrison, NY 10528
Address for Canada Life of America Financial Services, Inc.
6201 Powers Ferry Road, N.W.
Atlanta, Georgia 30339
8
<PAGE> 10
Address for Selling Broker-Dealer Address for General Agent
- ---------------------------------- --------------------------
- ---------------------------------- --------------------------
- ---------------------------------- --------------------------
This Agreement shall be effective upon execution by General Agent and Selling
Broker-Dealer, and delivery of the Agreement to CLNY or CLAFS.
Dated:
---------------------------------------------
Canada Life of America Canada Life Insurance Company
Financial Services, Inc. of New York
By: /s/ Frank D'Ambra III /s/ D. Allen Loney
------------------------------- ------------------------------
Frank D'Ambra III D. Allen Loney
General Agent, Please Print
- ---------------------------------
By: Name and Title
------------------------------ --------------------
Please print Signature
Selling Broker-Dealer, Please Print
- ---------------------------------
By: Name and Title
------------------------------ -------------------
Please Print Signature
9
<PAGE> 11
EXHIBIT A
General Letter of Recommendation
General Agent hereby certifies to Canada Life Insurance of New York
(CLNY) that all of the following requirements will be fulfilled in conjunction
with the submission of papers licensing/appointment for all applicants as
Producers submitted by General Agent. General Agent will, upon request,
forward proof of compliance with the same to CLNY in a timely manner
1. We have made a thorough and diligent inquiry and investigation relative
to each applicant's identify, residence and business reputation and
declare that each applicant is personally known to us, has been
examined by us, is known to be of good moral character, has a good
business reputation, is reliable, is financially responsible and is
worthy of a license. Each individual is trustworthy, competent and
qualified to act as an agent for CLNY to hold himself out in good faith
to the general public. We vouch for each applicant.
2. We have on file a U-4 Form which was completed by each applicant. We
have fulfilled all the necessary investigative requirements for the
registration of each applicant as a registered representative through
our NASD member firm, and each applicant is presently registered as an
NASD registered representative.
The Above information in our files indicates no fact or condition which
would disqualify the applicant from receiving a license and all the
findings of all investigative information is favorable.
3 We certify that all educational requirements have been met for the
specific state in which each applicant is requesting a license, and
that all such persons have fulfilled the appropriate examination,
education and training requirements.
4. If the applicant is required to submit his or her picture and signature
in the state in which he or she is applying for a license, we certify
that those items forwarded to CLNY are those of the applicant.
5. We hereby warrant that the applicant is not applying for a license with
CLNY in order to place insurance chiefly and solely on his or life or
property, lives or property of his or her relatives, or property or
liability of his or her associates.
6. We certify that each applicant will receive close and adequate
supervision, and that we will make inspection when needed of any or all
risks written by these applicants, to the end that the insurance
interest of the public will be properly protected.
7. We will not permit any applicant to transact insurance as an agent
until duly licensed therefor. No applicants have been given a contract
or furnished supplies, nor have any applicants been permitted to write,
solicit business, or act as an agent in any capacity, and they will not
be so permitted until the certificates of authority or license applied
for is received.
<PAGE> 12
8. We certify that General Agent, Selling Broker-Dealer and applicant
shall have entered into a written agreement pursuant to which a)
applicant is appointed a Producer of General Agent and a registered
representative of Selling Broker-Dealer; b) applicant agrees that his
or her selling activities relating to securities regulated contracts
shall be under the supervision and control of Selling Broker-Dealer and
his or her selling activities relating to insurance regulated contracts
shall be under the supervision and control of General Agent; and c)
that applicant's right to continue to sell such Contracts is subject to
his or her continued compliance with such agreement and any procedures,
rules or regulations implemented, by Selling Broker-Dealer or General
Agent.
<PAGE> 13
VARIFUND
SCHEDULE 1 - STATEMENT OF COMPENSATION AS OF FEBRUARY 1, 1997 Subject
to the terms and conditions of this Agreement, CLAFS will pay to Selling Firms
compensation based upon the premiums and purchase payments received from Selling
Firm, in accordance with applicable law, in the percentages shown below:
OPT. A1: SINGLE PREMIUM - OWNER ISSUE AGE 0-80
- ----------------------------------------------
Broker-Dealer Concession
- ------------------------
6.5%
OPT. A2: SINGLE PREMIUM - OWNER ISSUE AGE 81-84
- -----------------------------------------------
Broker-Dealer Concession
- ------------------------
3.25%
Chargebacks; (i) In the event a Contract is returned to CLNY pursuant to a "Free
Look" provision, the full B/D concession paid thereon or retained by
Selling Firm pursuant to net submission of premium or purchased payment shall be
charged back to Selling Firm.. (ii) Should any premium or purchase payment on
any Contract issued by CLNY be refunded for any reason, Selling Firm shall repay
or return B/D Concession received by it with respect to such premium or purchase
payment. (iii) If a Contract was not issued as a result of failure by Selling
Firm to submit to CLNY an application sufficient to satisfy state insurance laws
or CLNY eligibility requirements then amounts paid to Selling Firm shall be
returned or repaid. (iv) If a Contract was tendered to CLNY for redemption
within ten business days of the date of activity then amounts paid to Selling
Firm shall be returned or repaid. (v) For full or partial withdrawals from the
Contract other than those made pursuant to a systematic and/or free withdrawal
privilege: 100% of all B/D Concessions paid to Selling Firms on amount(s)
withdrawn within 6 months of such amount(s) being paid to CLNY and 50% of all
B/D Concessions paid to Selling Firm on amount(s) withdrawn from 7-12 months of
such amount(s) being paid to CLNY shall be returned or repaid. For any premium
or purchase payment that has been in the Contract for more than 12 months, there
shall be no charge back on B/D Concession. To the extent permitted by law, the
amount so charged back may, at the option of CLNY, be set off against B/D
Concession otherwise due to Selling Firm. In addition, such other compensation
will be payable as are from time to time agreed by the parties to the foregoing
Agreement and which is in accordance with applicable law, and will be added to
this schedule.
<PAGE> 14
Page 2
Expense Allowance
Total compensation may consist of agent commissions, override and/or expense
allowance.
If expense allowances are payable, they are subject to the following conditions
and limitations:
1. Lapses and surrenders in the first year, and any returns of first year
premium made by CLNY, will result in proportionate chargebacks of any
expense allowances paid for said premiums.
2. No expense allowance will be used to effect compensation in excess of
the limits of Section 4228 of the Insurance Law of New York.
3. No expense allowance will be due or payable after the termination of
this Contract except for first year expense allowances for policies
written prior to such termination.
4. Notwithstanding any of the other terms and conditions governing payment
of expense allowances in this Contract, and to conform with the
requirements of Section 4228 of the Insurance Law and the applicable
regulations resulting therefrom and other governing sections of the
law, the following will apply:
a. The maximum expense allowance payments shall be such that when
added to first year commissions, exclusive of overriding
commissions not exceeding 5% of first year premiums, the total
shall not exceed 91% of first year premiums for ordinary life
and annuity policies and contracts other than single premium
policies and contracts.
b. The maximum expense allowance shall not exceed 100% of the
commissions payable on single premium policies and contracts,
or the overall 7% of premium limit.
In monitoring the maximum allowances rules in this paragraph 4, CLNY will apply
those in a. and b., above, on a "per-policy" basis.
<PAGE> 1
Exhibit 4(a)
Form of Annuity Policy
<PAGE> 2
POLICY NUMBER: E1XXXXX
INSURED: JOHN DOE
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HARRISON, NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NY 10528
If you have any questions or complaints about this policy, you may call us toll
free at 1-800-905-1959.
We are pleased to issue this policy to you.
We agree to pay the proceeds as described in this policy, subject to its
provisions.
PLEASE READ THIS POLICY CAREFULLY, SINCE IT IS A LEGAL CONTRACT BETWEEN YOU AND
US.
THE DOLLAR AMOUNTS OF ACCUMULATION BENEFITS AND VALUES OF THIS POLICY PROVIDED
BY THE VARIABLE ACCOUNT MAY INCREASE OR DECREASE DAILY, DEPENDING ON THE
INVESTMENT PERFORMANCE OF THE PORTFOLIO OF THE FUND IN WHICH YOUR ELECTED
SUB-ACCOUNTS ARE INVESTED, AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS.
NO MINIMUM AMOUNT OF POLICY VALUE IS GUARANTEED, EXCEPT FOR ANY AMOUNTS IN THE
FIXED ACCOUNT.
REGARDING THE FIXED ACCOUNT, AMOUNTS TRANSFERRED, WITHDRAWN OR SURRENDERED
UNDER THIS POLICY FROM A GUARANTEE PERIOD WHOSE SPECIFIED DURATION IS GREATER
THAN ONE YEAR, MAY INCREASE OR DECREASE IN ACCORDANCE WITH A MARKET VALUE
ADJUSTMENT DURING THE GUARANTEE PERIOD TERM SPECIFIED, SUBJECT TO THE MINIMUM
VALUES DEFINED IN THIS POLICY.
TEN DAY RIGHT TO EXAMINE POLICY
YOU HAVE TEN DAYS AFTER YOU RECEIVE THIS POLICY TO DECIDE IF IT MEETS YOUR
NEEDS. IF IT DOES NOT, YOU MAY RETURN IT TO OUR ADMINISTRATIVE OFFICE OR TO
THE AGENT FROM WHOM YOU BOUGHT IT. WE SHALL CANCEL THE POLICY AND PROMPTLY
REFUND THE POLICY VALUE, INCLUDING ANY FEES AND OR CHARGES THAT WERE DEDUCTED
FROM THAT POLICY VALUE, LESS ANY PARTIAL WITHDRAWALS. THE POLICY WILL BE VOID
FROM THE BEGINNING.
/s/ David A. Hopkins /s/ D.A. Lorey
Secretary President
SINGLE PREMIUM VARIABLE DEFERRED ANNUITY
Accumulation benefits and values are variable, except for amounts in the
Fixed Account.
Guarantee Periods under the Fixed Account may be subject to a
Market Value Adjustment
After the Annuity Date or Maturity Date, payment options are on a
guaranteed basis.
Death Benefit payable upon death of the last surviving annuitant before the
Annuity Date or Maturity Date.
Nonparticipating - Not eligible for dividends
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TABLE OF CONTENTS
<TABLE>
<S> <C>
POLICY DETAILS 3
DEFINITIONS 4
PAYMENT OF PROCEEDS
Proceeds 4
Proceeds On Annuity Date 4
Proceeds On Maturity Date 5
Proceeds On Surrender 5
Proceeds On Death Of The Last Surviving Annuitant Before
Annuity Date Or Maturity Date (The Death Benefit) 5
Proceeds On Death Of Any Owner Before or After Annuity Date
Or Before Maturity Date 5
Conformity With Laws 6
PREMIUMS
Single Premium 6
Net Premium 6
Net Premium Allocation Among Sub-Accounts And
Fixed Account 6
THE VARIABLE ACCOUNT
Variable Account 6
Sub-Accounts 7
Variable Account Value 7
Units 7
Unit Value 8
Net Investment Factor 8
Reserved Rights 8
Change in Investment Policy 8
Valuation Periods and Valuation Days 9
THE FIXED ACCOUNT
Fixed Account 9
Market Value Adjustment 10
Fixed Account Value 11
TRANSFERS
Transfer Privilege 12
Restrictions on Transfers From Fixed Account 12
Transfer Processing Fee 12
POLICY VALUES
Policy Value 12
Cash Surrender Value 12
Partial Withdrawals 13
Surrender Charge 13
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
Policy Administration Charge 14
Annuity Date 14
Termination 14
Basis of Values 15
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS,
CASH SURRENDERS & TRANSFERS - POSTPONEMENT 15
GENERAL PROVISIONS
Contract 15
Incontestability 16
Owner 16
Beneficiary 17
Written Notice 17
Misstatement of Age 17
Periodic Reports 17
Assignment 17
Our Consent 17
Policy Date 17
Effective Date 17
Currency 17
Place of Payment 17
Modification 17
Nonparticipation 17
PAYMENT OPTIONS
Election of Payment Options 19
Payment Dates 19
Age and Survival of Payee 19
Death of Payee 19
Betterment of Income 20
Table of Payments on Basis of $1,000 Net Proceeds 21
</TABLE>
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POLICY DETAILS
POLICY NUMBER E1XXXXX
ANNUITANT JOHN DOE
AGE 35
POLICY DATE APRIL 1, 1997
EFFECTIVE DATE APRIL 1, 1997
ANNUITY DATE APRIL 1, 2027
MATURITY DATE APRIL 1, 2047
OWNER JOHN DOE
PREMIUM $5,000.00
ANNUALIZED MORTALITY AND
EXPENSE CHARGE 1.25%
ANNUALIZED RATE OF DAILY
ADMINISTRATIVE FEE 0.15%
ANNUAL ADMINISTRATION CHARGE $30.00*
* If the policy value on the policy anniversary is $75,000 or more, we will
waive the policy administration charge for the prior policy year.
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E1XXXXX
DEFINITIONS
"You" and "your" means the owner(s) of the policy.
"We", "our" and "us" means Canada Life Insurance Company of New York.
"Written notice" is defined in the "WRITTEN NOTICE" provision.
"Annuitant" means any natural person whose life is used to determine the
duration of any payments made under a payment option involving life
contingencies.
"Annuity Date" means the date when the policy value will be applied under
Payment Option 1, unless you have elected to receive a lump sum payment of the
cash surrender value. The Annuity Date is shown in the Policy Details unless
later changed.
"Maturity Date" means the first day of the month after the last surviving
annuitant's 85th (90th pending regulatory approval) birthday or any earlier
date required by law.
PAYMENT OF PROCEEDS
PROCEEDS
Proceeds means the amount we will pay when the first of the following occurs:
1. the policy reaches the annuity date; or
2. the policy reaches the maturity date; or
3. the policy is surrendered; or
4. when we receive due proof of death of the annuitant or any owner.
We will pay any proceeds in a single sum that may be payable due to death
before the annuity date or maturity date, unless an election is made for a
payment option. See "Election of Options". This policy ends when we pay the
proceeds.
"Due proof of death" is proof of death that is satisfactory to us. Such proof
may consist of: 1) a certified copy of the death certificate; and/or 2) a
certified copy of the decree of a court of competent jurisdiction as to the
finding of death.
We will deduct any applicable premium tax from the proceeds described below,
unless we already deducted the tax from the premiums when paid. See the "Net
Premium" provision. Currently no premium tax is levied in New York.
PROCEEDS ON ANNUITY DATE
If you have elected to receive the proceeds under Payment Option 1, no
surrender charges will be assessed. If proceeds are to be paid in a lump sum,
we will pay the cash surrender value as described in the "Cash Surrender Value"
provision.
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E1XXXXX
PROCEEDS ON MATURITY DATE
The proceeds we will pay is the policy value.
PROCEEDS ON SURRENDER
If you surrender this policy before the annuity date or the maturity date, the
proceeds we will pay is the cash surrender value. No death benefit is payable
if the policy is surrendered before the last surviving annuitant's death or any
owner's death.
PROCEEDS ON DEATH OF THE LAST SURVIVING ANNUITANT BEFORE ANNUITY DATE OR
MATURITY DATE (THE DEATH BENEFIT)
If we receive due proof of death of the last surviving annuitant before the
annuity date or maturity date, (such "due proof"), the proceeds we will pay to
the beneficiary is the death benefit.
If we receive due proof during the first 5 years, the death benefit is the
greater of:
1. the premiums paid, less: a) any partial withdrawals, including
applicable surrender charges; and b) any incurred taxes; or
2. the policy value on the date we receive such due proof.
If we receive such due proof after the first 5 policy years, the death benefit
is the greater of:
1. item "1" above; or
2. item "2" above; or
3. the policy value at the end of the most recent 5 policy year
period preceding the date we receive due proof, adjusted for any of
the following items that occur after such last 5 policy year period:
a) less any partial withdrawals, including applicable surrender
charges; b) less any incurred taxes; and c) plus any premiums paid.
The 5 policy year periods are measured from the policy date (i.e. 5,
10, 15, 20, 25, etc.)
If on the date the policy was issued, all annuitants had attained age 80 or
less, then after any annuitant attains age 81, the death benefit is then the
greater of "1" or "2" above.
However, if on the date the policy was issued, any annuitant was attained age
81 or more, then the death benefit is the policy value.
PROCEEDS ON DEATH OF ANY OWNER BEFORE OR AFTER THE ANNUITY DATE OR BEFORE THE
MATURITY DATE
If you are not the annuitant and we receive due proof of your death before the
annuity date or maturity date, we will pay the beneficiary the policy value as
of the date we receive due proof of your death. If you are the annuitant and
we receive due proof of your death before the annuity date or maturity date, we
will pay the beneficiary the death benefit described in "Proceeds on Death of
the Last Surviving Annuitant Before Annuity Date or Maturity Date". If you die
before the annuity date or maturity date, Federal tax law requires the policy
value be distributed within five years after the date of your death regardless
of whether or not you are an annuitant, unless your spouse is the designated
beneficiary, in which case the policy may be continued with your surviving
spouse as the new owner.
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E1XXXXX
Your "designated beneficiary" is designated by you as a beneficiary and to whom
the benefits of the policy pass by reason of your death.
If you die on or after the annuity date or before the maturity date, any
remaining payments must be distributed at least as rapidly under the payment
option in effect on the date of your death.
The distribution requirements described above will be considered satisfied as
to any portion of the proceeds:
1. payable to or for the benefit of a designated beneficiary; and
2. which is distributed over the life (or period not exceeding the
life expectancy) of that beneficiary, provided that the beneficiary is
a natural person and such distributions begin within one year of your
death.
If you are not a natural person, the annuitant as determined in accordance with
Section 72(s) of the Internal Revenue Code will be treated as owner for
purposes of these distribution requirements, and any change in the annuitant
will be treated as the death of the owner except that surrender charges will
apply.
CONFORMITY WITH LAWS
To the extent this policy conflicts with any applicable laws or the
requirements of the Internal Revenue Service concerning distributions on death,
this policy shall be considered to be amended to conform.
PREMIUMS
SINGLE PREMIUM
The single premium is shown in the Policy Details and is payable on or before
the effective date.
NET PREMIUM
The net premium is the premium paid less any premium tax, if applicable.
NET PREMIUM ALLOCATION AMONG SUB-ACCOUNTS AND FIXED ACCOUNT
You elected in your application how you wanted your initial net premium to be
allocated among the sub-accounts and Guarantee Periods under the Fixed Account.
Any additional net premiums will be allocated in the same manner unless at the
time of payment we have received your written notice to the contrary. The
total allocation must equal 100%.
THE VARIABLE ACCOUNT
VARIABLE ACCOUNT
We established the Canada Life Insurance Company of New York Variable Annuity
Account 1 (called "the Variable Account") as a separate investment account
under New York law. The Variable Account is
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E1XXXXX
registered with the Securities and Exchange Commission as a unit investment
trust under the Investment Company Act of 1940. The Variable Account is also
subject to the laws of the State of New York.
Although we own the assets in the Variable Account, these assets are held
separately from our other assets and are not part of our general account. The
assets in the Variable Account are used to support the operation of and provide
the variable values and benefits for this policy and similar policies.
The portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the Variable Account will not be charged with
liabilities that arise from any other business that we conduct. We have the
right to transfer to our general account any assets of the Variable Account
which are in excess of such reserves and other liabilities.
SUB-ACCOUNTS
The Variable Account currently consists of the sub-accounts shown in the
current prospectus you received. Each sub-account invests in shares of various
Funds offered as investment choices (the "Funds"). You may refer, at any time,
to the prospectus for detailed fund information. Shares of a portfolio are
purchased and redeemed for a sub-account at their net asset value. Any amounts
of income, dividends and gains distributed from the shares of a portfolio will
be reinvested in additional shares of that portfolio at its net asset value.
The Fund prospectus you received defines the net asset value and describes the
portfolios of the Fund.
The dollar amounts of accumulation values and benefits of this policy provided
by the Variable Account depend on the investment performance of the portfolio
of the Fund in which your elected sub-accounts are invested. We do not
guarantee the investment performance of the portfolios. You bear the full
investment risk for amounts applied to the elected sub-accounts.
VARIABLE ACCOUNT VALUE
The policy's Variable Account value before the annuity date or maturity date is
determined by multiplying the number of units credited to this policy for each
sub-account by the current unit value of these units.
UNITS
We will credit net premiums in the form of units. The number of units credited
to the policy for each sub-account is determined by dividing the net premium
allocated to that sub-account by the unit value for that sub-account at the end
of the valuation period during which we receive the premium at our Home Office.
We will credit units for the initial net premium on the effective date of the
policy. We will adjust the units for any transfers in or out of a sub-account,
including any transfer processing fee.
We will cancel the appropriate number of units based on the unit value at the
end of the valuation period in which any of the following events occur:
1. the policy administration charge shown in the Policy Details is
assessed;
2. the date we receive and process your written notice for a partial
withdrawal or surrender;
3. the annuity date or maturity date; or
4. the date we receive due proof of your death or the last surviving
annuitant's death.
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E1XXXXX
UNIT VALUE
The unit value of each sub-account for the first valuation period is set at a
fixed amount, generally $10. The unit value for each subsequent valuation
period is determined by multiplying the unit value at the end of the
immediately preceding valuation period by the net investment factor for the
valuation period for which the value is being determined.
The unit value for a valuation period applies to each day in that period. The
unit value may increase or decrease from one valuation period to the next.
NET INVESTMENT FACTOR
The net investment factor is an index that measures the investment performance
of a sub-account from one valuation period to the next. Each sub-account has a
net investment factor which may be greater than or less than 1.
The net investment factor for each sub-account for a valuation period equals 1
plus the rate of return earned by the relevant portfolio of the Fund adjusted
for the effect of taxes charged or credited to the sub-account, the mortality
and expense risk charge and the daily administration fee. The annualized rate
of the daily administration fee is shown on the Policy Details.
The rate of return of the relevant portfolio is equal to the fraction obtained
by dividing (a) by (b) where:
(a) is the next investment income and net gains, realized and
unrealized, credited during the current valuation period; and
(b) is the value of the net assets of the relevant series at the end
of the preceding valuation period, adjusted for the net capital
transactions and dividends declared during the current valuation
period.
RESERVED RIGHTS
When permitted by law, we reserve the right to:
1. create new variable accounts;
2. combine variable accounts, including the Canada Life Insurance
Company of New York Variable Annuity Account 1;
3. remove, combine or add sub-accounts and make the new sub-accounts
available to policyowners at our discretion;
4. add new portfolios of the Funds or of other registered investment
companies;
5. deregister the Variable Account under the Investment Company Act
of 1940 if registration is no longer required;
6. make any changes required by the Investment Company Act of 1940;
7. operate the Variable Account as a managed investment company
under the Investment Company Act of 1940 or any other form permitted
by law; and
8. substitute shares of another portfolio of the Fund or shares of
another registered open-end investment company or any other reserved
rights as detailed in the prospectus.
If a change is made, we will send you a revised prospectus and any notice
required by law.
CHANGE IN INVESTMENT POLICY
The investment policy for a sub-account in the Variable Account may not be
changed unless the change is approved by the New York Insurance Department.
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E1XXXXX
VALUATION PERIODS AND VALUATION DAYS
A valuation period for each sub-account is the period that starts at the close
of business on one valuation day and ends at the close of business on the next
succeeding valuation day. The close of business is when the New York Stock
Exchange closes, usually at 4:00 p.m. Eastern Time.
A valuation day is each day on which valuation of the assets is required by
applicable law, which currently is each day the New York Stock Exchange is open
for trading.
THE FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account provides values and benefits based only upon the net premium
payments and policy values allocated to the Fixed Account, the Guaranteed
Interest Rate credited on such amounts, and any charges or Market Value
Adjustments imposed on such amounts in accordance with the terms of the policy.
Amounts in the Fixed Account are part of our general account. The Fixed
Account is not part of and does not depend on the investment performance of the
Variable Account.
From time to time we will offer to credit each Guarantee Amount with interest
at specific guaranteed rates for specific periods of time. These periods of
time are known as Guarantee Periods. We may offer one or more Guarantee
Periods of one to ten years' duration at any time but will always offer a
Guarantee Period of one year. The Guarantee Periods we offer on the Date of
Issue are shown in your application. The Guaranteed Interest Rates available
at any time will vary with the number of years in the Guarantee Period.
Guarantee Periods begin on the date as of which a net premium payment is
allocated to or a portion of the policy value is transferred to the Guarantee
Period, and end on the last calendar day of the month when the number of years
in the Guarantee Period elected (measured from the end of the calendar month in
which the amount was allocated or transferred to the Guarantee Period) has
elapsed. The last day of the Guarantee Period is the expiration date for that
Guarantee Period.
Allocations of net premium payments and transfers of policy value to the Fixed
Account for a Guarantee Period may have different applicable Guaranteed
Interest Rates depending on the timing of such allocations or transfers. The
applicable Guaranteed Interest Rate does not change during a Guarantee Period.
If the allocated or transferred amount remains in the Guarantee Period until
such Guarantee Period ends, its value will be equal to the amount originally
allocated or transferred, multiplied, on an annually compounded basis, by its
Guaranteed Interest Rate. If a Guarantee Amount is surrendered, withdrawn or
transferred prior to the expiration of the Guarantee Period, the Guarantee
Amount is subject to a Market Value Adjustment, as described below, the
application of which may result in the payment of an amount greater or less
than the Guarantee Amount at the time of the transaction.
The Guaranteed Interest Rate is the applicable effective annual rate of
interest we determine that we will pay on a Guarantee Amount. The Guaranteed
Interest Rate will not be less than 3%.
The Guarantee Amount during a Guarantee Period is equal to:
1. an amount equal to that part of any net premium allocated to or
policy value transferred to the Fixed Account for a designated
Guarantee Period with a particular expiration date;
2. any policy value transferred to the Fixed Account for such
Guarantee Period; plus
3. interest at the Guaranteed Interest Rate on 1 and 2 above; minus
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E1XXXXX
4. any cash surrender value withdrawn from the Fixed Account for such
designated Guarantee Period, including any Market Value Adjustment;
minus
5. any amount transferred from the Fixed Account for such designated
Guarantee Period, including any Market Value Adjustment; minus
6. any applicable premium tax charge; minus
7. any policy administration charge deducted from the Guarantee
Period; minus
8. any applicable surrender charges.
During the 30 day period following the expiration of a Guarantee Period (30 day
window), you may transfer the Guarantee Amount from the expiring Guarantee
Period to a new Guarantee Period with a new
Guaranteed Interest Rate or to a subaccount(s). A Market Value Adjustment will
not apply if the Guarantee Amount from the expired Guarantee Period is
surrendered, withdrawn or transferred during the 30 day window. During the 30
day window, the Guarantee Amount will accrue interest at an annual effective
rate of 3% unless the Guarantee Amount remains in the Fixed Account in which
case you will receive the interest rate in accordance with the Guarantee Period
chosen.
Prior to the expiration date of any Guarantee Period, we will mail you a notice
of the Guarantee Periods then available and their applicable Guaranteed
Interest Rates. A new Guarantee Period will begin on the first business day
following the expiration of the prior Guarantee Period. The Guarantee Amount
of such expiring Guarantee Period will be:
1. transferred to such new Guarantee Period you elect from those
then available by sending us Written Notice prior to the end of the
30 day window; or
2. transferred to a new Guarantee Period of the same duration as
the expiring Guarantee Period if you have not made an election; or
3. will be allocated, on your instructions, to one or more
subaccount(s) and/or Guarantee Period(s).
However, a new Guarantee Period of one year will begin automatically on the
first business day following the expiration of the prior Guarantee Period if:
1. we do not receive a Written Notice from you and we are not offering
a Guarantee Period of the same duration as the expiring Guarantee
Period; or
2. the duration of the expiring Guarantee Period would, if renewed,
extend beyond the annuity date, if known, or maturity date.
To the extent permitted by law, we reserve the right, at any time, to offer
Guarantee Periods that differ from those available when your policy was issued.
We also reserve the right, at any time, to stop accepting net premium payment
allocations or transfers of policy value to a particular Guarantee Period.
Since the specific Guarantee Periods available may change periodically, please
contact our Home Office to determine the Guarantee Periods currently being
offered.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment applies to any surrender, withdrawal or transfer of a
Guarantee Amount unless:
1. the effective date of the surrender, withdrawal or transfer is
within 30 days after the end of a Guarantee Period; or
2. the surrender, withdrawal or transfer is from the one year
Guarantee Period; or
3. the surrender, withdrawal or transfer is to provide death, nursing
home, or terminal illness benefits; or
4. the Guarantee Amount is applied to an annuity payment option.
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E1XXXXX
The Market Value Adjustment will be applied after the deduction of any
applicable policy administration charge or transfer fee, and before the
deduction of any applicable surrender charge or charge for any applicable taxes
on premium payments.
A Market Value Adjustment reflects the relationship between:
1. the Guaranteed Interest Rate being applied to the Guarantee Period
from which the Guarantee Amount is requested to be surrendered,
withdrawn or transferred; and
2. the current Guaranteed Interest Rate that we credit for a Guarantee
Period equal in duration to the Guarantee Period from which the
Guarantee Amount will be surrendered, withdrawn or transferred.
If a Guarantee Period of such equal duration is not being offered at such time,
we will use the linear interpolation of the Guaranteed Interest Rates for the
Guarantee Periods closest in duration that are available.
Generally, if the Guaranteed Interest Rate for the selected Guarantee Period is
lower than the Guaranteed Interest Rate currently being offered for new
Guarantee Periods of equal duration, as of the date that the Market Value
Adjustment is applied, then the application of the Market Value Adjustment will
result in a reduction in the Guarantee Amount then surrendered, withdrawn or
transferred. Conversely, if the Guaranteed Interest Rate for the selected
Guarantee Period is higher than the Guaranteed Interest Rate currently being
offered for new Guarantee Periods of equal duration, as of the date that the
Market Value Adjustment is applied, then the application of the Market Value
Adjustment will result in an increase in the Guarantee Amount then surrendered,
withdrawn or transferred.
The Market Value Adjustment is calculated by multiplying the amount being
surrendered, withdrawn or transferred, (less any applicable policy
administration charge or transfer fees), by the Market Value Adjustment Factor.
The Market Value Adjustment Factor is calculated as the lesser of:
a) [(1 + i)n/12 / (1 + r + .005)n/12] - 1; or
b) .05
where:
"i" is the Guaranteed Interest Rate credited to the specific Guarantee
Period;
"r" is the Guaranteed Interest Rate that is currently being offered for a
Guarantee Period of duration equal to such Guarantee Period ; and
"n" is the number of months remaining to the expiration of such Guarantee
Period.
The Market Value Adjustment, however, will never invade principal nor reduce
the earnings on amounts allocated to the Fixed Account for a Guarantee Period
to less than 3% a year.
FIXED ACCOUNT VALUE
This policy's Fixed Account value before the annuity date or maturity date is
the sum of the Guarantee Amounts in the Guarantee Periods.
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TRANSFERS
TRANSFER PRIVILEGE
You may transfer all or part of an amount in the sub-account(s) to another
sub-account(s) or to the Fixed Account, or transfer a part of an amount in the
Fixed Account to the sub-account(s), subject to the availability of a
sub-account or shares of a portfolio and subject to these general restrictions
and the additional restrictions below in "Restrictions on Transfers from Fixed
Account":
1. the minimum transfer amount is $250;
2. a transfer request that would reduce the amount in that sub-account
or the Fixed Account below $500 will be treated as a transfer request
for the entire amount in that sub-account or the Fixed Account; and
3. transfers from the Fixed Account except from the one year Guarantee
Period may be subject to a Market Value Adjustment.
RESTRICTIONS ON TRANSFERS FROM THE FIXED ACCOUNT
You may transfer an amount from a Guarantee Period under the Fixed Account
subject to these additional restrictions:
1. transfers from a Guarantee Period other than the one year Guarantee
Period may be subject to a Market Value Adjustment.
2. transfers from one Guarantee Period to another are prohibited other
than within the 30 day window.
TRANSFER PROCESSING FEE
There is no limit to the number of transfers that you can make between
sub-accounts or to the Fixed Account. The first twelve transfers during each
policy year are free. We may assess a $25 processing fee for each additional
transfer. For the purposes of assessing the fee, each written notice of
transfer is considered to be one transfer, regardless of the number of
sub-accounts or the Guarantee Periods effected by the transfer. The processing
fee will be charged proportionately to the receiving sub-account(s) and/or
Guarantee Periods.
POLICY VALUES
POLICY VALUE
The policy value is the sum of the Variable Account value and the Fixed Account
value.
CASH SURRENDER VALUE
The cash surrender value is the policy value less: a) any applicable surrender
charge; and b) the policy administration charge. The cash surrender value will
be determined on the date we receive and file your written notice for surrender
and this policy at our Home Office.
You may surrender this policy for its cash surrender value at any time before
the death of the last surviving annuitant, the annuity date or the maturity
date. You may elect to have the cash surrender value paid in a single sum or
under a payment option. This policy ends when we pay the cash surrender value.
You may avoid a surrender charge by electing to apply the policy value under
Payment Option 1.
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E1XXXXX
PARTIAL WITHDRAWALS
You may withdraw part of the cash surrender value at any time before the death
of the last surviving annuitant, the annuity date or the maturity date subject
to these limits:
1. the minimum partial withdrawal is $250;
2. the maximum partial withdrawal is the amount that would leave a
cash surrender value of $5,000;
3. a partial withdrawal request which would reduce the amount in a
sub-account or a Guarantee Period under the Fixed Account below $500
will be treated as a request for a full withdrawal of the amount in
that subaccount or Guarantee Period; and
4. a partial withdrawal request for an amount exceeding $10,000 must
be accompanied by a guarantee of the owner's signature by a commercial
bank, trust company or a savings and loan.
On the date we receive and process your written notice for a partial withdrawal
at our Home Office, we will withdraw the amount of the partial withdrawal from
the policy value and we will then deduct any applicable surrender charge from
the remaining policy value.
You may specify the amount to be withdrawn from certain sub-accounts or
Guarantee Periods under the Fixed Account. If you do not provide this
information to us, we will withdraw proportionately from the sub-accounts and
Guarantee Periods under the Fixed Account in which you are invested. If you do
provide this information to us, but the amount in the designated sub-accounts
and Guarantee Periods is inadequate to comply with your withdrawal request, we
will first withdraw from the specified sub-accounts and Guarantee Periods. The
remaining balance will be withdrawn proportionately from the other sub-accounts
and Guarantee Periods in which you are invested.
SURRENDER CHARGE
For the purposes of determining if any surrender charge applies and the amount
of such charge, partial withdrawals and surrenders are taken according to these
rules from policy value attributable to premiums or investment earnings in the
following order:
<TABLE>
<CAPTION>
Surrender Charge
----------------
<S> <C> <C>
Up to 100% of positive investment earnings for each
variable sub-account available at the time the request
1. is made, once a policy year; plus None
Up to 100% of the current policy year's interest on the
Fixed Account at the time the request for the withdrawal
2. or surrender is made, once a policy year; plus None
Up to 10% of total premiums still subject to a surrender
3. charge, once a policy year; plus None
Up to 100% of those premiums not subject to a surrender
4. charge, available at any time; plus None
Premium subject to a surrender charge:
Policy Years Since Premiums Were Paid:
-------------------------------------- 6%
Less than 1 6%
At least 1, but less than 2 5%
At least 2, but less than 3 5%
At least 3, but less than 4 4%
At least 4, but less than 5 3%
At least 5, but less than 6 2%
5. At least 6, but less than 7 None
At least 7
</TABLE>
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Any surrender charge will be deducted proportionately from the sub-account(s)
and the Guarantee Periods under the Fixed Account being surrendered or
partially withdrawn in relation to the amount(s) withdrawn. If the amount
remaining in a sub-account or Guarantee Period after the withdrawal is
insufficient to cover the proportionate surrender charge deduction, the balance
of the surrender charge will be assessed proportionately from any other
sub-account and the Guarantee Period in which you are invested.
POLICY ADMINISTRATION CHARGE
We will assess the policy administration charge shown in the Policy Details:
1. for the prior policy year on the policy anniversary; and
2. for the current policy year on the date this policy is
surrendered for its cash surrender value, unless the policy is
surrendered on a policy anniversary.
If the policy value on the policy anniversary is $75,000 or more, we will waive
the policy administration charge for the prior policy year.
The charge will be assessed proportionately from any sub-accounts and Guarantee
Periods under the Fixed Account in which you are invested. If the charge is
obtained from a sub-account(s), we will cancel the appropriate number of units
from the applicable sub-account based on the unit value at the end of the
valuation period when the charge is assessed. If the charge is obtained from
the Fixed Account, we will reduce this policy's Fixed Account by the amount of
the charge.
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ANNUITY DATE
You may change the annuity date, subject to these limitations
1. we must receive your written notice at our Home Office at least
30 days before the current annuity date;
2. the requested annuity date must be a date that is at least 30
days after we receive your written request; and
3. the requested annuity date cannot be any later than the maturity
date.
TERMINATION
We may pay you the cash surrender value and end this policy if before the
annuity date or maturity date all of these events simultaneously exists:
1. you have not paid any premiums for at least two years; and
2. the policy value is less than $2,000; and
3. the total premiums paid, less any partial withdrawals, is less
than $2,000.
We will mail you a notice of our intention to terminate this policy at least
six months in advance. This policy will automatically terminate on the date
specified in the notice, unless we receive an additional premium before the
termination date specified in the notice. The additional premium must be at
least the minimum amount specified in the Additional Premiums provision.
BASIS OF VALUES
Any paid up annuity cash surrender or death benefits that may be available are
at least equal to the minimum required by law in the state in which this policy
is delivered. A detailed statement of the method used to compute the minimum
values has been filed, where required, with the insurance officials of the
jurisdiction in which this policy is delivered.
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS &
TRANSFERS - POSTPONEMENT
We will usually pay any proceeds, partial withdrawals, or cash surrenders
within seven calendar days after:
1. we receive and process your written notice for a partial
withdrawal or a cash surrender; or
2. the date chosen for any systematic withdrawal; or
3. we receive due proof of your death or the death of the last
surviving annuitant.
However, we can postpone the payment of proceeds, amounts withdrawn, cash
surrender value or the transfer of amounts between sub-accounts if:
1. the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on the exchange is restricted
as determined by the Securities and Exchange Commission (SEC); or
2. the SEC permits by an order the postponement for the protection
of policyowners; or
3. the SEC determines that an emergency exists that would make the
disposal of securities held in the Variable Account or the
determination of their value not reasonably practicable.
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E1XXXXX
We have the right to defer payment of any partial withdrawal, cash surrender,
or transfer from the Fixed Account for up to six months from the date we
receive your written notice for a withdrawal, surrender or transfer.
GENERAL PROVISIONS
CONTRACT
We have issued this policy in consideration of your application and your
payment of the initial premium. The entire contract is made up of this policy
and the attached copy of the application. The statements made in the
application are deemed representations and not warranties. We cannot use any
statement in defense to a claim or to void this policy unless it is contained
in the application and a copy of the application is attached to the policy at
issue.
Only our President, Secretary or Actuary may modify this policy or waive any of
our rights or requirements.
Any change in this policy must be in writing. The change must bear the
signature or a reproduction of the signature of one or more of the above
officers.
INCONTESTABILITY
We will not contest this policy after it has been in force during any
annuitant's lifetime for two years from the date of issue of this policy.
OWNER
During any annuitant's lifetime and before the earlier of the annuity date or
maturity date, you have all the rights and privileges granted by this policy.
If you appoint an irrevocable beneficiary, then your rights will be subject to
those of that beneficiary.
During any annuitant's lifetime and before the earlier of the annuity date or
maturity date, you may name a new owner, joint owner or annuitant by giving us
written notice.
BENEFICIARY
We will pay the beneficiary any proceeds payable on your death or the death of
the last surviving annuitant. During any annuitant's lifetime and before the
earlier of the annuity date or maturity date, you may name and change one or
more beneficiaries by giving us written notice. However, we will require
written notice from any irrevocable beneficiary specifying their consent to the
change.
We will pay the proceeds under the beneficiary appointment in effect at the
date of death. If you have not designated otherwise in your appointment, the
proceeds will be paid to the surviving beneficiary(ies) equally. If no
beneficiary is living when the last surviving annuitant dies, or if none has
been appointed, the proceeds will be paid to you. If no beneficiary is living
when you die, any proceeds will be paid to your estate.
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E1XXXXX
WRITTEN NOTICE
Written notice must be signed by you, dated, and of a form and content
acceptable to us. Your written notice will not be effective until we receive
and file it at our Home Office. However, the change provided in your written
notice to name or change the owner or beneficiary will then be effective as of
the date you signed the written notice:
1. subject to any payments made or other action we take before we
receive and file your written notice; and
2. whether or not the last surviving owner or annuitant are alive
when we receive and file your written notice.
MISSTATEMENT OF AGE
If the age of any annuitant has been misstated, we will pay the amount which
the proceeds would have purchased at the correct age.
If we make an overpayment because of an error in age, the overpayment plus
interest at 3% compounded annually will be a debt against the policy. If the
debt is not repaid, future payments will be reduced accordingly.
If we make an underpayment because of an error in age, any unpaid payments will
be recalculated at the correct age and future payments will be adjusted. The
underpayment with interest at 3% compounded annually will be paid in a single
sum.
PERIODIC REPORTS
We will mail you a report showing the following items:
1. the number of units credited to this policy and the dollar value
of those units;
2. the policy value;
3. any premiums paid, withdrawals and charges made since the last
report; and
4. any information required by law.
The information in the report will be as of a date not more than two months
before the date of the mailing. We will mail the report to you:
1. at least annually or more often as required by law; and
2. to your last address known to us.
ASSIGNMENT
You may assign a nonqualified policy or an interest in it at any time before
the earlier of the annuity date or maturity date during any annuitant's
lifetime. An assignment must be in written notice acceptable to us. It will
not be binding on us until we receive and file it at our Home Office. We are
not responsible for the validity of any assignment. Your rights and the rights
of any beneficiary will be affected by an assignment.
An assignment of a nonqualified policy may result in tax consequences for you.
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E1XXXXX
OUR CONSENT
If our consent is required, it must be given in writing. It must bear the
signature, or a reproduction of the signature, of our President, Secretary or
Actuary.
POLICY DATE
Policy years, months and anniversaries are measured from the policy date shown
in the Policy Details.
EFFECTIVE DATE
The effective date is the date this policy goes into effect and your initial
premium is invested.
CURRENCY
All amounts payable under this policy will be paid in United States currency.
PLACE OF PAYMENT
All amounts payable by us will be payable at our Home Office.
MODIFICATION
Upon notice to you, we may modify the policy, but only if such modification:
1. is necessary to make the policy or the Variable Account comply
with any law or regulation issued by a governmental agency to which we
are subject; or
2. is necessary to assure continued qualification of the policy
under the Internal Revenue Code or other federal or state laws
relating to retirement annuities or variable annuity policies; or
3. is necessary to reflect a change in the operation of the Variable
Accounts; or
4. provides additional variable account and/or fixed accumulation
options.
In event of such modification, we may make appropriate endorsement to the
policy.
NON-PARTICIPATION
This policy is not eligible for dividends and will not participate in our
divisible surplus.
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E1XXXXX
PAYMENT OPTIONS
The term "payee" means a person who is entitled to receive payment under this
section.
ELECTION OF PAYMENT OPTIONS
You may elect a payment option or revoke or change your election while any
annuitant is living and before the annuity date or maturity date. If an
election is not in effect at your death or the last surviving annuitant's
death, whichever applies, or if payment is to be made in a lump sum under an
existing payment option, the beneficiary may elect one of the payment options.
This election must be made within one year after the last surviving annuitant's
death and before any payment has been made.
An election of a payment option and any revocation or change must be made in a
written notice. It must be filed with our Home Office with the written consent
of any irrevocable beneficiary.
A payment option may not be elected and we will pay the proceeds in a lump sum
if either of the following conditions exist:
1. the amount to be applied under the payment option is less than
$1,000; or
2. any periodic payment under the election would be less than $50.
PAYMENT OPTION 1: LIFE INCOME WITH PAYMENTS FOR 10 YEARS CERTAIN
We will pay the proceeds in equal amounts at the beginning of each month,
during the payee's lifetime with payments for at least 10 years certain.
The amount of each payment will be determined from the Table of Payment on
Basis of $1,000 Net Proceeds, using the payee's age. Age will be determined
from the nearest birthday at the due date of the first payment.
PAYMENT OPTION 2: MUTUAL AGREEMENT
We will pay the proceeds according to other terms, if those terms are mutually
agreed upon.
PAYMENT DATES
The payment dates of the payment options will be calculated from the date on
which the proceeds become payable.
AGE AND SURVIVAL OF PAYEE
We have the right to require proof of age of the payee(s) before making any
payment. When any payment depends on the payee's survival, we will have the
right, before making the payment to require satisfactory proof that the payee
is alive.
DEATH OF PAYEE
At the death of the payee or the last surviving payee, any amount remaining to
be paid under this section will become payable in one sum, unless specified
otherwise.
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E1XXXXX
BETTERMENT OF INCOME
The annuity benefits provided at the time the policy value is applied under a
payment option will not be less than those that would be provided by the
application of any amount, defined below, to purchase any single premium
immediate annuity policy offered by us at the time to the same class of
annuitants. Such amount shall be the greater of the cash surrender value or 95%
of what the cash surrender value would be if there were no surrender charge.
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E1XXXXX
TABLE OF PAYMENTS ON BASIS OF $1,000 NET PROCEEDS
OPTION 1 - LIFE INCOME WITH PAYMENTS FOR 10 YEARS CERTAIN
AGE MONTHLY AGE MONTHLY
25 2.80 64 4.61
30 2.88 65 4.73
35 2.99 66 4.86
40 3.12 67 5.00
45 3.29 68 5.15
46 3.33 69 5.31
47 3.37 70 5.49
48 3.42 71 5.68
49 3.47 72 5.88
50 3.52 73 6.10
51 3.57 74 6.35
52 3.62 75 6.61
53 3.68 76 6.89
54 3.74 77 7.20
55 3.81 78 7.53
56 3.87 79 7.89
57 3.95 80 8.28
58 4.03 81 8.71
59 4.11 82 9.18
60 4.20 83 9.68
61 4.29 84 10.24
62 4.39 85 10.84
The Table is based on the following assumptions: 1983(a) Projection G, 100%
female, YOP = 1995, Interest = 3%, and 3% Load. The monthly payment for ages
not shown in the Table will be calculated on the same basis as these shown and
will be quoted on request.
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E1XXXXX
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HARRISON, NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NY 10528
SINGLE PREMIUM VARIABLE DEFERRED ANNUITY
SINGLE premiums as stated in the Additional Premiums Provision.
Accumulation benefits and values are variable, except for amounts in the
Fixed Account.
Guarantee Periods under the Fixed Account may be subject to a
Market Value Adjustment
After the Annuity Date or Maturity Date, payment options are on a
guaranteed basis.
Death Benefit payable upon death of the last surviving annuitant before the
Annuity Date or Maturity Date.
Nonparticipating - Not eligible for dividends
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<PAGE> 1
EXHIBIT 4(b)
RIDERS AND ENDORSEMENTS
<PAGE> 2
CANADA LIFE INSURANCE COMPANY OF NEW YORK
500 MAMARONECK AVENUE
HARRISON, NEW YORK 10528
PHONE (914) 835-8400
INDIVIDUAL RETIREMENT ANNUITY RIDER
This Rider is part of the Policy. The Policy is intended to qualify as an
individual retirement annuity under Section 408(b) and may be purchased
pursuant to a simplified employee pension intended to qualify under Section
408(k) of the Code. The following provisions apply and replace any contrary
Policy provisions:
1. You shall be the owner.
2. The Policy is not transferable or assignable (other than pursuant to a
divorce decree) and is established for the exclusive benefit of you and
your beneficiaries. It may not be sold, assigned, alienated, or
pledged as collateral for a loan or as security.
3. Your entire interest in the Policy shall be nonforfeitable.
4. Premium payments shall be in cash and, except in the case of rollover
contributions described in Sections 402(a)(5), 402(a)(6)(F), 402(a)(7),
403(a)(4), 403(b)(8) and 408(d)(3) of the Code, shall not exceed:
a)$2,000 for any taxable year; or b) if a premium payment is made by
your employer to the Policy in accordance with the terms of a
simplified employee pension plan described in Section 408(d) of the
Code, $30,000 for any taxable year, or c) if the policy is part of a
SIMPLE retirement plan described in Section 408(p) of the Code, the
amount allowable by law to be contributed to a SIMPLE plan for that
taxable year. You shall have the sole responsibility for determining
whether any premium payment qualifies as a rollover or simplified
employee pension contributions and whether it is deductible for income
tax purposes.
5. The Policy does not require fixed premium payments. We will accept
additional premium payments. The minimum additional premium payment
paid by pre-authorized check is $50.00. Any refund of premiums (other
than those attributable to excess contributions) will be applied before
the close of the calendar year following the year of the refund toward
the payment of additional premiums or the purchase of additional
benefits.
6. The Annuity Date is the date your entire Policy value will be
distributed or commence to be distributed to you. Your Annuity Date
shall be no later than April 1 of the calendar year following the
calendar year in which you attain age 70 1/2.
7. With respect to any amount which becomes payable under the Policy
during your lifetime, such payment shall commence on or before the
Annuity Date and shall be payable in substantially equal amounts, no
less frequently than annually. Payments shall be made in the manner
as follows:
(a) in a lump sum; or
(b) over your life; or
(c) over the lives of you and your designated beneficiary; or
(d) over a period certain not exceeding your life expectancy; or
(e) over a period certain not exceeding the joint and last survivor
expectancy of you and your designated beneficiary.
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If your entire interest is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with the
calendar year following the calendar year in which you attain age 70
1/2 and each year thereafter) shall be determined in accordance with
Code Section 408(b)(3) and the regulations thereunder, including the
incidental death benefit requirements of section 401(a)(9)(G) of the
Code, the regulations thereunder, and the minimum distribution
incidental benefit requirement of Proposed Income Tax Regulation
section 1.401(a)(9)-2. Payment must either nonincreasing or may
increase only as provided in Proposed Income Tax Regulation section
1.40(a)(9)-1, Q&A F-3.
8. If you die after distribution of your interest has commenced, the
remaining portion of such interest will continue to be distributed at
least as rapidly as under the method of distribution being used prior
to your death.
If you die before distribution has begun, the entire interest must be
distributed no later than December 31 of the calendar year in which the
fifth anniversary of your death occurs. However, proceeds which are
payable to a named beneficiary who is a natural person may be
distributed in substantially equal installments over the lifetime of
the beneficiary or a period certain not exceeding the life expectancy
of the beneficiary provided such distributions begin not later than
December 31 of the calendar year following the calendar year in which
your death occurred. If the beneficiary is your surviving spouse, the
beneficiary may elect not later than December 31 of the calendar year
in which the fifth anniversary of your death occurs to receive equal or
substantially equal payments over the life or life expectancy of the
surviving spouse commencing at any date prior to the date on which you
would have attained age 70 1/2. Payments will be calculated in
accordance with Code Section 408(b)(3) and the regulations thereunder.
For the purposes of this requirement, any amount paid to any of your
children will be treated as if it had been paid to your surviving
spouse if the remainder of the interest becomes payable to the
surviving spouse when the child reaches the age of majority.
If you die before your entire interest has been distributed, no
additional cash premiums or rollover contributions will be accepted
under the Policy after your death unless the beneficiary is your
surviving spouse.
9. If your spouse is not the named beneficiary, the method of distribution
selected will assure that at least 50% of the present value of the
amount available for distribution is paid within your life expectancy
and that such method of distribution complies with the requirements of
Code Section 408(b)(3) and the regulations thereunder.
10. For purposes of the foregoing provisions, life expectancy and joint and
last survivor expectancy shall be determined by use of the expected
return multiples in Tables V and VI of Treasury Regulation Section
1.72-9 in accordance with Code Section 408(b)(3) and the regulations
thereunder. In the case of distributions under paragraph 7 of this
Rider, your life expectancy or, if applicable, the joint and last
survivor expectancy of you and your beneficiary will be initially
determined on the basis of your attained ages in the year you reach age
70 1/2. In the case of a distribution under paragraph (8) of this
Rider, life expectancy will be initially determined on the basis of
your beneficiary's attained age in the year distributions are required
to commence. Unless you (or your spouse) elect otherwise prior to the
date distributions are required to commence, your life expectancy and,
if applicable, your spouse's life expectancy will be recalculated
annually based on your attained ages in the year for which the required
distribution is being determined. The life expectancy of a nonspouse
beneficiary will not be recalculated.
In the case of a distribution other than as life income or joint life
income, the annual distribution required to be made by your Annuity
Date is for the calendar year in which you reached age 70 1/2. Annual
payments for subsequent years, including the year in which your Annuity
Date occurs, must be made by December 31 of that year. The amount
distributed for each year shall equal or exceed the annuity value as of
the close of business on December 31 of the preceding year, divided by
the applicable life expectancy or joint and last survivor expectancy.
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You may satisfy the minimum distribution requirements under section
408(b)(3) of the Code by receiving a distribution from one IRA that is
equal to the amount required to satisfy the minimum distribution
requirement for two or more IRAs. For this purpose, if you own two or
more IRAs, you may use the alternative method described in Notice 88-
38, 1988-1 C.B. 524, to satisfy the minimum distribution requirements.
11. Under the Policy, you may not elect any variable account or sub-account
that directly or indirectly invests in collectibles within the meaning
of Section 408(m) of the Code. No part of the Policy value shall be
invested in or used to provide life insurance.
12. We reserve the right to amend the Policy or this Rider to the extent
necessary to qualify as an individual retirement annuity for federal
income tax purposes.
/s/ David A. Hopkins /s/ D.A. Lorey
Secretary President
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<PAGE> 5
CANADA LIFE INSURANCE COMPANY OF NEW YORK
FIXED ACCOUNT ENDORSEMENT
This endorsement is part of the policy to which it is attached. This
endorsement changes the policy as provided below.
REGARDING THE FIXED ACCOUNT, AMOUNTS TRANSFERRED, WITHDRAWN OR SURRENDERED
UNDER THIS POLICY FROM A GUARANTEE PERIOD WHOSE SPECIFIED DURATION IS GREATER
THAN ONE YEAR, MAY INCREASE OR DECREASE IN ACCORDANCE WITH A MARKET VALUE
ADJUSTMENT DURING THE GUARANTEE PERIOD TERM SPECIFIED, SUBJECT TO THE MINIMUM
VALUES DEFINED IN THIS POLICY.
FIXED ACCOUNT
The Fixed Account provides values and benefits based only upon the net premium
payments and policy values allocated to the Fixed Account, the Guaranteed
Interest Rate credited on such amounts, and any charges or Market Value
Adjustments imposed on such amounts in accordance with the terms of the policy.
Amounts in the Fixed Account are part of our general account. The Fixed
Account is not part of and does not depend on the investment performance of the
Variable Account.
From time to time we will offer to credit each Guarantee Amount with interest
at specific guaranteed rates for specific periods of time. These periods of
time are known as Guarantee Periods. We may offer one or more Guarantee
Periods of one to ten years' duration at any time but will always offer a
Guarantee Period of one year. The Guarantee Periods we offer on the Date of
Issue are shown in your application. The Guaranteed Interest Rates available
at any time will vary with the number of years in the Guarantee Period.
Guarantee Periods begin on the date as of which a net premium payment is
allocated to or a portion of the policy value is transferred to the Guarantee
Period, and end on the last calendar day of the month when the number of years
in the Guarantee Period elected (measured from the end of the calendar month in
which the amount was allocated or transferred to the Guarantee Period) has
elapsed. The last day of the Guarantee Period is the expiration date for that
Guarantee Period.
Allocations of net premium payments and transfers of policy value to the Fixed
Account for a Guarantee Period may have different applicable Guaranteed
Interest Rates depending on the timing of such allocations or transfers. The
applicable Guaranteed Interest Rate does not change during a Guarantee Period.
If the allocated or transferred amount remains in the Guarantee Period until
such Guarantee Period ends, its value will be equal to the amount originally
allocated or transferred, multiplied, on an annually compounded basis, by its
Guaranteed Interest Rate. If a Guarantee Amount is surrendered, withdrawn or
transferred prior to the expiration of the Guarantee Period, the Guarantee
Amount is subject to a Market Value Adjustment, as described below, the
application of which may result in the payment of an amount greater or less
than the Guarantee Amount at the time of the transaction.
The Guaranteed Interest Rate is the applicable effective annual rate of
interest we determine that we will pay on a Guarantee Amount. The Guaranteed
Interest Rate will not be less than 3%.
The Guarantee Amount during a Guarantee Period is equal to:
1. an amount equal to that part of any net premium allocated to or
policy value transferred to the Fixed Account for a designated
Guarantee Period with a particular expiration date;
2. any policy value transferred to the Fixed Account for such
Guarantee Period; plus
3. interest at the Guaranteed Interest Rate on 1 and 2 above; minus
4. any cash surrender value withdrawn from the Fixed Account for such
designated Guarantee Period, including any Market Value
Adjustment; minus
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5. any amount transferred from the Fixed Account for such designated
Guarantee Period, including any Market Value Adjustment; minus
6. any applicable premium tax charge; minus
7. any policy administration charge deducted from the Guarantee
Period; minus
8. any applicable surrender charges.
During the 30 day period following the expiration of a Guarantee Period (30 day
window), you may transfer the Guarantee Amount from the expiring Guarantee
Period to a new Guarantee Period with a new Guaranteed Interest Rate or to a
subaccount(s). A Market Value Adjustment will not apply if the Guarantee
Amount from the expired Guarantee Period is surrendered, withdrawn or
transferred during the 30 day window. During the 30 day window, the Guarantee
Amount will accrue interest at an annual effective rate of 3% unless the
Guarantee Amount remains in the Fixed Account in which case you will receive
the interest rate in accordance with the Guarantee Period chosen.
Prior to the expiration date of any Guarantee Period, we will mail you a notice
of the Guarantee Periods then available and their applicable Guaranteed
Interest Rates. A new Guarantee Period will begin on the first business day
following the expiration of the prior Guarantee Period. The Guarantee Amount
of such expiring Guarantee Period will be:
1. transferred to such new Guarantee Period you elect from those then
available by sending us Written Notice prior to the end of the 30
day window; or
2. transferred to a new Guarantee Period of the same duration as the
expiring Guarantee Period if you have not made an election; or
3. will be allocated, on your instructions, to one or more
subaccount(s) and/or Guarantee Period(s).
However, a new Guarantee Period of one year will begin automatically on the
first business day following the expiration of the prior Guarantee Period if:
1. we do not receive a Written Notice from you and we are not
offering a Guarantee Period of the same duration as the expiring
Guarantee Period; or
2. the duration of the expiring Guarantee Period would, if renewed,
extend beyond the annuity date, if known, or maturity date.
To the extent permitted by law, we reserve the right, at any time, to offer
Guarantee Periods that differ from those available when your policy was issued.
We also reserve the right, at any time, to stop accepting net premium payment
allocations or transfers of policy value to a particular Guarantee Period.
Since the specific Guarantee Periods available may change periodically, please
contact our Administrative Office to determine the Guarantee Periods currently
being offered.
MARKET VALUE ADJUSTMENT
A Market Value Adjustment applies to any surrender, withdrawal or transfer of a
Guarantee Amount unless:
1. the effective date of the surrender, withdrawal or transfer is
within 30 days after the end of a Guarantee Period; or
2. the surrender, withdrawal or transfer is from the one year
Guarantee Period; or
3. the surrender, withdrawal or transfer is
to provide death, nursing home, or terminal illness benefits; or
4. the Guarantee Amount is applied to an annuity payment option.
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The Market Value Adjustment will be applied after the deduction of any
applicable policy administration charge or transfer fee, and before the
deduction of any applicable surrender charge or charge for any applicable taxes
on premium payments.
A Market Value Adjustment reflects the relationship between:
1. the Guaranteed Interest Rate being applied to the Guarantee Period
from which the Guarantee Amount is requested to be surrendered,
withdrawn or transferred; and
2. the current Guaranteed Interest Rate that we credit for a
Guarantee Period equal in duration to the Guarantee Period from
which the Guarantee Amount will be surrendered, withdrawn or
transferred.
If a Guarantee Period of such equal duration is not being offered at such time,
we will use the linear interpolation of the Guaranteed Interest Rates for the
Guarantee Periods closest in duration that are available.
Generally, if the Guaranteed Interest Rate for the selected Guarantee Period is
lower than the Guaranteed Interest Rate currently being offered for new
Guarantee Periods of equal duration, as of the date that the Market Value
Adjustment is applied, then the application of the Market Value Adjustment will
result in a reduction in the Guarantee Amount then surrendered, withdrawn or
transferred. Conversely, if the Guaranteed Interest Rate for the selected
Guarantee Period is higher than the Guaranteed Interest Rate currently being
offered for new Guarantee Periods of equal duration, as of the date that the
Market Value Adjustment is applied, then the application of the Market Value
Adjustment will result in an increase in the Guarantee Amount then surrendered,
withdrawn or transferred.
The Market Value Adjustment is calculated by multiplying the amount being
surrendered, withdrawn or transferred, (less any applicable policy
administration charge or transfer fees), by the Market Value Adjustment Factor.
The Market Value Adjustment Factor is calculated as the lesser of:
n/12 n/12
a) [(1 + i) / (1 + r + .005) ] - 1; or
b) .05
where:
"i" is the Guaranteed Interest Rate credited to the specific Guarantee
Period;
"r" is the Guaranteed Interest Rate that is currently being offered
for a Guarantee Period of duration equal to such Guarantee Period ;
and
"n" is the number of months remaining to the expiration of such
Guarantee Period.
The Market Value Adjustment, however, will never invade principal nor reduce
the earnings on amounts allocated to the Fixed Account for a Guarantee Period
to less than 3% a year.
FIXED ACCOUNT VALUE
This policy's Fixed Account value before the annuity date or maturity date is
the sum of the Guarantee Amounts in the Guarantee Periods.
Page 3
<PAGE> 8
RESTRICTIONS ON TRANSFERS FROM THE FIXED ACCOUNT
You may transfer an amount from a Guarantee Period under the Fixed Account
subject to these additional restrictions:
1. transfers from a Guarantee Period other than the one year Guarantee
Period may be subject to a Market Value Adjustment.
2. Transfers from one Guarantee Period to another are prohibited other
than within the 30 day window.
/s/ David A. Hopkins /s/ D.A. Loney
Secretary President
Page 4
<PAGE> 1
EXHIBIT 5
FORM OF APPLICATION
<PAGE> 2
CANADA LIFE
INSURANCE COMPANY OF NEW YORK APPLICATION FOR
500 MAMARONECK AVENUE SINGLE PREMIUM VARIABLE DEFERRED ANNUITY
HARRISON, NEW YORK 10528
(800) 905-1959
<TABLE>
<S> <C>
PLEASE PRINT IN BLACK INK
- ------------------------------------------------------------- ---------------------------------------------------------------
1. OWNERS (APPLICANTS) 2. ANNUITANTS (IF DIFFERENT FROM OWNER)
- ------------------------------------------------------------- ---------------------------------------------------------------
Name* Name*
-------------------------------------------------------- ----------------------------------------------------------
First Middle Last First Middle Last
ADDRESS ADDRESS
------------------------------------------------------ --------------------------------------------------------
Street Street
---------------------------------------------------------- ------------------------------------------------------------
City State Zip City State Zip
Sex [ ] M [ ] F Date of Birth | | | | Sex [ ] M [ ] F Date of Birth | | | |
[ ] Other Month Day Year Month Day Year
Daytime Phone Number ( ) [ ][ ][ ][ ][ ][ ][ ][ ][ ]
------------------------------------ Social Security Number
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ] ===============================================================
Social Security Number Tax ID Number CO-ANNUITANT (Optional)
Client Brokerage Acct. # (if applicable) Name*
--------------------- ----------------------------------------------------------
============================================================= First Middle Last
JOINT OWNER (Optional)
Sex [ ] M [ ] F Date of Birth | | | |
Name* Month Day Year
--------------------------------------------------------
First Middle Last [ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number
Sex [ ] M [ ] F Date of Birth | | | | ---------------------------------------------------------------
[ ] Other Month Day Year 4. MY INVESTMENT
---------------------------------------------------------------
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ] Allocate payment with application of $ ______ as indicated
Social Security Number Tax ID Number below (MUST TOTAL 100%)
- ---------------------------------------------------------
3. BENEFICIARIES
- ---------------------------------------------------------
Enclose signed letter of more information if required % International Equity 10/30 % Seligman Comrs Info 50/70
% Money Market 11/31 % Seligman Frontier 51/71
Name % Managed 12/32 % Dreyfus Growth & Income 80/90
------------------------------------------------------ % Bond 13/33 % Dreyfuls Social Responsible 51/91
First Middle Last Relationship % Value Equity 14/34 % Alger Small Cap 82/92
% Capital 15/35 % Alger Growth 83/93
Percentage | | [ ][ ][ ][ ][ ][ ][ ][ ][ ] % Fidelity Asset Mgr. 16/36 % Alger MdCap 84/94
Social Security Number % Fidelity Growth 17/37 % Alger Leveraged All Cap 85/95
Name % Fidelity High Income 18/38 % Montgomery Emerg. Mids. 86/96
------------------------------------------------------ % Fidelity Overseas 19/39 % Montgomery Growth 87/97
First Middle Last Relationship % Fidelity Index 500 20/40 % BergerBiam Ipt Intern'l 87/98
Percentage | | [ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number
- ----------------------------------------------------------
Contingent Beneficiary
Name
------------------------------------------------------
First Middle Last Relationship
Percentage | | [ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number
- ---------------------------------------------------------- -------------------------------------------------------------------
5. FOR CLAFS OFFICE USE ONLY 6. REPLACEMENT
- ---------------------------------------------------------- -------------------------------------------------------------------
To be completed by CLAFS Office/Office of Supervisory Will this Annuity replace or change any other insurance or annuity?
Jurisdiction. / / No / / Yes (State company and Policy number in "Remarks" and
attach replacement forms.)
Has this application been reviewed by the Office of
Supervisory Jurisdiction?
/ / Yes / / No
- ----------------------------------------------------------- --------------------------------------------------------------------
8. TYPE OF PLAN (MUST BE COMPLETED)
--------------------------------------------------------------------
Authorized Signature Date / / Non-Qualified / / IRA Tax Year
- ----------------------------------------------------------- ---------
7. FOR AGENTS ONLY / / IRA Rollover / / 401(k) / / SEP IRA Tax Year
- ----------------------------------------------------------- ----
Questions? Contact either your broker/dealer or / / Qualified Other / / Keogh (HR-10) / / 403(b) If ERISA
Investment Products at (800) 905-1959, ext. 259. -----
/ / IRA Transfer / / Other
* Unless subsequently changed in accordance with terms of ----------------
** Unless indicated, will commence on the earliest possible
business day.
</TABLE>
<PAGE> 3
9. SERVICE OPTIONS
BY INITIALING THE BOX(ES) IN THIS SECTION, I/WE HEREBY AUTHORIZE THE COMPANY TO
INITIATE THE OPTION(S) INDICATED. I/WE UNDERSTAND AND AGREE ANY AUTHORIZATION
AS FOLLOWS: 1) ONLY APPLIES TO THE POLICY APPLIED FOR AND SEPARATE
AUTHORIZATION MUST BE COMPLETED FOR ANY OTHER POLICIES. 2) WILL CONTINUE IN
EFFECT UNTIL THE COMPANY RECEIVES WRITTEN REVOCATION FROM ME/US OR THE COMPANY
DISCONTINUES THE OPTION(S).
I/WE WILL CONSULT THE CURRENT PROSPECTUS FOR MORE DETAILS ON THE SERVICE OPTIONS
BELOW, SUCH AS THE MINIMUMS AND MAXIMUMS.
/ / DOLLAR COST AVERAGING**
I/We hereby authorize the Company to automatically transfer, on a periodic
basis, amounts for regular level investments over time, from one sub-account or
the 1 year Fixed Account shown on this form, to any of the other sub-accounts
or Fixed Accounts specified on this form.
Transfer $__________ From ____________.Start Date ______________
Stop Date __________ or Number of Transfers ___________ on a
/ / Monthly / / Quarterly / / Semi-Annual / / Annual basis.
Transfer above amount to:
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
/ / SYSTEMATIC WITHDRAWAL PRIVILEGE (SWP)**
Do you have a checking or savings account? / / Yes / / No
I/We hereby authorize the Company to initiate withdrawals from my Policy, via
Electronic Funds Transfer, as indicated below.
Withdraw $ _________ or / / Maximum amount allowed without incurring a Surrender
Charge, to Start on ______________.
Stop Date: _______________ or Number of Withdrawals _____________.
Withdraw From:
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
Frequency of Withdrawal: / / Monthly / / Quarterly / / Semi-Annually
Please / / Withhold / / Do Not Withhold Federal Income Taxes.
NOTE: WITHDRAWALS FROM THE 3,5,7 AND 10 YEAR FIXED ACCOUNTS WILL BE SUBJECT TO
A MARKET VALUE ADJUSTMENT.
===============================================================================
/ / PORTFOLIO REBALANCING**
I/We hereby authorize the Company to provide portfolio rebalancing services as
indicated below:
Frequency of Rebalancing: / / Quarterly / / Semi-Annually / / Annually
10. REMARKS
11. SIGNATURES
STATEMENT OF APPLICANT: To the best of the knowledge and belief of the
person(s) signing below, all statements in this Application are true and
correctly worded. Each person signing below adopts all statements made in this
Application and agrees to be bound by them. IT IS AGREED THAT THE POLICY WILL
NOT TAKE EFFECT UNTIL THE LATER OF: 1) THE POLICY IS ISSUED; OR 2) WE RECEIVE
AT OUR ADMINISTRATIVE OFFICE THE FIRST PREMIUM REQUIRED UNDER THE POLICY. No
agent or registered representative can modify this agreement or waive any of
the Company's rights or requirements. I/WE ACKNOWLEDGE RECEIPT OF THE
EFFECTIVE PROSPECTUS(ES) FOR THE POLICY. 3) I/WE CERTIFY THAT THE NUMBER SHOWN
ON THIS FORM IS MY/OUR SOCIAL SECURITY # OR TAXPAYER ID #. 4) THE POLICY I/WE
HAVE APPLIED FOR IS SUITABLE FOR MY/OUR INSURANCE INVESTMENT OBJECTIVES,
FINANCIAL SITUATION, AND NEEDS.
I/WE UNDERSTAND THAT ALL ACCUMULATION BENEFITS AND VALUES PROVIDED BY THE
VARIABLE ACCOUNT MAY INCREASE OR DECREASE DAILY DEPENDING ON INVESTMENT
PERFORMANCE, AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS.
I/WE FURTHER UNDERSTAND THAT AMOUNTS TRANSFERRED, WITHDRAWN OR SURRENDERED
UNDER THIS POLICY FROM THE 3,5,7 & 10 YEAR FIXED ACCOUNTS MAY INCREASE OR
DECREASE IN ACCORDANCE WITH A MARKET VALUE ADJUSTMENT DURING THE TERM PERIOD
SPECIFIED IN THIS POLICY, SUBJECT TO THE MINIMUM VALUES DEFINED IN THE POLICY.
/ / I/We request the Statement of Additional Information.
<TABLE>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Signed in (State) Date Signed Signature of Owner/Applicant Signature of Joint Owner
- -----------------------------------------------------------------------------------------------------------------------------------
Signature of Annuitant Signature of Co-Annuitant Signature of Irrevocable Beneficiary
(if different from Owner) (if different from Owner) (if designated)
STATEMENT OF AGENT: I certify that 1) the applicant signed this Application; 2) I am authorized and qualified to discuss the
Policy herein applied for; and 3) to the best of my knowledge replacement / / is / / is not involved.
FOR CLAFS AGENTS ONLY: You MUSt enclose a signed copy of the new CLIENT ACCOUNT WORKSHEET along with this application.
- -----------------------------------------------------------------------------------------------------------------------------
Print Registered Representative/Agent Name Name of Firm Date Signed
- -----------------------------------------------------------------------------------------------------------------------------
Signature of Agent Branch Address
- -----------------------------------------------------------------------------------------------------------------------------
Agent Number State License ID Number Agent Phone Number
</TABLE>
** Unless indicated, will commence on the earliest possible business day.
<PAGE> 1
EXHIBIT 6(a)
CERTIFICATE OF INCORPORATION OF CANADA LIFE INSURANCE COMPANY OF NEW YORK.
<PAGE> 2
[LETTERHEAD]
STATE OF NEW YORK
INSURANCE DEPARTMENT
324 STATE STREET
ALBANY 12210
BENJAMIN R. SCHENCK
SUPERINTENDENT OF INSURANCE
THE PEOPLE OF THE STATE OF NEW YORK by BENJAMIN R. SCHENCK,
Superintendent of Insurance, pursuant to Section 48 of the Insurance Law, do
hereby certify that
CANADA LIFE INSURANCE COMPANY OF NEW YORK
having complied with the requirements of said Law to become a body
corporate, is hereby declared to be incorporated.
IN WITNESS WHEREOF, I have hereunto set my hand and
[SEAL] affixed the official seal of this Department at the
City of Albany, New York this 7th day of June, 1971.
BENJAMIN R. SCHENCK
Superintendent of Insurance
By /s/ Robert J. Bertrand
-----------------------------------
Robert J. Bertrand
Deputy Superintendent
<PAGE> 1
EXHIBIT 6(b)
BY-LAWS OF CANADA LIFE INSURANCE COMPANY OF NEW YORK.
<PAGE> 2
CANADA LIFE INSURANCE
COMPANY OF NEW YORK
-------------------
BY-LAWS
-------
AS AMENDED UP TO
JANUARY 1, 1988
<PAGE> 3
TABLE OF CONTENTS
ARTICLE I. SHAREHOLDERS. . . . . . . . . . . . 2
1. Annual Meeting. . . . . . . . . . . 2
2. Special Meetings. . . . . . . . . . 2
3. Place of Meetings . . . . . . . . . 2
4. Notice of Meetings. . . . . . . . . 2
5. Waiver of Notice. . . . . . . . . . 4
6. Inspectors of Election. . . . . . . 4
7. List of Shareholders at
Meetings. . . . . . . . . . . . . . 5
8. Qualification of Voters . . . . . . 6
9. Quorum of Shareholders. . . . . . . 7
10. Proxies. . . . . . . . . . . . . . 7
11. Vote or Consent of
Shareholders. .. . . . . . . . . . . 8
12. Fixing Record Date . . . . . . . . . 8
ARTICLE II. BOARD OF DIRECTORS. . . . . . . . . 10
1. Power of Board and
Qualification of Directors . . . . . 10
2. Number of Directors. . . . . . . . . 10
3. Election and Term of
Directors. . . . . . . . . . . . . . 11
<PAGE> 4
4. Quorum of the Board;
Action by the Board. . . . . . . . 11
5. Meetings of the Board. . . . . . . 12
6. Resignations . . . . . . . . . . . 14
7. Removal of Directors . . . . . . . 14
8. Newly Created Director-
ships and Vacancies . . . . . . . 15
9. Compensation of Directors. . . . . 15
10. Indemnification. . . . . . . . . . 15
ARTICLE III. COMMITTEES . . . . . . . . . 21
1. Executive Committee. . . . . . . . 21
2. Investment Committee . . . . . . . 22
3. Audit and Nominating
Committee. . . . . . . . . . . . . 24
4. Other Committees . . . . . . . . . 26
5. Term of Members of
Committees . . . . . . . . . . . . 27
6. Meetings of Committees . . . . . . 27
7. Committee Action Without
Meeting. . . . . . . . . . . . . . 28
ARTICLE IV. OFFICERS . . . . . . . . . . . 29
1. Officers . . . . . . . . . . . . . 29
2. Term of Office and Removal . . . . 29
- ii -
<PAGE> 5
3. Powers and Duties . . . . . . . . 30
4. Books to be Kept. . . . . . . . . 30
5. Checks, Notes, Etc. . . . . . . . 31
6. Compensation of Officers. . . . . 32
ARTICLE V. FORM OF CERTIFICATES AND
LOSS AND TRANSFER OF
SHARES . . . . . . . . . . . . . . . . 33
1. Form of Share Certificates. . . . 33
2. Transfer of Shares. . . . . . . . 34
3. Lost, Stolen or Destroyed
Share Certificates. . . . . . . . 35
ARTICLE VI. OTHER MATTERS. . . . . . . . . . . . 36
1. Corporate Seal. . . . . . . . . . 36
2. Fiscal Year. . . . . . . . . . . . 36
3. Amendments . . . . . . . . . . . . 36
4. Dividends. . . . . . . . . . . . . 37
5. Registered Shareholders. . . . . . 37
6. Execution of Documents
under Seal . . . . . . . . . . . . 38
- iii -
<PAGE> 6
ARTICLE I
SHAREHOLDERS
SECTION 1. Annual Meeting. A meeting of shareholders for the election
of directors and the transaction of other business shall be held annually,
commencing in the year 1972, on the last Thursday in February (or if it be a
legal holiday, on the next succeeding business day) at twelve o'clock in the
forenoon.
SECTION 2. Special Meetings. Special meetings of the shareholders may
be called by the Board of Directors or the President or the holders of record
of a majority of the outstanding shares of the Corporation entitled to vote at
the meeting; and shall be held at such time as may be fixed in the call and
stated in the notice of meeting.
SECTION 3. Place of Meetings. Meetings of shareholders shall be held
at such place, within or without the State of New York, as may be fixed in the
call and notice of meeting. If no place is so fixed, such meetings shall be
held at the office of the Corporation in the Village of Scarsdale, State of New
York.
SECTION 4. Notice of Meetings. Notice of each meeting of shareholders
shall be in writing and shall state the place, date and hour of the meeting and
the purpose or purposes for which
- 2 -
<PAGE> 7
the meeting is called. In the case of special meetings, the notice shall also
state that it is being issued by or at the direction of the person or persons
calling the meeting.
If, at any meeting, action is proposed to be taken which would, if
taken, entitle shareholders fulfilling the requirements of Section 623 of the
Business Corporation Law to receive payment for their shares, the notice shall
include a statement of that purpose and to that effect.
A copy of the notice of any meeting shall be given, personally or by
mail, not less than ten nor more than fifty days before the date of the
meeting, to each shareholder entitled to vote at such meeting. If mailed, such
notice is given when deposited in the United States mail, with postage thereon
prepaid, directed to the shareholder at his address as it appears on the record
of shareholders, or, if he shall have filed with the Secretary of the
Corporation a written request that notices to him be mailed to some other
address, then directed to him at such other address.
When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and place to
which the meeting is adjourned are announced at the meeting at which the
adjournment it taken, and at the adjourned meeting any business may be
transacted that might have been
- 3 -
<PAGE> 8
transacted on the original date of the meeting. However, if after the
adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record on the new record date entitled to notice under the preceding
paragraphs of this SECTION 4.
SECTION 5. Waiver of Notice. Notice of meeting need not be given to
any shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
SECTION 6. Inspectors of Election. The Board of Directors, in advance
of any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint two inspectors. In case
any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath or affirmation faithfully
- 4 -
<PAGE> 9
to execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability.
The inspectors shall determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting, the existence of a
quorum, and the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting or any shareholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, question or matter
determined by them and execute a certificate of any fact found by them. Any
report or certificate made by them shall be prima facie evidence of the facts
stated and of the vote as certified by them.
SECTION 7. List of Shareholders at Meetings. A list of shareholders as
of the record date, certified by the Secretary or any Assistant Secretary or by
the transfer agent, if any, shall be produced at any meeting of shareholders
upon the request thereat or prior thereto of any shareholder. If the right to
vote at any meeting is challenged, the inspectors of election, or person
presiding thereat, shall require such list of shareholders to be produced as
- 5 -
<PAGE> 10
evidence of the right of the persons challenged to vote at such meeting, and
all persons who appear from such list to be shareholders entitled to vote
thereat may vote at such meeting.
SECTION 8. Qualification of Voters. Every shareholder of record of
capital stock of the corporation shall be entitled at every meeting of
shareholders to one vote for every one share of capital stock registered in his
name on the stock records of the Corporation.
Treasury shares as of the record date and shares held as of the record
date by another domestic or foreign corporation of any type or kind, if a
majority of the shares entitled to vote in the election of directors of such
other corporation is held as of the record date by the Corporation, shall not
be shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator,
committee, or other fiduciary, except a trustee, may be voted by him, either in
person or by proxy, without transfer of such shares into his name. Shares
held by a trustee may be voted by him, either in person or by proxy, only after
the shares have been transferred into his name as trustee or into the name of
his nominee.
Shares standing in the name of another domestic or foreign corporation
of any type or kind may be voted by such officer, agent or proxy as the
- 6 -
<PAGE> 11
by-laws of such corporation may provide, or, in the absence of such provision,
as the board of directors of such corporation may determine.
A shareholder shall not sell his vote or issue a proxy to vote to any
person for any sum of money or anything of value except as permitted by law.
SECTION 9. Quorum of Shareholders. The holders of a majority of the
shares entitled to vote thereat shall constitute a quorum at a meeting of
shreholders for the transaction of any business.
When a quorum is once present to organize a meeting, it is not broken
by the subsequent withdrawal of any shareholders.
The shareholders present, in person or by proxy, and entitled to vote
may, by a majority of votes cast, adjourn the meeting despite the absence of a
quorum.
SECTION 10. Proxies. Every shareholder entitled to vote at a meeting
of shareholders or to express consents or dissent without a meeting may
authorize another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided
by law.
- 7 -
<PAGE> 12
The authority of the holder of a proxy to act shall not be
revoked by the incompetence or death of the shareholder who
executed the proxy unless, before the authority is exercised,
written notice of an adjudication of such incompetence or of such
death is received by the Secretary or any Assistant Secretary.
SECTION 11. Vote or Consent of Shareholders. Directors
shall, except as otherwise required by law, be elected by a
plurality of the votes cast at a meeting of shareholders by the
holders of shares entitled to vote in the election.
Whenever any corporate action, other than the election of
directors, is to be taken by vote of the shareholders, it shall,
except as otherwise required by law, be authorized by a majority
of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote thereon.
Whenever shareholders are required or permitted to take any
action by vote, such action may be taken without a meeting or
written consent, setting forth the action so taken, signed by the
holders of all outstanding shares entitled to vote thereon.
Written consent thus given by the holders of all outstanding
shares entitled to vote shall have the same effect as a
unanimous vote of shareholders.
SECTION 12. Fixing Record Date. For the purpose of
determining the share-
-8-
<PAGE> 13
holders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to
or dissent from any proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment
of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in
advance, a date as the record date for any such determination of
shareholders. Such date shall not be more than fifty not less
than ten days before the date of such meeting, nor more than
fifty days prior to any other action.
When a determination of shareholders of record entitled to
notice of or to vote at any meeting of shareholders has been made
as provided in this SECTION 12, such determination shall apply to
any adjournment thereof, unless the Board of Directors fixes a
new record date for the adjourned meeting.
- 9 -
<PAGE> 14
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. Power of Board and Qualification of Directors.
The business of the Corporation shall be managed by the Board of
Directors, each of whom shall be at least eighteen years of age.
Not less than three of the directors shall be residents of the
added-- State of New York, and majority of the directors shall be
2/23/84 citizens and residents of the United States. Not less than
one-third of the directors shall be persons who are not officers
or employees of the Corporation or of any entity controlling,
controlled by, or under common control with the Corporation and
who are not beneficial owners of a controlling interest in the
voting stock of the Corporation or any such entity. A director
meeting the qualifications of the immediately preceding sentence
is hereafter referred to an a "Non-Affiliated Director".
SECTION 2. Number of Directors. The number of directors
constituting the whole Board shall not be less than thirteen nor
more than twenty-one. Within such limits, the number of
directors may be fixed from time to time by vote of a majority of
the whole Board at any regular or special meeting, except that
the first Board, as appointed in the Charter of the Corporation,
shall consist of
- 10 -
<PAGE> 15
thirteen directors. The term of any incumbent director shall not
be reduced by any decrease in the number of directors.
SECTION 3. Election any Term of Directors. At each annual
meeting of shareholders, directors shall be elected to hold
added-- office until the next annual meeting and until their successors
2/23/84 have been elected and qualified. No election of directors shall
be valid unless a copy of the notice of election shall have been
filed in the Office of the Superintendent of New York at least
ten days before the election. A majority or more of the
added-- directors may elect from among their number a Chairman and a Vice
2/24/72 Chairman of the Board to carry out such duties as the Board may
from time to time assign.
SECTION 4. Quorum of the Board; Action by the Board. The
presence of a majority or more of the directors constituting the
entire Board of Directors, at least one of whom shall be a
added-- Non-Affiliated Director, shall constitute a quorum for the
2/23/84 transaction of business, and the vote of a majority of the
directors present at the time of such vote, if a quorum is then
present, shall be the act of the Board.
Whenever the Board of Directors is required or permitted to
added-- take any action by vote, such action may be taken without a
2/23/84 meeting or written
- 11 -
<PAGE> 16
consent, setting forth the action so taken, signed by all of the
directors of the Corporation. Written consent thus given shall
have the same effect as a unanimous vote of the Board of
Directors. However, no action without a meeting shall be
initiated unless, in the opinion of the Chairman of the Board,
time is of the essence and no meeting has been prearranged, or,
where a meeting has been prearranged, an emergency of any kind
arises which in his opinion will prevent, impede or delay the
meeting.
SECTION 5. Meetings of the Board. An annual meeting of the
Board of Directors shall be held in each year directly after
adjournment of the annual shareholders' meeting. Regular meetings
of the Board shall be held at such times as may from time to time
be fixed by resolution of the Board. Special meetings of the
added-- Board may be held at any time upon the call of the Chairman or
2/23/84 any two directors.
Unless otherwise restricted by the Certificate of
added-- Incorporation or these By-Laws, members of the Board of Directors
2/23/84 may participate in a meeting of the Board by means of conference
telephone or similar communications equipment by means of which
all persons participating in such meeting can hear each other,
and participation in a meeting pursuant to this paragraph shall
constitute presence in person at such meeting.
- 12 -
<PAGE> 17
The Chairman or, in his absence, the Vice Chairman, shall
preside at all meetings of the Board of Directors, provided that
if a Chairman or a Vice Chairman is elected but is absent or
unable to preside at meeting of the Board, or if no Chairman or
Vice Chairman is elected, the President shall preside at such
meetings.
Meetings of the Board of Directors shall be held at such
place, within or without the State of New York, as from time to
time may be fixed by resolution of the Board for annual and
regular meetings and in the notice of meeting for special
meetings. If no place is so fixed, meetings of the Board shall
be held at the office of the Corporation in Scarsdale, New York.
No notice need be given of annual or regular meetings of the
Board of Directors. Notice of each special meeting of the Board
shall be given to each director by mail at least 48 hours before
the time of the meeting or by delivery personally in writing by
means of electronic transmission or by telephone at least 12
hours before the time of the meeting.
Notice of a meeting of the Board of Directors need not be
given to any director who submits a signed waiver of notice
whether before or after the meeting, or who attends
- 13 -
<PAGE> 18
the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him.
A notice, or waiver of notice, need not specify the purpose
of any meeting of the Board of Directors.
A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place.
Notice of any adjournment of a meeting to another time or place
shall be given, in the manner described above, to the directors
who were not present at the time of the adjournment and, unless
such time and place are announced at the meeting, to the other
directors.
SECTION 6. Resignations. Any director of the Corporation
may resign at any time by giving written notice to the Board of
Directors or to the President or to the Secretary of the
Corporation. Such resignation shall take effect at the time
specified therein; and unless otherwise specified therein the
acceptance of such resignation shall not be necessary to make it
effective.
SECTION 7. Removal of Directors. Any or all of the
directors may be
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removed for cause by action of the Board of Directors. Any or
all of the directors may be removed with or without cause by vote
of the shareholders.
SECTION 8. Newly Created Directorship and Vacancies.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the Board of
Directors for any reason except the removal of directors by
shareholders without cause may be filled by vote of a majority of
the directors then in office, although less than a quorum exists.
Vacancies occurring as a result of the removal of directors by
shareholders without cause shall be filled by the shareholders.
A director elected to fill a vacancy shall be elected to hold
office for the unexpired term of his predecessor.
SECTION 9. Compensation of Directors. The Board of
Directors shall have authority to fix the compensation of
directors for services in any capacity.
SECTION 10. Idemnification
A. (1) The Corporation shall indemnify any person,
made, or threatened to be made, a party to an action or
proceeding other than one by or in the right of the Corporation
to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation
of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise,
which any director, officer or employee of the Corporation served
in any capacity at the request of the Corporation, by reason of
the fact that he, his testator or intestate, was a
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<PAGE> 20
director, officer or employee of the Corporation or served such
other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable
expenses, including attorney's fees actually and necessarily
incurred as a result of such action or proceeding, or any appeal
therein, if such director, officer or employee acted, in good
faith, for a purpose which he reasonably believed to be in, or,
in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other
enterprise, not opposed to, the best interests of the Corporation
and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
(2) The termination of any such civil or criminal
action or proceeding by judgment, settlement, conviction or upon
a plea of nolo contendere, or its equivalent, shall not in itself
create a presumption that any such director, officer or employee
did not act, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best
interests of the Corporation or that he had reasonable cause to
believe that his conduct was unlawful.
(3) The Corporation shall indemnify any person
made, or threatened to be made, a party to an action by or in the
right of the Corporation to procure a judgment in its favor by
reason of the fact that he, his testator or intestate, is or
- 16 -
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was a director, officer or employee of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer or employee of any other corporation of any type or kind,
domestic or foreign, of any partnership, joint venture, trust,
employee benefit plan or other enterprise, against amounts paid
in settlement and reasonable expenses, including attorneys' fees,
actually and necessarily incurred by him in connection with the
defense or settlement of such action, or in connection with an
appeal therein if such director or officer acted, in good faith,
for a purpose which he reasonably believed to be in, or, in the
case of service for any other corporation or other partnership,
joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the Corporation, except
that no indemnification under this paragraph (3) shall be made in
respect of (a) a threatened action, or a pending action which is
settled or otherwise disposed of, or (b) any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the Corporation, unless and only to the extent that the
court in which the action was brought, or, if no action was
brought, any court of competent jurisdiction, determines upon
application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for
such portion of the settlement amount and expenses as the court
deems proper.
(4) For the purpose of this Subsection A, the
Corporation shall be deemed to have requested a person to serve
an employee benefit plan where the performance by such person of
his duties to the Corporation also imposes duties on, or
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otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a
person with respect to an employee benefit plan pursuant to applicable
law shall be considered fines; and action taken or omitted by a person
with respect to an employee benefit plan in the performance of such
person's duties for a purpose reasonably believed by such person to
be in the interest of the participants and beneficiaries of the plan
shall be deemed to be for a purpose which is not opposed to the best
interests of the Corporation.
B. (1) A person who has been successful, on the merits or
otherwise, in the defense of a civil or criminal action or proceeding
of the character described in Subsection A of this Section 10 shall be
entitled to indemnification as authorized in such Subsection,
(2) Except as provided in paragraph (1) of this Subsection B,
any indemnification under Subsection B, any indemnification under
Subsection A of this Section 10 or under Subsection C of this Section
10, unless ordered by a court under Section 724 of the New York
Busines Corporation Law, shall be made by the Corporation, only if
authorized in the specific case;
(a) By the Board of Directors acting by a quorum consisting of
directors who are not parties to such action or proceeding upon a
finding that the director, officer or employee has met the
standard of conduct set forth in Subsection A of this Section 10
or the director had met the standard of conduct set forth in
Subsection C of this Section 10, as the case may be, or,
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<PAGE> 23
(b) If a quorum under subparagraph (a) of this paragraph (2) is not
obtainable or, even if obtainable, a quorum of disinterested directors so
directors;
(x) By the Board of Directors upon the opinion in writing of
indepenent legal counsel that indemnification is proper in the
circumstances because the applicable standard of conduct set forth in such
Subsection A or in such Subsection C has been met by such director, officer
or employee or has been met by such director, as the case may be; or
(y) By the shareholder upon a finding that the director, officer or
employee has met the applicable standard of conduct set forth in such
Subsection A, or the director has met the standard set forth in such
Subsection C, as the case may be.
(3) Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the Corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by
or on behalf of such director, officer or employee to repay such amount as,
and to the extent, required by paragraph (a) of Section 725 of the New York
Business Corporation Law.
C. (1) In addition to and without limiting the generality of Subsections A
and B of this Section 10, the Corporation shall indemnify each director and
each person whose testator or intestate was a director made or threatened to be
made a
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<PAGE> 24
party to any action or proceeding, including an action or proceeding by or in
the right of the Corporation by reason of the fact that he is or was a director
or that his testator or intestate was a director, against judgments, fines,
amounts paid in settlement, and resonable expenses, including attorneys' fees
actually and necessarily incurred by him in connection with the defense or
settlement of such action or proceeding unless the judgment or other final
adjudication adverse to the director or to the person whose testator or
intestate was a director in such action or proceeding establishes that the
director's acts were committed in bad faith or were the result of active and
deliberate dishonesty and were material to the cause of action so adjudicated,
so that director personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
(2) The Corporation may from time to time during the course of any
action or proceeding advance the reasonable expenses, including attorneys' fees
actually and necessarily incurred in connection with such action or proceeding
to any person who would, at the conclusion of such action or proceeding be
entitled to indemnification pursuant to paragraph (1) of this Subsection C on
such terms and conditions as a quorum of disinterested directors or, in the
absence of such quorum, the shareholder conditions, the quorum of disinterested
directors or the shareholder, as the case may be, shall make such provision as
it deems appropriate for the repayment of the amounts advanced by the
Corporation in the event the judgment or other final adjudication adverse to
the director or the person
- 20 -
<PAGE> 25
whose testator or intestate was a director establishes that the director does
not meet the standard set forth in paragraph (1) of this Subsection C.
D. If any expenses or other amounts are paid by way of
indemnification, otherwise than by court order or action by the shareholders,
the Corporation shall, not later than the next annual meeting of shareholders
unless such meeting is held within three months from the date of such payment,
and in any event, within fifteen months of the date of such payment, mail to
its shareholders of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
E. The Corporation shall have the power, in furtherance of the
provisions of this Section 10, to purchase and maintain insurance of such
type and in such amounts as is or may hereinafter be permitted by the Business
Corporation Law.
- 20a -
<PAGE> 26
ARTICLE III
COMMITTEES
SECTION 1. Executive Committee. The Board of Directors, by
resolution passed by a majority of the whole Board, may designate
added-- from among its members an Executive Committee consisting of five
2/23/84 or more directors, such number of directors being determined from
time to time by the Board of Directors. At least one-third of
the members of the Executive Committee shall be Non-Affiliated
added-- Directors. The Board of Directors may designate one of the
2/24/ members of the Executive Committee to serve as the chairman of
the Executive Committee, and the chairman shall preside at
meetings of the Executive Committee, coordinate the activities
of the Executive Committee and carry out such other duties as may
added-- be assigned to him by the Board of Directors. The Board of
2/22/73 Directors may designate one or more directors as alternate
members of the Executive Committee, who may upon the request of
the Chairman of the Executive Committee or in his absence, the
Chairman of the Board of Directors, replace any absent member or
added-- members at any meeting thereof. A quorum shall consist of a
2/23/84 majority of its members, at least one of whom shall be a
Non-Affiliated Director. The Executive Committee shall have and
may exercise, between
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<PAGE> 27
meeting of the Board of Directors, all powers of the
Board of Directors in the management of the business
and affairs of the Corporation; except that the
Executive Committee shall not have and may not
exercise the following powers:
(1) To submit to the shareholders
any action which any applicable statute
requires to be approved by a vote of the
shareholders;
added-- (2) To fill any vacancy in the
2/23/84 Board of Directors or in any committee;
(3) To fix the compensation of any
director for serving on the Board of
Directors or on any committee;
(4) To amend or repeal these
by-laws, or to adopt new by-laws;
(5) To amend or repeal any
resolution of the Board of Directors which by
its terms provides that it shall not be so
amendable or repealable;
(6) To exercise such powers as may
be conferred exclusively by the Board of
amended-- Directors upon another committee.
2/23/84
SECTION 2. Investment Committee. The
Board of Directors, by resolution passed by a
majority of the whole
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<PAGE> 28
Board, may designate from among its members an
Investment Committee consisting of five or more
directors, such number of directors being determined
from time to time by the Board of Directors. At
added-- least one-third of the members of the Investment
2/23/94 Committee shall be Non-Affiliated Directors. The
Board of Directors may designate one of the members
of the Investment Committee to serve as the chairman
of the Investment Committee, and the chairman shall
preside at meetings of the Investment Committee,
coordinate the activities of the Investment
added-- Committee and carry out such other duties as may be
2/24/72 assigned to him by the Board of Directors. The
Board of Directors may designate one or more
directors as alternate members of the Investment
Committee, who may upon the request of the chairman
of the Investment Committee or, in his absence, the
added-- chairman of the Board of Directors, replace any
2/22/73 absent member or members at any meeting thereof.
The Investment Committee shall, to the extent
empowered by the Board, have and possess all of the
rights and powers of the Board of Directors, between
meetings of the Board of Directors, to make,
supervise and control the investments and loans of
the Corporation, inclusive of all real and personal
property acquired by virtue of or incidental to any
investment, to sell, assign, exchange, lease or
otherwise dispose of such investments and property,
and to do and perform all things deemed necessary
and proper in relation to such investments
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<PAGE> 29
and property. The Investment Committee shall not
have and may not exercise any of the powers referred
to in clauses (1) - (6), inclusive, of SECTION 1 of
this ARTICLE III. The Investment Committee shall
serve at the pleasure of the Board of Directors.
The Investment Committee shall keep a record of its
proceedings and shall adopt its own rules of
procedure, except that a quorum shall consist of a
majority of its members, at least one of whom shall
be a Non-Affiliated Director. The Investment
Committee shall submit a report of its activities to
the Board of Directors at the next meeting of the
Board of Directors.
SECTION 3. Audit and Nominating Committee. The
Board of Directors, by resolution passed by a
majority of the whole Board, shall designate an
Added Audit and Nominating Committee consisting of five or
28/11/84 more directors, such number of directors being
determined from time to time by the Board of
Directors. The Audit and Nominating Committee shall
consist solely of Non-Affiliated Directors. The
Board of Directors may designate one of the members
of the Audit and Nominating Committee to serve as
the Chairman of the Audit and Nominating Committee
coordinate the activities of the Audit and
Nominating Committee and carry out such other duties
as may be assigned by him by the Board of Directors.
The Board of Directors may designate one or more
directors as alternate members of the Audit and
Nominating Committee, who may replace any absent
members or members at any meeting thereof.
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<PAGE> 30
provided that such alternate members shall also be
Non-Affiliated Directors. The Audit and Nominating
Committee shall have responsibility for recommending
the selection of independent certified public
accountants and for reviewing the Corporation's
financial condition, the scope and results of the
independent audit and any internal audit. The Audit
and Nominating Committee shall, to the extent
empowered by the Board, have and possess all of the
rights and powers of the Board of Directors, to meet
and discuss with the representatives of any firm of
certified public accountants retained by the
Corporation, at any time and from time to time,
whether before and/or after the preparation of the
year-end financial statements of the Corporation,
the scope of the audit of such firm with respect to
any year, and to question such representatives with
respect thereof. In addition, the Audit and
Nominating Committee shall have the authority to
meet with and question officers and employees of the
Corporation with respect to financial matters
pertaining to the Corporation.
The Audit and Nominating Committee shall have
responsibility for nominating candidates for
director for election by shareholders, and
evaluating the performance of officers who, pursuant
to Section 1, Article IV of these by-laws, are
principal officers of the Corporation and
recommending to the Board of Directors the selection
and compensation of such principal officers.
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<PAGE> 31
The Audit and Nominating Committee shall, to the extent empowered by
the Board have and possess all of the rights and powers of the Board of
Directors, between meetings of the Board of Directors, to carry out its duties
hereunder. The Audit and Nominating Committee shall not have and may not
exercise any of the powers referred to in clauses (1) through (6), inclusive,
of Section 1 of this Article III. The Audit and Nominating Committee shall
serve at the pleasure of the Board of Directors. The Audit and Nominating
Committee shall keep a record of its proceedings and shall adopt its own rules
of procedure, except that a quorum shall consist of a majority of its members.
The Audit and Nominating Committee shall submit a report of its activities to
the Board of Directors at the next meeting of the Board of Directors.
SECTION 4. Other Committees. The Board of Directors may appoint such
other committees, which may include as members directors only or directors and
non-directors, as the Board may from time to time consider desirable, and such
committees shall have such powers and duties as the Board may properly
determine; provided however, that the powers and duties of any such committee
whose members shall include non-directors shall be limited to making
recommendations to the Board of Directors. The Board of Directors may
designate one of the members of any such committee to serve as chairman of such
committee, and the chairman shall preside at meetings of such committee,
coordinate
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<PAGE> 32
the activities of such committee and carry out such other duties as may be
assigned to him by the Board of Directors.
At least one-third of the directors of each committee composed of
directors of the Corporation shall be Non-Affiliated Directors. The majority
of the members of a committee, at least one of whom shall be a Non-Affiliated
Director, shall constitute a quorum for the transaction of committee business,
and the act of a majority of the members present at which there is a quorum
shall be the act of the committee.
SECTION 5. Term of Members of Committees. Any Committee appointed
pursuant to this Article shall serve at the pleasure of the Board, which shall
have power at any time to change the membership of such committee, to fill
vacancies in it or to dissolve it; but, subject to such change or dissolution,
members of a committee shall hold office until the first meeting of the Board
of Directors following the annual shareholders' meeting next succeeding their
appointment and until their successors are appointed.
SECTION 6. Meetings of Committees. Meetings of a committee shall be
held at such place, within or without the State of New York, as may from time
to time be determined by the Board of Directors or such committee, and no
notice of such regular meetings
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<PAGE> 33
shall be required. Special meetings of any committee may be called by the
chairman of such committee or by the Chairman of the Board, the President or
the Secretary of the Corporation and shall be called by the Secretary on the
written request of any two members of any such committee. Notice of a special
meeting of any committee shall be given to each member thereof by mail at least
48 hours before the time of the meeting or by delivery personally or in writing
by means of electronic transmission or by telephone at least 12 hours before
the time of the meeting.
SECTION 7. Committee Action without Meeting. Any action required or
permitted to be taken by a Committee may be taken without a meeting of such
Committee if all members of the Committee consent in writing to the adoption
of a resolution or resolutions permitting the action; provided, however, that
no action without a meeting shall be initiated unless, in the opinion of the
Chairman of that Committee, time is of the essence and no meeting has been
prearranged, or, where a meeting has been prearranged, an emergency of any kind
arises which in his opinion will prevent, impede or delay the meeting. The
resolution or resolutions and the written consent thereto by the members of the
Committee shall be filed with the minutes of the proceedings of the Committee.
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ARTICLE IV
OFFICERS
SECTION 1. Officers. The Board of Directors, as soon as may be
practicable after the annual election of directors, shall elect or appoint a
President and a Secretary, provided, however, that the Board may at any time
elect or appoint one or more Vice Presidents and a Treasurer, and from time to
time may elect or appoint such other officers, agents and employees as it may
determine. Any two or more offices may be held by the same person, except the
offices of President and Secretary. Any officer of the Corporation (other than
an officer whose title includes the word "Assistant") whose compensation is
paid by the Corporation shall be a principal officer of the Corporation for the
purposes of Section 3 of ARTICLE III of these By-laws.
SECTION 2. Term of Office and Removal. Each officer shall hold office
for the term for which he is elected or appointed, and until his successor has
been elected or appointed and qualified. Unless otherwise provided in the
resolution of the Board of Directors electing or appointing an officer, the
term of office of each officer shall extend to and expire at the meeting of the
Board following the next annual meeting of shareholders. Any officer may be
removed by the
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Board, with or without cause, at any time. Removal of an officer without cause
shall be without prejudice to his contract rights, if any, but his election or
appointment as an officer shall not of itself create contract rights.
SECTION 3. Powers and Duties. The officers, agents and employees of
the Corporation shall each have such powers and authority and perform such
duties in the management of the property and affairs of the Corporation as from
time to time may be prescribed by the Board of Directors and, to the extent not
so prescribed, they shall each have such powers and authority and perform such
duties in the management of the property and affairs of the Corporation,
subject to the control of the Board of Directors, as generally pertain to
their respective offices. Securities of other corporations held by the
Corporation may be voted by any officer designated by the Board of Directors
and, in the absence of any such designation, by the President, and Vice
President, the Secretary or the Treasurer. The Board may require any officer,
agent or employee to give security for the faithful performance of his duties.
SECTION 4. Books to be Kept. The Corporation shall keep (a) correct
and complete books and records of account, (b) minutes of the proceedings of
the shareholders and of the Board
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of Directors, and (c) a current list of the directors and officers and their
residence addresses; and the Corporation shall also keep at its office in the
State of New York or at the office of its transfer agent or registrar in the
State of New York, if any, a record containing the names and addresses of all
shareholders, the number of shares held by each and the dates when they
respectively became the owners of record thereof.
The Board of Directors from time to time shall determine whether and to
what extent and at what times and places and under what conditions and
regulations any accounts, books, records or other documents of the Corporation
shall be open to inspection, and no creditor or security holder or other person
shall have any right to inspect any accounts, books, records or other documents
of the Corporation except as conferred by statute, or as authorized by the
Board.
SECTION 5. Checks, Notes, Etc. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes and
all acceptances, obligations and other instruments, for the payment of money,
shall be signed on behalf of the Corporation by such officer or officers or
agent or agents as shall be thereunto authorized from time to time by the Board
of Directors.
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<PAGE> 37
SECTION 6. Compensation of Officers. Officers shall receive such
salaries as may be fixed from time to time by the Board of Directors.
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<PAGE> 38
ARTICLE V
FORM OF CERTIFICATES
AND LOSS AND TRANSFER
OF SHARES
SECTION 1. Form of Share Certificates. The shares of the Corporation
shall be represented by certificates, in such form as the Board of Directors
may from time to time prescribe, signed by the President or a Vice President
and the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof. The signatures of the officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar other than the Corporation or its employee. In case any officer who
has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer at
the date of issue.
Each certificate representing shares issued by the Corporation shall
set forth upon the face or back of the certificate, or shall state that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of the designation, relative rights, preferences and limitations
of the shares of each class
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<PAGE> 39
of shares authorized to be issued.
Each certificate representing shares shall state upon the face thereof:
(1) That the Corporation is formed under the laws of the State of
New York.
(2) The name of the person or persons to whom issued.
(3) The number and class of shares which such certificate
represents.
(4) The par value of each share represented by such certificate, or
a statement that the shares are without par value.
Section 2. Transfer of Shares. Shares of the Corporation shall be
transferable on the books of the Corporation by the registered holder thereof
in person or by his duly authorized attorney, by delivery for cancellation of a
certificate or certificates for the same number of shares, with proper
indorsement consisting of either a written assignment of the certificate or a
power of attorney to sell, assign or transfer the same or the shares
represented thereby, signed by the person appearing by the certificate to be
the owner of the shares represented thereby, either written thereon or
attached thereto, with such proof of the authenticity of the signature as the
Corporation or its agents may reasonable require. Such indorsement may be
either in blank or to a specified person, and shall have
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<PAGE> 40
affixed thereto all stock transfer stamps required by law.
SECTION 3. Lost, Stolen or Destroyed Share Certificates. No
certificate or certificates for shares of the Corporation shall be issued in
place of any certificate alleged to have been lost, stolen or destroyed, except
upon production of such evidence of the loss, theft or destruction, and upon
such indemnification and payment of costs of the Corporation and its agents to
such extent and in such manner as the Board of Directors may from time to time
prescribe.
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<PAGE> 41
ARTICLE VI
OTHER MATTERS
SECTION 1. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation and such other appropriate legend as the
Board of Directors may from time to time determine. In lieu of the corporate
seal, when so authorized by the Board, a facsimile thereof may be affixed or
impressed or reproduced in any other manner.
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall be
the calendar year, or shall be such other period as may from time to time be
prescribed by the Board of Directors.
SECTION 3. Amendments. By-Laws of the Corporation may be amended,
repealed or adopted by vote of the holders of the shares at the time entitled
to vote in the election of any directors. By-Laws may also be amended,
repealed, or adopted by the Board of Directors, but any by-law adopted by the
Board may be amended or repealed by the shareholders entitled to vote thereon
as hereinabove provided.
If any by-law regulating an impending election of directors is adopted,
amended or repealed by the Board of Directors, there shall be set forth in the
notice of the next meeting of shareholders for the election of directors the
by-law so adopted, amended or repealed, together with a concise statement of
the changes
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<PAGE> 42
made.
SECTION 4. Dividends. Dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting; provided, however, that the Corporation shall not distribute any
dividend to its stockholders unless a notice of its intention to declare such
dividend and the amount thereof shall have been filed with the Superintendent
of Insurance of the State of New York not less than thirty days in advance of
such proposed declaration, nor if the Superintendent of Insurance of the State
of New York within thirty days after such filing gives written notice to the
Corporation of his disapproval of such distribution, on the ground that he
finds that the financial condition of the Corporation does not warrant the
distribution of such dividend. Dividends may be paid out of any funds legally
available therefor in cash, in property, or in shares of the capital stock of
the Corporation. Before payment of any dividend or the distribution of any
profits there may be set aside out of the net profits of the Corporation such
sum or sums as the Board of Directors from time to time, in its absolute
discretion, thinks proper as a reserve fund for such purpose as the Board shall
think conducive to the interest of the Corporation.
SECTION 5. Registered Shareholders. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
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<PAGE> 43
other claim to, or interest in, such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of New York.
SECTION 6. Execution of Documents under Seal. All documents not
relating to transactions involving real property to which the seal of the
Corporation is attached shall be signed by (1) any two of the Chairman, Vice
Chairman, President, a Vice-President who is a Director or any Director or
officer designated by the Board for that purpose; or by any one of such
persons, and (2) any Vice-President who is not a Director or such other officer
as may be designated by the Board from time to time for that purpose. Any
document relating to transactions involving real property to which the seal of
the Corporation is attached may be signed by any two of such officers as may be
designated by the Board from time to time for that purpose.
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<PAGE> 1
Exhibit 6 (c)
Amendment to the By-Laws of Canada Life Insurance Company of New York
passed by the Board on November 19, 1993
<PAGE> 2
[LANE & MITTENDORF LETTERHEAD]
December 27, 1994
David A. Hopkins, Esq.
The Canada Life Assurance Company
6201 Powers Ferry Road, N.W.
Suite 600
Atlanta, Georgia 30339
Re: Amendment to Declaration of Intention
and Charter of Canada Life Insurance
Company of New York
-------------------------------------
Dear Mr. Hopkins:
I enclose herewith for your records a copy of the Certificate of
Amendment of Declaration of Intention and Charter of Canada Life Insurance
Company of New York (the "Certificate of Amendment") as certified by the
Westchester County Clerk. The Certificate of Amendment was approved by the New
York State Insurance Department on December 7, 1994, and filed with Westchester
County on December 21, 1994.
For the completeness of your file, I have also enclosed a copy of the
Insurance Department's letter of December 15, 1994, and a copy of my letter
today advising the Insurance Department of the filing with Westchester County.
Very truly yours,
/s/ Owen M. Colligan
Owen M. Colligan
OMC:mg
Enclosure
<PAGE> 3
SHORT CERTIFICATE
STATE OF NEW YORK
INSURANCE DEPARTMENT
SALVATORE R. CURIALE
SUPERINTENDENT OF INSURANCE
It is hereby certified that the annexed copy of Certificate of Amendment of the
Declaration of Intention and Charter of CANADA LIFE INSURANCE COMPANY OF NEW
YORK, of Harrison, New York, to amend Article Sixth regarding the Board of
Directors, as approved by this Department December 7, 1994 pursuant to Section
1206 of the New York Insurance Law,
HAS BEEN COMPARED WITH THE ORIGINAL ON FILE IN THIS DEPARTMENT AND THAT IT IS A
CORRECT TRANSCRIPT THEREFROM AND OF THE WHOLE OF SAID ORIGINAL.
[OFFICIAL SEAL] IN WITNESS WHEREOF, I have hereunto
set my hand and affixed the official
seal of this Department
at the City of Albany,
this 7th day of December, 1994.
/a/ Robert A. Ginnelly
Special
DEPUTY SUPERINTENDENT OF INSURANCE
[OFFICIAL DATE STAMP] [COUNTY CLERK STAMP]
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
DECLARATION OF INTENTION
AND
CHARTER
OF
CANADA LIFE INSURANCE COMPANY
OF NEW YORK
UNDER SECTION 1206 OF ARTICLE 12 OF
THE INSURANCE LAW OF THE STATE OF NEW YORK
------------------------------------------
Filed by:
Lane & Mittendorf
99 Park Avenue
New York, New York 10016
<PAGE> 5
CERTIFICATE OF AMENDMENT
OF
DECLARATION OF INTENTION
AND
CHARTER
OF
CANADA LIFE INSURANCE COMPANY
OF NEW YORK
UNDER SECTION 1206 OF ARTICLE 12 OF
THE INSURANCE LAW OF THE STATE OF NEW YORK
------------------------------------------
THE UNDERSIGNED, being the President and Secretary of Canada Life
Insurance Company of New York, a New York corporation (the "Corporation"), do
hereby certify and set forth:
FIRST: The name of the Corporation is Canada Life Insurance
Company of New York.
SECOND: The Declaration of Intention and Charter of the Corporation
was filed by the Department of Insurance of the State of New York on June 7,
1971.
THIRD: The Declaration of Intention and Charter of the Corporation
is hereby amended, pursuant to Section 1206 of Article 12 of the Insurance Law
of the State of New York, in the following respect:
Article SIXTH of the Declaration of Intention and Charter of the
Corporation, which presently provides, inter alia, that the Board of
Directors of the Corporation shall consist of the number of directors as
may from time to time be determined in accordance with the By-Laws of the
Corporation, but shall not be less than thirteen nor more than twenty-one
in number, is hereby amended by deleting
<PAGE> 6
Article SIXTH in its entirety and substituting therefor a new Article
SIXTH in the following form:
"SIXTH: The Board of Directors of the Corporation shall consist of
the number of Directors as may from time to time be determined in
accordance with the By-Laws of the Corporation, but shall not be less
than thirteen nor more than twenty-one in number; provided, however, that
if the Corporation has admitted assets of less than $500,000,000, the
Corporation may have not less than nine directors of which at least four
must not be officers or employees of the Corporation or any entity
controlling, controlled by, or under common control with the Corporation
and who are not beneficial owners of a controlling interest in the voting
stock of the Corporation or any such entity; provided, further, however,
that, in the event that the Corporation has admitted assets of less than
$500,000,000 and fewer than thirteen, but at least nine, directors, the
number of directors of the Corporation shall be increased to not fewer
than thirteen within one year following the end of the calendar year in
which the Corporation exceeded $500,000,000 in admitted assets. Each
Director shall be at least eighteen years of age, and at all times a
majority of the Directors shall be citizens and residents of the United
States and not less than three of the Directors shall be residents of the
State of New York. The Directors shall not be required to hold any
shares of stock of the Corporation. In the event that the number of
Directors duly elected and serving shall be less than nine, or thirteen,
if required, the Corporation shall not for that reason be dissolved, but
the vacancy or vacancies shall be filled as hereinafter provided. The
Directors shall be elected at each annual meeting of stockholders by the
majority vote of those present and voting, a quorum being present, and
each Director so elected shall hold office until a successor is duly
elected and qualified. If any vacancy shall occur in the Board of
Directors by death, resignation, removal or otherwise, the remaining
members of the Board of Directors at a meeting called for that purpose on
such notice as may be provided for in the By-Laws of the Corporation, or
at any regular meeting, may elect a Director or Directors to fill the
vacancy or vacancies and each Director so elected shall hold office until
the next annual meeting of stockholders and until a successor has been
duly elected and qualified."
-2-
<PAGE> 7
FOURTH: The amendment to the Declaration of Intention and Charter
of the Corporation set forth in this Certificate of Amendment has been duly
adopted in accordance with the applicable provisions of Section 803 of the
Business Corporation Law of the State of New York by vote of the Board of
Directors followed by the affirmative vote of the holder of all of the
outstanding shares of stock of the Corporation at a meeting of shareholders duly
called and held on the 24th day of February, 1994.
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 27th day of October, 1994, and affirm, under the penalties of
perjury, that the statements made herein are true and correct.
/s/ D. Allen Loney
------------------------------------
D. Allen Loney, President
/s/ David A. Hopkins
-----------------------------------
David A. Hopkins, Secretary
-3-
<PAGE> 1
Exhibit 8 (a)(a)
Participation Agreement Between Canada Life Series Fund
and
Canada Life of New York
<PAGE> 2
PARTICIPATION AGREEMENT
THIS AGREEMENT, is hereby entered into on this ____ day of ____, 1989,
between Canada Life Insurance Company of New York ("CLNY"), a life insurance
company organized under the laws of the State of New York, for itself and on
behalf of its Variable Annuity Account 1 ("Separate Account"), a separate
account established by CLNY in accordance with the laws of the State of New
York; and the Canada Life of America Series Fund, Inc. ("Fund"), an open-end
management investment company organized under the laws of the State of Maryland.
WITNESSETH:
WHEREAS, the Separate Account has been established by CLYN pursuant to
the New York Insurance Law in connection with certain variable annuity policies
("Policies") proposed to be issued to the public by CLNY; and
WHEREAS, the Separate Account has been registered as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, the income, gains and losses, whether or not realized, from
assets allocated to the Separate Account are, in accordance with the applicable
Policies, to be credited to or charged against such Separate Account without
regard to other income, gains or losses of CLNY; and
WHEREAS, the Separate Account is subdivided into various sub-accounts
("Sub-accounts") under which income, gains and losses, whether or not realized,
from assets allocated to each such Sub-account are, in accordance with the
applicable Policies, to be credited to or charged against such Sub-accounts
without regard to other income, gain or losses of other sub-accounts or of
CLNY; and
WHEREAS, the Fund is registered as an open-end management investment
company organized under the laws of the State of Maryland and will operate in
accordance with the 1940 Act; and
WHEREAS, the Fund is divided into various series ("Series"), each
Series being subject to certain fundamental investment policies and
restrictions which may not be changed without a majority vote of the
shareholders of such Series; and
<PAGE> 3
WHEREAS, certain Series will serve as the underlying investment medium
for certain Sub-accounts; and
WHEREAS, Canada Life of America Financial Series, Inc., the principal
underwriter for the Policies to be funded by the Separate Account, is a
broker-dealer registered as such under the Securities Exchange Act of 1934;
NOW THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, CLNY, the Separate Account, and the Fund hereby agree as follows:
1. The Policies funded through the Separate Account will provide
for the allocation of premium payments among certain Sub-accounts for
investment in such shares of the Series as may be offered from time to time in
the prospectus of the Policies. The selection of the particular Sub-account is
to be made by the Policy owner and such selection may be changed or the policy
value may be transferred among Sub-accounts in accordance with the terms of the
Policies.
2. No representation is made as to the number or amount of such
Policies to be sold; however, CLNY, through Canada Life of America Financial
Services, Inc., will make reasonable efforts to market such Policies.
3. The Fund agrees to sell to CLNY those shares of the Fund which
the Separate Accounts orders, expecting such orders on a daily basis at the new
asset value next computed after receipt by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section, CLNY (or its
designated agent) shall be the designee of the Fund for receipt of such orders
from Policy owners and receipt by such designee shall constitute receipt by the
Fund; provided that the Fund receives notice of such order by 9:30 a.m. New
York time on the next following Business Day. "Business Day" shall mean any
day on which the New York Stock Exchange is open for trading and on which the
Fund calculates its new asset value pursuant to the rules of the Securities and
Exchange Commission.
The Fund agrees to make Fund shares available indefinitely for purchase
at the applicable new asset value per share by CLNY and the Separate Account on
those days on which the Fund calculates its new asset value pursuant to rules
of the Securities and Exchange Commission and the Fund shall use reasonable
efforts to calculate such new asset value on each day which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the Board of
Directors of the Fund (hereinafter the "Directors") may refuse to sell shares
of any Series to CLNY, or suspend or terminate the offering of share of any
- 2 -
<PAGE> 4
Series if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Directors acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary in the best interests of the shareholders of such series.
CLNY shall pay for the Fund shares on the next Business Day after an
order to purchase shares is made in accordance with the provisions of this
Section. Payment shall be in federal funds transmitted by wire or by a credit
for any shares redeemed.
4. The Fund agrees to redeem for cash, on CLNY's request, any full
or fractional shares of the Fund held by CLNY, executing such requests on a
daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section, CLNY
(or its designated agent) shall be the designee of the Fund for receipt of
requests for redemption from Policy owners and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption by 9:30 a.m. New York time on the next following
Business Day.
The Fund ordinarily shall make payment to CLNY for shares on the day
the Fund receives notice from CLNY, but the Fund may delay payment for up to
seven calendar days after the request is received. Payment be in federal funds
transmitted by wire.
5. Transfer of Series shares will be by book entry. No stock
certificates will be issued to the Separate Account unless the Separate Account
so requests. Shares of each Series will be recorded in an appropriate title for
the corresponding Sub-account on the books of CLNY. If, However, state law
requires transfer other than by book entry, then the Series agrees to provide
the required form of transfer.
6. The Fund shall make the net asset value per share for each
Series available to CLNY on a daily basis as soon as reasonably practicable
after the net asset value per share is calculated and shall use its best
efforts to make such net asset value per share available by 7 p.m. New York
time.
7. The Fund shall furnish notice on the ex-dividend date to CLNY
of any dividend or distribution payable on any share underlying Sub-accounts.
All of such dividends and distributions as are payable on shares of a Series
recorded in the title for the corresponding Sub-account shall be automatically
reinvested in additional shares of that Series. The Fund shall notify CLNY of
the number of shares so issued.
8. The Fund shall pay all its expenses incidental to its
performance under this Agreement. The Fund shall see to it
- 3 -
<PAGE> 5
that all of its shares are registered and authorized for issue in accordance
with applicable federal and state laws prior to their purchase by CLNY for the
Sub-accounts. The Fund shall bear the expenses for the cost of registration of
its shares, preparation of its prospectus, proxy materials and reports, the
printing and distribution of such items to each Policy owner who has allocated
net amounts to any Sub-account, the preparation of all statements and notices
required by any federal or state law, and taxes imposed upon the fund on the
issue or transfer of the Fund's shares subject to this Agreement. The parties
shall cooperate in the printing of the prospectuses of the Policies and the
Fund. The Fund shall provide CLNY with a reasonable quantity of Fund
prospectuses and reports to be sent to existing Policy owners.
9. CLNY shall make no representations concerning the Fund or its
shares except those contained in the then-current prospectus of the Fund and in
printed information subsequently issued on behalf of the Fund and approved in
writing by the Fund as supplemental to such prospectus, or otherwise approved
by the Fund in writing.
10. The Fund represents that each Series of the Fund shall comply
with Section 817(h) of the Internal Revenue Code of 1986, and the regulations
issued thereunder (Reg. Section 1.817-5), relating to the diversification
requirements for variable annuity, endowment, and life insurance contracts, and
any amendments or other modifications to such Section or regulations.
The Fund represents that each Portfolio of the Fund is currently
qualified or will be qualified as a Regulated Investment Company under
Subchapter M of the Internal Revenue Code of 1986, as amended, (the "Code") and
that every effort will be made to maintain such qualification (under Subchapter
M or any successor or similar provision) and that the Fund will notify CLNY
orally (followed by written notice) or by wire immediately upon having a
reasonable basis for believing that any Series of the Fund has ceased to so
qualify or that any Series might not so qualify in the future.
11. It is understood among the parties to this Agreement that,
subject to obtaining any applicable regulatory approvals which may be
conditioned on the parties complying with certain requirements, shares of the
Series may be offered to separate accounts of various insurance companies in
addition to CLNY and in connection with insurance contracts or policies other
than the Policies. It is also understood among the parties that shares of the
Series only may be offered to the other persons identified in paragraph (f) of
Regulation Section 1.817-5, in order that the Separate Account can rely on the
look-through provisions of said paragraph.
-4-
<PAGE> 6
12. The Fund represents and warrants that all of its officers,
employees, investment advisers, and other individuals or entities dealing with
the money and/or securities of the Fund are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund in an amount not less than the minimal coverage as required currently
by Section 17(g) and Rule 17g-1 of the 1940 Act or related provisions as may be
promulgated from time to time. The aforesaid bond shall include coverage for
larcency and embezzlement and shall be issued by a reputable bonding company.
13. This Agreement shall terminate:
(a) at any time on six months' written notice by the Fund to CLNY or on
six months' written notice by CLNY to the Fund without the payment of any
penalty (provided, however, if CLNY is not able, acting in good faith, to
obtain suitable substitute investment media within six months, this Agreement
shall terminate one year from the date of the notice of termination); or
(b) at the option of CLNY or of the Fund upon institution of formal
enforcement proceedings against the Fund or the Fund's investment adviser by
the Securities and Exchange Commission, or if CLNY or the Fund is determined by
CLNY or the Fund to have failed to perform its obligations under this Agreement
in a satisfactory manner; or
(c) upon a vote of the holders of a majority of the shares underlying
the Policies having an interest in a particular Sub-account to substitute the
shares of another investment company for the corresponding Fund shares in
accordance with the terms of the Policies for which those shares had been
selected to serve as the underlying investment medium. CLNY will give 60 days'
prior written notice to the Fund upon the occurrence of the earlier of the
following actions taken for the purpose of substituting shares of the Fund:
(1) an application made to the SEC or (2) a proposed Policy owner vote; or
(d) in the event the shares of the Fund are not registered, issued, or
sold in accordance with applicable state and/or federal law prohibits the use
of such shares as an underlying investment for the Policies issued or to be
issued by CLNY. Prompt notice of such an event shall be given by each party to
the other in the event the conditions of this provision occur; or
(e) upon assignment of this Agreement, at the option of any party not
assigning this Agreement.
- 5 -
<PAGE> 7
14. Each notice required by this Agreement shall be given in writing
and delivered via certified mail -- return receipt requested to:
Alfred F. Kelly
Canada Life Insurance Company of New York
2 Overhill Road
Scarsdale, New York 10583
Douglas V. Rough
Canada Life of America Series Fund, Inc.
330 University Avenue
Toronto, Ontario Canada M5G 1R8
15. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby,
The Fund agrees that all records and other data pertaining to the
Policies are the exclusive property of CLNY and that any such records and other
data shall be furnished to CLNY by the Fund upon termination of this Agreement
for any reason whatsoever. CLNY shall have the right to inspect, audit and copy
all pertinent records pertaining to the Policies. This shall not preclude the
Fund from keeping copies of such data or records for its own files subject to
the provisions of this section.
16. CLNY and the Separate Account agree to look solely to the assets
of the Fund for the satisfaction of any liability of the Fund, with respect to
this Agreement and will not seek recourse against the members of the Board of
Directors of the Fund, or its officers, employees, agents, or shareholders, or
any of them, or any of their personal assets for such satisfaction.
17. The Fund agrees to indemnify and hold harmless CLNY, each member
of its Board of Directors, each of its officers, and any person that controls
CLNY within the meaning of section 15 of the Securities Act of 1933 against
any and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which CLNY may become subject under any statute, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements arise as a result of
CLNY'S reliance on any information contained in a then-current prospectus,
Statement of Additional Information, or report of the Fund; or any current
information communicated to CLNY in writing by the Fund.
- 6 -
<PAGE> 8
The Fund shall, at all times, have the right, but not the obligation,
to take over and conduct, in the name of CLNY and/or the Separate Account, the
investigation and defense of any claim by a third party for which
indemnification may be sought, and in such event, CLNY and/or the Separate
Account shall cooperate in every way with the Fund.
18. CLNY agrees to indemnify and hold harmless the Fund, each member
of its Boards of Directors, each of its officers, and each person that controls
the Fund within the meaning of the Securities Act of 1933 against any and all
losses, claims, damages, liabilites (including amount paid in settlement with
the written consent of CLNY) or litigation (including legal and other expenses)
to which the Fund may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements arise as a result of the Fund's
reliance on any information contained in the then-current prospectus, Statement
of Additional Information, or contract of the Separate Account; or any
information communicated to the Fund in writing by CLNY.
CLNY shall, at all times, have the right, but not the obligation, to
take over and conduct, in the name of the Fund, the investigation and defense
of any claim by a third party for which indemnification may be sought, and in
such event, the Fund shall cooperate in every way with CLNY and/or the Separate
Account.
19. This Agreement shall be construed in accordance with the laws of
the State of Maryland.
20. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
- 7 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested as of the date first above written.
CANADA LIFE INSURANCE
COMPANY OF NEW YORK ON
BEHALF OF ITSELF AND
VARIABLE ANNUITY ACCOUNT 1
Attest: By:
- ------------------------------ ------------------------------
- ------------------------------ ------------------------------
CANADA LIFE OF AMERICA SERIES
FUND, INC.
Attest: By:
- ------------------------------ -------------------------------
- ------------------------------ -------------------------------
<PAGE> 1
Exhibit 8(a)(b)
Participation Agreement Between Dreyfus Corporation
and
Canada Life of New York
<PAGE> 2
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the _____ day of ____,1993, between_______
("Insurance Company"), a life insurance company organized under the laws of the
______ of ______, and DREYFUS VARIABLE INVESTMENT FUND ("Fund"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts.
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, an amended.
1.2 "Board" shall mean the Board of Trustees of the Fund having the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which the Fund calculates net
asset value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity contract that uses the Fund
as an underlying investment medium. Individuals who participate under
a group Contract are "Participants".
1.6 "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company.
1.7 "Disinterested Board Members, shall mean those members of the Board
that are not deemed to be "interested persons" of the Fund, as defined
by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
including Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company), which offers variable annuity and/or variable life
insurance contracts to the public and which has entered into an
agreement with the Fund for the purpose of making Fund shares
available to serve as the underlying investment medium for the
aforesaid Contracts.
1.10 "Prospectus" shall mean the Fund's current prospectus and statement
of additional information, as most recently filed with the Commission.
<PAGE> 3
1.11 "Separate Account" shall mean ______ Variable Annuity Separate
Account, a separate account established by Insurance Company in
accordance with the laws of the ______ of _______.
1.12 "Software Program" shall mean the software program used by the Fund
for providing Fund and account balance information including net
asset value per share. Such Program may include the Lion System. In
situations where the Lion System or any other Software Program used by
the Fund is not available, such information may be provided by
telephone. The Lion System shall be provided to Insurance Company at
no charge.
1.13 Insurance Company's General Account(s)" shall mean the general
account(s) of Insurance Company and its affiliates which invest in the
Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b)
it has legally and validly established the Separate Account pursuant
to the [NAME OF STATE INSURANCE LAWS] for the purpose of offering to
the public certain individual variable annuity contracts; (c) it has
registered the Separate Account as a unit investment trust under the
Act to serve as the segregated investment account for the Contracts;
and (d) each Separate Account is eligible to invest in shares of the
Fund without such investment disqualifying the Fund as an investment
medium for insurance company separate accounts supporting variable
annuity contracts or variable life insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will
be described in a registration statement filed under the Securities
Act of 1933, as amended ("1933 Act"); (b) the Contracts will be issued
and sold in compliance in all material respects with all applicable
federal and state laws; and (c) the sale of the Contracts shall comply
in all material respects with state insurance law requirements.
Insurance Company agrees to inform the Fund promptly of any investment
restrictions imposed by state insurance law and applicable to the
Fund.
2.3 Insurance Company represents and warrants that the incomes, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the applicable Contracts, to be
credited to or charged against such Separate Account without regard to
other
-2-
<PAGE> 4
income, gains or losses from assets allocated to any other accounts of
Insurance Company. Insurance Company represents and warrants that the
assets of the Separate Account are and will be kept separate from
Insurance Company's General Account and any other separate accounts
Insurance Company may have, and will not be charged with liabilities
from any business that Insurance Company may conduct or the
liabilities of any companies affiliated with Insurance Company.
2.4 Fund represents that the Fund is registered with the Commission under
the Act as an open-end, diversified management investment company and
possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for Fund to operate and
offer its shares as an underlying investment medium for Participating
Companies. The Fund has established six series of shares (each, a
"Series") and may in the future establish other series of shares.
2.5 Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify Insurance Company
immediately upon having a reasonable basis for believing that it has
ceased to so qualify or that it might not so qualify in the future.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies or annuity contracts, whichever is appropriate,
under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify the Fund and
Dreyfus immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be
so treated in the future. Insurance Company agrees that any prospectus
offering a Contract that is a modified endowment contract, as that
term is defined in Section 7702A of the Code, will identify such
Contract as a modified endowment contract (or policy).
2.7 Fund agrees that the Fund's assets shall be managed and invested in a
manner that complies with the requirements of Section 817(h) of the
Code.
2.8 Insurance Company agrees that the Fund shall be permitted (subject to
the other terms of this Agreement) to make Series' shares available to
other Participating Companies and contractholders.
-3-
<PAGE> 5
2.9 Fund represents and warrants that any of its trustees, officers,
employees, investment advisers, and other individuals/entities who
deal with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less
than that required by Rule 17g-1 under the Act. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
2.10 Insurance Company represents and warrants that all of its employees
and agents who deal with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage in an amount not less than the coverage
required to be maintained by the Fund. The aforesaid Bond shall
include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in the Series' shares.
3.2 Fund agrees to make the shares of its Series available for purchase at
the then applicable net asset value per share by Insurance Company and
the Separate Account on each Business Day pursuant to rules of the
Commission. Notwithstanding the foregoing, the Fund may refuse to sell
the shares of any Series to any person, or suspend or terminate the
offering of the shares of any Series if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws,
necessary and in the best interests of the shareholders of such
Series.
3.3 Fund agrees that shares of the Fund will be sold only to Participating
Companies and their separate accounts and to the general accounts of
those Participating Companies and their affiliates. No shares of any
Series will be sold to the general public.
3.4 Fund shall use its best efforts to provide closing net asset value,
dividend and capital gain information for each Series
-4-
<PAGE> 6
available on a per-share and Series basis to Insurance Company by 6:00
p.m. Eastern Time on each Business Day. Any material errors in the
calculation of net asset value, dividend and capital gain information
shall be reported immediately upon discovery to Insurance Company.
Nonmaterial errors will be corrected in the next Business Day's net
asset value per share for the Series in question.
3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the
Separate Account unit values for the day. Using this unit value,
Insurance Company will process the day's Separate Account transactions
received by it by the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net
dollar amount of Series shares which will be purchased or redeemed at
that day's closing not asset value per share for such Series. The net
purchase or redemption orders will be transmitted to the Fund by
Insurance Company by 11:00 a.m. Eastern Time on-the Business Day next
following Insurance Company's receipt of that information. Subject to
Sections 3.6 and 3.8, all purchase and redemption orders for Insurance
Company's General Accounts shall be effected at the net asset value
per share of the relevant Series next calculated after receipt of the
order by the Fund or its Transfer Agent.
3.6 Fund appoints Insurance Company as its agent for the limited purpose
of accepting orders for the purchase and redemption of shares of each
Series for the Separate Account. Fund will execute orders for any
Series at the applicable net asset value per share determined as of
the close of trading on the day of receipt of such orders by Insurance
Company acting as agent ("effective trade date"), provided that the
Fund receives notice of such orders by 11:00 a.m. Eastern Time on the
next following Business Day and, if such orders request the purchase
of Series shares, the conditions specified in Section 3.8, as
applicable, are satisfied. A redemption or purchase request for any
Series that does not satisfy the conditions specified above and in
Section 3.8, as applicable, will be effected at the not asset value
computed for such Series on the Business Day immediately preceding the
next following Business Day upon which such conditions have been
satisfied.
3.7 Insurance Company will make its beat efforts to notify Fund in advance
of any unusually large purchase or redemption orders.
3.8 If Insurance Company's order requests the purchase of Series shares,
Insurance Company will pay for such purchases by wiring Federal Funds
to Fund or its designated custodial
-5-
<PAGE> 7
account on the day the order is transmitted. Insurance Company shall
make all reasonable efforts to transmit to the Fund payment in Federal
Funds by 12:00 noon Eastern Time on the Business Day the Fund receives
the notice of the order pursuant to Section 3.5. Fund will execute
such orders at the applicable net asset value per share determined as
of the close of trading on the effective trade date if Fund receives
payment in Federal Funds by 12:00 midnight Eastern Time on the
Business Day the Fund receives the notice of the order pursuant to
Section 3.5. If payment in Federal Funds for any purchase is not
received or is received by the Fund after 12:00 noon Eastern Time on
such Business Day, Insurance Company shall promptly upon the Fund's
request, reimburse the Fund for any charges, costs, fees, interest or
other expenses incurred by the Fund in connection with any advances
to, or borrowings or overdrafts by, the Fund, or any similar expenses
incurred by the Fund, as a result of portfolio transactions effected
by the Fund based upon such purchase request. If Insurance Company's
order requests the redemption of Series shares valued at or greater
than $1 million dollars, the Fund will wire such amount to Insurance
Company within seven days of the order.
3.9 Fund has the obligation to ensure that Series shares are registered
with applicable federal agencies at all times.
3.10 Fund will confirm each purchase or redemption order made by Insurance
Company. Transfer of Series shares will be by book entry only. No
share certificates will be issued to Insurance Company. Insurance
Company will record shares ordered from Fund in an appropriate title
for the corresponding account.
3.11 Fund shall credit Insurance Company with the appropriate number of
shares.
3.12 On each ex-dividend date of the Fund or, if not a Business Day, on the
first Business Day thereafter, Fund shall communicate to Insurance
Company the amount of dividend and capital gain, if any, per share of
each Series. All dividends and capital gains of any Series shall be
automatically reinvested in additional shares of the relevant Series
at the applicable net asset value per share of such Series on the
payable date. Fund shall, on the day after the payable date or, if not
a Business Day, on the first Business Day thereafter, notify Insurance
Company of the number of shares so issued.
-6-
<PAGE> 8
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Fund shall provide monthly statements of account as of the end of each
month for all of Insurance Company's accounts by the fifteenth (15th)
Business Day of the following month.
4.2 Fund shall distribute to Insurance Company copies of the Fund's
Prospectuses, proxy materials, notices, periodic reports and other
printed materials (which the Fund customarily provides to its
shareholders) in quantities as Insurance Company may reasonably
request for distribution to each Contractholder and Participant.
4.3 Fund will provide to Insurance Company at least one complete copy of
all registration statements, Prospectuses, reports, proxy statements,
sales literature and other promotional materials, applications for
exemptions, requests for noaction letters, and all amendments to any
of the above, that relate to the Fund or its shares, contemporaneously
with the filing of such document with the Commission or other
regulatory authorities.
4.4 Insurance Company will provide to the Fund at least one copy of all
registration statements, Prospectuses, reports proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for noaction letters, and all amendments to any
of the above, that relate to the Contracts or the Separate Account,
contemporaneously with the filing of such document with the
Commission.
ARTICLE V
EXPENSES
5.1 The charge to the Fund for all expenses and costs of the Series,
including but not limited to management fees, administrative expenses
and legal and regulatory costs, will be made in the determination of
the relevant Series' daily net asset value per share so as to
accumulate to an annual charge at the rate set forth in the Fund's
Prospectus. Excluded from the expense limitation described herein
shall be brokerage commissions and transaction fees and extraordinary
expenses.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of the Fund or expenses relating to the distribution of its
shares. Insurance Company shall pay the following expenses or costs:
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<PAGE> 9
a. Such amount of the production expenses of any Fund materials,
including the cost of printing the Fund's Prospectus, or
marketing materials for prospective Insurance Company
Contractholders and Participants as Dreyfus and Insurance
Company shall agree from time to time.
b. Distribution expenses of any Fund materials or marketing
materials for prospective Insurance Company Contractholders
and Participants.
c. Distribution expenses of Fund materials or marketing
materials for Insurance Company Contractholders and
Participants.
Except as provided herein, all other Fund expenses shall not be borne
by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated December 23,
1987 of the Securities and Exchange Commission under Section 6(c) of
the Act and, in particular, has reviewed the conditions to the relief
set forth in the related Notice. As set forth therein, Insurance
Company agrees to report any potential or existing conflicts promptly
to the Board, and in particular whenever contract voting instructions
are disregarded, and recognizes that it will be responsible for
assisting the Board in carrying out its responsibilities under such
application. Insurance Company agrees to carry out such
responsibilities with a view to the interests of existing
Contractholders.
6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists
with regard to Contractholder investments in the Fund, the Board shall
give prompt notice to all Participating Companies. if the Board
determines that Insurance Company is responsible for causing or
creating said conflict, Insurance Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by a
majority of the Disinterested Board Members), take such action as is
necessary to remedy Or eliminate the irreconcilable material conflict.
Such necessary action may include, but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from
the Series and reinvestinq such assets in a different
investment medium, or submitting the question of whether such
segregation should be
-8-
<PAGE> 10
implemented to a vote or all affected Contractholders; and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision
by Insurance Company to disregard Contractholder voting instructions
and said decision represents a minority position or would preclude a
majority vote by all Contractholders having an interest in the Fund,
Insurance Company may be required, at the Board's election to withdraw
the Separate Account's investment in the Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies Any irreconcilable material conflict, but in no event will
the Fund be required to bear the expense of establishing a new funding
medium for any Contract. Insurance Company shall not be required by
this Article to establish a new funding medium for any Contract if an
offer to do so has been declined by vote of a majority of the
Contractholders materially adversely affected by the irreconcilable
material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or the Fund taken or omitted as a result of any act
or failure to act by Insurance Company pursuant to this Article VI
shall relieve Insurance Company of its obligations under, or otherwise
affect the operation of, Article V.
ARTICLE VII
VOTING OF FUND SHARES
7.1 Fund shall provide Insurance Company with copies at no cost to
Insurance Company, of the Fund's proxy material, reports to
shareholders and other communications to shareholders in such quantity
as Insurance Company shall reasonably require for distributing to
Contractholders or Participants.
Insurance Company shall:
(a) solicit voting instructions from Contractholders or
Participants on a timely basis and in accordance with
applicable law;
(b) vote the Series shares in accordance with instructions
received from Contractholders or Participants; and
-9-
<PAGE> 11
(c) vote Series shares for which no instructions have been
received in the same proportion as Series shares for which
instructions have been received.
Insurance Company agrees at all times to vote its General Account
shares in the same proportion as Series shares for which instructions
have been received from Contractholders or Participants. Insurance
Company further agrees to be responsible for assuring that voting Fund
shares for the Separate Account is conducted in a manner consistent
with other Participating Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of the Fund and Dreyfus, solicit, induce or encourage
Contractholders to (a) change or supplement the Fund's current
investment adviser or (b) change, modify, substitute, add to or delete
the Fund from the current investment media for the Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 The Fund or its underwriter shall periodically furnish Insurance
Company with the following documents, in quantities as Insurance
Company may reasonably request:
a. Current Prospectus and any supplements thereto;
b. other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities which
shall have the requisite licenses to solicit applications for the sale
of Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Insurance Company. Insurance Company
shall make reasonable efforts to market the Contracts and shall comply
with all applicable federal and state laws in connection therewith.
8.3 Insurance Company shall furnish, or shall cause to be furnished, to
the Fund, each piece of sales literature or other promotional material
in which the Fund, its investment adviser or the administrator is
named, at least fifteen Business Days prior to its use. No such
material shall be used unless the Fund approves such material. Such
approval (if given) must be in writing and shall be presumed not given
if not received within ten Business Days after receipt
-10-
<PAGE> 12
of such material. The Fund shall use all reasonable efforts to respond
within ten days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the
Fund or any Series in connection with the sale of the Contracts other
than the information or representations contained in the registration
statement or Prospectus, as may be amended or supplemented from time
to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund.
8.5 Fund shall furnish, or shall cause to be furnished, to Insurance
Company, each piece of the Fund's sales literature or other
promotional material in which Insurance Company or the Separate
Account is named, at least fifteen Business Days prior to its use. No
such material shall be used unless Insurance Company approves such
material. Such approval (if given) must be in writing and shall be
presumed not given if not received within ten Business Days after
receipt of such material. Insurance Company shall use all reasonable
efforts to respond within ten days of receipt.
8.6 Fund shall not, in connection with the sale of Series shares, give any
information or make any representations on behalf of Insurance Company
or concerning Insurance Company, the Separate Account, or the
Contracts other than the information or representations contained in a
registration statement or prospectus for the Contracts, as may be
amended or supplemented from time to time, or in published reports for
the Separate Account which are in the public domain or approved by
Insurance Company for distribution to Contractholders or Participants,
or in sales literature or other promotional material approved by
Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed
for use, in a newspaper, magazine or other periodical, radio,
television telephone or tape recording, videotape display, signs or
billboards, motion pictures or other public media), sales literature
(such as any written communication distributed or made generally
available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other
communications distributed or made generally available to some or all
agents or employees, registration statements, prospectuses, statements
of additional information, shareholder reports
-11-
<PAGE> 13
and proxy materials, and any other material constituting sales
literature or advertising under National Association of Securities
Dealers, Inc. rules, the Act or the 1933 Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless the Fund,
Dreyfus, any sub-investment adviser of a Series, and their
affiliates, and each of their directors, trustees, officers,
employees, agents and each person, if any, who controls or is
associated with any of the foregoing entities or persons within the
meaning of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of Section 9.1), against any and all losses, claims, damages
or liabilities joint or several (including any investigative, legal
and other expenses reasonably incurred in connection with, and any
amounts paid in settlement of, any action, suit or proceeding or any
claim asserted) for which the Indemnified Parties may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect to thereof) (i) arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in information furnished by
Insurance Company for use in the registration statement or Prospectus
or sales literature or advertisements of the Fund or with respect to
the Separate Account or Contracts, or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; (ii) arise out of or as a result of conduct,
statements or representations (other than statements or
representations contained in the Prospectus and sales literature or
advertisements of the Fund) of Insurance Company or its agents, with
respect to the sale and distribution of Contracts for which Series'
shares are an underlying investment; (iii) arise out of the wrongful
conduct of Insurance Company or persons under its control with respect
to the sale or distribution of the Contracts or Series' shares; (iv)
arise out of insurance Company's incorrect calculation and/or untimely
reporting of net purchase or redemption orders; or (v) arise out of
any breach by Insurance Company of a material term of this Agreement
or as a result of any failure by Insurance Company to provide the
services and furnish the materials or to make any payments provided
for in this Agreement. Insurance Company will reimburse any
Indemnified Party in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that
with respect to clauses (i) and (ii) above. Insurance Company will not
be liable in any such case to the extent that any such
-12-
<PAGE> 14
loss, claim, damage or liability arises out of or is based upon any
untrue statement or omission or alleged omission made in such
registration statement, prospectus sales literature, or advertisement
in conformity with written information furnished to Insurance Company
by the Fund specifically for use therein. This indemnity agreement
will be in addition to any liability which Insurance Company may
otherwise have.
9.2 The Fund agrees to indemnify and hold harmless Insurance Company and
each of its directors, officers, employees, agents and each person, if
any, who controls Insurance Company within the meaning of the 1933 Act
against any losses, claims, damages or liabilities to which Insurance
Company or any such director, officer, employee agent or controlling
person may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) (1) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or Prospectus or sales literature or
advertisements of the Fund; (2) arise out of or are based upon the
omission to state in the registration statement or Prospectus or sales
literature or advertisements of the Fund any material fact required to
be stated therein or necessary to make the statements therein not
misleading; or (3) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
registration statement or Prospectus or sales literature or
advertisements with respect to the Separate Account or the Contracts
and such statements were based on information provided to insurance
Company by the Fund; and the Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such
director, officer, employee agent or controlling person in connection
with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Fund will not be
liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or omission or alleged omission made in such Registration Statement,
Prospectus, sales literature or advertisements in conformity with
written information furnished to the Fund by Insurance Company
specifically for use therein. This indemnity agreement will be in
addition to any liability which the Fund may otherwise have.
9.3 The Fund shall indemnify and hold Insurance Company harmless against
any and all liability, loss, damages, costs or expenses which
Insurance Company may incur, suffer or be required to pay due to the
Fund's (1) incorrect calculation of the daily net asset value,
dividend rate or capital gain distribution rate of a Series; (2)
incorrect reporting of
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<PAGE> 15
the daily net asset value, dividend rate or capital gain distribution
rate; and (3) untimely reporting of the net asset value, dividend rate
or capital gain distribution rate; provided that the Fund shall have
no obligation to indemnify and hold harmless Insurance Company if the
incorrect calculation or incorrect or untimely reporting was the
result of incorrect information furnished by Insurance Company or
information furnished untimely by Insurance Company or otherwise as a
result of or relating to a breach of this Agreement by Insurance
Company.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Article, notify the indemnifying party of the
commencement thereof. The omission to so notify the indemnifying party
will not relieve the indemnifying party from any liability under this
Article IX, except to the extent that the omission results in a
failure of-actual notice to the indemnifying party and such
indemnifying party is damaged solely as a result of the failure to
give such notice. In case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party,
and to the extent that the indemnifying party has given notice to such
effect to the indemnified party and is performing its obligations
under this Article, the indemnifying party shall not be liable for any
legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable
costs of investigation. Notwithstanding the foregoing, in any such
proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention
of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party
and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its
written consent.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX.
-14-
<PAGE> 16
9.5 Insurance Company shall indemnify and hold the Fund, Dreyfus and any
sub-investment adviser of a Series harmless against any tax liability
incurred by the Fund under Section 851 of the Code arising from
purchases or redemptions by Insurance Company's General Accounts or
the account of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty as to one or more
Series at the option of the terminating party:
a. At the option of Insurance Company or the Fund at any time
from the date hereof upon 180 days' notice, unless a shorter
time is agreed to by the parties;
b. At the option of Insurance Company, if shares of any Series
are not reasonably available to meet the requirements of the
Contracts as determined by Insurance Company. Prompt notice
of election to terminate shall be furnished by Insurance
Company, said termination to be effective ten days after
receipt of notice unless the Fund makes available a
sufficient number of shares to meet the requirements of the
Contracts within said ten-day period;
C. At the option of insurance Company, upon the institution of
formal proceedings against the Fund by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in Insurance Company's reasonable
judgment, materially impair the Fund's ability to meet and
perform the Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by
Insurance Company with said termination to be effective upon
receipt of notice;
d. At the option of the Fund, upon the institution of formal
proceedings against Insurance Company by the Commission,
National Association of Securities Dealers or any other
regulatory body, the expected or anticipated ruling, judgment
or outcome of which would, in the Fund's reasonable
judgment, materially impair Insurance Company's ability to
meet and perform Insurance Company's obligations and duties
hereunder. Prompt notice of election to terminate shall be
-15-
<PAGE> 17
furnished by the Fund with said termination to be effective
upon receipt of notice;
e. At the option of the Fund, if the Fund shall determine, in
its sole judgment reasonably exercised in good faith, that
Insurance Company has suffered a material adverse change in
its business or financial condition or is the subject of
material adverse publicity and such material adverse change
or material adverse publicity is likely to have a material
adverse impact upon the business and operation of the Fund or
Dreyfus, the Fund shall notify Insurance Company in writing
of such determination and its intent to terminate this
Agreement, and after considering the actions taken by
Insurance Company and any other changes in circumstances
since the giving of such notice, such determination of the
Fund shall continue to apply on the sixtieth (60th) day
following the giving of such notice, which sixtieth day shall
be the effective date of termination;
f. Upon termination of the Investment Advisory Agreement between
the Fund and Dreyfus or its successors unless Insurance
Company specifically approves the selection of a new Fund
investment adviser. The Fund shall promptly furnish notice of
such termination to Insurance Company;
g. In the event the Fund's shares are not registered, issued or
sold in accordance with applicable federal law, or such law
precludes the use of such shares an the underlying investment
medium of Contracts issued or to be issued by Insurance
Company. Termination shall be effective immediately upon such
occurrence without notice;
h. At the option of the Fund upon a determination by the Board
in good faith that it is no longer advisable and in the best
interests of shareholders for the Fund to continue to operate
pursuant to this Agreement. Termination pursuant to this
Subsection (h) shall be effective upon notice by the Fund to
Insurance Company of such termination;
i. At the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably
believes that the Contracts may fail to so qualify;
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<PAGE> 18
j. At the option of either party to this Agreement, upon another
party's breach of any material provision of this Agreement;
k. At the option of the Fund, if the Contracts are not
registered, issued or sold in accordance with applicable
federal and/or state law; or
l. Upon assignment of this Agreement, unless made with the
written consent of the non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e, 10.2f or
10.2k herein shall not affect the operation of Article V of this
Agreement. Any termination of this Agreement shall not affect the
operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, the Fund and Dreyfus may, at the option of the Fund,
continue to make available additional Series shares for so long as the
Fund desires pursuant to the terms and conditions of this Agreement as
provided below, for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Fund or Dreyfus
so elects to make additional series shares available, the owners of
the Existing Contracts or Insurance Company, whichever shall have
legal authority to do so, shall be permitted to reallocate investments
in the Series, redeem investments in the Fund and/or invest in the
Fund upon the making of additional purchase payments under the
Existing Contracts. In the event of a termination of this Agreement
pursuant to Section 10.2 hereof, the Fund and Dreyfus, as promptly an
is practicable under the circumstances, shall notify insurance Company
whether Dreyfus and the Fund will continue to make Series shares
available after such termination. If Series shares continue to be made
available after such termination, the provisions of this Agreement
shall remain in effect and thereafter either the Fund or insurance
company may terminate the Agreement, as so continued pursuant to this
Section 10.3, upon prior written notice to the other party such notice
to be for a period that is reasonable under the circumstances but, if
given by the Fund, need not be for more than six months.
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<PAGE> 19
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement shall be
made by agreement in writing between Insurance Company and
Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by
certified mail, return receipt requested to the appropriate
parties at the following addresses:
Insurance Company:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
Attn:
----------------------------------
Fund: Dreyfus Variable Investment Fund
200 Park Avenue
New York, New York 10166
Attn: Daniel C. Maclean, Secretary
with copies to: Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004-2696
Attn: Lewis G. Cole, Esq.
Stuart R. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by
the addresses as evidenced by the return receipt.
ARTICLE XIII
MISCELLANEOUS
13.1 This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer
of the Fund. The obligations of this Agreement shall only be
binding upon the assets and property of the Fund and shall
not be binding upon any Trustee, officer or shareholder of
the Fund individually.
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<PAGE> 20
ARTICLE XIV
LAW
14.1 This Agreement shall be construed in accordance with the
internal laws of the State of New York, without giving effect
to principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be duly executed and attested as of the date first above written.
[NAME OF INSURANCE COMPANY]
By:
------------------------------------
Its:
------------------------------------
Attest:
-----------------------------
DREYFUS VARIABLE INVESTMENT FUND
By:
------------------------------------
Its:
------------------------------------
Attest:
-----------------------------
-19-
<PAGE> 1
Exhibit 8(a)(c)
Participation Agreement Between Montgomery Asset Management, L.P.
and
Canada Life of New York
<PAGE> 2
PARTICIPATION AGREEMENT
By and Among
CANADA LIFE INSURANCE COMPANY OF NEW YORK
And
MONTGOMERY FUNDS III
And
MONTGOMERY ASSET MANAGEMENT, L.P.
THIS AGREEMENT, made and entered into this 1st day of May, 1996 by and among
Canada Life Insurance Company of New York, organized under the laws of the
State of New York (the "Company"), on its own behalf and on behalf of each
separate account of the Company named in Schedule I to this Agreement, as may
be amended from time to time (each account referred to as the "Account"),
Montgomery Funds III, an open-end management investment company and business
trust organized under the laws of the State of Delaware (the "Fund") and
Montgomery Asset Management, L.P., a limited partnership organized under the
laws of the State of California (the "Adviser").
WHEREAS, the Fund engages in business as an open-end management investment
company and was established for the purpose of serving as the investment
vehicle for separate accounts established for variable life insurance contracts
and variable annuity contracts to be offered by insurance companies which have
entered into participation agreements substantially identical to this Agreement
(the "Participating Insurance Companies"), and
<PAGE> 3
WHEREAS, beneficial interests in the Fund are divided into several series of
shares, each representing the interest in a particular managed portfolio of
securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has received an order from the Securities & Exchange
Commission (alternatively referred to as the "SEC" or the "Commission")
granting Participating Insurance Companies and variable annuity separate
accounts and variable life insurance separate accounts relief from the
provisions of Sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund
to be sold to and held by variable annuity separate accounts and variable life
insurance separate accounts of both affiliated and unaffiliated Participating
Insurance Companies and qualified pension and retirement plans outside of the
separate account context (the "Mixed and Shared Funding Exemptive Order"). The
parties to this Agreement agree to the conditions or undertakings specified in
the Mixed and Shared Funding Exemptive Order and that may be imposed on the
Company, the Fund and/or the Adviser by virtue of the receipt of such order by
the SEC will be incorporated herein by reference, and such parties agree to
comply with such conditions and undertakings to the extent applicable to each
such party; and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (the "1933 Act"); and
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<PAGE> 4
WHEREAS,, the Company has registered or will register certain variable annuity
contracts (the "Contracts") under the 1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the insurance laws of the State of New York, to set aside and invest
assets attributable to the Contracts; and
WHEREAS, the Company has registered the Account as a unit investment trust
under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company intends to purchase shares of the Portfolios named in Schedule 2, as
such schedule may be amended from time to time (the "Designated Portfolios") on
behalf of the Account to fund the Contracts, and the Fund is authorized to sell
such shares to unit investment trusts such as the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Adviser agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of the
Designated Portfolios which each Account orders, executing such
orders on a daily basis at the net asset value next computed
after receipt and acceptance by the Fund or its designee of the
order for the shares of the Fund. For purposes of this Section
1.1, the Company
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<PAGE> 5
will be the designee of the Fund for receipt of such orders from
each Account and receipt by such designee will constitute receipt
by the Fund; provided that the Fund receives notice of such order
by 9:00 a.m. Central Time on the next following business day.
"Business Day" will mean any day on which the New York Stock
Exchange is open for trading and on which the Fund calculates its
net asset value pursuant to the rules of the SEC.
1.2. The Company will pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with
Section 1.1 above. Payment will be in federal funds transmitted
by wire except for amounts less than $500, which may be paid by
check or by another method acceptable to the parties.
1.3. The Fund agrees to make shares of the Designated Portfolios
available indefinitely for purchase at the applicable net asset
value per share by Participating Insurance Companies and their
separate accounts on those days on which the Fund calculates its
Designated Portfolio net asset value pursuant to rules of the
SEC; provided, however, that the Board of Trustees of the Fund
(the "Fund Board") may refuse to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any
Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of
the Fund Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the shareholders of such
Portfolio.
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<PAGE> 6
1.4. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as
are permitted under applicable provisions of the Internal Revenue
Code of 1986, as amended, (the "Internal Revenue Code"), and
regulations promulgated thereunder, the sale to which will not
impair the tax treatment currently afforded the Contracts. No
shares of any Portfolio will be sold to the general public.
1.5. The Fund will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, and VII of this
Agreement are in effect to govern such sales.
1.6. The Fund agrees to redeem for cash, upon the Company's request,
any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value
next computed after receipt and acceptance by the Fund or its
agent of the request for redemption. For purposes of this
Section 1.6, the Company will be the designee of the Fund for
receipt of requests for redemption from each Account and receipt
by such designee will constitute receipt by the Fund; provided
the Fund receives notice of such requests for redemption by 9:00
a.m. Central Time on the next following Business Day. Payment
will be in federal funds transmitted by wire to the Company's
account as designated by the Company in writing from time to
time, on the same Business Day the Fund receives notice of the
redemption order from the Company, except for amounts less than
$500 which may be paid by check or by another method acceptable
to the
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<PAGE> 7
parties. The Fund reserves the right to delay payment of
redemption proceeds, but in no event may such payment be delayed
longer than the period permitted under Section 22(e) of the 1940
Act. The Fund will not bear any responsibility whatsoever for
the proper disbursement or crediting of redemption proceeds; the
Company alone will be responsible for such action. If
notification of redemption is received after 9:00 a.m. Central
Time, payment for redeemed shares will be made on the next
following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of
the Fund in accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or to
any Account. Purchase and redemption orders for Fund shares will
be recorded in an appropriate tide for each Account or the
appropriate subaccount of each Account.
1.9. The Fund will furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of the
declaration of any income, dividends or capital gain
distributions payable on each Designated Portfolio's shares. The
Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form
of additional shares of that Portfolio. The Company reserves the
right to revoke this election and to receive all such
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<PAGE> 8
dividends and distributions in cash. The Fund will notify the
Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund will make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as
soon as reasonably practical after the net asset value per share
is calculated and will use its best efforts to make such net
asset value per share available by 5:00 p.m., Central Time, each
business day.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or
will be registered under the 1933 Act and that the Contracts will
be issued and sold in compliance with all applicable federal and
state laws, including state insurance suitability requirements.
The Company further represents and warrants that it is an
insurance company duly organized and in good standing under
applicable law and that it has legally and validly established
each Account as a separate account under applicable state law and
has registered each such account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts, and that it will
maintain such registration for so long as any Contracts are
outstanding. The Company will amend the registration statement
under the 1933 Act for the Contracts and the registration
statement under the 1940 Act for the Account from time to time as
required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The
Company will register and qualify the Contracts for sale in
accordance with the
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<PAGE> 9
securities laws of the various states only if and to the extent
deemed necessary by the Company.
2.2. The Company represents that the Contracts are currently and at
the time of issuance will be treated as annuity contracts under
applicable provisions of the Internal Revenue Code of 1986, as
amended, and that it will make every effort to maintain such
treatment and that it will notify the Fund and the Adviser
immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be
so treated in the future.
2.3. The Company represents and warrants that it will not purchase
shares of the Designated Portfolios with assets derived from
tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
2.4. The Fund represents and warrants that Fund shares of the
Designated Portfolios sold pursuant to this Agreement will be
registered under the 1933 Act and duly authorized for issuance in
accordance with applicable law and that the Fund is and will
remain registered under the 1940 Act for as long as such shares
of the Designated Portfolios are sold. The Fund will amend the
registration statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund will register and
qualify the shares of the Designated Portfolios for sale in
accordance with the laws of the various states only if and to the
extent deemed advisable by the Fund.
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<PAGE> 10
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue
Code, and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Company immediately upon
having a reasonable basis for believing that it has ceased to so
qualify or that it might not so qualify in the future.
2.6. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they
may apply to the Fund. The Fund makes no representation as to
whether any aspect of its operations (including, but not limited
to, fees and expenses and investment policies, objectives and
restrictions) complies with the insurance laws and regulations of
any state. The Company alone will be responsible for informing
the Fund of any insurance restrictions imposed by state insurance
laws which are applicable to the Fund. To the extent feasible
and consistent with market conditions, the Fund will adjust its
investments to comply with the aforementioned state insurance
laws upon written notice from the Company of such requirements
and proposed adjustments, it being agreed and understood that in
any such case the Fund will be allowed a reasonable period of
time under the circumstances after receipt of such notice to make
any such adjustment. The Fund and the Adviser agree that they
will furnish the information required by state insurance laws so
that the Company can obtain the authority needed to issue the
Contracts in the various states.
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<PAGE> 11
2.7. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule l2b-1 under the
1940 Act or otherwise, although it reserves the right to make
such payments in the future. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Fund
undertakes to have the trustees of its Fund Board, a majority of
whom are not "interested" persons of the Fund, formulate and
approve any plan under Rule 12b-1 to finance distribution
expenses.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Delaware and that it does
and will comply in all material respects with applicable
provisions of the 1940 Act.
2.9. The Adviser represents and warrants that it is and will remain
duly registered under all applicable federal and state securities
laws and that it will perform its obligations for the Fund in
accordance in all material respects with the laws of the State
of California and any applicable state and federal securities
laws.
2.10. The Fund represents and warrants that all of its trustees,
officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities
of the Fund are and continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required
currently by Rule 17g-(1) of the 1940 Act or related provisions
as may be promulgated from time to time. The aforesaid
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<PAGE> 12
bond includes coverage for larceny and embezzlement and is issued
by a reputable bonding company.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1. The Fund will provide the Company, at the Fund's expense, with as
many copies of the current Fund prospectus for the Designated
Portfolios as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners and applicants. The Fund will provide, at the
Fund's expense, as many copies of said prospectus as necessary
for distribution, at the Fund's expense, to existing
contractowners. The Fund will provide the copies of said
prospectus to the Company or to its mailing agent. The Company
will distribute the prospectus to existing contractowners and
will bill the Fund for the reasonable cost of such distribution.
If requested by the Company in lieu thereof, the Fund will
provide such documentation, including a final copy of a current
prospectus set in type at the Fund's expense, and other
assistance as is reasonably necessary in order for the Company at
least annually (or more frequently if the Fund prospectus is
amended more frequently) to have the new prospectus for the
Contracts and the Fund's new prospectus printed together, in
which case the Fund will pay its share of reasonable expenses
directly related to the required disclosure of information
concerning the Fund.
3.2. The Fund's prospectus will state that the statement of additional
information for the Fund is available from the Company. The Fund
will provide the Company, at the
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<PAGE> 13
Fund's expense, with as many copies of the statement of
additional information as the Company may reasonably request for
distribution, at the Company's expense, to prospective
contractowners owners and applicants. The Fund will provide,
at the Fund's expense, as many copies of said statement of
additional information as necessary for distribution, at the
Fund's expense, to any existing contractowner who requests such
statement or whenever state or federal law otherwise requires
that such statement be provided. The Fund will provide the
copies of said statement of additional information to the Company
or to its mailing agent. The Company will distribute the
statement of additional information as requested or required and
will bill the Fund for the reasonable cost of such distribution.
3.3. The Fund, at its expense, will provide the Company or its mailing
agent with copies of its proxy material, if any, reports to
shareholders and other communications to shareholders in such
quantity as the Company will reasonably require. The Company
will distribute this proxy material, reports and other
communications to existing contractowners and will bill the Fund
for the reasonable cost of such distribution.
3.4. If and to the extent required by law the Company will:
(a) solicit voting instructions from contractowners;
(b) vote the shares of the Designated Portfolios held in the
Account in accordance with instructions received from
contractowners; and
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<PAGE> 14
(c) vote shares of the Designated Portfolios held in the
Account for which no timely instructions have been
received, in the same proportion as shares of such
Designated Portfolio for which instructions have been
received from the Company's contractowners;
so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass-through voting privileges for
variable contractowners. The Company reserves the right to
vote Fund shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies will be responsible for assuring that each of their
separate accounts participating in the Fund calculates voting
privileges in a manner consistent with all legal requirements,
including the Mixed and Shared Funding Exemptive Order.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular, the Fund
either will provide for annual meetings (except insofar as the
SEC may interpret Section 16 of the 1940 Act not to require such
meetings) or, as the Fund currently intends, to comply with
Section 16(c) of the 1940 Act (although the Fund is not one of
the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further,
the Fund will act in accordance with the SEC's interpretation of
the requirements of Section 16(a) with respect to periodic
elections of directors and with whatever rules the Commission may
promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
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<PAGE> 15
4.1. The Company will furnish, or will cause to be furnished, to the
Fund or the Adviser, each piece of sales literature or other
promotional material in which the Fund or the Adviser is named,
at least ten (10) Business Days prior to its use. No such
material will be used if the Fund or the Adviser reasonably
objects to such use within five (5) Business Days after receipt
of such material.
4.2. The Company will not give any information or make any
representations or statements on behalf of the Fund or
concerning the Fund in connection with the sale of the Contracts
other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for Fund shares, as such registration statement,
prospectus and statement of additional information may be amended
or supplemented from time to time, or in reports or proxy
statements for the Fund, or in published reports for the Fund
which are in the public domain or approved by the Fund or the
Adviser for distribution, or in sales literature or other
material provided by the Fund or by the Adviser, except with
permission of the Fund or the Adviser. The Fund and the Adviser
agree to respond to any request for approval on a prompt and
timely basis. Nothing in this Section 4.2 will be construed as
preventing the Company or its employees or agents from giving
advice on investment in the Fund.
4.3. The Fund or the Adviser will furnish, or will cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company or
its separate account is named, at least ten (10) Business Days
prior to its use. No such material will be used if the Company
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<PAGE> 16
reasonably objects to such use within five (5) Business Days
after receipt of such material.
4.4. The Fund and the Adviser will not give any information or make
any representations or statements on behalf of the Company or
concerning the Company, each Account, or the Contracts other than
the information or representations contained in a registration
statement, prospectus or statement of additional information for
the Contracts, as such registration statement, prospectus and
statement of additional information may be amended or
supplemented from time to time, or in published reports for each
Account or the Contracts which are in the public domain or
approved by the Company for distribution to contractowners, or
in sales literature or other material provided by the Company,
except with permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
4.5. The Fund will provide to the Company at least one complete copy
of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to
any of the above, that relate to the Fund or its shares,
contemporaneously with the filing of each such document with the
SEC or the NASD.
4.6. The Company will provide to the Fund at least one complete copy
of all registration statements, prospectuses, statements of
additional information, reports,
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<PAGE> 17
solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for
no action letters, and all amendments to any of the above, that
relate to the Contracts or each Account, contemporaneously with
the filing of each such document with the SEC or the NASD.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use
in, a newspaper, magazine, or other periodical, radio,
television, telephone or tape recording, videotape display, signs
or billboards, motion pictures, or other public media, (i.e.,
on-line networks such as the Internet or other electronic
messages)), sales literature (i.e., any written communication
distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market
letters, form letters, seminar texts, reprints or excerpts of any
other advertisement, sales literature, or published article),
educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, statements of
additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.8. The Fund and the Adviser hereby consent to the Company's use of
the names Montgomery, Montgomery Funds III, Montgomery Variable
Series and Montgomery Asset Management, in connection with
marketing the Contracts,
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<PAGE> 18
subject to the terms of Sections 4.1 and 4.2 of this Agreement.
Such consent will terminate with the termination of this
Agreement.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund will pay no fee or other compensation to the Company
under this Agreement, except as provided below: (a) if the Fund
or any Designated Portfolio adopts and implements a plan pursuant
to Rule l2b-1 under the 1940 Act to finance distribution
expenses, then, subject to obtaining any required exemptive
orders or other regulatory approvals, the Fund may make payments
to the Company or to the underwriter for the Contracts if and in
such amounts agreed to by the Fund in writing; (b) the Fund may
pay fees to the Company for services provided to contractowners
that are not primarily intended to result in the sale of shares
of the Designated Portfolio or of underlying Contracts.
5.2. All expenses incident to performance by the Fund of this
Agreement will be paid by the Fund to the extent permitted by
law. All shares of the Designated Portfolios will be duly
authorized for issuance and registered in accordance with
applicable federal law and, to the extent deemed advisable by the
Fund, in accordance with applicable state law, prior to sale.
The Fund will bear the expenses for the cost of registration and
qualification of the Fund's shares; preparation and filing of the
Fund's prospectus, statement of additional information and
registration statement, proxy materials and reports; setting the
Fund's prospectus in type; setting in type and printing proxy
materials and reports to
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<PAGE> 19
contractowners, (including the costs of printing a Fund
prospectus that constitutes an annual report); the preparation of
all statements and notices required by any federal or state law;
all taxes on the issuance or transfer of the Fund's shares; any
expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule l2b-1 under the 1940 Act; and all
other typesetting, printing and distribution expenses as set
forth in Article III of this Agreement.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as
variable annuity contracts under the Internal Revenue Code and
the regulations issued thereunder. Without limiting the scope of
the foregoing, the Fund will comply with Section 817(h) of the
Internal Revenue Code and Treasury Regulation 1.817-5, as amended
from time to time, relating to the diversification requirements
for variable annuity, endowment, or life insurance contracts and
any amendments or other modifications to such Section or
Regulation in accordance with guidelines provided by the Company
prior to the execution of this Agreement and as necessary
thereafter. In the event of a breach of this Article VI by the
Fund, it will take all reasonable steps: (a) to notify the
Company of such breach; and (b) to adequately diversify the Fund
so as to achieve compliance within the grace period afforded by
Treasury Regulation 1.817-5.
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<PAGE> 20
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Fund Board will monitor the Fund for the existence of any
irreconcilable material conflict among the interests of the
contractowners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference
in voting instructions given by Participating Insurance Companies
or by variable annuity and variable life insurance
contractowners; or (f) a decision by an insurer to disregard the
voting instructions of contractowners. The Fund Board will
promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications
thereof. A majority of the Fund Board will consist of persons
who are not "interested" persons of the Fund.
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Fund Board. The Company agrees to assist
the Fund Board in carrying out its responsibilities, as
delineated in the Mixed and Shared Funding Exemptive Order, by
providing the Fund Board with all information reasonably
necessary for the Fund Board to consider any issues raised. This
includes, but is not limited to, an obligation by the Company to
inform the Fund Board whenever contractowner voting instructions
are to be disregarded. The Fund Board will record in its
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<PAGE> 21
minutes, or other appropriate records, all reports received by it
and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a
majority of its disinterested trustees, that an irreconcilable
material conflict exists, the Company and other Participating
Insurance Companies will, at their expense and to the extent
reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to
remedy or eliminate the irreconcilable material conflict, up to
and including: (a) withdrawing the assets allocable to some or
all of the Accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be
implemented to a vote of all affected contractowners and, as
appropriate, segregating the assets of any appropriate group
(i.e., variable annuity contractowners or variable life insurance
contractowners of one or more Participating Insurance Companies)
that votes in favor of such segregation, or offering to the
affected contractowners the option of making such a change; and
(b) establishing a new registered management investment company
or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contractowner voting
instructions, and such disregard of voting instructions could
conflict with the majority of contractowner voting instructions,
and the Company's judgment represents a minority position or
would preclude a
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<PAGE> 22
majority vote, the Company may be required, at the Fund's
election, to withdraw the affected subaccount of the Account's
investment in the Fund and terminate this Agreement with respect
to such subaccount; provided, however, that such withdrawal and
termination will be limited to the extent required by the
foregoing irreconcilable material conflict as determined by a
majority of the disinterested trustees of the Fund Board. No
charge or penalty will be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within six
(6) months after the Fund gives written notice to the Company
that this provision is being implemented. Until the end of such
six-month period the Adviser and Fund will, to the extent
permitted by law and any exemptive relief previously granted to
the Fund, continue to accept and implement orders by the Company
for the purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company
conflicts with the majority of other state insurance regulators,
then the Company will withdraw the affected subaccount of the
Account's investment in the Fund and terminate this Agreement
with respect to such subaccount; provided, however, that such
withdrawal and termination will be limited to the extent required
by the foregoing irreconcilable material conflict as determined
by a majority of the disinterested directors of the Fund Board.
No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal and termination must take place
within six (6) months after the Fund gives written notice to the
Company that this provision is being implemented. Until the end
of such six-month period the Advisor and Fund will, to the extent
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permitted by law and any exemptive relief previously granted to
the Fund, continue to accept and implement orders by the Company
for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Fund Board will
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the Fund
be required to establish a new funding medium for the Contracts.
The Company will not be required by Section 7.3 to establish a
new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of contractowners affected by
the irreconcilable material conflict.
7.7. The Company will at least annually submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably
request so that the Fund Board may fully carry out the duties
imposed upon it as delineated in the Mixed and Shared Funding
Exemptive Order, and said reports, materials and data will be
submitted more frequently if deemed appropriate by the Fund
Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T), are
amended, or Rule 6e-3 is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated
thereunder with respect to mixed or shared funding (as defined
in the Mixed and Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the
Mixed and Shared Funding Exemptive Order, then: (a) the Fund
and/or the Participating Insurance Companies,
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<PAGE> 24
as appropriate, will take such steps as may be necessary to
comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such rules are applicable; and (b)
Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement
will continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained
in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
(a) Thee Company agrees to indemnify and hold harmless the
Fund, the Adviser, and each person, if any, who
controls or is associated with the Fund or the Adviser
within the meaning of such terms under the federal
securities laws and any director, trustee, officer, employee
or agent of the foregoing (collectively, the "Indemnified
Parties" for purposes of this Section 8.1) against any and
all losses, claims, expenses, damages, liabilities
(including amounts paid in settlement with the written
consent of the Company) or litigation (including reasonable
legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or
settlements:
(1) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact
contained in the registration statement,
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<PAGE> 25
prospectus or statement of additional information for
the Contracts or contained in the Contracts or sales
literature or other promotional material for the
Contracts (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a
material fact required to be stated or necessary to
make such statements not misleading in light of the
circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon
and in conformity with information furnished to the
Company by or on behalf of the Adviser or the Fund for
use in the registration statement, prospectus or
statement of additional information for the Contracts
or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund
shares; or
(2) arise out of or as a result of statements or
representations by or on behalf of the Company
(other than statements or representations contained in
the Fund registration statement, prospectus, statement
of additional information or sales literature or other
promotional material of the Fund, or any amendment or
supplement to the foregoing, not supplied by the
Company or persons under its control) or wrongful
conduct of the Company or persons under its control,
with respect to the sale or distribution of the
Contracts or Fund shares; or
-24-
<PAGE> 26
(3) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
Fund registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Fund (or amendment or
supplement) or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make such statements not
misleading in light of the circumstances in which they
were made, if such a statement or omission was made in
reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company or
persons under its control; or
(4) arise as a result of any failure by the Company to
provide the services and furnish the materials
under the terms of this Agreement; or
(5) arise out of any material breach of any representation
and/or warranty made by the Company in this
Agreement or arise out of or result from any other
material breach by the Company of this Agreement;
except to the extent provided in Sections 8.1(b) and 8.4
hereof. This indemnification will be in addition to any
liability that the Company otherwise may have.
(b) No party will be entitled to indemnification under
Section 8.1(a) if such loss, claim, damage, liability or
litigation is due to the willful misfeasance, bad
-25-
<PAGE> 27
faith, or gross negligence in the performance of such party's
duties under this Agreement, or by reason of such party's
reckless disregard of its obligations or duties under this
Agreement.
(c) The Indemnified Parties promptly will notify the Company of the
commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with
the issuance or sale of the Fund shares or the Contracts or the
operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
(a) The Adviser agrees to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the
Company within the meaning of such terms under the federal
securities laws and any director, officer, employee or agent of
the foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.2) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation
(including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements:
-26-
<PAGE> 28
(1) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Fund or sales literature or other promotional
material of the Fund (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated or necessary to make such statements not misleading in
light of the circumstances in which they were made; provided that
this agreement to indemnify will not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Adviser or Fund by or on behalf of
the Company for use in the registration statement, prospectus or
statement of additional information for the Fund or in sales
literature of the Fund (or any amendment or supplement thereto)
or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(2) arise out of or as a result of statements or representations
(other than statements or representations contained in the
Contracts or in the Contract or Fund registration statements,
prospectuses or statements of additional information or sales
literature or other promotional material for the Contracts or of
the Fund, or any amendment or supplement to the foregoing, not
supplied by the Adviser or the Fund or persons under the control
of the Adviser or the Fund respectively) or wrongful
-27-
<PAGE> 29
conduct of the Adviser or the Fund or persons under the control
of the Adviser or the Fund respectively, with respect to the sale
or distribution of the Contracts or Fund shares; or
(3) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, statement of additional information or sales
literature or other promotional material covering the Contracts
(or any amendment or supplement thereto), or the omission or
alleged omission to state therein a material fact required to be
stated or necessary to make such statement or statements not
misleading in light of the circumstances in which they were made,
if such statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or on
behalf of the Adviser or the Fund or persons under the control of
the Adviser or the Fund; or
(4) arise as a result of any failure by the Fund or the Adviser to
provide the services and furnish the materials under the terms of
this Agreement; or
(5) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser or the Fund in
this Agreement, or arise out of or result from any other material
breach of this Agreement by the Adviser or the Fund;
-28-
<PAGE> 30
except to the extent provided in Sections 8.2(b) and 8.4 hereof.
(b) No party will be entitled to indemnification under Section 8.2(a)
if such loss, claim, damage, liability or litigation is due to
the willful misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard or its obligations or
duties under this Agreement.
(c) The Indemnified Parties will promptly notify the Adviser and the
Fund of the commencement of any litigation, proceedings,
complaints or actions by regulatory authorities against them in
connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3. INDEMNIFICATION BY THE FUND
(a) The Fund agrees to indemnify and hold harmless the Company and
each person, if any, who controls or is associated with the
Company within the meaning of such terms under the federal
securities laws and any director, officer, employee or agent of
the foregoing (collectively, the "Indemnified Parties" for
purposes of this Section 8.3) against any and all losses, claims,
expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation
(including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses,
-29-
<PAGE> 31
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement; or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other
material breach of this Agreement by the Fund; or
(iii) arise out of or result from the incorrect or untimely
calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate;
except to the extent provided in Sections 8.3(b) and 8.4 hereof.
(b) No party will be entitled to indemnification under Section 8.3(a)
if such loss, claim, damage, liability or litigation is due to
the willful misfeasance, bad faith, or gross negligence in the
performance of such party's duties under this Agreement, or by
reason of such party's reckless disregard of its obligations and
duties under this Agreement.
-30-
<PAGE> 32
(c) The Indemnified Parties will promptly notify the Fund of the
commencement of any litigation, proceedings, complaints or
actions by regulatory authorities against them in connection with
the issuance or sale of the Contracts or the operation of the
Account.
8.4. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this
Article VIII ("Indemnifying Party" for the purpose of this
Section 8.4) will not be liable under the indemnification
provisions of this Article VIII with respect to any claim made
against a party entitled to indemnification under this Article
VIII ("Indemnified Party" for the purpose of this Section 8.4)
unless such Indemnified Party will have notified the Indemnifying
Party in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim will have been served upon such Indemnified Party (or after
such party will have received notice of such service on any
designated agent), but failure to notify the Indemnifying Party
of any such claim will not relieve the Indemnifying Party from
any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of the
indemnification provision of this Article VIII, except to the
extent that the failure to notify results in the failure of
actual notice to the Indemnifying Party and such Indemnifying
Party is damaged solely as a result of failure to give such
notice. In case any such action is brought against the
Indemnified Party, the Indemnifying Party will be entitled to
participate, at its own expense, in the defense thereof. The
Indemnifying Party
-31-
<PAGE> 33
also will be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
the Indemnifying Party to the Indemnified Party of the
Indemnifying Party's election to assume the defense thereof, the
Indemnified Party will bear the fees and expenses of any
additional counsel retained by it, and the Indemnifying Party
will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation, unless: (a) the Indemnifying
Party and the Indemnified Party will have mutually agreed to the
retention of such counsel; or (b) the named parties to any such
proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation
of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. The
Indemnifying Party will not be liable for any settlement of any
proceeding effected without its written consent but if settled
with such consent or if there is a final judgment for the
plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by
reason of such settlement or judgment. A successor by law of the
parties to this Agreement will be entitled to the benefits of the
indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII will
survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
-32-
<PAGE> 34
9.1. This Agreement will be construed and the provisions hereof
interpreted under and in accordance with the laws of the State
of California.
9.2. This Agreement will be subject to the provisions of the 1933 Act,
the 1934 Act and the 1940 Act, and the rules and regulations and
rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant (including,
but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof will be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement will terminate:
(a) at the option of any party, with or without cause, with
respect to some or all of the Portfolios, upon one (1)
year's advance written notice to the other parties or, if
later, upon receipt of any required exemptive relief or
orders from the SEC, unless otherwise agreed in a
separate written agreement among the parties; or
(b) at the option of the Company, upon receipt of written
notice by the other parties, with respect to any
Portfolio if shares of the Portfolio are not reasonably
available to meet the requirements of the Contracts as
determined in good faith by the Company; or
-33-
<PAGE> 35
(c) at the option of the Company, upon receipt of written
notice by the other parties, with respect to any
Portfolio in the event any of the Portfolio's shares are
not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes
the use of such shares as the underlying investment media
of the Contracts issued or to be issued by Company; or
(d) at the option of the Fund, upon receipt of written notice
by the other parties, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory
body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the
administration of the Contracts, the operation of the
Account, or the purchase of the Fund shares, provided
that the Fund determines in its sole judgment, exercised
in good faith, that any such proceeding would have a
material adverse effect on the Company's ability to
perform its obligations under this Agreement; or
(e) at the option of the Company, upon receipt of written
notice by the other parties, upon institution of formal
proceedings against the Fund or the Adviser by the NASD,
the SEC, or any state securities or insurance department
or any other regulatory body, provided that the Company
determines in its sole judgment, exercised in good faith,
that any such proceeding would have a material adverse
effect on the Fund's or the Adviser's ability to perform
its obligations under this Agreement; or
-34-
<PAGE> 36
(f) at the option of the Company, upon receipt of written
notice by the other parties, if the Fund ceases to
qualify as a Regulated Investment Company under
Subchapter M of the internal Revenue Code, or under any
successor or similar provision, or if the Company
reasonably and in good faith believes that the Fund may
fail to so qualify; or
(g) at the option of the Company, upon receipt of written
notice by the other parties, with respect to any
Portfolio if the Fund fails to meet the diversification
requirements specified in Article VI hereof or if the
Company reasonably and in good faith believes the Fund
may fail to meet such requirements; or
(h) at the option of any party to this Agreement, upon
written notice to the other parties, upon another party's
material breach of any provision of this Agreement; or
(i) at the option of the Company, if the Company determines
in its sole judgment exercised in good faith, that either
the Fund or the Adviser has suffered a material adverse
change in its business, operations or financial condition
since the date of this Agreement or is the subject of
material adverse publicity which is likely to have a
material adverse impact upon the business and operations
of the Company, such termination to be effective sixty
(60) days' after receipt by the other parties of written
notice of the election to terminate; or
-35-
<PAGE> 37
(j) at the option of the Fund or the Adviser, if the Fund or
Adviser respectively, determines in its sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations or
financial condition since the date of this Agreement or
is the subject of material adverse publicity which is
likely to have a material adverse impact upon the
business and operations of the Fund or the Adviser, such
termination to be effective sixty (60) days' after receipt
by the other parties of written notice of the election to
terminate; or
(k) at the option of the Company or the Fund upon receipt of
any necessary regulatory approvals and/or the vote of the
contractowners having an interest in the Account (or any
subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares
of the Fund in accordance with the terms of the Contracts
for which those Portfolio shares had been selected to
serve as the underlying investment media. The Company
will give sixty (60) days' prior written notice to the
Fund of the date of any proposed vote or other action
taken to replace the Fund's shares; or
(l) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a
majority of the disinterested Fund Board members, that an
irreconcilable material conflict exists among the
interests of: (l) all contractowners of variable
insurance products of all separate accounts; or (2) the
interests of the Participating Insurance Companies
investing in the Fund as set forth in Article VII of
this Agreement; or
-36-
<PAGE> 38
(m) at the option of the Fund in the event any of the
Contracts are not issued or sold in accordance with
applicable federal and/or state law. Termination will be
effective immediately upon such occurrence without
notice.
10.2. NOTICE REQUIREMENT
(a) No termination of this Agreement, except a termination
under Section 10.1 (m) of this Agreement, will be
effective unless and until the party terminating this
Agreement gives prior written notice to all other parties
of its intent to terminate, which notice will set forth
the basis for the termination.
(b) In the event that any termination of this Agreement is
based upon the provisions of Article VII, such prior
written notice will be given in advance of the effective
date of termination as required by such provisions.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement, the
Fund and the Adviser will, at the option of the Company,
continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement,
for all Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation,
the owners of the Existing Contracts will be permitted to
reallocate investments in the Designated Portfolios (as
in effect on such date), redeem
-37-
<PAGE> 39
investments in the Designated Portfolios and/or invest in
the Designated Portfolios upon the making of additional
purchase payments under the Existing Contracts. The
parties agree that this Section 10.3 will not apply to
any terminations under Article VII and the effect of such
Article VII terminations will be governed by Article VII
of this Agreement.
10.4 SURVIVING PROVISIONS
Notwithstanding any termination of this Agreement, each party's
obligations under Article VIII to indemnify other parties will
survive and not be affected by any termination of this Agreement.
In addition, with respect to Existing Contracts, all provisions
of this Agreement also will survive and not be affected by any
termination of this Agreement.
ARTICLE XI. NOTICES
Any notice will be deemed duly given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other parties.
-38-
<PAGE> 40
If to the Company:
David Hopkins
Canada Life Insurance Company
6201 Powers Ferry Road, N.W.
Atlanta, GA 30339
If to the Fund:
Montgomery Funds III
600 Montgomery Street
San Francisco, CA 94111
Attn: John Story
Executive Vice President
If to the Adviser:
Montgomery Asset Management, L.P.
600 Montgomery Street
San Francisco, CA 94111
Attn: John Story
Executive Vice President
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against
the Fund as neither the trustees, officers,
-39-
<PAGE> 41
agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. The Fund and the Adviser acknowledge that the identities of the
customers of the Company or any of its affiliates (collectively
the "Protected Parties" for purposes of this Section 12.2),
information maintained regarding those customers, and all
computer programs and procedures developed by the Protected
Parties or any of their employees or agents in connection with
the Company's performance of its duties under this Agreement are
the valuable property of the Protected Parties. The Fund and the
Adviser agree that if they come into possession of any list or
compilation of the identities of or other information about the
Protected Parties' customers, or any other property of the
Protected Parties, other than such information as may be
independently developed or compiled by the Fund or the Adviser
from information supplied to them by the Protected Parties'
customers who also maintain, accounts directly with the Fund or
the Adviser, the Fund and the Adviser will hold such information
or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except:
(a) with the Company's prior written consent; or (b) as
required by law or judicial process. The Fund and the Adviser
acknowledge that any breach of the agreements in this Section
12.2 would result in immediate and irreparable harm to the
Protected Parties for which there would be no adequate remedy at
law and agree that in the event of such a breach, the Protected
Parties will be entitled to
-40-
<PAGE> 42
equitable relief by way of temporary and permanent injunctions,
as well as such other relief as any court of competent
jurisdiction deems appropriate.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one
and the same instrument.
12.5. If any provision of this Agreement will be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of
the Agreement will not be affected thereby.
12.6. This Agreement will not be assigned by any party hereto without
the prior written consent of all the parties.
12.7. Each party to this Agreement will cooperate with each other
party and all appropriate governmental authorities (including
without limitation the SEC, the NASD and state insurance
regulators) and will permit each other and such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the
transactions contemplated hereby.
-41-
<PAGE> 43
12.8. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated
herein have been duly authorized by all necessary corporate or
board action, as applicable, by such party and when so executed
and delivered this Agreement will be the valid and binding
obligation of such party enforceable in accordance with its
terms.
12.9. The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to
the Contracts, the Accounts or the Portfolios of the Fund or
other applicable terms of this Agreement.
-42-
<PAGE> 44
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed hereto as of the date specified below.
CANADA LIFE INSURANCE COMPANY OF
NEW YORK
SEAL By: /s/ David A. Hopkins
-----------------------------
MONTGOMERY FUNDS III
SEAL By: /s/ John Story
-----------------------------
MONTGOMERY ASSET MANAGEMENT,
L.P.
SEAL By: /s/ John Story
-----------------------------
-43-
<PAGE> 45
Schedule I
PARTICIPATION AGREEMENT
By and Among
CANADA LIFE INSURANCE COMPANY OF NEW YORK
And
MONTGOMERY FUNDS III
And
MONTGOMERY ASSET MANAGEMENT, L.P.
The following separate accounts of Canada Life Insurance Company of New York
are permitted in accordance with the provisions of this Agreement to invest in
Portfolios of the Fund shown in Schedule 2:
Variable Annuity Account No. 1, established September 1989 under
New York law.
May 1, 1996
-44-
<PAGE> 46
Schedule 2
PARTICIPATION AGREEMENT
By and Among
CANADA LIFE INSURANCE COMPANY OF NEW YORK
And
MONTGOMERY FUNDS III
And
MONTGOMERY ASSET MANAGEMENT, L.P.
The Separate Account(s) shown on Schedule I may invest in the following
Portfolios of the Montgomery Funds III:
Montgomery Variable Series: Emerging Markets Fund
May 1, 1996
-45-
<PAGE> 1
Exhibit 8(a)(d)
Participation Agreement Between Fred Alger and Company, Inc.
and
Canada Life of New York
<PAGE> 2
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 1st day of May, 1996, by and among The Alger
American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Canada Life Insurance Company of
New York, a life insurance company organized as a corporation under the laws of
the State of New York, (the "Company"), on its own behalf and on behalf of each
segregated asset account of the Company set forth in Schedule A, as may be
amended from time to time (the "Accounts"), and Fred Alger and Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and has
an effective registration statement relating to the offer and sale of the
various series of its shares under the Securities Act of 1933, as amended (the
"1933 Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into the
following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income & Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of
Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
<PAGE> 3
WHEREAS, the Company desires to use shares of one or more Portfolios as
investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's
agent for the receipt from each account of purchase orders and
requests for redemption pursuant to the Contracts relating to
each Portfolio, provided that the Company notifies the Trust of
such purchase orders and requests for redemption by 9:30 a.m.
Eastern time on the next following Business Day, as defined in
Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the
Accounts at the net asset value next computed after receipt of a
purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of
the Trust describing Portfolio purchase procedures. The Company
will transmit orders from time to time to the Trust for the
purchase and redemption of shares of the Portfolios. The
Trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person, or suspend or terminate the
offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Trustees acting in good faith and in
light of their fiduciary duties under federal and any applicable
state laws, such action is deemed in the best interests of the
shareholders of such Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio
on behalf of an Account with federal funds to be transmitted by
wire to the Trust, with the reasonable expectation of receipt by
the Trust by 2:00 p.m. Eastern time on the next Business Day
after the Trust (or its agent) receives the purchase order. Upon
receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall
become the responsibility of the Trust for this purpose.
"Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Commission.
2
<PAGE> 4
1.4. The Trust will redeem for cash any full or fractional shares of
any Portfolio, when requested by the Company on behalf of an
Account, at the net asset value next computed after receipt by
the Trust (or its agent) of the request for redemption, as
established in accordance with the provisions of the then current
prospectus of the Trust describing Portfolio redemption
procedures. The Trust shall make payment for such shares in the
manner established from time to time by the Trust. Proceeds of
redemption with respect to a Portfolio will normally be paid to
the Company for an Account in federal funds transmitted by wire
to the Company by order of the Trust with the reasonable
expectation of receipt by the Company by 2:00 p.m. Eastern time
on the next Business Day after the receipt by the Trust (or its
agent) of the request for redemption. Such payment may be
delayed if, for example, the Portfolio's cash position so
requires or if extraordinary market conditions exist, but in no
event shall payment be delayed for a greater period than is
permitted by the 1940 Act. The Trust reserves the right to
suspend the right of redemption, consistent with Section 22(e) of
the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of
shares of the Trust's Portfolios under Section 1.4 on any
Business Day may be netted against one another for the purpose of
determining the amount of any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by
book entry only. Stock certificates will not be issued to the
Company or the Accounts. Portfolio Shares purchased from the
Trust will be recorded in the appropriate title for each Account
or the appropriate subaccount of each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date,
notice to the Company of any income dividends or capital gain
distributions payable on the shares of any Portfolio of the
Trust. The Company hereby elects to receive all such income
dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of that Portfolio. The
Trust shall notify the Company of the number of shares so issued
as payment of such dividends and distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio
on each Business Day, as defined in Section 1.3. The Trust shall
make the net asset value per share for each Portfolio available
to the Company or its designated agent on a daily basis as soon
as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset
value per share available to the Company by 6:30 p.m. Eastern
time each Business Day.
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1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset
accounts, to the Fund Sponsor or its affiliates and to such other
entities as may be permitted by Section 817(h) of the Code, the
regulations hereunder, or judicial or administrative
interpretations thereof. No shares of any Portfolio will be sold
directly to the general public. The Company agrees that it will
use Trust shares only for the purposes of funding the Contracts
through the Accounts listed in Schedule A, as amended from time
to time.
1.10. The Trust agrees that all Participating Insurance Companies
shall have the obligations and responsibilities regarding
pass-through voting and conflicts of interest corresponding
materially to those contained in Section 2.9 and Article IV of
this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar
materials such as voting instruction solicitation materials),
prospectuses and statements of additional information of the
Trust. The Trust shall bear the costs of registration and
qualification of shares of the Portfolios, preparation and filing
of the documents listed in this Section 2.1 and all taxes to
which an issuer is subject on the issuance and transfer of its
shares.
2.2. The Company shall distribute such prospectuses, proxy statements
and periodic reports of the Trust to the Contract owners as
required to be distributed to such Contract owners under
applicable federal or state law.
2.3. The Trust shall provide such documentation (including a final
copy of the Trust's prospectus as set in type or in camera-ready
copy) and other assistance as is reasonably necessary in order
for the Company to print together in one document the current
prospectus for the Contracts issued by the Company and the
current prospectus for the Trust. The Trust shall bear the
expense of printing copies of its current prospectus that will be
distributed to existing Contract owners, and the Company shall
bear the expense of printing copies of the Trust's prospectus
that are used in connection with offering the Contracts issued by
the Company.
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2.4. The Trust and the Distributor shall provide (1) at the Trust's
expense, one copy of the Trust's current Statement of Additional
Information ("SAI") to the Company and to any Contract owner who
requests such SAI, (2) at the Company's expense, such additional
copies of the Trust's current SAI as the Company shall reasonably
request and that the Company shall require in accordance with
applicable law in connection with offering the Contracts issued
by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies
of its proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company
shall reasonably require for purposes of distributing to Contract
owners. The Trust, at the Company's expense, shall provide the
Company with copies of its periodic reports to shareholders and
other communications to shareholders in such quantity as the
Company shall reasonably request for use in connection with
offering the Contracts issued by the Company. If requested by
the Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the Trust's proxy
materials, periodic reports to shareholders and other
communications to shareholders, as set in type or in camera-ready
copy) and other assistance as reasonably necessary in order for
the Company to print such shareholder communications for
distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the
sole owner of the name and mark "Alger" and that all use of any
designation comprised in whole or part of such name or mark under
this Agreement shall inure to the benefit of the Distributor.
Except as provided in Section 2.5, the Company shall not use any
such name or mark on its own behalf or on behalf of the Accounts
or Contracts in any registration statement, advertisement, sales
literature or other materials relating to the Accounts or
Contracts without the prior written consent of the Distributor.
Upon termination of this Agreement for any reason, the Company
shall cease all use of any such name or mark as soon as
reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust
or its designee a copy of each Contract prospectus and/or
statement of additional information describing the Contracts,
each report to Contract owners, proxy statement, application for
exemption or request for no-action letter in which the Trust or
the Distributor is named contemporaneously with the filing of
such document with the Commission. The Company shall furnish, or
shall cause to be furnished, to the Trust or its designee each
piece of sales literature or other promotional material in which
the Trust or the Distributor is named, at least five Business
Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any
representations or statements on behalf of the Trust or
concerning the Trust or the Distributor in connection with the
sale of the Contracts other than information or representations
contained in and accurately
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derived from the registration statement or prospectus for the
Trust shares (as such registration statement and prospectus may
be amended or supplemented from time to time), annual and
semi-annual reports of the Trust, Trust-sponsored proxy
statements, or in sales literature or other promotional material
approved by the Trust or its designee, except as required by
legal process or regulatory authorities or with the prior written
permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any
request for approval on a prompt and timely basis. The Company
shall adopt and implement procedures reasonably designed to
ensure that "broker only" materials including information therein
about the Trust or the Distributor are not distributed to
existing or prospective Contract owners.
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the
Portfolios and the Distributor, in such form as the Company may
reasonably require, as the Company shall reasonably request in
connection with the preparation of registration statements,
prospectuses and annual and semi-annual reports pertaining to the
Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make
any representations or statements on behalf of the Company or
concerning the Company, the Accounts or the Contracts other than
information or representations contained in and accurately
derived from the registration statement or prospectus for the
Contracts (as such registration statement and prospectus may be
amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales
literature or other promotional materials, except as required by
legal process or regulatory authorities or with the prior written
permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the
1940 Act to require pass-through voting privileges for Contract
owners, the Company will provide pass-through voting privileges
to Contract owners whose cash values are invested, through the
registered Accounts, in shares of one or more Portfolios of the
Trust. The Trust shall require all Participating Insurance
Companies to calculate voting privileges in the same manner and
the Company shall be responsible for assuring that the Accounts
calculate voting privileges in the manner established by the
Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered
Account and for which no timely voting instructions from Contract
owners are received in the same proportion as those shares for
which voting instructions are received. The Company and its
agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Portfolio shares held to fund the
Contacts without the prior written consent of the Trust, which
consent may be withheld in the Trust's sole discretion. The
Company reserves the right, to the extent permitted by law, to
vote shares held in any Account in its sole discretion.
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2.12. The Company and the Trust will each provide to the other
information about the results of any regulatory examination
relating to the Contracts or the Trust, including relevant
portions of any "deficiency letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by
the Company to the Trust, under this Agreement (except for
specified expense reimbursements). However, nothing herein shall
prevent the parties hereto from otherwise agreeing to perform,
and arranging for appropriate compensation for, other services
relating to the Trust, the Accounts or both.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the
State of New York and that it has legally and validly established
each Account as a segregated asset account under such law as of
the date set forth in Schedule A, and that Canada Life of America
Financial Services, Inc., the principal underwriter for the
Contracts, is registered as a broker-dealer under the Securities
Exchange Act of 1934 and is a member in good standing of the
National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the
provisions of the 1940 Act and cause each Account to remain so
registered to serve as a segregated asset account for the
Contracts, unless an exemption from registration is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from
registration is available prior to any issuance or sale of the
Contracts; the Contracts will be issued and sold in compliance in
all materials respects with all applicable federal and state
laws; and the sale of the Contracts shall comply in all material
respects with state insurance law suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the Commonwealth of
Massachusetts and that it does and will comply in all material
respects with the 1940 Act and the rules and regulations
thereunder.
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3.5. The Trust and the Distributor represent and warrant that the
Portfolio shares offered and sold pursuant to this Agreement will
be registered under the 1933 Act and sold in accordance with all
applicable federal and state laws, and the Trust shall be
registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its
registration statement under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth
in Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the rules and regulations thereunder,
including without limitation Treasury Regulation 1.817-5, and
will notify the Company immediately upon having a reasonable
basis for believing any Portfolio has ceased to comply or might
not so comply and will immediately take all reasonable steps to
adequately diversify the Portfolio to achieve compliance within
the grace period afforded by Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified
as a "regulated investment company" under Subchapter M of the
Code, that it will make every effort to maintain such
qualification and will notify the Company immediately upon having
a reasonable basis for believing it has ceased to so qualify or
might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors,
officers, employees and others dealing with the money or
securities, or both, of a Portfolio shall at all times be covered
by a blanket fidelity bond or similar coverage for the benefit of
the Trust in an amount not less than the minimum coverage
required by Rule 17g-1 or other applicable regulations under the
1940 Act. Such bond shall include coverage for larceny and
embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act
of 1934 and is a member in good standing of the National
Association of Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance
Companies. In such event, the Trustees will monitor the Trust
for the existence of any material irreconcilable conflict between
the interests of the contract owners of all Participating
Insurance Companies. A material irreconcilable conflict may
arise for a variety of reasons, including: (a) an action by any
state insurance
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regulatory authority; (b) a change in applicable federal or state
insurance, tax or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners.
The Trust shall promptly inform the Company of any determination
by the Trustees that a material irreconcilable conflict exists
and of the implications thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is aware to the Trustees. The Company will
assist the Trustees in carrying out their responsibilities under
the Shared Funding Exemptive Order by providing the Trustees with
all information reasonably necessary for and requested by the
Trustees to consider any issues raised including, but not limited
to, information as to a decision by the Company to disregard
Contract owner voting instructions. All communications from the
Company to the Trustees may be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority
of the disinterested Trustees, that a material irreconcilable
conflict exists that affects the interests of contract owners,
the Company shall, in cooperation with other Participating
Insurance Companies whose contract owners are also affected, at
its own expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, which
steps could include: (a) withdrawing the assets allocable to some
or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should
be implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners,
or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or
offering to the affected Contract owners the option of making
such a change; and (b) establishing a new registered management
investment company or managed separate account.
4.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, the Company may be required, at
the Trusts election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect
to such Account; provided, however that such withdrawal and
termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust
gives written notice that this provision is being implemented.
Until the end of such six (6) month period, the
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Trust shall continue to accept and implement orders by the
Company for the purchase and redemption of shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the
Company will withdraw the affected Account's investment in the
Trust and terminate this Agreement with respect to such Account
within six (6) months after the Trustees inform the Company in
writing that the Trust has determined that such decision has
created a material irreconcilable conflict; provided, however,
that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Until
the end of such six (6) month period, the Trust shall continue to
accept and implement orders by the Company for the purchase and
redemption of shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether
any proposed action adequately remedies any material
irreconcilable conflict, but in no event will the Trust be
required to establish a new funding medium for any Contract. The
Company shall not be required to establish a new funding medium
for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by
the material irreconcilable conflict. In the event that the
Trustees determine that any proposed action does not adequately
remedy any material irreconcilable conflict, then the Company
will withdraw the Account's investment in the Trust and terminate
this Agreement within six (6) months after the Trustees inform
the Company in writing of the foregoing determination; provided,
however, that such withdrawal and termination shall be limited to
the extent required by any such material irreconcilable conflict
as determined by a majority of the disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request
so that the Trustees may fully carry out the duties imposed upon
them by the Shared Funding Exemptive Order, and said reports,
materials and data shall be submitted more frequently if
reasonably deemed appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3
is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Shared Funding
Exemptive Order) on terms and conditions materially different
from those contained in the Shared Funding Exemptive Order, then
the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply
with Rule 6e-3(T), as amended, or Rule 6e-3, as adopted, to the
extent such rules are applicable.
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ARTICLE V.
INDEMNIFICATION
5.1. Indemnification By the Company. The Company agrees to indemnify
and hold harmless the Distributor, the Trust and each of its
Trustees, officers, employees and agents and each person, if any,
who controls the Trust within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 5.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Company, which consent shall not be
unreasonably withheld) or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to
which the Indemnified Parties may become subject under any
statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in a registration statement or prospectus for the
Contracts or in the Contracts themselves or in sales
literature generated or approved by the Company on behalf
of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively,
"Company Documents" for the purposes of this Article V),
or arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately
derived from written information furnished to the Company
by or on behalf of the Trust for use in Company Documents
or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in
and accurately derived from Trust Documents as defined in
Section 5.2(a)) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in
Trust Documents as defined in Section 5.2(a) or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make
the statements therein not misleading if such statement
or omission was made in reliance upon and accurately
derived from written information furnished to the Trust
by or on behalf of the Company; or
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(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required
under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company; or
(f) arise out or result from the provision by the Company to
the Trust of insufficient or incorrect information
regarding the purchase or sale of shares of any
Portfolio, or the failure of the Company to provide such
information on a timely basis.
5.2. Indemnification by the Distributor, The Distributor agrees to
indemnify and hold harmless the Company and each of its
directors, officers, employees, and agents and each person, if
any, who controls the Company within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for the
purposes of this Section 5.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor, which consent shall not
be unreasonably withheld) or expenses (including the reasonable
costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses"), to
which the Indemnified Parties may become subject under any
statute or regulation, or at common law or otherwise, insofar as
such Losses are related to the sale or acquisition of the
Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained
in the registration statement or prospectus for the Trust
(or any amendment or supplement thereto) (collectively,
"Trust Documents" for the purposes of this Article V), or
arise out of or are based upon the omission or the
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately
derived from written information furnished to the
Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares
and; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in
and accurately derived form Company Documents) or
wrongful conduct of the Distributor or persons under its
control, with respect to the sale or acquisition of the
Contracts or Portfolio shares; or
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(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in
Company Documents or the omission or alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading if such statement or omission was made in
reliance upon and accurately derived from written
information furnished to the Company by or on behalf of
the Trust; or
(d) arise out of or result from any failure by the
Distributor or the Trust to provide the services or
furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or
the Trust in this Agreement or arise out of or result
from any other material breach of this Agreement by the
Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any Losses incurred or assessed
against an Indemnified Party that arise from such Indemnified
Party's willful misfeasance, bad faith or negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations or
duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable
under the indemnification provisions of Sections 5.1 or 5.2, as
applicable, with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the other
party in writing within a reasonable time after the summons, or
other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise
received by such Indemnified Party (or after such Indemnified
Party shall have received notice of service upon or other
notification to any designated agent), but failure to notify the
party against whom indemnification is sought of any such claim
shall not relieve that party from any liability which it may have
to the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party,
the indemnifying party shall be entitled to participate, at its
own expense, in the defense of such action. The indemnifying
party also shall be entitled to assume the defense thereof, with
counsel reasonably satisfactory to the party named in the action.
After notice from the indemnifying party to the Indemnified Party
of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel
retained by it, and the indemnifying party will not be liable to
the Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs
of investigation.
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ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
(a) at the option of any party upon 60 days advance written notice to
the other parties, unless a shorter time is agreed to by the
parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if the
Contracts are not registered, issued or sold in accordance with
applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority of
the Trustees of the Trust, or a majority of its disinterested
Trustees, that a material irreconcilable conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body regarding the Trust's or the Distributor's duties
under this Agreement or related to the sale of Trust shares or
the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails to
meet the diversification requirements specified in Section 3.6
hereof; or.
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law precludes
the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or
(h) at the option of the Company, if the Portfolio fails to qualify
as a Regulated Investment Company under Subchapter M of the Code;
or
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(i) at the option of the Distributor if it shall determine in
its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse
publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available
additional shares of any Portfolio and redeem shares of any
Portfolio pursuant to the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination
of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of
the Trust are held on behalf of Contract owners in accordance
with Section 6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Canada Life Insurance Company of New York
500 Mamaroneck Avenue
Harrison, NY 10528
Attn: David A. Hopkins
15
<PAGE> 17
ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or
effect.
8.2. This Agreement may be executed in two or more counterparts, each
of which taken together shall constitute one and the same
instrument.
8.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
New York. It shall also be subject to the provisions of the
federal securities laws and the rules and regulations thereunder
and to any orders of the Commission granting exemptive relief
therefrom and the conditions of such orders. Copies of any such
orders shall be promptly forwarded by the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly,
under this Agreement, of any and every nature whatsoever, shall
be satisfied solely out of the assets of the Trust and no
Trustee, officer, agent or holder of shares of beneficial
interest of the Trust shall be personally liable for any such
liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without
limitation the Commission, the National Association of Securities
Dealers, Inc. and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in
connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties
hereto are entitled to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the prior written
approval of the other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and
executed by both parties.
16
<PAGE> 18
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this Agreement, treat as confidential the names and
addresses of the owners of the Contracts and all information
reasonably identified as confidential in writing by any other
party hereto, and shall not disclose such confidential
information without the written consent of the affected party
unless such information has become publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
Fred Alger and Company, Incorporated
By: /s/ Gregory Duch
--------------------------------
Name: Gregory S. Duch
Title: Executive Vice President
Alger American Fund
By: /s/ Gregory Duch
--------------------------------
Name: Gregory S. Duch
Title: Treasurer
Canada Life Insurance Company of New York
By: /s/ David A. Hopkins
--------------------------------
Name: David A. Hopkins
Title: Assistant Secretary
17
<PAGE> 1
Exhibit 8(a)(e)
Participation Agreement Between Fidelity Distributors Corporation
and
Canada Life of New York
<PAGE> 2
PARTICIPATION AGREEMENT
Between
FIDELITY DISTRIBUTORS CORPORATION
and
CANADA LIFE INSURANCE COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into as of this 15th day of April,
1994 by and between Canada Life Insurance Company of New York, (hereinafter the
"Company"), a Michigan corporation, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto, as may
be amended from time to time, (each such account hereinafter referred to as an
"Account" and collectively as the "Accounts"), and FIDELITY DISTRIBUTORS
CORPORATION (hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, each Fund set forth on Schedule A hereto (which may be amended
from time to time by mutual written consent) engages in business as an open-end
management investment company.
WHEREAS, the beneficial interest in any Fund may be divided into
several series of shares, each designated a "Portfolio" as set forth in Schedule
A and representing the interest in a particular managed portfolio of securities
and other assets; and
WHEREAS, the Company has established the Accounts, to serve as
investment vehicles for the group annuity contracts offered by the Company set
forth on Schedule A (which may be amended from time to time by mutual written
consent) ("Contracts"). Selection of a particular investment company is made by
the owner of a certificate issued under a Contract ("Certificate") in accordance
with the provisions of the applicable Contract; and
WHEREAS, the Underwriter is registered as a broker/dealer with the
Securities and Exchange Commission (the "SEC") under the Securities Exchange Act
of 1934, as amended, (hereinafter the "1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable securities and insurance
laws and regulations, the Company intends to purchase shares in the Portfolios
on behalf of each Account to fund certain of the aforesaid variable annuity
contracts.
NOW, THEREFORE, in consideration of their mutual promises, the Company
and the Underwriter agree as follows:
1
<PAGE> 3
ARTICLE I. Sale of Fund Shares
1.1. The Underwriter agrees to make available shares of the Portfolios
indefinitely for purchase at the applicable net asset value per share next
computed in accordance with the then current prospectus for the applicable Fund
after receipt by the applicable Fund of the order for purchase by the Company
and its Accounts on those days on which the applicable Fund calculates its net
asset value pursuant to rules of the SEC; provided that the Company qualifies
for any sales load waiver described in the then current prospectus for such
Portfolio. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made. Payment shall be in federal funds
transmitted by wire. Upon receipt by a Fund of the federal funds so wired, for
purposes of Section 2.6 such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund. The Funds shall use
reasonable efforts to calculate such net asset value on each day that the New
York Stock Exchange is open for trading and to make their net asset values
available to the Company by 7 p.m. Boston time. Notwithstanding the foregoing,
the Board of Trustees of the Funds (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.2. Each Fund, on behalf of its Portfolios, agrees to redeem for cash,
on the Company's request, any full or fractional shares of the Portfolios held
by the Company, executing such requests on a daily basis at the net asset value
next computed in accordance with the then current prospectus for the applicable
Fund after receipt by the applicable Fund of the request for redemption.
1.3. The Company agrees that all net amounts available under the
Contracts shall be invested in the Portfolios, or in the Company's general
account, provided that such amounts may also be invested in an investment
company other than the Portfolios if (a) such other investment company, or
series thereof, has investment objectives or policies that are substantially
different from the investment objectives and policies of all the Portfolios; or
(b) the Company gives the Underwriter 60 days written notice of its intention to
make such other investment company available as a funding vehicle for the
Contracts; or (c) such other investment company was available as a funding
vehicle for the Contracts prior to the date of this Agreement and the Company so
informs the Underwriter prior to their signing this Agreement; or (d) the
Underwriter consents to the use of such other investment company.
1.4. Issuance and transfer of the Portfolios, shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Portfolios will be recorded in an appropriate title for
each Account or the appropriate subaccount of each Account.
1.5. The Funds shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Funds shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
2
<PAGE> 4
1.6 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to shares attributable to the Company's assets held in the
Account) except (i) as necessary to implement Contract Owner or plan participant
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or legal precedent of general application
(hereinafter referred to as "Legally Required Redemptions"). Upon request, the
Company will promptly furnish to the Underwriter the opinion of counsel for the
Company (which counsel shall be reasonably satisfactory to the Underwriter) to
the effect that any redemption pursuant to clause (ii) above is a Legally
Required Redemption. Furthermore, except in cases where permitted under the
terms of the Contracts or the plans funded thereby, the Company shall not
prevent Contract Owners or plan participants, as the case may be, from
allocating payments to a Fund that was otherwise available under the Contracts
or the plans, as appropriate, without first giving the Underwriter 90 days
notice of its intention to do so.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that the Contracts and
Certificates are or will be registered under the Securities Act of 1933 ("1933
Act") or are exempt from registration thereof; that the Contracts and
Certificates will be issued and sold in compliance in all material respects with
all applicable Federal and State laws and that the sale of the Contracts and
Certificates shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under Section 500.925 of
the Michigan Insurance Code and that each Account is or will be registered as a
unit investment trust in accordance with the provisions of the Investment
Company Act of 1940 ("1940 Act") to serve as a segregated investment account for
the Contracts or is exempt from registration thereunder.
2.2. The Underwriter represents that each Fund is currently qualified
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code of 1986, as amended, (the "Code") and that it will make every effort to
maintain such qualification (under Subchapter M or any successor or similar
provision) and that it will notify the Company immediately upon having a
reasonable basis for believing that any Fund ceased to so qualify or might not
so qualify in the future.
2.3. The Company represents that the Contracts and Certificates are
currently treated as annuity contracts under applicable provisions of the Code
and that it will make every effort to maintain such treatment and that it will
notify the Underwriter immediately upon having a reasonable basis for believing
that the Contracts or Certificates have ceased to be so treated or that they
might not be so treated in the future.
2.4. The Underwriter makes no representation as to whether any aspect
of any Fund's operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states.
2.5. The Underwriter represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell
3
<PAGE> 5
and distribute the Fund shares in accordance with all applicable state and
federal securities laws, including without limitation the 1933 Act, the 1934
Act, and the 1940 Act.
2.6. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Funds are and shall continue to be at
all times covered by a blanket fidelity bond or similar coverage for the benefit
of the Funds, in an amount not less than the minimum coverage as required
currently of entities subject to the requirements of Rule 17g-1 of the 1940 Act
or related provisions as may be promulgated from time to time. The aforesaid
Bond shall include coverage for larceny and embezzlement and shall be issued by
a reputable bonding company.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1. Unless otherwise required by applicable federal law, the Company
will distribute to Certificate owners all proxy material furnished by the Funds
and will vote Portfolio shares in accordance with instructions received from
those Certificate owners with Certificate value allocated to Portfolio shares.
The Company shall vote Portfolio shares for which no instructions have been
received in the same proportion as shares for which such instructions have been
received from Certificate owners. The Company and its agents will in no way
recommend action in connection with or oppose or interfere with the solicitation
of proxies for Portfolio shares held by Certificate owners.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Underwriter or its designee, each piece of sales literature or other promotional
material in which any Fund or its investment adviser or the Underwriter is
named, at least fifteen Business Days prior to its use. No such material shall
be used if the Underwriter or its designee objects to such use within fifteen
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of any Fund or concerning any Fund in
connection with the sale of the Contracts and Certificates other than the
information or representations contained in the registration statement or
prospectus for such Fund shares, as such registration statement and prospectus
may be amended or supplemented from time to time, or in reports or proxy
statements for such Fund, or in sales literature or other promotional material
approved by the Underwriter or its designee, except with the permission of the
Underwriter or its designee.
4.3. Sales literature in which any Fund or its investment advisor is
named shall be submitted to the SEC or NASD for review as required by applicable
law. Copies of any comments received shall be sent to the Underwriter or its
designee.
4.4. The Underwriter or its designee shall furnish, or shall cause to
be furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or any Account is named, at
least fifteen Business Days prior to its use. No such material shall be used if
the Company or its designee objects to such use within fifteen Business Days
after receipt of such material.
4
<PAGE> 6
4.5. The Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, any Account,
the Contracts or the Certificates other than the information or representations
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.6. The Company will provide to the Underwriter at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, applications for
exemptions, requests for no action letters, and all amendments to any of the
above, that relate to the Contracts or any Account, contemporaneously with the
filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials.
ARTICLE V. Fees and Expenses
5.1. The Underwriter shall pay no fee or other compensation to the
Company under this agreement, except that if a Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Underwriter may make payments to the Company or to the underwriter for the
Contracts if and in amounts agreed to by the Underwriter in writing and such
payments will be made out of existing fees otherwise payable to the Underwriter,
past profits of the Underwriter or other resources available to the Underwriter.
5.2. Each Fund shall bear the expenses for the cost of registration and
qualification of its shares, preparation and filing of its prospectus and
registration statement, proxy materials and reports. The Underwriter shall
provide to the Company one copy for each Account of each Fund's prospectus,
proxy materials and reports. The Company shall provide, at its own expense
unless otherwise agreed to in writing by the Company and any affiliate of the
Underwriter, a copy of such prospectuses, proxy materials and reports to
Certificate owners who have allocated a portion of their Certificate value to
the applicable Fund. In addition, the Company shall not permit any Certificate
owner to allocate any portion of their Certificate value to a Fund unless prior
to such allocation such Certificate owner has received a copy of the Fund's
current prospectus.
5
<PAGE> 7
ARTICLE VI. Indemnification
6.1. Indemnification By the Company
6.1(a). The Company agrees to indemnify and hold harmless each Fund and
each trustee of the Board and officers and each person, if any, who controls any
Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 6.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of any Fund's shares, the Contracts or
the Certificates and arise out of or result from or are based upon:
(i) any untrue statements or alleged untrue statements of any
material fact contained in the Registration Statement or
prospectus for the Contracts or contained in the Contracts or
Certificates or sales literature for the Contracts or
Certificates (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission
was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of any Fund for use
in the Registration Statement or prospectus for the Contracts
or Certificates or in the Contracts or Certificates or sales
literature (or any amendment or supplement thereto) or
otherwise for use in connection with the sale of the Contracts
or Certificates or any Fund shares; or
(ii) statements or representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature of any Fund not supplied by the
Company, or persons under its control) or wrongful conduct of
the Company or persons under its control, with respect to the
sale or distribution of the Contracts or Certificates or any
Fund Shares; or
(iii) untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement,
prospectus, or sales literature of any Fund or any amendment
thereof or supplement thereto or the omission or alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in
reliance upon information furnished to the Underwriter by or
on behalf of the Company; or
(iv) failure by the Company to provide the services and
furnish the materials under the terms of this Agreement; or
(v) material breach of any representation and/or warranty made
by the Company in this Agreement or any other material breach
of this Agreement by the Company.
6
<PAGE> 8
6.1(b). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
6.1(c). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of any Fund's Shares or the Contracts or Certificates or
the operation of any Fund.
6.2. Indemnification by the Underwriter
6.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 6.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of any Fund's shares or the
Contracts or Certificates and arise out of or result from or are based upon any:
(i) untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or
prospectus or sales literature of any Fund (or any amendment
or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as
to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter by or
on behalf of the Company for use in the Registration Statement
or prospectus for any Fund or in sales literature (or any
amendment or supplement thereto) or otherwise for use in
connection with the sale of the Contracts or Certificates or
any Fund shares; or
(ii) statements or representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature for the Contracts or
Certificates not supplied by the Underwriter or persons under
its control) or wrongful conduct of any
7
<PAGE> 9
Fund, or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or
Certificates or any Fund shares; or
(iii) untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement,
prospectus, or sales literature covering the Contracts or
Certificates, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of any
Fund; or
(iv) failure by any Fund to provide the services and furnish
the materials under the terms of this Agreement; or
(v) material breach of any representation and/or warranty made
by the Underwriter in this Agreement or any other material
breach of this Agreement by the Underwriter.
6.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
6.2(c). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or
Certificates or the operation of any Account.
ARTICLE VII. Applicable Law
7.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
7.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
8
<PAGE> 10
ARTICLE VIII. Termination
8.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason on sixty (60) days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the
Underwriter with respect to any Portfolio based upon the
Company's determination that shares of such Portfolio are not
reasonably available to meet the requirements of the
Contracts; or
(c) termination by the Company by written notice to the
Underwriter with respect to any Portfolio in the event any of
the Portfolio's shares are not registered, issued or sold in
accordance with applicable state and/or federal law or such
law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by
the Company; or
(d) termination by the Company by written notice to the
Underwriter with respect to any Portfolio in the event that
such Portfolio ceases to qualify as a Regulated Investment
Company under Subchapter M of the Code or under any successor
or similar provision, or if the Company reasonably believes
that such Fund may fail to so qualify; or
(e) termination by the Underwriter by written notice to the
Company, in its sole judgment exercised in good faith, that
the Company and/or its affiliated companies has suffered a
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is
the subject of material adverse publicity; or
(f) termination by the Company by written notice to the
Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse
publicity.
8.2 Notwithstanding any termination of this Agreement, the Underwriter
shall, at the option of the Company, continue to make available additional
shares of the Funds pursuant to the terms and conditions of this Agreement, for
all Contracts in effect on the effective date of termination of this Agreement.
ARTICLE IX. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
9
<PAGE> 11
Attention: Treasurer
If to the Company
Canada Life Insurance Company of New York
6201 Powers Ferry Road Northwest, Suite 600
Atlanta, GA 30339
Attn: David A. Hopkins
ARTICLE X. Miscellaneous
10.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and Certificates and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information without the express
written consent of the affected party until after such time, if any, as it has
come into the public domain.
10.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
10.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall, permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
10.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
10.7. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Underwriter may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed and registered
to perform the obligations of the Underwriter under this Agreement.
10.8. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
10
<PAGE> 12
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles ("GAAP")), as soon as
practical and in any event within 90 days after the end of
each fiscal year;
(b) the Company's quarterly statements (statutory and GAAP), as
soon as practical and in any event within 45 days after the
end of each quarterly period;
(c) any financial statement, proxy statement, notice or report of
the Company sent to stockholders and/or policyholders, as
soon as practical after the delivery thereof to stockholders;
(d) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulator, as soon as
practical after the filing thereof;
(e) any other report submitted to the Company by independent
accountants in connection with any annual, interim or special
audit made by them of the books of the Company, as soon as
practical after the receipt thereof.
10.9 All persons dealing with any Fund must look solely to the property
of the Fund for the enforcement of any claims against the Fund as neither the
Board, officers, agents or shareholders of any Fund assume any personal
liability for obligations entered into or on behalf of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officers,
By: /s/
---------------------------
Title: PRESIDENT
------------------------
Date: APRIL 29, 1994
-------------------------
By: /s/ D.E. Barton
---------------------------
Title: DIRECTOR, GROUP SALES
------------------------
Date: APRIL 29, 1994
-------------------------
11
<PAGE> 13
FIDELITY DISTRIBUTORS CORPORATION
By its authorized officer,
By: /s/
---------------------------
Title: President
------------------------
Date: 4/28/94
-------------------------
12
<PAGE> 14
SCHEDULE A
<TABLE>
<CAPTION>
Name and Date of
Formation of Policy Form Numbers of Contracts Corresponding Mutual
Separate Account Issued Through Separate Account Fund or Fund Portfolio
- ---------------- ------------------------------- ----------------------
<S> <C> <C>
Canada Life Insurance Canada Life 401(k) Fidelity Advisor Growth Opportunities Fund
Company of New York Fidelity Advisor Income and Growth Fund
Annuity Account 2 Fidelity Advisor High Yield Fund
(2-25-93) Fidelity VIP Fund Overseas Portfolio
Fidelity VIP Fund II Asset Manager Portfolio
</TABLE>
1
<PAGE> 1
Exhibit 8(a)(f)
Participation Agreement Between Berger Institutional Products Trust
and
Canada Life of New York
<PAGE> 2
PARTICIPATION AGREEMENT
Among
BERGER INSTITUTIONAL PRODUCTS TRUST
BBOI WORLDWIDE LLC
and
CANADA LIFE INSURANCE COMPANY OF NEW YORK
THIS AGREEMENT, made and entered into this 1st day of MAY, 1997 by and among
CANADA LIFE INSURANCE COMPANY OF NEW YORK, (hereinafter the "Insurance
Company"), a New York corporation, on its own behalf and on behalf of each
segregated asset account of the Insurance Company set forth on Schedule A hereto
as may be amended from time to time (each such account hereinafter referred to
as the "Account"), BERGER INSTITUTIONAL PRODUCTS TRUST, a Delaware business
trust (the "Trust") and BBOI WORLDWIDE LLC, a Delaware limited liability company
("BBOI Worldwide").
WHEREAS, the Trust engages in business as an open-end management investment
company and is available to act as the investment vehicle for variable annuity
and life insurance contracts to be offered by separate accounts of insurance
companies which have entered into participation agreements substantially
identical to this Agreement ("Participating Insurance Companies") and for
qualified retirement and pension plans ("Qualified Plans"); and
WHEREAS, the beneficial interest in the Trust is divided into several series
of shares, each designated a "Fund" and representing the interest in a
particular managed portfolio of securities and other assets; and
WHEREAS, the Trust has obtained an order from the Securities and Exchange
Commission (the "Commission"), dated April 24, 1996 (File NO. 812-9852),
granting Participating Insurance Companies and their separate accounts
exemptions from the provisions of
<PAGE> 3
Sections 9 (a) , 13 (a) , 15 (a) , and 15(b) of the Investment Company Act of
1940, as amended, (the "1940 Act") and Rules 6e-2(b) (15) and 6e-3 (T)(b)(15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by Qualified Plans and by variable annuity and variable life insurance
separate accounts of life insurance companies that may or may not be affiliated
with one another (the "Mixed and Shared Funding Exemptive Order"); and
WHEREAS, the Trust is registered as an open-end management investment company
under the 1940 Act and the offering of its shares is registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act") ; and
WHEREAS, BBOI Worldwide is duly registered as an investment adviser under the
Investment Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Insurance Company has registered under the 1933 Act, or will
register under the 1933 Act, certain variable annuity or variable life insurance
contracts identified by the form number(s) listed on Schedule B to this
Agreement, as amended from time to time hereafter by mutual written agreement of
all the parties hereto (the "Contracts") ; and
WHEREAS, each Account is a duly organized, validly existing segregated asset
account, established by resolution of the board of directors of the Insurance
Company on the date shown for that Account on Schedule A hereto, to set aside
and invest assets attributable to the Contracts; and
WHEREAS, the Insurance Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurance Company intends to purchase shares in the Funds at
net asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Insurance
Company, the Trust and BBOI Worldwide agree as follows:
2
<PAGE> 4
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Insurance Company those shares of the
Trust which each Account orders, executing such orders on a daily basis at the
net asset value next computed after receipt by the Trust or its designee of the
order for the shares of the Trust. For purposes of this Section 1.1, the
Insurance Company shall be the designee of the Trust for receipt of such orders
from the Accounts and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust receives notice of such order by 7:00 a.m.,
Mountain Time, on the next following Business Day. In this Agreement, "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Trust calculates its net asset value pursuant to the rules of
the Commission.
1.2. The Trust agrees to make its shares available for purchase at the
applicable net asset value per share by the Insurance Company and its Accounts
on those days on which the Trust calculates its Funds' net asset values
pursuant to rules of the Commission and the Trust shall use reasonable efforts
to calculate its Funds' net asset values on each day on which the New York Stock
Exchange is open for trading. Notwithstanding the foregoing, the trustees of the
Trust may refuse to sell shares of any Fund to any person, or suspend or
terminate the offering of shares of any Fund if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole discretion
of the trustees of the Trust acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of that Fund.
1.3. The Trust agrees that shares of the Trust will be sold only to Accounts
of Participating Insurance Companies and to Qualified Plans. No shares of any
Fund will be sold to the general public.
1.4. The Trust will not sell its shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Sections 2.4, 3.4, 3.5, and
3
<PAGE> 5
Sections 7.1 - 7.7 of this Agreement is in effect to govern such sales.
1.5. The Trust agrees to redeem, on the Insurance Company's request, any full
or fractional shares of the Trust held by the Account, executing such requests
on a daily basis at the net asset value next computed after receipt by the Trust
or its designee of the request for redemption. However, if one or more Funds has
determined to settle redemption transactions for all of its shareholders on a
delayed basis (more than one business day, but in no event more than three
Business Days, after the date on which the redemption order is received, unless
otherwise permitted by an order of the Commission under Section 22(e) of the
1940 Act), the Trust shall be permitted to delay sending redemption proceeds to
the Insurance Company by the same number of days that the Trust is delaying
sending redemption proceeds to the other shareholders of the Fund. For purposes
of this Section 1.5, the Insurance Company shall be the designee of the Trust
for receipt of requests for redemption from each Account and receipt by that
designee shall constitute receipt by the Trust; provided that the Trust receives
notice of the request for redemption by 7:00 a.m., Mountain Time, on the next
following Business Day.
1.6. The Insurance Company agrees to purchase and redeem the shares of each
Fund offered by the then-current prospectus of the Trust in accordance with the
provisions of that prospectus. The Insurance Company agrees that all net amounts
available under the Contracts shall be invested in the Trust, or in the
Insurance Company's general account, provided that such amounts may also be
invested in an investment company other than the Trust if (a) the other
investment company, or series thereof, has investment objectives or policies
that are substantially different from the investment objectives and policies of
any Fund of the Trust in which the Account may invest; or (b) the other
investment company was available as a funding vehicle for the Contracts prior to
the date of this Agreement and the Insurance Company so informs the Trust and
BBOI Worldwide prior to their signing this Agreement; or (c) the Trust and BBOI
Worldwide consent in advance in writing to the use of the other investment
company.
1.7. The Insurance Company shall pay for Trust shares by 1:00 p.m., Mountain
Time, on the next Business Day after an order
4
<PAGE> 6
to purchase Trust shares is made in accordance with the provisions of Section
1.1 hereof. Payment shall be in federal funds transmitted by wire. For the
purpose of Sections 2.9 and 2.10, upon receipt by the Trust of the federal funds
so wired, such funds shall cease to be the responsibility of the Insurance
Company and shall become the responsibility of the Trust. Payment of net
redemption proceeds (aggregate redemptions of a Fund's shares by an Account
minus aggregate purchases of that Fund's shares by that Account) of less than $1
million for a given Business Day will be made by wiring federal funds to the
Insurance Company on the next Business Day after receipt of the redemption
request. Payment of net redemption proceeds of $1 million or more will be by
wiring federal funds within three Business Days after receipt of the redemption
request. However, payment may be postponed under unusual circumstances, such as
when normal trading is not taking place on the New York Stock Exchange, an
emergency as defined by the Securities and Exchange Commission exists, or as
permitted by the Securities and Exchange Commission.
1.8. Issuance and transfer of the Trust shares will be by book entry only.
Stock certificates will not be issued to the Insurance Company or any Account.
Shares ordered from the Trust will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Trust shall furnish same day notice (by wire or telephone, followed,
by written confirmation) to the Insurance Company of any income, dividends or
capital gain distributions payable on the Funds' shares. The Insurance Company
hereby elects to receive all income dividends and capital gain distributions
payable on a Fund's shares in Additional shares of that Fund. The Insurance
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Trust shall notify
the Insurance Company of the number of shares issued as payment of dividends and
distributions. Any material errors in the calculation of the income dividends
and capital gain distributions shall be reported immediately upon discovery to
the Insurance Company. Non-material errors will be corrected in the next
Business Day's net asset value per share for the Fund in question.
5
<PAGE> 7
1.10. The Trust shall make the net asset value per share for each Fund
available to the Insurance Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make those pershare net asset values available by 4:00 p.m.,
Mountain Time. Any material error in the calculation of the net asset value per
share shall be reported immediately upon discovery to the Insurance Company.
Non-material errors will be corrected in the next Business Day's net asset value
per share for the Fund in question.
ARTICLE II. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
2.1. The Insurance Company represents, warrants an agrees that the offerings
of the Contracts are, or will be, registered under the 1933 Act; that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws and that the sale of the Contracts shall
comply in all material. respects with applicable state insurance suitability
requirements. The Insurance Company further represents that it is an insurance
company duly organized and in good standing under applicable law and that it has
legally and validly established the Account prior to any issuance or sale
thereof as a segregated asset account under Section 4240 of the New York
Insurance Code and has registered, or warrants and agrees that prior to any
issuance or sale of the Contracts it will register, the Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve as a
segregated investment account for the Contracts.
2.2. The Trust warrants and agrees that Trust shares sold pursuant to this
Agreement shall be registered under the 1933 Act, duly authorized for issuance
and sale in compliance with the laws of the State of Delaware and all applicable
federal securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust warrants and agrees that it shall amend the registration
statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Trust
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Trust or
BBOI Worldwide.
6
<PAGE> 8
2.3. The Trust represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and warrants and agrees that it will make all reasonable
efforts to maintain its qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Insurance Company immediately
upon having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
2.4. The Insurance Company represents that the Contracts are currently
treated as annuity or life insurance contracts under applicable provisions of
the Code and warrants and agrees that it will make every effort to maintain such
treatment and that it will notify the Trust and BBOI Worldwide immediately upon
having a reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.5. The Trust may elect to make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. To the extent that it decides to
finance distribution expenses pursuant to Rule 12b-1, the Trust undertakes to
have a board of trustees, a majority of whom are not interested persons of the
Trust, formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.6. The Trust makes no representation warranties as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies or will comply with the insurance laws or regulations of the
various states.
2.7. The Trust represents that it is lawfully organized and validly existing
under the laws of the State of Delaware and represents, warrants and agrees that
it does and will comply in all material respects with the 1940 Act.
2.8. BBOI Worldwide represents that it is and warrants that it shall remain
duly registered as an investment adviser under all applicable federal and state
securities laws and agrees that it shall perform its obligations for the Trust
in compliance in all
7
<PAGE> 9
material respects with the laws of the State of Colorado and any applicable
state and federal securities laws.
2.9. The Trust and BBOI Worldwide represent and warrant that all of their
officers, employees, investment advisers, investment sub-advisers, and other
individuals or entities described in Rule 17g-1 under the 1940 Act dealing with
the money and/or securities of the Trust are, and shall continue to be at all
times, covered by a blanket fidelity bond or similar coverage for the benefit
of the Trust in an amount not less than the minimum coverage required currently
by Rule 17g-1 under the 1940 Act or related provisions as may be promulgated
from time to time. That fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.10. The Insurance Company represents and warrants that all of its officers,
employees, investment advisers, and other individuals or entities described in
Rule 17g-1 under the 1940 Act are and shall continue to be at all times covered
by a blanket fidelity bond or similar coverage for the benefit of the Trust, in
an amount not less than the minimum coverage required currently for entities
subject to the requirements of Rule 17g-1 of the 1940 Act or related provisions
or may be promulgated from time to time. The aforesaid bond shall include
coverage for larceny and embezzlement and shall be issued by a reputable bonding
company.
ARTICLE III. DISCLOSURE DOCUMENTS AND VOTING
3.1. BBOI Worldwide shall provide the Insurance Company (at the Insurance
Company's expense) with as many copies of the Trust's current prospectus as the
Insurance Company may reasonably request. If requested BY the Insurance Company
in lieu thereof, the Trust shall provide such documentation (including a final
copy of the new prospectus as set in type at the Trust'S expense) and other
assistance as is reasonably necessary in order for the Insurance Company once
each year (or more frequently if the prospectus for the Trust is amended) to
have the prospectus for the Contracts and the Trust's prospectus printed
together in one document (at the Insurance Company's expense).
3.2. The Trust's prospectus shall state that the Statement of Additional
Information for the Trust (the "SAI") is available
8
<PAGE> 10
from the Trust, and BBOI Worldwide (or the Trust), at its expense, shall print
and provide the SAI free of charge to the Insurance Company and to any owner of
a Contract or prospective owner who requests the SAI.
3.3. The Trust, at its expense, shall provide the Insurance Company with
copies of its proxy material, reports to shareholders and other communications
to shareholders in such quantity as the Insurance Company shall reasonably
require for distributing to Contract owners.
3.4. If and to the extent required by law, the Insurance Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Trust shares in accordance with instructions received
from Contract owners; and
(iii) vote Trust shares for which no instructions have been received in
the same proportion as Trust shares of that Fund for which
instructions have been received;
so long as and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable contract owners. The
Insurance Company reserves the right to vote Trust shares held in any segregated
asset account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts participating in the Trust calculates voting privileges in a
manner consistent with the standards set forth on Schedule C attached hereto and
incorporated herein by this reference, which standards will also be provided to
the other Participating Insurance Companies. The Insurance Company shall fulfill
its obligation under, and abide by the terms and conditions of, the Mixed and
Shared Funding Exemptive Order.
3.5. The Trust will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Trust will either provide for
annual meetings (except insofar as the Commission may interpret Section 16 of
the 1940 Act not to require
9
<PAGE> 11
such meetings) or, as the Trust currently intends, comply with Section 16 (c) of
the 1940 Act (although the Trust is not one of the trusts described in Section
16(c) of that Act) as well as with Sections 16 (a) and, if and when applicable,
16 (b). Further, the Trust will act in accordance with the Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
ARTICLE IV. Sales Material and Information
4.1. The Insurance Company shall furnish, or shall cause to be furnished, to
the Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, a sub-adviser of one of the Funds, or BBOI
Worldwide is named, at least fifteen calendar days prior to its use. No such
material shall be used if the Trust or its designee objects to such use within
ten calendar days after receipt of such material.
4.2. The Insurance Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust in
connection with the sale of the Contracts other than the information or
representations contained in the Trust's registration statement, prospectus or
SAI, as that registration statement, prospectus or SAI may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee or by BBOI Worldwide or its designee, except with the
permission of the Trust or BBOI Worldwide or their designees.
4.3. The Trust, BBOI Worldwide, or its designee shall furnish, or shall cause
to be furnished, to the Insurance Company or its designee, each piece of sales
literature or other promotional material in which the Insurance Company or the
Account is named at least fifteen calendar days prior to its use. No such
material shall be used if the Insurance Company or its designee objects to such
use within ten calendar days after receipt of that material.
4.4. The Trust and BBOI Worldwide, or their designees, shall not give any
information or make any representations on behalf of
10
<PAGE> 12
the Insurance Company or concerning the Insurance Company, any Account, or the
Contracts other than the information or representations contained in a
registration statement, prospectus or statement of additional information for
the Contracts, as that registration statement, prospectus or statement of
additional information may be amended or supplemented from time to time, or in
published reports for any Account which are in the public domain or approved by
the Insurance Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Insurance Company or
its designee, except with the permission of the Insurance Company.
4.5. The Trust will provide to the Insurance Company at least one complete
copy of each registration statement, prospectus, statement of additional
information, report, proxy statement, piece of sales literature or other
promotional material, application for exemption, request for no-action letter,
and any amendment to any of the above, that relate to the Trust or its shares,
contemporaneously with the filing of the document with the Commission, the
National Association of Securities Dealers, Inc. ("NASD"), or other regulatory
authorities.
4.6. The Insurance Company will provide to the Trust at least one complete
copy of each registration statement, prospectus, statement of additional
information, report, solicitation for voting instructions, piece of sales
literature and other promotional material, application for exemption, request
for no-action letter, and any amendment to any of the above, that relates to the
Contracts or the Account, contemporaneously with the filing of the document with
the Commission, the NASD, or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements,
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media, sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, shareholder
newsletters, seminar texts, reprints or excerpts of any other advertisement,
sales literature,
11
<PAGE> 13
or published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees, and
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials.
4.8. At the request of any party to this Agreement, each other party will
make available to the other party's independent auditors and/or representative
of the appropriate regulatory agencies, all records, data and access to
operating procedures that may be reasonably requested.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust and BBOI Worldwide shall pay no fee or other compensation to
the Insurance Company under this agreement, except as set forth in Section 5.4
and except that if the Trust or any Fund adopts and implements a plan pursuant
to Rule 12b-1 to finance distribution expenses, BBOI Worldwide or the Trust may
make payments to the Insurance Company in amounts consistent with that 12b-1
plan, subject to review by the trustees of the Trust.
5.2. All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall see to it that any offering of its
shares is registered and that all of its shares are authorized for issuance in
accordance with applicable federal law and, if and to the extent deemed
advisable by the Trust or BBOI Worldwide, in accordance with applicable state
laws prior to their sale. The Trust shall bear the cost of registration and
qualification of the Trust's shares, preparation and filing of the Trust's
prospectus and registration statement, proxy materials and reports, setting the
prospectus in type, setting in type and printing the proxy materials and reports
to shareholders, the preparation of all statements and notices required by any
federal or state law, and all taxes on the issuance or transfer of the Trust's
shares.
5.3. The Insurance Company shall bear the expenses of printing and
distributing to Contract owners the Contract prospectuses and of distributing to
Contract owners the Trust's prospectus, proxy materials and reports.
12
<PAGE> 14
5.4. The Insurance Company bears the responsibility and correlative expense
for administrative and support services for Contract owners. BBOI Worldwide
recognizes the Insurance Company as the sole shareholder of shares of the Trust
issued under this Agreement. From time to time, BBOI Worldwide may pay amounts
from its past profits to the Insurance Company for providing certain
administrative services for the Trust or for providing other services that
relate to the Trust. In consideration of the savings resulting from such
arrangement, and to compensate the Insurance Company for its costs, BBOI
Worldwide agrees to pay to the Insurance Company an amount equal to 25 basis
points (0.25%) per annum of the average aggregate amount invested by the
Insurance Company in the Trust under this Agreement. Such payments will be made
only when the average aggregate amount invested exceeds $1,000,000. The parties
agree that such payments are for administrative services and investor support
services, and do not constitute payment for investment advisory, distribution or
other services. Payment of such amounts by BBOI Worldwide shall not increase the
fees paid by the Trust or its shareholders. The obligation to pay the amounts
provided for in this Section 5.4 may be assigned by BBOI Worldwide in its
discretion to Berger Associates, Inc., or other entity acceptable to the
Insurance Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Trust will comply with Section 817(h) of the Code and Treasury
Regulation 1.817-5 relating to the diversification requirements for variable
annuity, endowment, modified endowment or life insurance contracts and any
amendments or other modifications to that Section or Regulation at all times
necessary to satisfy those requirements.
13
<PAGE> 15
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The trustees of the Trust will monitor the Trust for the existence of
any material irreconcilable conflict between the interests of the variable
Contract owners of all separate accounts investing in the Trust and the
participants of all Qualified Plans investing in the Trust. An irreconcilable
material conflict may arise for a variety of reasons, including: (a) an action
by any state insurance regulatory authority; (b) a change in applicable federal
or state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax, or securities regulatory authorities; (c) an administrative
or judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Fund are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by a Participating Insurance Company to
disregard the voting instructions of variable contract owners. The trustees of
the Trust shall promptly inform the Insurance Company if they determine that an
irreconcilable material conflict exists and the implications thereof. The
trustees of the Trust shall have sole authority to determine whether an
irreconcilable material conflict exists and their determination shall be binding
upon the Insurance Company.
7.2. The Insurance Company and BBOI Worldwide each will report promptly any
potential or existing conflicts of which it is aware to the trustees Of the
Trust. The Insurance Company and BBOI Worldwide each will assist the trustees of
the Trust in carrying out their responsibilities under the Mixed and Shared
Funding Exemptive Order, by providing the trustees of the Trust with all
information reasonably necessary for them to consider any issues raised. This
includes, but is not limited to, an obligation by the Insurance Company to
inform the trustees of the Trust whenever Contract owner voting instructions are
to be disregarded. These responsibilities shall be carried out by the Insurance
Company with a view only to the interests of the Contract owners and by BBOI
Worldwide with a view only to the interests of Contract holders and Qualified
Plan participants.
14
<PAGE> 16
7.3. If it is determined by a majority of the trustees of the Trust, or a
majority of the trustees who are not interested persons of the Trust, any of its
Funds, or BBOI Worldwide (the "Independent Trustees"), that a material
irreconcilable conflict exists, the Insurance Company and/or other Participating
Insurance Companies or Qualified Plans that have executed participation
agreements shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the Independent Trustees), take whatever steps are
necessary to remedy or eliminate the irreconcilable material conflict, up to and
including: (1) withdrawing the assets allocable to some or all of the separate
accounts from the Trust or any Fund and reinvesting those assets in a different
investment medium, including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected variable contract owners and, as appropriate, segregating the
assets of any appropriate group (e.g., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such segregation, or offering to the
affected variable contract owners the option of making such a change; and (2)
establishing a new registered management investment company or managed separate
account and obtaining any necessary approvals or orders of the Commission in
connection therewith.
7.4. If a material irreconcilable conflict arises because of a decision by
the Insurance Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Insurance Company may be required, at the Trust's election, to withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to that Account; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the Independent Trustees. Any such
withdrawal and termination must take place within six (6) months after the Trust
gives written notice that this provision is being implemented, and, until the
end of that six month period, the Trust shall continue to accept and implement
orders by the Insurance Company for the purchase (and redemption) of shares of
the Trust.
15
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7.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Insurance Company conflicts
with the majority of other state regulators, then the Insurance Company will
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to that Account within six months after the trustees of
the Trust inform the Insurance Company in writing that they have determined that
the state insurance regulator's decision has created an irreconcilable material
conflict; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the Independent Trustees. Until the end of the
foregoing six month period, the Trust shall continue to accept and implement
orders by the Insurance Company for the purchase (and redemption) of shares of
the Trust.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the Independent Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Trust be required to establish a new funding medium for the Contracts. The
Insurance Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the trustees of the Trust
determine that any proposed action does not adequately remedy any irreconcilable
material conflict, then the Insurance Company will withdraw the Account's
investment in the Trust and terminate this Agreement within six (6) months after
the trustees of the Trust inform the Insurance Company in writing of the
foregoing determination, provided, however, that the withdrawal and termination
shall be limited to the extent required by the material irreconcilable conflict,
as determined by a majority of the Independent Trustees.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3 (T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Trust and/or the
16
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Participating Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent those rules are applicable; and (b) Sections 3.4, 3.5,
7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to
the extent that terms and conditions substantially identical to those Sections
are contained in the Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE INSURANCE COMPANY
8.1(A). The Insurance Company agrees to indemnify and hold harmless the Trust
and each trustee, officer, employee or agent of the Trust, and each person, if
any, who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Insurance Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale, acquisition, or
redemption of the Trust's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement or prospectus for the Contracts or contained in the
Contracts or sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
17
<PAGE> 19
omission was made in reliance upon and in conformity with
information furnished in writing to the Insurance Company by or on
behalf of the Trust for use in the registration statement or
prospectus for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or shares of the Trust;
ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of the Trust
not supplied by the Insurance Company, or persons under its control)
or wrongful conduct of the Insurance Company or persons under its
control, with respect to the sale or distribution of the Contracts
or Trust Shares;
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature of the Trust or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such a
statement or omission was made in reliance upon information
furnished in writing to the Trust by or on behalf of the Insurance
Company;
(iv) arise as a result of any failure by the Insurance Company to
provide the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by the Insurance Company
in
18
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this Agreement or arise out of or result from any other material
breach of this Agreement by the Insurance Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(B). The Insurance Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from that
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of that Indemnified Party's duties or by reason of that Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Trust, whichever is applicable.
8.1(C). The Insurance Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
that Indemnified Party shall have notified the Insurance Company in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon that
Indemnified Party (or after the Indemnified Party shall have received notice of
such service on any designated agent) . Notwithstanding the foregoing, the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Insurance Company of its obligations hereunder except to the extent
that the Insurance Company has been prejudiced by such failure to give notice.
In addition, any failure by the Indemnified Party to notify the Insurance
Company of any such claim shall not relieve the Insurance Company from any
liability which it may have to the Indemnified Party against whom the action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Insurance Company
shall be entitled to participate, at its own expense, in the defense of the
action. The Insurance Company also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action; provided,
however, that if the Indemnified Party shall have reasonably concluded that
there may be defenses available to it which are different from or additional to
those available to
19
<PAGE> 21
the Insurance Company, the Insurance Company shall not have the right to assume
said defense, but shall pay the costs and expenses thereof (except that in no
event shall the Insurance Company be liable for the fees and expenses of more
than one counsel for Indemnified Parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances). After notice from the Insurance
Company to the Indemnified Party of the Insurance Company's election to assume
the defense thereof, and in the absence of such a reasonable conclusion that
there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Insurance Company will not be liable to that
party under this Agreement for any legal or other expenses subsequently incurred
by the party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.1(D). The Indemnified Parties will promptly notify the Insurance Company of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Trust's shares or the Contracts or the
operation of the Trust.
8.2. INDEMIFICATION BY BBOI WORLDWIDE
8.2(A). BBOI Worldwide agrees to indemnify and hold harmless the Insurance
Company and each of its directors, officers, employees or agents, and each
person, if any, who controls the Insurance Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of BBOI Worldwide) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale, acquisition or redemption of
the Trust's shares or the Contracts and:
20
<PAGE> 22
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if the
statement or omission or alleged statement or omission was made in
reliance upon and in conformity with information furnished in
writing to BBOI Worldwide or the Trust by or on behalf of the
Insurance Company for use in the registration statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust shares;
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Contracts not supplied by BBOI Worldwide or persons under its
control) or wrongful conduct of the Trust, BBOI Worldwide or persons
under their control, with respect to the sale or distribution of the
Contracts or shares of the Trust;
(iii) arise out of any untrue statement or alleged untrue statement
of a material fact contained in a registration statement,
prospectus, or sales literature covering the Contracts, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material
21
<PAGE> 23
fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished in writing
to the Insurance Company by or on behalf of the Trust;
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation, warranty or agreement made by BBOI Worldwide in this
Agreement or arise out of or result from any other material breach
of this Agreement by BBOI Worldwide;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b) BBOI Worldwide shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party that may arise from the
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of the Indemnified Party's duties or by reason of the Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Insurance Company or the Account, whichever is applicable.
8.2(c) BBOI Worldwide shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified BBOI Worldwide in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Indemnified
22
<PAGE> 24
Party (or after the Indemnified Party shall have received notice of such service
on any designated agent). Notwithstanding the foregoing, the failure of any
Indemnified Party to give notice as provided herein shall not relieve BBOI
Worldwide of its obligations hereunder except to the extent that BBOI Worldwide
has been prejudiced by such failure to give notice. In addition, any failure by
the Indemnified Party to notify BBOI Worldwide of any such claim shall not
relieve BBOI Worldwide from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, BBOI Worldwide will be entitled to participate, at its own
expense, in the defense thereof. BBOI Worldwide also shall be entitled to assume
the defense thereof, with counsel satisfactory to the party named in the action;
provided, however, that if the Indemnified Party shall have reasonably concluded
that there may be defenses available to it which are different from or
additional to those available to BBOI Worldwide, BBOI Worldwide shall not have
the right to assume said defense, but shall pay the costs and expenses thereof
(except that in no event shall BBOI Worldwide be liable for the fees and
expenses of more than one counsel for Indemnified Parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances). After notice
from BBOI Worldwide to the Indemnified Party of BBOI Worldwide's election to
assume the defense thereof, and in the absence of such a reasonable conclusion
that there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and BBOI Worldwide will not be liable to that party
under this Agreement for any legal or other expenses subsequently incurred by
that party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.2(d) The Insurance Company agrees to notify BBOI Worldwide promptly of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
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<PAGE> 25
8.3 INDEMNIFICATION BY THE TRUST
8.3 (A). The Trust agrees to indemnify and hold harmless the Insurance
Company, and each of its directors, officers, employees and agents, and each
person, if any, who controls the Insurance Company within the meaning of Section
15 of the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 8.3) against any and all losses, claims, damages, liabilities
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as those losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
any trustee(s) of the Trust, are related to the operations of the Trust and:
(i) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation, warranty or agreement made by the Trust in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Trust;
as limited by, and in accordance with the provisions of, Sections 8.3(b) and
8.3(c) hereof.
8.3(B). The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party that may arise from the Indemnified
Party's willful misfeasance, bad faith, or gross negligence in the performance
of the Indemnified Party's duties or by reason of the Indemnified Party's
reckless disregard of obligations and duties under this Agreement or to the
Insurance Company, the Trust, BBOI Worldwide or the Account, whichever is
applicable.
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<PAGE> 26
8.3(C) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless the
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Indemnified Party (or after
the Indemnified Party shall have received notice of such service on any
designated agent). Notwithstanding the foregoing, the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Trust of its
obligations hereunder except to the extent that the Trust has been prejudiced by
such failure to give notice. In addition, any failure by the Indemnified Party
to notify the Trust of any such claim shall not relieve the Trust from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Trust will be
entitled to participate, at its own expense, in the defense thereof. The Trust
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action; provided, however, that if the Indemnified
Party shall have reasonably concluded that there may be defenses available to it
which are different from or additional to those available to the Trust, the
Trust shall not have the right to assume said defense, but shall pay the costs
and expenses thereof (except that in no event shall the Trust be liable for the
fees and expenses of more than one counsel for Indemnified Parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances).
After notice from the Trust to the Indemnified Party of the Trust's election to
assume the defense thereof, and in the absence of such a reasonable conclusion
that there may be different or additional defenses available to the Indemnified
Party, the Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Trust will not be liable to that party under
this Agreement for any legal or other expenses subsequently incurred by that
party independently in connection with the defense thereof other than reasonable
costs of investigation.
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8.3(D). The Insurance Company and BBOI Worldwide agree promptly to notify
the Trust of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Trust.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and provisions hereof interpreted
under and in accordance with the laws of the State of Delaware.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934, and
1940 Acts, and the rules and regulations and rulings thereunder, including any
exemptions from those statutes, rules and regulations the Commission may grant
(including, but not limited to, the Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon one year advance written notice to
the other parties; provided, however, such notice shall not be given
earlier than one year following the date of this Agreement; or
(b) at the option of the Insurance Company to the extent that shares of
Funds are not reasonably available to meet the requirements of the
Contracts as determined by the Insurance Company, provided, however,
that such a termination shall apply only to the Fund(s) not reasonably
available. Prompt written notice of the election to terminate for such
cause shall be furnished by the Insurance Company to the Trust and BBOI
Worldwide; or
(c) at the option of the Trust or BBOI Worldwide, in the event that
formal administrative proceedings are
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instituted against the Insurance Company by the NASD, the Commission,
an insurance commissioner or any other regulatory body regarding the
Insurance Company's duties under this Agreement or related to the sale
of the Contracts, the operation of any Account, or the purchase of the
Trust's shares, provided, however, that the Trust determines in its
sole judgment exercised in good faith, that any such administrative
proceedings will have a material adverse effect upon the ability of the
Insurance Company to perform its obligations under this Agreement; or
(d) at the option of the Insurance Company in the event that formal
administrative proceedings are instituted against the Trust or BBOI
Worldwide by the NASD, the Commission, or any state securities or
insurance department or any other regulatory body, provided, however,
that the Insurance Company determines in its sole judgement exercised
in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Trust or BBOI Worldwide
to perform its obligations under this Agreement; or
(e) with respect to any Account, upon requisite vote of the Contract
owners having an interest in that Account (or any subaccount) to
substitute the shares of another investment company for the
corresponding Fund shares in accordance with the terms of the Contracts
for which those Fund shares had been selected to serve as the
underlying investment media. The Insurance Company will give at least
30 days' prior written notice to the Trust of the date of any proposed
vote to replace the Trust's shares; or
(f) at the option of the Insurance Company, in the event any of the
Trust's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or exemptions therefrom, or such
law precludes the use of those shares as the underlying investment
media of the Contracts issued or to be issued by the Insurance Company;
or
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(g) at the option of the Insurance Company, if the Trust ceases to
qualify as a regulated investment company under Subchapter M of the
Code or under any successor or similar provision, or if the Insurance
Company reasonably believes that the Trust may fail to so qualify; or
(h) at the option of the Insurance Company, if the Trust fails to meet
the diversification requirements specified in Article VI hereof; or
(i) at the option of either the Trust or BBOI Worldwide, if (1) the
Trust or BBOI Worldwide, respectively, shall determine, in their sole
judgment reasonably exercised in good faith, that the Insurance Company
has suffered a material adverse change in its business or financial
condition or is the subject of material adverse publicity and that
material adverse change or material adverse publicity will have a
material adverse impact upon the business and operations of either the
Trust or BBOI Worldwide, (2) the Trust or BBOI Worldwide shall notify
the Insurance Company in writing of that determination and its intent
to terminate this Agreement, and (3) after considering the actions
taken by the Insurance Company and any other changes in circumstances
since the giving of such a notice, the determination of the Trust or
BBOI Worldwide shall continue to apply on the sixtieth (60th) day
following the giving of that notice, which sixtieth day shall be the
effective date of termination; or
(j) at the option of the Insurance Company, if (1) the Insurance
Company shall determine, in its sole judgment reasonably exercised in
good faith, that either the Trust or BBOI Worldwide has suffered a
material adverse change in its business or financial condition or is
the subject of material adverse publicity and that material adverse
change or material adverse publicity will have a material adverse
impact upon the business and operations of the Insurance Company, (2)
the Insurance
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Company shall notify the Trust and BBOI Worldwide in writing of the
determination and its intent to terminate the Agreement, and (3) after
considering the actions taken by the Trust and/or BBOI Worldwide and
any other changes in circumstances since the giving of such a notice,
the determination shall continue to apply on the sixtieth (60th) day
following the giving of the notice, which sixtieth day shall be the
effective date of termination.
10.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 10.1(a) may be exercised for any
reason or for no reason.
10.3. No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for the termination. Furthermore,
(a) In the event that any termination is based upon the provisions of
Article VII, or the provision of Section 10.1(a), 10.1(i), 10.1(j), or 10.1(k)
of this Agreement, the prior written notice shall be given in advance of the
effective date of termination as required by those provisions; and
(b) in the event that any termination is based upon the provisions of
Section 10.1(c) or 10.1(d) of this Agreement, the prior written notice shall be
given at least ninety (90) days before the effective date of termination.
10.4. Notwithstanding any termination of this Agreement, subject to Section
1. 2 of this Agreement and for so long as the Trust continues to exist, the
Trust and BBOI Worldwide shall at the option of the Insurance Company, continue
to make available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement ("Existing Contracts"). Specifically, without
limitation, the owners of the Existing Contracts shall be permitted to
reallocate investments in the Trust, redeem investments in the Trust and/or
invest in the Trust upon the making of additional purchase payments under the
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<PAGE> 31
Existing Contracts. The parties agree that this Section 10.4 shall not apply to
any terminations under Article VII and the effect of Article VII terminations
shall be governed by Article VII of this Agreement.
10.5. The Insurance Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Insurance Company's
assets held in the Account) except (i) as necessary to implement
Contract-owner-initiated transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (a "Legally Required Redemption"). Upon request, the Insurance
Company will promptly furnish to the Trust and BBOI Worldwide the opinion of
counsel for the Insurance Company (which counsel shall be reason satisfactory
to the Trust and BBOI Worldwide) to the effect that any redemption pursuant to
clause (ii) above is a Legally Required Redemption. Furthermore, the Insurance
Company shall not prevent new Contract owners from allocating payments to a
Fund that formerly was available under the Contracts without first giving the
Trust or BBOI Worldwide 90 days notice of its intention to do so.
30
<PAGE> 32
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of that other party set forth below or at
such other address as the other party may from time to time specify in writing.
If to the Trust:
210 University Boulevard, Suite 900
Denver, Colorado 80206
Attention: Kevin R. Fay, Vice President
If to the Insurance Company:
6201 Powers Ferry Road
Atlanta, Georgia 30339
Attention: David Hopkins, Chief Counsel
If to BBOI Worldwide:
210 University Boulevard, Suite 900
Denver, Colorado 80206
Attention: Kevin R. Fay
ARTICLE XII. MISCELLANEOUS
12.1. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party unless and until that information may come into the public
domain.
12.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
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12.3. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.5. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit those
authorities reasonable access to its books and records in connection with any
lawful investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.6. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.7. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns; provided, that no party may
assign this Agreement without the prior written consent of the others.
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<PAGE> 34
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
as of the date specified below.
Insurance Company:
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By its authorized officer,
By: /s/
------------------------------
Title: Secretary
---------------------------
Date: march 28, 1997
---------------------------
Trust:
BERGER INSTITUTIONAL PRODUCTS TRUST
By its authorized offier,
By: /s/
-------------------------------
Title: President
-------------------------------
Date: March 25, 1997
-------------------------------
BBOI Worldwide:
BBOI WORLDWIDE LLC
BY its authorized offier
By: /s/
-------------------------------
Title: Co-Chief Executive
----------------------------
Date: March 25, 1997
----------------------------
33
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SCHEDULE A
ACCOUNTS
NAME OF ACCOUNT DATE OF RESOLUTION OF
INSURANCE COMPANY'S BOARD
Variable Annuity Account 1 WHICH ESTABLISHED THE ACCOUNT
September 23, 1989
34
<PAGE> 36
SCHEDULE B
CONTRACTS
1. Contract Form - VariFund
35
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SCHEDULE C
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Trust by BBOI Worldwide, the Trust and the
Insurance Company. The defined terms herein shall have the meanings assigned in
the Participation Agreement except that the term "Insurance Company" shall also
include the department or third party assigned by the Insurance Company to
perform the steps delineated below.
1. The number of proxy proposals is given to the Insurance Company by BBOI
Worldwide as early as possible before the date set by the Trust for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time BBOI Worldwide will inform the Insurance Company of
the Record, Mailing and Meeting dates. This will be done verbally
approximately two months before meeting.
2. Promptly after the Record Date, the Insurance Company will perform a "tape
run", or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
Customer') as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Insurance Company will use its best efforts to call in
the number of Customers to BB0I Worldwide, as soon as possible, but no later
than one week after the Record Date.
3. The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Insurance Company by the Trust.
The Insurance Company, at its expense, shall produce and personalize the
Voting Instruction cards. BBOI Worldwide must approve the Card before it is
printed. Allow approximately 2-4 business days for printing information on
the Cards. Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
36
<PAGE> 38
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Trust).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
4. During this time, BBOI Worldwide will develop, produce, and the Trust will
pay for the Notice of Proxy and the Proxy Statement (one document). Printed
and folded notices and statements will be sent to Insurance Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to customers by
Insurance Company will include:
a. Voting Instruction Card(s)
b. one proxy notice and statement (one document)
c. Return envelope (postage pre-paid by Insurance Company) addressed to
the Insurance Company or its tabulation agent
d. "Urge buckslip" - optional, but recommended.
(This is a small, single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy will be
supplied by the Trust.)
e. Cover letter - optional, supplied by Insurance Company and reviewed
and approved in advance by BBOI Worldwide.
5. The above contents should be received by the Insurance Company approximately
3-5 business days before mail date. Individual in charge at Insurance Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to BBOI Worldwide.
6. Package mailed by the Insurance Company.
* The Trust must allow at least a 15-day solicitation time to the Insurance
Company as the shareowner. (A 5week period is recommended.) Solicitation
time is calculated as calendar days from (but not including) the meeting,
counting backwards.
37
<PAGE> 39
7. Collection and tabulation of Cards begins. Tabulation usually takes place in
another department or another vendor depending on process used. An often used
procedure is to sort cards on arrival by proposal into vote categories of all
yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure.
8. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to the Customer with an explanatory letter, a new
Card and return envelope. The mutilated or illegible Card is disregarded and
considered to be not received for purposes of vote tabulation. Such mutilated or
illegible Cards are "hand verified," i.e., examined as to why they did not
complete the system. Any questions on those Cards are usually remedied
individually.
9. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the Cards
as they first arrive into categories depending upon their vote; an estimate of
how the vote is progressing may then be calculated. If the initial estimates and
the actual vote do not coincide, then an internal audit of that vote should
occur. This may entail a recount.
10. The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Trust receives the tabulations stated in
terms of a percentage and the number of shares.) BBOI Worldwide must review and
approve tabulation format.
11. Final tabulation in shares is verbally given by the Insurance Company to
BBOI Worldwide on the morning of the meeting not later than 10:00 a.m.
Denver time. BBOI Worldwide may request an earlier deadline if required to
calculate the vote in time for the meeting.
12. A Certificate of Mailing and Authorization to Vote Shares will be required
from the Insurance Company as well as an original
38
<PAGE> 40
copy of the final vote. BBOI Worldwide will provide a standard form for each
Certification.
13. The Insurance Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, BBOI Worldwide
will be permitted reasonable access to such Cards.
14. All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
39
<PAGE> 1
Exhibit 8 (b)
Service Agreement
<PAGE> 2
SERVICE AGREEMENT
WHEREAS Canada Life Insurance Company of New York (hereinafter called
"the Company") has filed a Plan of Operation with the New York Insurance
Department dated December 13, 1971.
AND WHEREAS it is contemplated that the Canada Life Assurance Company
(hereinafter called "the Servicer") will perform all or part of certain
functions for the Company, which functions, without limiting the generality of
the foregoing, include
1. Marketing functions
2. Field Service functions
3. Underwriting and Policy Issue Functions
4. Actuarial functions
5. Investment functions
6. Policyholder Service functions
7. Policy Accounting functions
8. General Accounting functions
9. Death Claim functions
all as more particularly described in said Plan of Operation, a copy of which is
annexed hereto and shall form part of this agreement,
<PAGE> 3
- 2 -
IT IS NOW HEREBY AGREED by and between the Company and the
Servicer that
A. The Servicer shall perform the functions contemplated in the said
Plan of Operation and such other functions as may be agreed upon
between the parties hereto, all hereinafter referred to as
"service functions",
B. Activities carried out by the Company which are in the nature of
auditing and verification of service functions performed by the
Servicer hereunder shall be at the sole expense of the Company.
C. The method of allocating costs hereunder shall be in accordance
with Regulation 33 of the New York State Insurance Department and
shall be determined in the following manner,
(1) The cost of service functions performed by the Servicer
which are identifiable as expenses incurred directly and
exclusively for the benefit of the Company shall be charged
to the Company,
(2) The cost of service functions performed by the Servicer
which are not identifiable as expenses incurred directly
and exclusively for the benefit of the Company shall be
determined by a
<PAGE> 4
- 3 -
cost accounting division of the Home Office expenses of the
Servicer in accordance with the principles set forth in
Appendix A attached to this Agreement. At the request of
the Company, and at its expense, the Servicer shall produce
records and provide access to enable the Company to verify
that the said cost accounting division is in accordance
with the said principles.
D. The Company shall reimburse the Servicer the total of the costs of
the service functions performed by the Servicers periodically
throughout each fiscal year at the request of the Servicer based
upon the Servicer's estimates of such total costs. A final
adjustment shall be made within 30 days after completion of the
Servicer's annual cost analysis.
E. Either party to this Agreement may terminate this Agreement
(a) with respect to "service functions" to be performed by the
Servicer which involve the use of its electronic data
processing equipment, by giving six months' notice in
writing and
<PAGE> 5
- 4 -
(b) with respect to other "service functions" by giving 30
days' notice in writing.
IN WITNESS WHEREOF this agreement is signed in duplicate, on the dates
indicated, at the home office of each company.
CANADA LIFE INSURANCE COMPANY OF NEW YORK
Date December 14, 1971 By /s/ Alfred O. Kelly
------------------- --------------------------------------
Vice-President
THE CANADA LIFE ASSURANCE COMPANY
Date December 9, 1971 By /s/ W. J. Adams
------------------- --------------------------------------
Senior Vice-President and Secretary
<PAGE> 6
APPENDIX A
With respect to the service functions performed by the Servicer, the
costs to be charged to the Company shall be determined and calculated as
follows:
1. The Servicer shall follow, in general, its long-established procedures
and practices in the allotment of expenses by line of business and
country in respect to annual statements to Canadian and United States
governments, tax calculations and internal Company statements, making use
of cost accounting procedures, work studies, and analysis of accounts, to
divide its Home Office expenses between Individual Ordinary, Individual
Health and Group lines of business, and into various functions.
2. There shall be deducted from the total Home Office expenses of the
Servicer all expenses which are identifiable with or attributable to the
Servicer's business in the United Kingdom and Ireland.
3. Pursuant to the Servicer's procedures and practices above mentioned, the
balance of the Servicer's Home Office expenses shall be divided between
(a) Individual Ordinary business functions, divided into 21 sections,
<PAGE> 7
- 2 -
(b) Investment functions,
(c) Individual Health business functions, and
(d) Group life and health lines of business.
4. From the total expenses for each function or line of business performed
by the Servicer, as measured in 3 above, there shall be deducted
(a) expenses which are directly identifiable with or attributable
to services performed by the Servicer for the exclusive benefit of
the Company, and
(b) expenses which are directly identifiable with or attributable to
services performed by the Servicer for the exclusive benefit of
the Servicer.
5. The portion attributable to the Company of the said balances of the
Servicer's Home Office expenses will be found by proration as set out in
the Table following:
<TABLE>
<CAPTION>
Function Basis of Proration
-------- ------------------
<S> <C> <C>
Acquisition - On new business credit, a measure
of production roughly equivalent to
new commissions.
Selection - 25% of total prorated on new sums
assured issued and paid for.
- 75% of total prorated on number of
new policies issued and paid for.
Policy Issue - On number of new policies issued and
paid for.
</TABLE>
<PAGE> 8
- 3 -
<TABLE>
<CAPTION>
Function Basis of Proration
-------- ------------------
<S> <C> <C>
Premium Collection - On number of premium payments.
Commission Accounting - On number of premium payments.
Dividend Work - On mean number of participating
contracts in force.
Policy Changes - On mean number of contracts in force.
Death Benefits - "
Matured Endowments - "
Cash Surrenders - "
Lapses, Cancelled by
Auto Loan, Expiries - "
Disability Claims - "
Reinstatements - "
Policy Valuation - "
Preparation of Special
Settlements - "
Annuity & Option
Payments - On mean vested annuities in force.
Conservation - On mean number of premium-paying
contracts in force.
Taxation Work - On mean number of contracts in force.
General Insurance - On total direct insurance maintenance
Maintenance expenses.
Insurance Overhead - On total insurance expenses.
Investment Work including
Investment Overhead
(a) Securities - On mean dollar amount of securities
asset.
(b) Mortgages - On mean dollar amount of mortgage
asset.
(c) Policy Loans - On mean dollar amount of policy loan
asset.
</TABLE>
<PAGE> 9
- 4 -
<TABLE>
<CAPTION>
Function Basis of Proration
-------- ------------------
<S> <C> <C>
Individual Health
(a) Acquisition - On new business credit.
(b) Maintenance - On mean number of contracts in force.
(c) Claims and - On mean number of contracts in force.
Payments
</TABLE>
<PAGE> 1
EXHIBIT 9
OPINION AND CONSENT OF COUNSEL
<PAGE> 2
[LETTERHEAD] CANADA LIFE
March 11, 1991
Canada Life Insurance Company of New York
2 Overhill Road
Scarsdale, NY 10583
Re: Canada Life of New York Variable
Annuity Account 1 (the "Account")
Registration Statement on Form N-4
File No.
Gentlemen:
In my capacity as Counsel, U.S. Division for The Canada Life Assurance
Company, it is my professional opinion that:
1. Canada Life Insurance Company of New York (the "Company") is a corporation
duly organized, validly existing and qualified as a stock life insurance
company to write Life and Accident and Health Insurance under the laws of
the State of New York;
2. The establishment of the Account as a separate investment account of the
Company is authorized, and when created, shall validly exist under the
laws of the State of New York;
3. The offer and sale of individual variable annuity contracts ("contracts")
have been duly authorized by the Company and the contracts, when issued in
accordance with the Registration Statement and in compliance with
applicable local law, will be legal and binding obligations of the Company
in accordance with their terms;
4. If and to the extent the Company so provides under its variable annuity
contracts, that portion of the assets of the Account equal to the reserves
and other contract liabilities with respect to such Account will not be
chargeable with liabilities arising out of any other business the Company
may conduct;
5. Owners of contracts, as such, will not be subject to any deductions,
charges or assessments imposed by the Company other than those provided in
the contracts.
<PAGE> 3
Page Two
In forming this opinion, I have made such examination of law and have
examined such records and other documents as in my judgment are necessary and
appropriate.
I hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the prospectus contained in the Registration Statement.
Very truly yours,
/s/ David A. Hopkins
David A. Hopkins
Counsel, U.S. Division
DAH/kr
<PAGE> 1
EXHIBIT 10(a)
CONSENT OF COUNSEL
<PAGE> 2
April 14, 1997
Board of Directors
Canada Life Insurance Company of New York
Canada Life of New York Variable Annuity Account 1
500 Mamaroneck Avenue
Harrison, New York 10528
Gentlemen:
I hereby consent to the use of my name under the Caption "Legal Matters"
in the Statement of Additional Information contained in Post-effective
Amendment No. 11 to the Registration Statement on Form N-4 (File No.
33-32199) filed by Canada Life Insurance Company of New York and Canada
Life of New York Variable Annuity Account 1 with the Securities and
Exchange Commission. In giving this consent, I do not admit that I am in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933.
Sincerely,
/s/ David A. Hopkins
David A. Hopkins
Chief Counsel, U.S. Division
DAH/
<PAGE> 1
EXHIBIT 10(b)
CONSENT OF INDEPENDENT COUNSEL
<PAGE> 2
EXHIBIT 10(b)
CONSENT OF INDEPENDENT COUNSEL
[TRANSMITTED ON SUTHERLAND, ASBILL & BRENNAN, L.L.P. LETTERHEAD]
April 24, 1997
VIA EDGARLINK
Board of Directors
Canada Life Insurance Company of New York
500 Mamaroneck Avenue
Harrison, New York 10528
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Statement of Additional Information filed as part of
Post-Effective Amendment No. 11 to the registration statement on Form N-4 for
the Canada Life of New York Variable Annuity Account 1 (File No. 33-32199). In
giving this consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
SUTHERLAND, ASBILL & BRENNAN, L.L.P.
By: /s/ Stephen E. Roth
--------------------------------
Stephen E. Roth
<PAGE> 1
EXHIBIT 10(c)
CONSENT OF INDEPENDENT AUDITORS
<PAGE> 2
EXHIBIT 10(c)
[ERNST & YOUNG LETTERHEAD]
---------------------------------------------------------------
CONSENT OF
INDEPENDENT CHARTERED ACCOUNTANTS
---------------------------------------------------------------
We consent to the reference to our Firm under the captions "Financial
Statements" and "Experts" and to the use of our reports dated February 14, 1997
with respect to the financial statements of the Canada Life of New York
Variable Annuity Account 1 and the Canada Life Insurance Company of New York
included in the Registration Statement [Form N-4, No. 33-32199] and related
Prospectus of Canada Life of New York Variable Annuity Account 1 [dated May 1,
1997].
Toronto, Canada /s/ Ernst & Young
April 24, 1997 Chartered Accountants
<PAGE> 1
Exhibit 13
Sample Performance Data Calculations
<PAGE> 2
EXHIBIT 13
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF MONEY MARKET SUB ACCOUNT
7-DAY CURRENT YIELD
AS AT DECEMBER 31, 1996
7-DAY CURRENT YIELD = (( NCS - ES/UV /7 ) x 365)
<TABLE>
<S> <C>
Where NCS = the net change in the value of the Series (exclusive of
realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) for the 7-day
period attributable to a hypothetical account having a
balance of 1 Sub - Account Unit
ES = M & E + Admin
Where ES = per unit expenses of the Sub-Account for the 7-day
period
M & E = per unit Mortality & Expense Risk Charges deducted for
the 7-day period
Admin = per unit administration charges deducted for the 7-day
period
= (30 / AAV/ 365) x AUV X 7
Where AAV = Average Accumulated Value of Contracts on the last day of the
7-day period
= $35,000.00
AUV = the sum of the unit values on the first and last day of
the 7-day period divided by 2
= 12.2823 + 12.2900 = 12.28615
UV = the unit value on the first day of the 7-day period
= 12.2823
- --------------------------------------------------------------------------------------
DATE NCS M&E Admin
Dec 25 0.000000000 0.000038251
Dec 26 0.000000000 0.000038251
Dec 27 0.003849500 0.000038251
Dec 30 0.003838625 0.000038251
Dec 31 0.001290515 0.000114754
-------------------------------------
0.00897864 0.00026776 0.000201412 (a) = 0.008509
UV = 12.2823
7 day current yield = (((.00897864 - .00026776 - .000201412) /12.2823))/7 x 365
7 - DAY CURRENT YIELD = 3.612580557 OR 3.61%
</TABLE>
<PAGE> 3
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF MONEY MARKET SUB ACCOUNT
7-DAY EFFECTIVE YIELD
AS AT DECEMBER 31, 1996
365/7
EFFECTIVE YIELD = [ (1 + NCS - ES) / UV) - 1 ]
Where NCS = NCS as calculated for the current yield
ES = ES as calculated for the current yield
UV = UV as calculated for the current yield
365/7
7 day effective yield: [((.008509) / 12.2823) + 1) - 1] 3.68%
<PAGE> 4
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF: Money Market, Managed, Bond, Value Equity, Capital, and International
Equity Sub-Accounts
AVERAGE ANNUAL TOTAL RETURN (EXCLUDING SURRENDER CHARGE)
<TABLE>
<S> <C>
1/n
Total Return = ((ERV/P) - 1)
where ERV = the value, at the end of the applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period. It is assumed that all dividends and capital gains
distributions are reinvested
P = a hypothetical initial investment of $1,000
n = number of years
= 2584 / 365 = Money Market, Managed, Bond and Value Equity Sub-Accounts
= 1348 / 365 = Capital Sub-Account
= 617 / 365 = International Equity Sub-Account
ERV = (1,000 x ((EUV - BUV) / BUV )) + 1,000 - ADMIN
where EUV = Unit value at the end of the period
BUV = Unit value at the beginning of the period
ADMIN = Administration Charges attributable to the hypothetical account for the period
= (30 / AAV / 365 ) x No. of days in the period x
($1,000 + ($1,000 x ((EUV - BUV) / BUV) / 2))
where AAV = Average Accumulated Value of Contracts on the last day of the period
= $35,000
MONEY MARKET SUB-ACCOUNT
ADMIN = (30 / 35000 / 365) x 2584
x (1,000 + (1,000 x ((12.2900 - 10.000) / 10.0000 / 2))
= (.006068102) x (1,114.50)
= 6.762899413
ERV = (1,000 x ((12.2900 - 10.0000) / 10.000)) + 1,000
- 6.762899413
= 1,222.24
(1 / (2584 / 365))
Total Return = (1,222.24 / 1,000) - 1
= 2.88%
</TABLE>
<PAGE> 5
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF: Money Market, Managed, Bond, Value Equity, Capital, and International
Equity Sub-Accounts
<TABLE>
<S> <C>
MANAGED SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 2584
x (1,000 + (1.000 x ((17.2294 - 10.000) / 10.0000 / 2))
= ( .006068102) x (1,361.47)
= 8.261538505
ERV = (1,000 x (17.2294 - 10.0000) / 10.0000)) + 1,000
- 8.261538505
= 1,714.68
(1 / (2584 / 365))
Total Return = (1,714.68 / 1,000) - 1
= 7.91%
BOND SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) X 2584
x (1,000 + (1,000 X ((15.4213 - 10.0000) / 10.0000 / 2))
= (.006068102) x (1,271.07)
= 7.712951765
ERV = (1,000 x ((15.4213 - 10.0000) / 10.0000)) + 1,000
- 7.712951765
= 1,534.42
(1 / (2584 / 365))
Total Return = (1,534.42 / 1,000) - 1
= 6.23%
VALUE EQUITY SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 2584
x (1,000 + (1,000 x (( 18.2602 - 10.0000) / 10.0000 / 2))
= (.006068102) x (1,413.01)
= 8.574288470
ERV = (1,0000 x ((18.2602 - 10.0000) / 10.0000)) + 1,000
- 8.574288470
= 1,817.45
(1 / (2584 / 365))
Total Return = (1,817.45 / 1,000) - 1
= 8.81%
</TABLE>
<PAGE> 6
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF: Money Market, Managed, Bond, Value Equity, Capital, and International
Equity Sub-Accounts
<TABLE>
<S> <C>
CAPITAL SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 1348
x (1,000 + (1,000 x ((15.4640 - 10.0000) / 10.0000 / 2))
= (.003165558) x (1,273.20)
= 4.030388102
ERV = (1,000 x ((15.4640 - 10.0000) / 10.0000)) + 1,000
- 4.030388102
= 1,542.37
(1 / (1348 / 365))
Total Return = (1,542.37 / 1000) - 1
= 12.45%
INTERNATIONAL EQUITY SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 617
x (1,000 + (1,000 x ((12.3349 - 10.0000) / 10.0000 / 2))
= (.001448924) x (1,116.75)
= 1.618078274
ERV = (1,000 x ((12.3349 - 10.0000) / 10.0000)) + 1,000
- 1.618078274
= 1,231.87
(1 / (617 / 365))
Total Return = (1,231.87 / 1000) - 1
= 13.13%
</TABLE>
<PAGE> 7
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF: Money Market, Managed, Bond, Value Equity, Capital, and International
Equity Sub-Accounts
AVERAGE ANNUAL TOTAL RETURN (INCLUDING SURRENDER CHARGE)
<TABLE>
<S> <C>
1/n
Total Return = ((ERV/P) - 1)
where ERV = the value, at the end of the applicable period, of a hypothetical $1,000 investment made at
the beginning of the applicable period. It is assumed that all dividends and capital gains
distributions are reinvested
P = a hypothetical initial investment of $1,000
n = number of years
= 2584/365 = Money Market, Managed, Bond and Value Equity Sub-Accounts
= 1348/365 = Capital Sub-Account
= 617/365 = International Equity Sub-Account
ERV = (1,000 x ((EUV - BUV) / BUV )) + 1,000 - ADMIN
- (SC x 1,000)
where EUV = Unit value at the end of the period
BUV = Unit value at the beginning of the period
SC = Surrender charge
= 0.0% for inception date 1989 (2584 days)
= 4.5% for inception date 1993 (1348 days)
= 5.4% for inception date 1995 (617 days)
ADMIN = Administration Charges attributable to the hypothetical account for the period
= (30 / AAV / 365) x No. of days in the period x
($1,000 + ($1,000 x ((EUV - BUV) / BUV) / 2))
where AAV = Average Accumulated Value of Contracts on the last day of the period
= $35,000
MONEY MARKET SUB-ACCOUNT
ADMIN = (30 / 35000 / 365) x 2584
x (1,000 + (1,000 x ((12.2900 - 10.000) / 10.0000 / 2))
= (.006068102) x (1,114.50)
= 6.762899413
ERV = (1,000 x ((12.2900 - 10.0000) / 10.000)) + 1,000
- 6.762899413 - (.00 x 1,000)
= 1,222.24
(1/ (2584 / 365))
Total Return = (1.222.24 / 1,000) - 1
= 2.88%
</TABLE>
<PAGE> 8
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF: Money Market, Managed, Bond, Value Equity, Capital, and International
Equity Sub-Accounts
<TABLE>
<S> <C>
MANAGED SUB-ACCOUNT
ADMIN = (30 /35,000 / 365) x 2584
x (1,000 + (1,000 x ((17.2294 - 10.000) / 10.0000 / 2))
= ( .006068102) x (1,361.47)
= 8.261538505
ERV = (1,000 x (17.2294 - 10.0000) / 10.0000)) + 1,000
- 8.261538505 - (.00 x 1,000)
= 1,714.68
(1 / (2584 / 365))
Total Return = (1,714.68 / 1,000) - 1
= 7.91%
BOND SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 2584
x (1,000 + (1,000 x ((15.4213 - 10.0000) / 10.0000 / 2))
= (.006068102) x (1,271.07)
= 7.712951765
ERV = (1,000 x ((15.4213 - 10.0000) / 10.0000)) + 1,000
- 7.712951765 x (.00 x 1,000)
= 1,534.42
(1 / (2584 / 365))
Total Return = (1,534.42 / 1,000) - 1
= 6.23%
VALUE EQUITY SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 2584
x (1,000 + (1,000 x (( 18.2602 - 10.0000) / 10.0000 / 2))
= (.006068102) x (1,413.01)
= 8.574288470
ERV = (1,0000 x ((18.2602 - 10.0000) / 10.0000)) + 1,000
- 8.574288470 - (.00 x 1,000)
= 1,817.45
(1 / (2584 / 365))
Total Return = (1,817.45 / 1,000) - 1
= 8.81%
</TABLE>
<PAGE> 9
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 1
CLASF: Money Market, Managed, Bond, Value Equity, Capital, and International
Equity Sub-Accounts
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CAPITAL SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 1348
x (1,000 + (1,000 x ((15.4640 - 10.0000) / 10.0000 /2))
= (.003165558) x (1,273.20)
= 4.030388102
ERV = (1,000 x ((15.4640 - 10.0000) /10.000)) + 1,000
- 4.030388102 - (0.045 x 1,000)
= 1,497.37
(1 / (1348 / 365))
Total Return = (1,497.37 / 1000) - 1
= 11.55%
INTERNATIONAL EQUITY SUB-ACCOUNT
ADMIN = (30 / 35,000 / 365) x 617
x (1,000 + (1,000 x ((12.3349 - 10.0000) / 10.0000 / 2))
= (.001448924) x (1,116.75)
= 1.618078274
ERV = (1,000 x ((12.3349 - 10.0000) / 10.0000)) + 1,000
- 1.618078274 - (0.054 x 1,000)
= 1,177.87
(1 / (617 / 365))
Total Return = (1,177.87 / 1000) - 1
= 10.17%
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