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As filed with the Securities and Exchange Commission on April 29, 1997.
Registration No. 33-64240
811-7776
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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. 6
and/or
Registration Statement Under the Investment Company Act of 1940
Amendment No. 6
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CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
(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
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It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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x on May 1, 1997 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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on _______________ pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on ________________ pursuant to paragraph (a)(ii) of Rule 485
----
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.
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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.
<PAGE> 2
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
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(iii) Exchanges N/A
c. Changes Reserved Rights
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 STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
Additional Information
PART B
ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION
---------------- -------------------------------------------
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
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a. Fees and Expenses of Registrant N/A
b. Management Contract N/A
c. Custodian SAFEKEEPING OF ACCOUNT ASSETS
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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4
<PAGE> 5
PART A
INFORMATION REQUIRED TO BE IN THE PROSPECTUS
<PAGE> 6
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NEW YORK 10528
PHONE: (914) 835-8400
PROSPECTUS
VARIABLE ANNUITY ACCOUNT 2
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
This Prospectus describes the flexible 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 twelve sub-accounts of the Canada Life of New York Variable Annuity Account
2 (the "Variable Account") and the Fixed Account. 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 Seligman Portfolios, Inc. (the "Fund"), a Maryland
corporation that is a diversified open-end investment company which uses the
investment management services of J. & W. Seligman & Co. Incorporated (the
International, Global Smaller Companies, Global Technology and Global Growth
Opportunities Portfolios use the sub-advisory services of Seligman Henderson
Co.). The Fund has twelve portfolios: Capital; Cash Management; Common Stock;
Bond; Income; International; Communications and Information; Frontier; Global
Smaller Companies; High-Yield Bond; Global Technology; and Global Growth
Opportunities. The policy value prior to the annuity date or maturity date,
except for amounts in the Fixed Account, will vary according to the investment
performance of the portfolio of the Fund 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 upward or 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 date of this Prospectus is May 1, 1997
<PAGE> 7
TABLE OF CONTENTS
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PAGE
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DEFINITIONS ................................................................................. 4
SUMMARY ..................................................................................... 6
TABLE OF EXPENSES ........................................................................... 9
CONDENSED FINANCIAL INFORMATION ............................................................. 12
THE COMPANY ................................................................................. 13
THE VARIABLE ACCOUNT AND THE FUND ........................................................... 14
The Variable Account ....................................................................... 14
The Fund ................................................................................... 14
Seligman Capital Portfolio ............................................................ 14
Seligman Cash Management Portfolio...................................................... 15
Seligman Common Stock Portfolio ....................................................... 15
Seligman Communications and Information Portfolio ..................................... 15
Seligman Bond Portfolio ............................................................... 15
Seligman Frontier Portfolio ........................................................... 15
Seligman Henderson Global Growth Opportunities Portfolio ............................... 15
Seligman Henderson International Portfolio ............................................. 15
Seligman Henderson Global Smaller
Companies Portfolio ............................................................... 15
Seligman Henderson Global Technology ................................................... 15
Seligman High-Yield Bond Portfolio ..................................................... 16
Seligman Income Portfolio ............................................................. 16
Reserved Rights ........................................................................... 16
Change in Investment Policy ............................................................... 16
The Fixed Account ......................................................................... 17
Guarantee Amount ................................................................... 17
Guarantee Periods ................................................................... 17
Market Value Adjustment ............................................................. 18
DESCRIPTION OF ANNUITY POLICY ............................................................... 19
Ten Day Right to Examine the Policy ....................................................... 19
Premiums ................................................................................. 19
Initial Premium ....................................................................... 19
Additional Premiums ................................................................... 19
Wire Transmittal Privilege ............................................................. 20
Electronic Data Transmission of
Application Information ........................................................... 20
Net Premium Allocation ................................................................. 20
Termination ........................................................................... 20
Variable Account Value ................................................................... 21
Units ................................................................................. 21
Unit Value ............................................................................. 21
Net Investment Factor ................................................................. 21
Transfers ................................................................................. 22
Transfer Privilege ..................................................................... 22
Telephone Transfer Privilege ........................................................... 22
Dollar Cost Averaging Privilege ....................................................... 22
Restrictions on Transfers From
Fixed Account ..................................................................... 22
Transfer Processing Fee ............................................................... 23
Payment of Proceeds ....................................................................... 23
Proceeds ............................................................................... 23
Proceeds on Annuity Date or Maturity Date ............................................. 23
Proceeds on Surrender ................................................................. 24
Proceeds on Death Of Last Surviving
Annuitant Before Annuity Date or Maturity Date
(The Death Benefit) ............................................................... 25
Proceeds on Death of Any Owner Before or
After Annuity Date or Maturity Date ............................................... 25
Partial Withdrawals ....................................................................... 25
Systematic Withdrawal Privilege ....................................................... 26
Seligman Time Horizon Matrix4 ........................................................... 26
Portfolio Rebalancing ..................................................................... 27
Loans ..................................................................................... 27
Payment of Benefits, Partial Withdrawals, Cash
Surrenders, & Transfers - Postponement ............................................... 28
Charges Against the Policy, Variable Account, and Fund ................................... 28
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Surrender Charge ....................................................................... 28
Policy Administration Charge ........................................................... 29
Daily Administration Fee ............................................................... 30
Transfer Processing Fee ............................................................... 30
Annualized Mortality and Expense Risk Charge ........................................... 30
Reduction or Elimination of Surrender Charges ......................................... 30
Reduction or Elimination of Policy Administration Charge ............................... 31
Taxes ................................................................................. 31
Other Charges Including Investment Management Fees ..................................... 31
Payment Options ........................................................................... 31
Election of Options ................................................................... 32
Description of Payment Options ......................................................... 32
Payment Dates ......................................................................... 32
Age and Survival of Payee ............................................................. 32
Death of Payee ......................................................................... 32
Betterment of Income ..................................................................... 32
Other Policy Provisions ................................................................... 33
Owner or Joint Owner ................................................................... 33
Beneficiary ........................................................................... 33
Written Notice ......................................................................... 33
Periodic Reports ....................................................................... 33
Assignment ............................................................................. 34
Modification ........................................................................... 34
YIELDS AND TOTAL RETURNS ................................................................... 34
TAX DEFERRAL ............................................................................... 35
FEDERAL TAX STATUS ......................................................................... 36
Introduction ............................................................................. 36
The Company's Tax Status ................................................................. 36
Tax Status of the Policy ................................................................. 36
Diversification Requirements ........................................................... 36
Required Distributions ................................................................. 37
Taxation of Annuities ..................................................................... 37
In General ............................................................................. 37
Withdrawals/Distributions ............................................................. 38
Annuity Payments ....................................................................... 38
Taxation of Death Benefit Proceeds ..................................................... 38
Penalty Tax on Certain Withdrawals ..................................................... 38
Transfers, Assignments, or Exchanges of a Policy ......................................... 39
Withholding ............................................................................... 39
Multiple Policies ......................................................................... 39
Possible Tax Changes ..................................................................... 39
Taxation of Qualified Plans ............................................................... 39
Individual Retirement Annuities and Simplified
Employee Pensions (SEP/IRAs) ....................................................... 40
Minimum Distribution Requirements ("MDR") for IRAs ..................................... 40
Corporate and Self-Employed (H.R.10 and Keogh)
Pension and Profit-Sharing Plans ................................................... 40
Deferred Compensation Plans ........................................................... 41
Tax-Sheltered Annuity Plans ........................................................... 41
Other Tax Consequences ................................................................... 41
DISTRIBUTION OF POLICIES ................................................................... 41
LEGAL PROCEEDINGS ........................................................................... 42
VOTING RIGHTS ............................................................................... 42
FINANCIAL STATEMENTS ....................................................................... 42
STATEMENT OF ADDITIONAL INFORMATION TABLE
OF CONTENTS ............................................................................... 43
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3
<PAGE> 9
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 on the death of the last surviving annuitant.
CASH SURRENDER VALUE: The policy value less: 1) any applicable surrender
charge; and 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
nonqualified 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; or 2) a certified
copy of the decree of a court of competent jurisdiction as to the finding of
death.
EFFECTIVE DATE: The date the policy is effective is 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.
FUND: Seligman Portfolios, Inc., a diversified open-end investment company that
offers shares in twelve portfolios of shares in which the corresponding
sub-accounts of the Variable Account are invested.
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.
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.
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.
4
<PAGE> 10
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. Currently, no premium tax is levied in New York.
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 flexible 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: The Variable Account has twelve sub-accounts: Capital; Cash
Management; Common Stock; Bond; Income; International; Communications and
Information; Frontier; Global Smaller Companies; High-Yield Bond; Global
Technology; and Global Growth Opportunities. The assets of these sub-accounts
are invested in the corresponding portfolio of the Fund.
UNIT: A unit is a measurement used in the determination of the policy's
Variable Account value before the annuity date or maturity date.
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 2.
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.
5
<PAGE> 11
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 within seven days.
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
The minimum initial premium is $5,000 ($600 if the policy is an Individual
Retirement Annuity, but we reserve the right to lower or raise the minimum
premium for IRAs). 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 $600, or $50 per month if paid by PAC. 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 twelve
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".
THE FUND
The assets of each sub-account are invested in the corresponding portfolios of
the Fund. The Fund currently offers twelve portfolios: Seligman Capital;
Seligman Cash Management; Seligman Common Stock; Seligman Bond; Seligman
Income; Seligman Henderson International; Seligman Communications and
Information; Seligman Frontier; Seligman Henderson Global Smaller Companies;
Seligman High-Yield Bond; Seligman Henderson Global Technology; and Seligman
Henderson Global Growth Opportunities. The Fund is a diversified, open-end
investment company. See "The Fund".
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
based, by its Guaranteed Interest Rate. Except for the one year account, any
surrender, withdrawal, or transfer 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 greater 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".
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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 CERTAIN POLICIES ISSUED ON OR AFTER MAY 1, 1996
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 the
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 the 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 PRIOR TO 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 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 the 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 the 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.). For policies issued from May 1, 1995 through
April 30, 1996, no further step-ups in Death Benefits will occur
after any annuitant's age of 80.
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".
7
<PAGE> 13
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 the last surviving annuitant, the annuity date or the
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:
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SURRENDER CHARGE
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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:
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>
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 0.35% 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".
8
<PAGE> 14
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 Fund in which the Variable Account invests is responsible
for its own expenses. In addition, charges for investment management services
are charged daily from each portfolio of the Fund as a percentage of the
average net assets of the portfolios, as follows: 0.40% for Capital, Cash
Management (currently waived), Common Stock, Bond, and Income; 0.75% for
Communications and Information, and Frontier; 1.00% for International, Global
Smaller Companies, Global Technology and Global Growth Opportunities; and 0.50%
for High-Yield Bond. See "Other Charges Including Investment Management Fees"
and the attached "PROSPECTUS FOR THE FUND."
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. The effective cost of a policy loan would be 2% per year
of the amount borrowed. See "Loans".
ANNUITY DATE, MATURITY DATE AND PAYMENT OPTIONS
On the annuity date, we will apply the policy value under 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 with Payments for 10 Years Certain; 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 one. All inquiries
should include the policy number, and the names of the owner and the annuitant.
TABLE OF EXPENSES
EXPENSE DATA
<TABLE>
<S> <C>
The following information regarding expenses assumes that the entire policy value is in the Variable Account.
POLICYOWNER TRANSACTION EXPENSES*
---------------------------------
Sales load on purchase payments ....................................................................... 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.
</TABLE>
9
<PAGE> 15
<TABLE>
<S> <C>
Transfer fee
Current policy - First 12 transfers each policy year: ....................................... No fee
Each transfer thereafter: .................................................................... No fee**
POLICY ADMINISTRATION CHARGE
- ----------------------------
Per policy per policy year: .................................................................... $ 30
(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%
Effective annual rate of daily administration fee ............................................... 0.35%
-----
Total Variable Account annual expenses .......................................................... 1.60%
</TABLE>
SELIGMAN PORTFOLIOS, INC. (THE "FUND")
ANNUAL EXPENSES***
(as a percentage of average net assets)
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT OTHER EXPENSE ANNUAL
SUB-ACCOUNT FEES AFTER REIMBURSEMENT*** EXPENSES
----------- ---------- ---------------------- --------
<S> <C> <C> <C>
Bond 0.40% 0.20% 0.60%
Capital 0.40% 0.19% 0.59%
Cash Management 0.00% 0.00% 0.00%
Common Stock 0.40% 0.13% 0.53%
Communications and Information 0.75% 0.12% 0.87%
Frontier 0.75% 0.17% 0.92%
Global Growth Opportunities 1.00% 0.40% 1.40%
Global Smaller Companies 1.00% 0.40% 1.40%
Global Technology 1.00% 0.40% 1.40%
High-Yield Bond 0.50% 0.20% 0.70%
Income 0.40% 0.19% 0.59%
International 1.00% 0.40% 1.40%
</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 above table is intended to assist the policyowner in understanding
the costs and expenses that will be borne, under the policy, directly or
indirectly. These include the expenses of the Fund. The 0.00% following
"Management Fees" under Cash Management is based on the fact that the
Manager, in its sole discretion, waived its fee of 0.40% during 1996.,
There is no assurance that the Manager will continue this policy in the
future. In the event that this waiver is discontinued, this will be
reflected in an updated prospectus. With respect to all portfolios of the
Fund except International, Global Smaller Companies, Global Technology and
Global
10
<PAGE> 16
Growth Opportunities, the percentage listed following "Other expenses
after expense reimbursement" is based on the fact that the Fund expenses,
other than the management fee, exceeding 0.20% (0.00% under Cash
Management) will be reimbursed by the Fund's Manager by voluntary agreement
of the Manager. There is no assurance that the Manager will continue this
policy in the future. With respect to International, Global Smaller
Companies, Global Technology and Global Growth Opportunities, the
Sub-Advisor has agreed to reimburse annual expenses (other than the
management fee) that exceed 0.40% of average net assets. There is no
assurance that the Manager and the Sub-Advisor will continue this policy in
the future. In the event that any of these waivers and reimbursements are
discontinued, this will be reflected in an updated prospectus. Absent such
a reimbursement, the Fund's "Other Expenses" would be higher, and during
1996 would have been: Cash Management 0.23%; Bond 0.39%; International
1.30%; Global Smaller Companies 0.90%; and High-Yield Bond 0.38%. Expenses
for Capital, Common Stock, Communications and Information, Frontier, and
Income did not exceed the reimbursement level of 0.20%. The Global
Technology and Global Growth Opportunities Portfolios commenced operations
on May 1, 1996. In the absence of any expense reimbursement, the annualized
"Other Expenses" for the Global Technology and Global Growth Opportunities
Portfolios were 3.71% and 5.04% respectively.
The data with respect to the Fund's annual expenses have been provided to us by
the Fund and we have not independently verified such data.
See "Charges Against the Policy, Variable Account, and Fund", and the
Prospectus for the Fund.
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 YEAR 5 YEAR 10 YEAR
----------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Bond $ 77 $ 116 $ 158 $ 262
Capital $ 77 $ 116 $ 158 $ 261
Cash Management $ 71 $ 98 $ 127 $ 199
Common Stock $ 76 $ 114 $ 154 $ 254
Communications and Information $ 80 $ 124 $ 172 $ 289
Frontier $ 80 $ 126 $ 174 $ 293
Global Growth Opportunities $ 85 $ 140 $ 198 $ 339
Global Smaller Companies $ 85 $ 140 $ 198 $ 339
Global Technology $ 85 $ 140 $ 198 $ 339
High-Yield Bond $ 78 $ 119 $ 163 $ 272
Income $ 77 $ 116 $ 158 $ 261
International $ 85 $ 140 $ 198 $ 339
</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 YEAR 5 YEAR 10 YEAR
----------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Bond $ 23 $ 71 $ 122 $ 262
Capital $ 23 $ 71 $ 121 $ 261
Cash Management $ 17 $ 53 $ 91 $ 199
Common Stock $ 22 $ 69 $ 118 $ 254
Communications and Information $ 26 $ 79 $ 135 $ 289
Frontier $ 26 $ 81 $ 138 $ 293
</TABLE>
11
<PAGE> 17
<TABLE>
<CAPTION>
SUB-ACCOUNT 1 YEAR 3 YEAR 5 YEAR 10 YEAR
----------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Global Growth Opportunities $ 31 $ 95 $ 161 $ 339
Global Smaller Companies $ 31 $ 95 $ 161 $ 339
Global Technology $ 31 $ 95 $ 161 $ 339
High-Yield Bond $ 24 $ 74 $ 127 $ 272
Income $ 23 $ 71 $ 121 $ 261
International $ 31 $ 95 $ 161 $ 339
</TABLE>
The examples provided above assume that no transfer charges have been assessed.
The examples also reflect a policy administration charge of .08% of assets,
determined by dividing the total policy administration charge 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 commencement of business operations through December
31, 1996. Accumulation Unit Values will not be provided for any date prior to
the inception of the Variable Account.
<TABLE>
<CAPTION>
ACCUMULATION UNIT VALUE
AS OF AS OF
SUB-ACCOUNT 12/31/96 INCEPTION DATE
----------- -------- --------------
<S> <C> <C>
Bond $ 15.21 $ 15.40
Capital $ 25.79 $ 22.63
Cash Management $ 1.34 $ 1.30
Common Stock $ 27.42 $ 23.44
Communications and Information $ 15.17 $ 13.61
Frontier $ 16.86 $ 17.32
Global Growth Opportunities $ 9.82 $ 10.00
Global Smaller Companies $ 13.91 $ 14.16
Global Technology $ 10.29 $ 10.00
High-Yield Bond $ 11.99 $ 11.21
Income $ 19.11 $ 18.40
International $ 13.00 $ 12.35
</TABLE>
12
<PAGE> 18
NUMBER OF UNITS OUTSTANDING
AT END OF PERIOD
<TABLE>
<CAPTION>
AS OF
SUB-ACCOUNT 12/31/96
----------- --------
<S> <C>
Bond* 1,008
Capital* 4,295
Cash Management* 107,526
Common Stock* 7,651
Communications and Information* 13,615
Frontier* 20,321
Global Growth Opportunities* 2,878
Global Smaller Companies* 23,204
Global Technology** 3,596
High-Yield Bond* 10,064
Income* 4,576
International* 2,363
</TABLE>
* Commenced operations 1/28/96.
** Commenced operations 5/1/96.
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, 1977, 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.
We share our A.M. Best 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 Corporation, 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.
13
<PAGE> 19
THE VARIABLE ACCOUNT, THE FUND AND FIXED ACCOUNT
THE VARIABLE ACCOUNT
We established the Canada Life of New York Variable Annuity Account 2 (the
"Variable Account") as a separate investment account on February 25, 1993,
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.
The Variable Account currently is divided into twelve sub-accounts with the
assets of each sub-account invested in shares of the corresponding portfolio of
the Fund described below.
THE FUND
Seligman Portfolios, Inc. (the "Fund") currently has twelve portfolios:
Seligman Capital; Seligman Cash Management; Seligman Common Stock; Seligman
Bond; Seligman Income; Seligman Henderson International; Seligman
Communications and Information; Seligman Frontier; Seligman Henderson Global
Smaller Companies; Seligman High-Yield Bond; Seligman Henderson Global
Technology; and Seligman Henderson Global Growth Opportunities. Shares of a
portfolio are purchased and redeemed for a corresponding 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 their net asset value. The Fund Prospectus defines the net asset
value of portfolio shares.
The Fund is a diversified open-end investment company incorporated in Maryland
which uses the investment management services of J. & W. Seligman & Co.
Incorporated (the International, Global Smaller Companies, Global Technology
and Global Growth Opportunities Portfolios use the sub-advisory services of
Seligman Henderson Co.). The following is a brief description of the investment
objectives of each of the current portfolios of the Fund. There is, of course,
no assurance that the investment objective of any portfolios will be achieved.
The following brief descriptions are qualified in their entirety by the more
detailed information appearing in the attached Prospectus for the Fund.
SELIGMAN CAPITAL PORTFOLIO
The investment objective of this Portfolio is to produce capital appreciation,
not current income, by investing in common stocks (primarily those with strong
near-or intermediate-term prospects) 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.
14
<PAGE> 20
SELIGMAN CASH MANAGEMENT PORTFOLIO
The investment objective of this Portfolio is to preserve capital and to
maximize liquidity and current income by investing in a diversified portfolio
of high-quality money market instruments. Investments in this Portfolio are
neither insured nor guaranteed by the U.S. Government and there is no assurance
that this Portfolio will be able to maintain a stable net asset value of $1.00
per share.
SELIGMAN COMMON STOCK PORTFOLIO
The investment objective of this Portfolio is to produce favorable (but not the
highest) current income and long-term growth of both income and capital value,
without exposing capital to undue risk, primarily through equity investments
broadly diversified over a number of industries.
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.
SELIGMAN BOND PORTFOLIO
The investment objective of this Portfolio is to achieve favorable current
income by investing in a diversified range of debt securities, primarily of
investment grade, including convertible issues and preferred stock, with
capital appreciation as a secondary consideration.
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 prospects.
SELIGMAN HENDERSON GLOBAL GROWTH OPPORTUNITIES PORTFOLIO
The investment objective of this Portfolio is to seek long-term capital
appreciation by investing primarily in capital stock of companies that have the
potential to benefit from global economic or social trends.
SELIGMAN HENDERSON INTERNATIONAL PORTFOLIO
The investment objective of this Portfolio currently is long-term capital
appreciation primarily through global investments in securities of medium to
large-sized companies.
SELIGMAN HENDERSON GLOBAL SMALLER COMPANIES PORTFOLIO
The investment objective of this Portfolio is long-term capital appreciation
primarily through global investments in securities of companies with small to
medium market capitalizations.
SELIGMAN HENDERSON GLOBAL TECHNOLOGY PORTFOLIO
The investment objective of this Portfolio is to seek long-term capital
appreciation by making global investments of at least 65% of its assets in
securities of U.S. and non-U.S. companies operating in the technology and
technology-related industries.
15
<PAGE> 21
SELIGMAN HIGH-YIELD BOND PORTFOLIO
The investment objective of this Portfolio is to produce maximum current income
by investing primarily in high-yielding, high risk corporate bonds and
corporate notes, which, generally, are unrated or carry ratings lower than
those assigned to investment grade bonds by Standard & Poor's Rating Service
("S&P") or Moody's Investors Service, Inc. ("Moody's"). The Portfolio may
invest up to 100% of its assets in lower rated bonds, commonly known as "junk
bonds" which are subject to a greater risk of loss of principal and interest
than higher rated investment grade bonds. An investment in the Series is
appropriate for you only if you can bear the high risk inherent in investing in
such securities. This risk is described in the attached Prospectus for the
Fund, which should be read carefully before investing.
SELIGMAN INCOME PORTFOLIO
The investment objective of this Portfolio is primarily to produce high current
income consistent with what is believed to be prudent risk of capital and
secondarily to provide the possibility of improvement in income and capital
value over the longer term, by investing primarily in income-producing
securities.
Since the Fund 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 Canada Life
Insurance Company of New York, Canada Life Insurance Company of America, The
Canada Life Assurance Company, and other unaffiliated insurance companies, it is
possible that material conflicts may arise between the interests of the Variable
Account and one or more other separate accounts investing in the Fund. The
Fund's board of directors, the Fund's investment manager, and we and any other
insurance companies participating in the Fund 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 series.
A FULL DESCRIPTION OF THE FUND, ITS INVESTMENT OBJECTIVES, ITS POLICIES AND
RESTRICTIONS, ITS EXPENSES AND OTHER ASPECTS OF ITS OPERATION, AS WELL AS A
DESCRIPTION OF THE RISKS RELATED TO INVESTMENT IN THE FUND, IS CONTAINED IN THE
ATTACHED PROSPECTUS FOR THE FUND. THE PROSPECTUS FOR THE FUND SHOULD BE READ
CAREFULLY BY A PROSPECTIVE PURCHASER ALONG WITH THIS PROSPECTUS.
RESERVED RIGHTS
We reserve the right to substitute shares of another portfolio of the Fund 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 2; remove, combine or add sub-accounts and make the
new sub-accounts available to policyowners at our discretion; add new
portfolios of the Fund or of other registered investment companies; 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.
16
<PAGE> 22
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.
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
17
<PAGE> 23
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 Guaranteed
Interest Rate currently being offered for new Guarantee Periods of a duration
equal 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:
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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 within seven days.
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
INITIAL PREMIUM
An applicant 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 ($600 if the Policy is an Individual Retirement Annuity, but we reserve
the right to lower or raise the minimum premium for IRAs). However, the minimum
initial premium is $100 ($50 if the Policy is an Individual Retirement Annuity)
when an applicant 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 applicant of the reasons for the delay and immediately return the
premium, unless the applicant specifically consents to our retaining the
premium until the application is made complete. If the applicant 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
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.
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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
and/or 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 applicant, 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 applicant, unless we receive within such five
valuation days the applicant'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 of receipt of the initial wire order premium, we will
return the premium wired to us to the broker/dealer who will return the full
premium paid to the applicant. 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 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 you request 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
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:
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<PAGE> 26
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."
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 is assessed; the date we receive and file your
written notice for a partial withdrawal or 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 the last surviving annuitant's death.
UNIT VALUE
The unit value for each sub-account's first valuation period is set at $10,
except the Cash Management sub-account which is set at $1. 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 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 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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<PAGE> 27
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; and
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 right 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 Fixed Account is completely depleted; 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:
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<PAGE> 28
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.
We will deduct any applicable premium tax from the proceeds described below,
unless we deducted the tax from the premiums when paid.
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" on . If the proceeds are paid in a
lump sum on the annuity date, we will pay the cash surrender value.
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<PAGE> 29
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 first day
of the month following any annuitant's 85th birthday (90th birthday,
pending regulatory approval) or any earlier date required by law.
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 the last surviving annuitant, the annuity date or
maturity date. However, the surrender proceeds may be subject to 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. You may avoid a surrender charge by electing to apply the
policy values under Payment Option 1. See "Proceeds on Annuity Date or Maturity
Date".
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 CERTAIN POLICIES ISSUED ON OR AFTER MAY 1, 1996
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 the 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 the 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 CERTAIN POLICIES ISSUED PRIOR TO MAY 1, 1996 OR
SUCH LATER DATE AS APPLICABLE REGULATORY APPROVAL IS OBTAINED IN THE
JURISDICTION IN WHICH THE POLICIES ARE OFFERED:
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<PAGE> 30
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 the 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 7 policy year period
preceding the date we receive due proof of the 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.). For policies issued from May 1, 1995 through April 30,
1996, no further step-ups in Death Benefits will occur after any
annuitant's age of 80.
No death benefit is payable if the policy is surrendered before the last
surviving annuitant's death. If you are the last surviving annuitant who dies
before the annuity date or maturity date, the death benefit proceeds must be
distributed pursuant to the rules set forth below in "Proceeds on Death of Any
Owner Before or After Annuity Date or Maturity Date."
PROCEEDS ON DEATH OF ANY OWNER BEFORE OR AFTER ANNUITY DATE OR MATURITY DATE
If you are not an 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 the Death
of Last Surviving 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 proceeds 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;
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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, a trust company, or a 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.
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 the 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 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 from a Guarantee Period other than from the one year
Guarantee Period under the Fixed Account 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 those 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.
SELIGMAN TIME HORIZON MATRIX(SM)("MATRIX")
You may elect to participate in Seligman Time Horizon Matrix (the "Matrix") an
asset allocation strategy which will allocate your policy value based primarily
upon the amount of time you have to reach specific financial goals. The Matrix
uses certain predetermined model portfolios, designed by J. & W. Seligman, that
seek a wide range of financial goals for an investor's specific time horizon.
Each J. & W. Seligman model portfolio represents a predetermined allocation of
your policy value
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among one or more of the variable sub-accounts. The Matrix also allows you to
construct your own customized model portfolio.
Under the Matrix, you may elect to periodically rebalance your policy value to
reflect the J. & W. Seligman model portfolio you have selected or periodically
rebalance your policy value to reflect your customized model portfolio. Any
rebalancing of your policy value will be made pursuant to our procedures
governing portfolio rebalancing. See "Portfolio Rebalancing" below. You may
also choose a J. & W. Seligman model portfolio or create a customized portfolio
and elect not to rebalance your policy value after the initial allocation of
policy value under that model portfolio. We make no representation or guarantee
that following the Matrix will result in a profit, protect against loss or
ensure the achievement of financial goals.
To initiate the Matrix, we must receive your written notice on our form.
Participation in the Matrix is voluntary and can be modified or discontinued at
any time by you in writing on our form. We reserve the right to change our
procedures or to discontinue offering the Matrix upon 30 days written notice to
you.
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
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<PAGE> 33
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. On
each policy anniversary, the Company will 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 & 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.
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.
CHARGES AGAINST THE POLICY, VARIABLE ACCOUNT, AND FUND
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
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<PAGE> 34
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 ............................. 6%
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.
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 a sub-account(s), 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.
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<PAGE> 35
DAILY ADMINISTRATION FEE
At each valuation period, we also deduct a daily administration fee at an
effective annual rate of 0.35% from the assets 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, telephone call, or automatic transfer) is considered to be one
transfer, regardless of the number of sub-accounts or Guarantee Periods under
the Fixed Account effected 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 last surviving annuitant dies before the annuity date or maturity date.
The expense risk we assume is the risk that the surrender charges, policy
administration charge, 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. This charge is
not made after the earlier of the annuity date or maturity date, and this
charge is not made against any Fixed Account value. This charge consists of
approximately 0.75% to cover the mortality risk, and approximately 0.50% 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.
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<PAGE> 36
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.
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 MANAGEMENT FEES
Each portfolio of the Fund is responsible for all of its operating expenses. In
addition, the Fund pays J. & W. Seligman & Co. Incorporated (the "Manager")
fees for investment management services that are calculated daily and payable
monthly from each portfolio at an annual rate of 0.40% for Capital, Cash
Management (currently waived), Common Stock, Bond and Income; 0.50% for
High-Yield Bond; 0.75% for Communications and Information, and Frontier; and
1.00% for International, Global Smaller Companies, Global Technology and Global
Growth Opportunities (of which the Manager in turn pays 0.90% to Seligman
Henderson Co., the Sub-Adviser to these four portfolios) of the average daily
net assets of the portfolio. The Prospectus and Statement of Additional
Information for the Fund provide more information concerning the investment
management fee, other charges against the portfolios, the investment management
services provided to the portfolios by J. & W. Seligman & Co. Incorporated, and
the sub-advisory services provided to the International, Global Smaller
Companies, Global Technology, and Global Growth Opportunities Portfolios by
Seligman Henderson Co.
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). The proceeds
we will pay on the maturity date is the policy value. See "Proceeds on Annuity
Date or Maturity Date" on. 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.
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<PAGE> 37
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 the 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.
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 $1,000; or
2. any periodic payment under the election would be less than $50.
DESCRIPTION OF PAYMENT OPTIONS
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 for at least 10 years certain.
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 of 95% of what the cash surrender value
would be if there were no surrender charge.
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<PAGE> 38
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.
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 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
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 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, 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.
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<PAGE> 39
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 effected 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".
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 portfolios of the Fund. The Fund's
performance in part reflects the Fund's expenses. See the Prospectus for the
Fund.
The yield of the Cash Management 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 Cash Management 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 the end of that period. This standardized version of average
annual total return reflects all historical investment results, less all
charges and
34
<PAGE> 40
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 series 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 an 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.
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 law. 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 portfolio of the Fund is positive.
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<PAGE> 41
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 taxes on
the amounts held under a policy, or annuity payments, and on the economic
benefit to the owner, an 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. We, however, reserve the right in the
future to make a charge 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.
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
the Fund, 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 the fund 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
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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 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 beneficiary" is the person designated by such owner as a
beneficiary and to whom ownership 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 IRAs).
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 withdrawals and 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.
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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
or 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.
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 an death of the 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
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.
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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 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 effect 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, the
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 transactions with
respect to the
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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 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.
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 calendar year
following the calendar year in which the owner (or plan participant) reaches
age 701/2 or (ii) 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
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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.
DISTRIBUTION OF POLICIES
Canada Life of America Financial Services, Inc. ("CLAFS") acts as the principal
underwriter, as defined in the Investment Company Act of 1940, of the policies
for the Variable Account. 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 (the "1934 Act") as a broker-dealer and is a
member of the National Association of Securities Dealers, Inc. ("NASD"). CLAFS'
principal business address is 6201 Powers Ferry Road, NW, Atlanta, Georgia.
Sales of the policies will be made by registered representatives of
broker-dealers authorized by CLAFS to sell the policies. Such registered
representatives will be licensed insurance agents of our Company. CLAFS and our
Company have entered into an exclusive promotional agent (distribution)
agreement with Seligman Financial Services, Inc. ("Seligman Financial").
Seligman Financial is a broker-dealer registered with the SEC under the 1934
Act and is a member of the NASD. Under the promotional agent distribution
agreement, Seligman Financial will recruit and provide sales training and
licensing assistance to such registered representatives. In addition, Seligman
Financial will prepare sales and promotional materials for the policies. CLAFS
will pay distribution compensation to selling broker-dealers in varying amounts
which, under normal circumstances,
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are not expected to exceed 6.5% of premium payments under the policies. Seligman
Financial may from time to time pay additional compensation pursuant to
promotional contracts. In some circumstances, Seligman Financial may provide
reimbursement of certain sales and marketing expenses. CLAFS will pay the
promotional agent a fee for providing marketing support for the distribution of
the contracts.
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.
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 Prospectus
for the Fund, portfolio shares held in the Variable Account and in our general
account will be voted by us at regular and special shareholder meetings of the
Fund 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 portfolio 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 of a portfolio 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 of the Fund. Voting
instructions will be solicited by written communication prior to such meeting
in accordance with procedures established by the Fund.
Fund 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 series.
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 statements of operations and 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.
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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.
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
Cash Management Yields ........................................ 3
Other Sub-Account Yields ...................................... 4
Total Returns ................................................. 5
Effect of the Policy Administration Charge on Performance Data 7
SAFEKEEPING OF ACCOUNT ASSETS
STATE REGULATION ................................................. 7
RECORDS AND REPORTS .............................................. 7
LEGAL MATTERS .................................................... 7
EXPERTS .......................................................... 7
OTHER INFORMATION ................................................ 8
FINANCIAL STATEMENTS ............................................. 8
</TABLE>
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Part B
Statement of Additional Information
<PAGE> 50
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 2
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
- --------------------------------------------------------------------------------
This Statement of Additional Information contains information in addition to
the information described in the Prospectus for the flexible 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 and
Seligman Portfolios, Inc. (the "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> 51
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL POLICY PROVISIONS
Contract .................................................... 2
Incontestability ............................................ 3
Misstatement Of Age ......................................... 3
Currency .................................................... 3
Place Of Payment ............................................ 3
Non-Participation ........................................... 3
Our Consent ................................................. 3
CALCULATION OF YIELDS AND TOTAL RETURNS
Cash Management Yields ...................................... 3
Other Sub-Account Yields .................................... 4
Total Returns ............................................... 5
Effect Of The Policy Administration Charge On Performance Data 7
SAFEKEEPING OF ACCOUNT ASSETS ........................................ 7
STATE REGULATION ..................................................... 7
RECORDS AND REPORTS .................................................. 7
LEGAL MATTERS ........................................................ 7
EXPERTS .............................................................. 7
OTHER INFORMATION .................................................... 8
FINANCIAL STATEMENTS ................................................. 8
</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.
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<PAGE> 52
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.
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
CASH MANAGEMENT YIELDS
We may, from time to time, quote in advertisements and sales literature the
current annualized yield of the Cash Management 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 Cash Management 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 Cash Management 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
3
<PAGE> 53
administration charge of $30 per year 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>
The current yield for the 7 day period ended December 31, 1996 was 2.67%.
We may also quote the effective yield of the Cash Management 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 2.71%.
Because of the charges and deductions imposed under the policy, the yield for
the Cash Management Sub-Account will be lower than the yield for the Cash
Management Portfolio.
The yields on amounts held in the Cash Management 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 Cash Management Sub-Account's actual yield is affected by changes
in interest rates on money market securities, average portfolio maturity of the
Cash Management Portfolio, the types and quality of portfolio securities held
by the Cash Management Portfolio of the Fund, and the Cash Management
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 sub-accounts (except the Cash
Management Sub-Account) 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 series 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)
4
<PAGE> 54
Where:
<TABLE>
<S> <C> <C>
NI = net income of the portfolio for the 30 day or one month period attributable to the sub-account's units.
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.
</TABLE>
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 6 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 6 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 quarter-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/N
TR = ((ERV/P)) - 1
Where:
<TABLE>
<S> <C> <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>
5
<PAGE> 55
Average annual total returns for the periods shown below were:
<TABLE>
<CAPTION>
1 YEAR 5 YEAR RETURN FROM FUND
YEAR ENDED YEAR ENDED INCEPTION DATE FUND
SUB-ACCOUNT* 12/31/96 12/31/96 TO 12/31/96 INCEPTION DATE
- ------------ ---------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Bond (6.98)% 3.35% 4.98% 06/21/88
Capital 7.22% 8.17% 11.68% 06/21/88
Cash Management (1.76)% 1.91% 3.45% 06/21/88
Common Stock 12.69% 11.79% 12.49% 06/21/88
Communications and
Information 1.61% *** 18.75% 10/04/94
Frontier 16.48% *** 24.67% 10/04/94
Global Growth Opportunities**** ** *** (7.29)% 05/01/96
Global Smaller Companies 11.29% *** 14.11% 10/04/94
Global Technology**** ** *** (2.56)% 05/01/96
High Yield Bond 7.31% *** 8.43% 05/01/95
Income (0.52)% 6.75% 7.82% 06/21/88
International (0.10)% *** 6.33% 05/03/93
</TABLE>
* The Inception Dates of the Sub-Accounts are as follows: Capital, Cash
Management, Common Stock, Bond and Income Portfolios, 06/21/93; International,
05/03/93; Communication and Information, Frontier and Global Smaller Companies,
10/11/94; High Yield Bond, 05/01/95; and Global Growth Opportunities and Global
Technology, 05/01/96. These dates may not coincide with the fund inception
dates or with the date of first activity in the account.
** These Sub-Accounts invest in portfolios that have not been in operation one
year as of December 31, 1996, and accordingly, no one year average annual total
return is available. The from inception date returns for these Sub-Accounts
were not annualized.
*** 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.
****The date of inception of Global Growth Opportunities and Global Technology
was May 1, 1996, therefore, only cumulative from inception total returns are
provided.
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.
Average annual total returns without a surrender charge for the periods shown
below for the sub-accounts were:
<TABLE>
<CAPTION>
1 YEAR 5 YEAR RETURN FROM FUND
YEAR ENDED YEAR ENDED INCEPTION DATE FUND
SUB-ACCOUNT* 12/31/96 12/31/96 TO 12/31/96 INCEPTION DATE
------------ ---------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Bond (1.58)% 3.82% 4.98% 06/21/88
Capital 12.62% 8.56% 11.68% 06/21/88
Cash Management 3.64% 2.41% 3.45% 06/21/88
Common Stock 18.09% 12.13% 12.49% 06/21/88
Communications and
Information 7.01% *** 20.33% 10/04/94
</TABLE>
6
<PAGE> 56
<TABLE>
<CAPTION>
1 YEAR 5 YEAR RETURN FROM FUND
YEAR ENDED YEAR ENDED INCEPTION DATE FUND
SUB-ACCOUNT* 12/31/96 12/31/96 TO 12/31/96 INCEPTION DATE
------------ ---------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Frontier 21.88% *** 26.15% 10/04/94
Global Growth Opportunities**** ** *** (1.89)% 05/01/96
Global Smaller Companies 16.69% *** 15.77% 10/04/94
Global Technology**** ** *** 2.84% 05/01/96
High Yield Bond 12.71% *** 11.42% 05/01/95
Income 4.88% 7.17% 7.82% 06/21/88
International 5.30% *** 7.36% 05/03/93
</TABLE>
* The Inception Dates of the Sub-Accounts are as follows: Capital, Cash
Management, Common Stock, Bond and Income Portfolios, 06/21/93; International,
05/03/93; Communication and Information, Frontier and Global Smaller Companies,
10/11/94; High Yield Bond, 05/01/95; and Global Growth Opportunities and Global
Technology, 05/01/96. These dates may not coincide with the fund inception
dates or with the date of first activity in the account.
** These Sub-Accounts invest in portfolios that have not been in operation one
year as of December 31, 1996, and accordingly, no one year average annual total
return is available. The from inception date returns for these Sub-Accounts
were not annualized.
*** 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.
****The date of inception of Global Growth Opportunities and Global Technology
was May 1, 1996, therefore, only cumulative from inception total returns are
provided.
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 and
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.
7
<PAGE> 57
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, DC, has provided advice on certain matters relating to the federal
securities laws.
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 statements of
operations and 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, Ontario 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.
8
<PAGE> 58
FINANCIAL STATEMENTS
The Variable Account's statement of net assets as of December 31, 1996, and the
related statements of operations and changes in net assets for the periods
indicated therein, as well as the Report of Independent Auditors and Actuary's
Report thereon, are contained herein. Ernst & Young, Chartered Accountants,
serves 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> 59
FINANCIAL STATEMENTS
CANADA LIFE OF NEW YORK VARIABLE
ANNUITY ACCOUNT 2
DECEMBER 31, 1996
WITH REPORT OF INDEPENDENT AUDITORS
<PAGE> 60
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
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................................................ 4
Statements of Changes in Net Assets.................................... 6
Notes to Financial Statements.......................................... 8
</TABLE>
<PAGE> 61
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 2 ("Variable Annuity Account 2") as of December
31, 1996, and the related statements 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 the audits 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Variable Annuity Account 2 at
December 31, 1996, and the results of its operations and the changes in its net
assets for each of the periods indicated therein in conformity with accounting
principles generally accepted in the United States.
Toronto, Canada
February 14, 1997
/s/ Ernst & Young
Chartered Accountants
<PAGE> 62
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
CASH COMMON COMMUNICATIONS
CAPITAL MANAGEMENT STOCK AND INFORMATION BOND
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS:
Investment in Seligman
Portfolios, Inc. at market
(see Note 3 for cost values) $110,828 $144,506 $209,920 $206,369 $15,361
Due (to) from Canada Life
Insurance Company of
New York (Note 6) 42 (552) 249 831 (25)
Receivable (payable) for
investments sold (purchased) (101) 422 (398) (666) -
---------------------------------------------------------------------------------------
NET ASSETS $110,769 $144,376 $209,771 $206,534 $15,336
=======================================================================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability reserve $110,769 $144,376 $209,771 $206,534 $15,336
---------------------------------------------------------------------------------------
NET ASSETS $110,769 $144,376 $209,771 $206,534 $15,336
=======================================================================================
NUMBER OF UNITS OUTSTANDING 4,295 107,526 7,651 13,615 1,008
=======================================================================================
NET ASSET VALUE PER UNIT $25.7902 $ 1.3427 $27.4175 $15.1696 $15.2143
=======================================================================================
</TABLE>
See accompanying notes.
2
<PAGE> 63
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
December 31, 1996
<TABLE>
<CAPTION>
GLOBAL
INTER- GROWTH GLOBAL
FRONTIER NATIONAL OPPORTU- SMALLER GLOBAL HIGH YIELD SUB-
SUB- SUB- NITIES SUB- COMPANIES TECHNOLOGY BOND INCOME ACCOUNTS
ACCOUNT ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT COMBINED
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$342,353 $30,747 $28,273 $322,978 $37,036 $120,792 $87,491 $1,656,654
464 173 (22) 120 (8,337) (3) (196) (7,256)
(116) (193) 4 (307) 8,309 (79) 135 7,010
- ------------------------------------------------------------------------------------------------------------------------
$342,701 $30,727 $28,255 $322,791 $37,008 $120,710 $87,430 $1,656,408
========================================================================================================================
$342,701 $30,727 $28,255 $322,791 $37,008 $120,710 $87,430 $1,656,408
- ------------------------------------------------------------------------------------------------------------------------
$342,701 $30,727 $28,255 $322,791 $37,008 $120,710 $87,430 $1,656,408
========================================================================================================================
20,321 2,363 2,878 23,204 3,596 10,064 4,576
========================================================================================================================
$16.8644 $13.0034 $9.8180 $13.9111 $10.2914 $11.9942 $19.1062
========================================================================================================================
</TABLE>
3
<PAGE> 64
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
CASH* COMMON* COMMUNICATIONS*
CAPITAL* MANAGEMENT STOCK AND INFORMATION BOND*
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Dividend and capital gain
distributions $6,864 $2,854 $ 29,599 $ 946 $ 827
Less mortality and expense
risk charges (Note 6) 594 1,006 1,321 1,384 25
--------------------------------------------------------------------------------------
Net investment income/(loss) 6,270 1,848 28,278 (438) 802
--------------------------------------------------------------------------------------
NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized gain (loss) on
investments 3 - 3,926 17,049 0
Net unrealized
appreciation
(depreciation) on
investments (5,135) - (17,345) 4,387 (714)
--------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss)
on investments (5,132) - (13,419) 21,436 (714)
--------------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,138 $1,848 $ 14,859 $ 20,998 $ 88
======================================================================================
</TABLE>
_____________
*For the period January 28, 1996 (commencement of operations) to December 31,
1996.
**For the period May 1, 1996 (commencement of operations) to December 31, 1996.
See accompanying notes.
4
<PAGE> 65
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
For the year ended December 31, 1996
<TABLE>
<CAPTION>
GLOBAL**
INTER- GROWTH GLOBAL*
FRONTIER* NATIONAL* OPPORTU- SMALLER GLOBAL** HIGH YIELD* INCOME* SUB-
SUB- SUB- NITIES SUB- COMPANIES TECHNOLOGY BOND SUB- ACCOUNTS
ACCOUNT ACCOUNT ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT ACCOUNT COMBINED
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$36,682 $899 $ 30 $22,151 $ 230 $8,547 $5,648 $115,277
2,372 156 93 1,755 275 346 588 9,915
- -----------------------------------------------------------------------------------------------------------------------
34,310 743 (63) 20,396 (45) 8,201 5,060 105,362
- -----------------------------------------------------------------------------------------------------------------------
5,843 (1) (1) 25 7 5 13 26,869
(23,822) 64 224 (18,969) 2,546 (4,577) (2,202) (65,543)
- -----------------------------------------------------------------------------------------------------------------------
(17,979) 63 223 (18,944) 2,553 (4,572) (2,189) (38,674)
- -----------------------------------------------------------------------------------------------------------------------
$ 16,331 $806 $ 160 $ 1,452 $ 2,508 $ 3,629 $ 2,871 $ 66,688
=======================================================================================================================
</TABLE>
5
<PAGE> 66
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CAPITAL CASH MANAGEMENT
SUB-ACCOUNT SUB-ACCOUNT
--------------- ---------------
01/28/96* TO 01/28/96* TO
12/31/96 12/31/96
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ 6,270 $ 1,848
Net realized gain (loss) on
investments 3 -
Unrealized appreciation
(depreciation) on investments (5,135) -
---------- ----------
Net increase (decrease) in net
assets resulting from operations 1,138 1,848
---------- ----------
CAPITAL TRANSACTIONS:
Net increase from unit
transactions (Note 5) 109,631 142,528
---------- ----------
Net increase in net assets arising
from capital transactions 109,631 142,528
---------- ----------
TOTAL INCREASE IN NET ASSETS 110,769 144,376
NET ASSETS, BEGINNING OF PERIOD - -
---------- ----------
NET ASSETS, END OF PERIOD $ 110,769 $ 144,376
========== ==========
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL GROWTH OPPORTU-
SUB-ACCOUNT NITIES SUB-ACCOUNT
------------------- ---------------------
01/28/96* TO 05/01/96* TO
12/31/96 12/31/96
---------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 743 $ (63)
Net realized gain (loss) on
investments (1) (1)
Unrealized appreciation
(depreciation) on investments 64 224
---------- ----------
Net increase (decrease) in net
assets resulting from operations 806 160
---------- ----------
CAPITAL TRANSACTIONS:
Net increase from unit
transactions (Note 5) 29,921 28,095
---------- ----------
Net increase in net assets
arising from capital
transactions 29,921 28,095
---------- ----------
TOTAL INCREASE IN NET ASSETS 30,727 28,255
NET ASSETS, BEGINNING OF PERIOD - -
---------- ----------
NET ASSETS, END OF PERIOD $ 30,727 $ 28,255
========== ==========
</TABLE>
*Commencement of operations.
See accompanying notes.
6
<PAGE> 67
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<CAPTION>
COMMON COMMUNICATIONS
STOCK AND INFORMATION BOND FRONTIER
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
01/28/96* TO 01/28/96* TO 01/28/96* TO 01/28/96* TO
12/31/96 12/31/96 12/31/96 12/31/96
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 28,278 $ (438) $ 802 $ 34,310
3,926 17,049 - 5,843
(17,345) 4,387 (714) (23,822)
-------------------------------------------------------------------------------------
14,859 20,998 88 16,331
-------------------------------------------------------------------------------------
194,912 185,536 15,248 326,370
-------------------------------------------------------------------------------------
194,912 185,536 15,248 326,370
-------------------------------------------------------------------------------------
209,771 206,534 15,336 342,701
- - - -
-------------------------------------------------------------------------------------
$209,771 $ 206,534 $ 15,336 $ 342,701
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SMALLER GLOBAL HIGH YIELD
COMPANIES TECHNOLOGY BOND INCOME SUB-ACCOUNTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT COMBINED
01/28/96* TO 05/01/96* TO 01/28/96* TO 01/28/96* TO 01/28/96* TO
12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 20,396 $ (45) $ 8,201 $ 5,060 $ 105,362
25 7 5 13 26,869
(18,969) 2,546 (4,577) (2,202) (65,543)
----------------------------------------------------------------------------------------------------------------
1,452 2,508 3,629 2,871 66,688
----------------------------------------------------------------------------------------------------------------
321,339 34,500 117,081 84,559 1,589,720
----------------------------------------------------------------------------------------------------------------
321,339 34,500 117,081 84,559 1,589,720
----------------------------------------------------------------------------------------------------------------
322,791 37,008 120,710 87,430 1,656,408
- -
----------------------------------------------------------------------------------------------------------------
$ 322,791 $ 37,008 $ 120,710 $ 87,430 $ 1,656,408
================================================================================================================
</TABLE>
7
<PAGE> 68
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Canada Life of New York Variable Annuity Account 2 ("Variable Annuity Account
2") was established on February 25, 1993 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 2 is registered as a unit investment trust under the Investment
Company Act of 1940, as amended. The assets of the Variable Annuity Account 2
are invested in the shares of Seligman Portfolios, Inc. (the "Fund"), a
diversified, open-end, management investment company. Variable Annuity Account
2 has twelve sub-accounts, each of which invests only in the shares of the
corresponding portfolio of the Fund.
The assets of Variable Annuity Account 2 are the property of CLNY. The portion
of Variable Annuity Account 2 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 Fund are valued at the reported net asset values
of the respective 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.
FOREIGN CURRENCY TRANSLATION
The accounting records of Variable Annuity Account 2 are maintained in U.S.
dollars. The International, Global Growth Opportunities, Global Smaller
Companies, and Global Technology Sub-accounts 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.
8
<PAGE> 69
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIVIDENDS
Dividends are recorded on the ex-dividend date and reflect the dividends
declared by the Fund from their accumulated net investment income and net
realized investment gains. Dividends in the Cash Management Portfolio are
declared daily and paid monthly. Dividends in the Capital, Common Stock,
Communications and Information, Bond, Frontier, International, Global Growth
Opportunity, Global Smaller Companies (formerly Global Emerging Companies),
Global Technology, High Yield Bond and Income Portfolios are declared and paid
annually. Dividends paid to the Variable Annuity Account 2 are reinvested in
additional shares of the respective Fund at the net asset value per share.
FEDERAL INCOME TAXES
Variable Annuity Account 2 is not taxed separately because the operations of
Variable Annuity Account 2 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.
9
<PAGE> 70
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
3. INVESTMENTS
The investment by Variable Annuity Account 2 in the individual Portfolios of
the Fund is as follows:
<TABLE>
<CAPTION>
NUMBER OF MARKET MARKET
SHARES PRICE VALUE COST
------------------------------------------------------
<S> <C> <C> <C> <C>
Capital 6,922 $16.0110 $ 110,828 $ 115,963
Cash Management 144,506 1.0000 144,506 144,506
Common Stock 13,186 15.9199 209,920 227,265
Communications and Information 14,048 14.6903 206,369 201,982
Bond 1,553 9.8912 15,361 16,075
Frontier 22,854 14.9800 342,353 366,175
International 2,372 12.9625 30,747 30,683
Global Growth Opportunities 2,853 9.9100 28,273 28,049
Global Smaller Companies 25,095 12.8702 322,978 341,947
Global Technology 3,589 10.3193 37,036 34,490
High Yield 10,795 11.1896 120,792 125,369
Income 8,317 10.5195 87,491 89,693
--------------------------
$ 1,656,654 $ 1,722,197
==========================
</TABLE>
4. SECURITY PURCHASES AND SALES
The aggregate cost of purchases and the proceeds from sales of investments are
presented below:
<TABLE>
<CAPTION>
AGGREGATE COST
OF PURCHASES PROCEEDS FROM SALES
------------ -------------------
<S> <C> <C>
Capital $ 116,602 $ 642
Cash Management 730,829 586,324
Common Stock 290,872 67,534
Communications and Information 550,261 365,327
Bond 16,075 -
Frontier 486,156 125,826
International 30,845 161
Global Growth Opportunities 35,633 7,583
Global Smaller Companies 356,110 14,188
Global Technology 42,289 7,807
High Yield 125,630 268
Income 90,346 666
------------ ---------------
$ 2,871,648 $ 1,176,326
============ ===============
</TABLE>
10
<PAGE> 71
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
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 Bond, Capital,
Cash Management, Common Stock, Communications and Information, Frontier,
International, Global Smaller, High Yield Bond and Income Portfolios commenced
operations on January 28, 1996. The Global Growth Opportunity and Global
Technology commenced operations on May 1, 1996.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------
UNITS AMOUNT
-------------------------
<S> <C> <C>
CAPITAL SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 4,295 $ 109,631
Terminated contracts & net transfers out - -
-------------------------
4,295 109,631
=========================
CASH MANAGEMENT SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 547,032 727,407
Terminated contracts & net transfers out (439,506) (584,879)
-------------------------
107,526 142,528
=========================
COMMON STOCK SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 10,072 260,881
Terminated contracts & net transfers out (2,421) (65,969)
-------------------------
7,651 194,912
=========================
COMMUNICATIONS AND INFORMATION
SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 36,158 528,539
Terminated contracts & net transfers out (22,543) (343,003)
-------------------------
13,615 185,536
=========================
BOND SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 1,008 15,248
Terminated contracts & net transfers out - -
-------------------------
1,008 15,248
=========================
FRONTIER SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 27,406 447,643
Terminated contracts & net transfers out (7,085) (121,273)
-------------------------
20,321 326,370
=========================
INTERNATIONAL SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 2,363 29,921
Terminated contracts & net transfers out - -
-------------------------
2,363 29,921
=========================
</TABLE>
11
<PAGE> 72
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
5. SUMMARY OF CHANGES FROM UNIT TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------
UNITS AMOUNT
----------------------
<S> <C> <C>
GLOBAL GROWTH OPPORTUNITIES
SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 2,878 28,095
Terminated contracts & net transfers out - -
----------------------
2,878 28,095
======================
GLOBAL SMALLER COMPANIES
SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 23,242 321,864
Terminated contracts & net transfers out (38) (525)
----------------------
23,204 321,339
======================
GLOBAL TECHNOLOGY SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 3,596 34,500
Terminated contracts & net transfers out - -
----------------------
3,596 34,500
======================
HIGH YIELD SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 10,064 117,081
Terminated contracts & net transfers out - -
----------------------
10,064 117,081
======================
INCOME SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 4,576 84,559
Terminated contracts & net transfers out - -
----------------------
4,576 84,559
======================
Net increase from unit transactions $1,589,720
==========
</TABLE>
6. MORTALITY AND EXPENSE RISK (M AND E) CHARGES
CLNY assumes mortality and expense risks related to the operations of Variable
Annuity Account 2 and deducts a charge equal to an effective annual rate of
1.25% of the net asset value of each of the Funds at each valuation period. In
addition, at each valuation period an effective annual rate of 0.35% of the net
asset value of each Fund is deducted as daily administration fees.
12
<PAGE> 73
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
7. NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
NET
ACCUMULATED NET UNREALIZED
INVESTMENT REALIZED APPRECIATION
ACCUMULATED INCOME GAIN (LOSS) (DEPRECIATION)
UNIT M AND E AND CAPITAL ON ON
SUB-ACCOUNT TRANSACTIONS CHARGES GAINS INVESTMENTS INVESTMENTS TOTAL
----------- ------------ ------- ----- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Capital $ 109,631 $ (594) $ 6,864 $ 3 $ (5,135) $ 110,769
Cash Management 142,528 (1,006) 2,854 - - 144,376
Common Stock 194,912 (1,321) 29,599 3,926 (17,345) 209,771
Communications &
Information 185,536 (1,384) 946 17,049 4,387 206,534
Bond 15,248 (25) 827 - (714) 15,336
Frontier 326,370 (2,372) 36,682 5,843 (23,822) 342,701
International 29,921 (156) 899 (1) 64 30,727
Global Growth
Opportunities 28,095 (93) 30 (1) 224 28,255
Global Smaller
Companies 321,339 (1,755) 22,151 25 (18,969) 322,791
Global Technology 34,500 (275) 230 7 2,546 37,008
High Yield 117,081 (346) 8,547 5 (4,577) 120,710
Income 84,559 (588) 5,648 13 (2,202) 87,430
-----------------------------------------------------------------------------------------------
$1,589,720 $(9,915) $115,277 $26,869 $(65,543) $1,656,408
===============================================================================================
</TABLE>
8. UNIT VALUE
Unit Values as reported are calculated as total net assets divided by total
units for each Sub-account.
13
<PAGE> 74
FINANCIAL STATEMENTS
CANADA LIFE INSURANCE COMPANY OF
NEW YORK
December 31, 1996
With Auditors' Report
<PAGE> 75
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> 76
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> 77
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> 78
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> 79
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> 80
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> 81
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> 82
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> 83
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> 84
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> 85
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> 86
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> 87
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> 88
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> 89
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> 90
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> 91
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> 92
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> 93
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> 94
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> 95
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> 96
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> 97
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> 98
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> 99
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> 100
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> 101
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> 102
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> 103
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> 104
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> 105
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> 106
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> 107
PART C
OTHER INFORMATION
<PAGE> 108
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 2
(2) Not applicable
(3) (a) Form of Promotional Agent Distribution Agreement
(b) Form of Selling Agreement
(c) Distribution Agreement*
(d) Amendment to Distribution 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-Law of Canada Life Insurance Company
of New York passed by the Board on November 19, 1993.*
(7) Not applicable
(8) Buy-Sell 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 are ommitted from Item 23.
(12) Not applicable
(13) Not applicable
* Incorporated herein by reference to the filing of Post Effective
Amendment No. 11 of the Registration Statement on Form N-4 for Variable
Account 1 of Canada Life Insurance Company of New York (File No. 33-32199)
made April 1997.
<PAGE> 109
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) Assistant 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> 110
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 Insurance
Operations
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> 111
<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> 112
Item 27. Number of Policy Owners
As of December 31, 1996 there were 22 Non-Qualified and 43 Qualified Policy
Owners.
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.
<PAGE> 113
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
R.W. Linden* Assistant Secretary
K.T. Ledwos* Administrative Officer and Director
F. D'Ambra** President 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 address at 500 Mamaroneck Avenue, Harrison, New York
10528 and 6201 Powers Ferry Road, N.W., Atlanta, Georgia 30339.
Item 31. Management Services
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
<PAGE> 114
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;
(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> 115
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 6
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 2
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
6 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> 116
<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> 117
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
<S> <C>
1 Resolution of the Board of Directors of Canada Life Insurance Company of
New York (CLNY) Authorizing Establishment of the Variable Account 2
3 (a) Form of Promotional Agent Distribution Agreement
3 (b) Form of Selling Agreement
3 (c) Amendment to Distribution Agreement
4 (a) Form of Annuity Policy
4 (b) Riders and Endorsements
5 Form of Application
8 (a) Buy-Sell 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 Calculation
</TABLE>
<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 2.
<PAGE> 2
CANADA LIFE INSURANCE COMPANY OF NEW YORK
Certificate of Assistant Secretary
I, DAVID A. HOPKINS, Assistant Secretary of CANADA LIFE INSURANCE
COMPANY OF NEW YORK, a New York insurer, HEREBY CERTIFY THAT:
Attached hereto is an extract from the Minutes of the Meeting of the
Board of Directors of Canada Life Insurance Company of New York held on the
25th day of February, 1993 regarding the establishment of Variable Annuity
Account 2 and approval of the Registration Statement for Variable Annuity
Account 2 as inforce and effect on the date hereof.
WITNESS THE DUE EXECUTION HEREOF this 26th day of May, 1993.
/s/ David A. Hopkins
(SEAL) David A. Hopkins
Assistant Secretary
<PAGE> 3
ESTABLISHMENT OF VARIABLE ANNUITY ACCOUNT 2
The Secretary then reported that an additional separate account is
required for a "wrap" variable annuity. The Secretary indicated this will be a
variable annuity with the underlying funds being those of the J. & W. Seligman
& Company Inc.
After discussion, on motion duly made by Mortgagor. D. C. Cooper and
seconded by Mortgagor. D. A. Loney the following resolution regarding the
establishment of Variable Annuity Account 2 was unanimously adopted:
5
<PAGE> 4
RESOLVED THAT, the Board of Directors of Canada Life Insurance
Company of New York 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 2" for the
following use and purposes, and subject to such conditions as hereinafter set
forth; and
FURTHER RESOLVED THAT, the Variable Annuity Account 2 is
established for the purpose of providing for the issuance by the Company of
variable annuity contracts, or variable annuity options under annuity contracts
(hereinafter, the "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 in the Secretary's
Office; and
FURTHER RESOLVED THAT, the income, gains, and losses, whether
or not realized, from assets allocated to Variable Annuity Account 2 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; and
FURTHER RESOLVED THAT, the portion of the assets of Variable
Annuity Account 2 equal to the reserve and other contract liabilities with
respect to Variable Annuity Account 2 shall not be chargeable with liabilities
arising out of any other business the Company may conduct; and
FURTHER RESOLVED THAT, Variable Account 2 shall be divided
into Investment Subaccounts, each of which shall invest in the shares or units
of a designated Investment Company Portfolio, and net premiums under the
Contracts shall be allocated to the eligible portfolios set forth in the
Contracts in accordance with instructions from owners of the Contracts; and
FURTHER RESOLVED THAT, the Board of Directors expressly
reserves the right to add, combine, or remove any Investment Subaccount of
Variable Annuity Account 2 as it may hereafter deem necessary or appropriate;
and
FURTHER RESOLVED THAT, any two of the Officers of the Company
are hereby authorized to invest such amount or amounts of the Company's cash in
Variable Annuity Account 2 or in any Investment Subaccount thereof as may be
deemed necessary or appropriate to facilitate the commencement of Variable
Annuity Account 2's operations and/or to meet any minimum capital requirements
under the Investment Company Act of 1940; and
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 2 as deemed necessary or
appropriate and consistent with the terms of the Contracts; and
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<PAGE> 5
FURTHER RESOLVED THAT, the Board of Directors of the Company
reserves the right to change the designation as it may deem necessary or
appropriate; and
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 2 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 2 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, and any
applications for exemptions, and any amendments thereto, under the Investment
Company Act of 1940 or other applicable federal laws as the said Officers of
the Company shall deem necessary or appropriate; and
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 2 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 2 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; and
FURTHER RESOLVED THAT, Roy W. Linden, Secretary, and David A.
Hopkins, Assistant Secretary, are duly appointed as agents for service under
such registration statement, duly authorized to receive communications and
notices from the Securities and Exchange Commission with respect thereto; and
FURTHER RESOLVED THAT, any two of the Officers of the Company
are hereby authorized on behalf of Variable Annuity Account 2 and on behalf of
the Company to take any and all action that each of them 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 any of the
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<PAGE> 6
states of the United States of America and other jurisdictions, and in
connection therewith to prepare, execute, deliver, and file all such
applications, 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 and all 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 2 and the Company; and
FURTHER RESOLVED THAT, any two of the Officers of the Company
are hereby authorized in the names and on behalf of Variable Annuity Account 2
and the Company to execute and file irrevocable written consents on the part of
Variable Annuity Account 2 and of the company to be used in such states
(including New York) wherein such consents to service of process may be
requisite under the insurance or 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 2 and of the
Company for the purpose of receiving and accepting process; and
FURTHER RESOLVED THAT, the Standards of Suitability previously
established by the Board of Directors of the company on September 13, 1989, and
which are applicable to recommendations to applicants to purchase a separate
account or a variable annuity contracts issued by the Company, are hereby
expressly adopted in connection with recommendations to applicants to purchase
the contracts and
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 2 insofar as such rights are required by any
applicable law; and
FURTHER RESOLVED THAT, any two of the Officers of the Company
are hereby authorized to execute such agreement or agreements as deemed
necessary and appropriate (i) with any qualified entity under which such entity
will be appointed principal underwriter and distributor of the Contracts and
(ii) with one or more qualified banks or other qualified entities to provide
administrative and/or custodial services in connection with the establishment
and maintenance of Variable Annuity Account 2 and the design, issuance, and
administration of the Contracts; specifically, such Officers are hereby
authorized to execute and deliver the Promotional Agent Distribution Agreement
by and among the Company, Canada Life of America Financial Services, Inc. and
Seligman Financial Services, Inc. in the form in which such agreement has been
provided to the Board of Directors, as modified or amended to the extent deemed
8
<PAGE> 7
necessary or appropriate by such officers or counsel, and to do such
acts and thins as may be deemed necessary or desirable to carry out the intent
and purposes thereof; and
FURTHER RESOLVED THAT, any two of the Officers of the Company
are hereby authorized to execute and deliver the Selling Agreement by and among
the Company, Canada Life of America Financial Services, Inc. and Seligman
Financial Services, Inc. in the form in which such agreement will be provided
to the Board of Directors, as modified or amended to the extent deemed
necessary or appropriate by such Officers or counsel and to do such acts and
things as may be deemed necessary or desirable to carry out the intent and
purposes thereof; and
FURTHER RESOLVED THAT, because it is expected that Variable
Annuity Account 2 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 and enter into any arrangements that may be necessary
or appropriate to enable such investments to be made; specifically, such
Officers are hereby authorized to execute and deliver the Buy-Sell Agreement by
and among the Company, Seligman Portfolios, Inc., and J. & W. Seligman & Co.
Incorporated in the form in which such agreement will be provided to the Board
of Directors as modified or amended to the extent deemed necessary or
appropriate by such Officers or counsel, and to do such acts and things as may
be deemed necessary or desirable to carry out the intent and purposes thereof;
and
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 amendment 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; and
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.
APPROVAL OF THE REGISTRATION STATEMENT FOR VARIABLE ANNUITY ACCOUNT 2
The Secretary also stated that approval of the Registration Statement
for Canada Life of New York Variable Annuity Account 2 and authorization of its
filing and the Registration of Securities under the Federal Securities Laws was
in order.
9
<PAGE> 1
EXHIBIT 3 (a)
FORM OF PROMOTIONAL AGENT DISTRIBUTION AGREEMENT
<PAGE> 2
PROMOTIONAL AGENT DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this ____ day of __________, 1993 is among CANADA LIFE OF
AMERICA FINANCIAL SERVICES, INC., a Georgia corporation ("CLAFS"), CANADA LIFE
INSURANCE COMPANY OF New York, a New York Corporation ("CLNY"), and SELIGMAN
FINANCIAL SERVICES, INC., a Delaware Corporation ("Seligman Financial").
WHEREAS, CLNY has determined to issue certain contracts or subsequent
variations thereof, such contracts are described in Exhibit A hereto (the
"Contracts"), which Contracts shall be funded either through a separate account
known as CLNY Variable Annuity Account 2 ("Separate Account") and/or through
CLNY's General Account; and
WHEREAS, a Registration Statement on Form N-4 including a Prospectus and
Statement of Additional Information relating to the Separate Account and units
of interest under the Contracts (Registration Statement") have been or will be
filed with the Securities and Exchanged Commission ("SEC") to register the
Separate Account as a unit investment trust under the Investment Company Act of
1940 ("1940 Act") and to register the units of interest under the Contracts
funded through the Separate Account under the Securities Act of 1933 ("1933
Act") and
WHEREAS, CLNY and CLAFS have entered into an agreement pursuant to which CLAFS
will serve as principal underwriter for the Contracts funded through the
Separate Account, it being the intention of CLNY and CLAFS that such Contracts
be offered to the public on a continuous basis; and
WHEREAS, Seligman Financial is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member of the
National Association of Securities Dealers, Inc.("NASD"); and
WHEREAS, CLAFS desires to appoint Seligman Financial as the promotional
distributing agent for the Contracts and Seligman Financial desires to act as
such promotional distributing agent.
In consideration of the mutual agreements herein made and intending to be
legally bound hereby, the parties agree as follows:
1. Promotional Distributing Agent. CLNY and CLAFS hereby appoint
Seligman Financial, and Seligman Financial hereby accepts appointment, as the
promotional distributing agent ("Promotional Agent") for the Contracts within
the United States and its territories. CLAFS agrees that during the term of
the Agreement, except in its capacity as a Selling Firm, as hereinafter
defined, it will not distribute the Contracts, will not reallow any in
compensation it receives to any broker-dealer firm unaffiliated with it and
will not be entitled to compensation with respect to distribution of the
Contracts to purchasers thereof. As Promotional Agent, Seligman Financial
undertakes to make best efforts consistent with market conditions to actively
market the Contracts through Selling Firms in those states in which it is so
authorized pursuant to applicable law, including, among other things,
advertising, visits to brokerage firms, and development of sales literature
As Promotional Agent, Seligman Financial may enter into written agreements
("Selling Agreements") with such brokerage firms ("Selling Firms") as it may
from time to time select subject to Section 10 (D) below. The form of Selling
Agreement is attached hereto as Exhibit B. Any material changes to the form of
the Selling Agreement must be approved by CLNY and such approval shall not be
unreasonably withheld. CLNY and CLAFS hereby undertake and agree that during
the term of this Agreement applications to purchase the Contracts will not be
accepted or Contracts issued unless submitted by Selling Firms or Seligman
Financial. Seligman Financial hereby agrees that CLAFS may become a Selling
Firm, provided however, that CLAFS enters into a Selling Agreement with
Seligman Financial.
2. Compensation. As compensation for its services as Promotional Agent,
Seligman Financial shall be entitled to receive compensation ("Promotional
Agent Fee") with respect to any Contract issued, as disclosed on the attached
Exhibit C, Statement of Compensation. CLNY agrees to pay to Selling Firms
compensation as set
<PAGE> 3
forth in Exhibit C which includes commissions payable to Selling Firms ("B/D
Concession"), and any potential Service Fee that might become payable to
Seligman Financial and Selling Firm at annuitization. CLNY will pay all
compensation consistent with its regular compensation-paying schedule.
In addition, CLNY will accept purchase payments net of B/D Concession, subject
to certain conditions imposed by CLNY from time to time, from Selling Firms as
specified from time to time by Seligman Financial on both initial and
subsequent purchase payments. If CLNY is required to return purchase payments
because (i) a Contracts's "Free Look" provision was exercised, (ii) a Contract
was not issued as a result of a failure by a Selling Firm to submit to CLNY an
application sufficient to satisfy state insurance laws or CLNY's eligibility
requirement, or (iii) a Contract was tendered to CLNY for redemption within ten
business days of the date of activity, then (a) no B/D Concession will be
payable with respect to said purchase payments, (b) Seligman Financial will
refund to CLNY the Promotional Agent Fee it may have received in connection
with such purchase payments, (c) any B/D Concessions paid by CLNY for said
purchase payments may be deducted by CLNY from any B/D concession owing to the
Selling Firm, and (d) if no B/D Concession is owing to the Selling Firm,
Seligman Financial will collect from Selling Firm such B/D Concession paid by
CLNY and will pay such amount to CLNY , it being understood that CLNY's, CLAFS'
and Seligman Financier's liability is limited and that Selling Firms are
responsible to Contract Owners for any loss of contract value or loss due to
reversal of trades which may occur due to wire errors, either in purchase
payment amount or investment option, failure of CLNY to receive an original
properly completed application, and/or any other failure on part of Selling
Firms to follow CLNY's administrative procedures. It is also understood that
Seligman Financial's liability, it if is unable to collect from a Selling Firm,
is limited as provided in Section 11D.
3. Recordkeeping Service Agent. The parties hereby agree that CLNY shall
be the Recordkeeping Service Agent to perform certain services in connection
with processing purchase payments, redemptions, transfers, processing of
Promotional Agent Fee and B/D Concessions and related services as agent for
itself and CLAFS. It is understood that in entering into this Agreement,
Seligman Financial is relying upon representations by CLNY that it, CLNY, will
provide and maintain or cause to be provided and maintained, certain
administrative and other services necessary for the operation of the Separate
Account and for the benefit of the Contract Owners and Seligman Financial.
4. Issuance of Contracts. CLNY and CLAFS hereby undertake to use their
best efforts, subject to the standards set forth in the Registration Statement,
(i) to maintain a continuous offering of the Contracts and (ii) to ensure that
applications to purchase units of interest under the Contracts shall be
acceptable to CLNY and that the Contracts shall be issued pursuant to such
applications and (iii) to ensure that all purchase payments be processed at the
accumulation unit value determined in the manner as described in the
Registration Statement. It is understood that a Contract shall not be issued
unless and until the purchase payments and application received relating to
such Contract are sufficient to satisfy CLNY's eligibility requirements as set
forth in the Contracts and the requirements of New York insurance law.
Seligman Financial agrees that all applications for the Contracts shall be made
on the application forms supplied by CLNY. Seligman Financial agrees to
instruct Selling Firms to (i) review the applications for completeness and
correctness as to form, (ii) review all applications for suitability, and (iii)
to promptly forward to CLNY all applications found to be complete together with
any purchase payments received with the applications received. Any additional
purchase payments, to the extent permitted by the Contract shall also be
remitted directly to CLNY.
5. Chargebacks. (i) In the event a Contract is returned to CLNY pursuant
to a Free Look provision, the full Promotional Agent Fee paid thereon shall be
charged back to Seligman Financial in accordance with Section 2 above. (ii)
Should any premium or purchase payment on any Contract issued by CLNY be
refunded for any reason, Seligman Financial shall repay or return Promotional
Agent Fees received by it with respect to such premium or purchase payment.
(iii) For full or partial withdrawals from the Contract: 100% of all B/D
Concessions paid to Selling Firms on amount(s) withdrawn within 6 months of
said amount(s) being paid to CLNY and 50% of all B/D concessions paid to
Selling Firms on amount(s) withdrawn from 7-12 months of such amount(s) being
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<PAGE> 4
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 either Promotional Agent Fee or B/D Concession. To the extent
permitted by law, the amount so charged back may, at the option of CLNY, be set
off against Promotional Agent Fees otherwise due to Seligman Financial . In
addition, such other compensation will be payable as are from time to time
agreed by the parties to the this Agreement and will be added to Schedule I of
the Selling Agreement in accordance therewith.
6. Plan Name. CLNY, CLAFS and Seligman Financial agree that the
Contracts will be sold under the name "Trillium" (Trillium) and that
communications to prospective and existing Contract Owners with respect to the
sale and servicing of the Contracts will contain prominent reference to the
aforementioned name. Property rights to the Name are owned by Canada Life
Insurance Company of America ("CLICA") an affiliated Company, which has entered
into a license agreement with Seligman Financial to permit the Name's use.
7. Confirmations and Prospectus Delivery.
A. CLNY and CLAFS agree that CLAFS, at its own expense and
through its agent CLNY, unless otherwise agreed in writing by Seligman
Financial, shall issue and deliver or cause to be issued and delivered,
confirmations of transactions effected with respect to the account of any
Contract Owner for each transaction for which a confirmation is legally
required in accordance with the provisions of the 1934 Act and Rule 10b-10
thereunder. CLNY and CLAFS further agree that CLAFS, through its agent CLNY,
shall cause copies of all such confirmations to be forwarded to such Selling
Firms as agreed to, in writing, by Seligman Financial and CLNY.
B. CLNY agrees that it will, in accordance with the provisions of
the 1933 Act and the rules thereunder, deliver or cause to be delivered to a
Contract Owner who has made an initial purchase payment, a copy of the then
current prospectus of the Separate Account and the then current prospectus for
the Fund. Such prospectuses shall be delivered prior to or at the time the
initial premium or purchase payment is made, or with the confirmation for such
initial premium purchase payment, delivered in accordance with Section 7(A).
8. Expenses. Seligman Financial shall be responsible for all costs
associated with the marketing and distribution of the Contracts including: (i)
the expenses of printing and distributing prospectuses, statements of
additional information and financial reports with respect to the Separate
Account and the Fund to prospective Contract Owners and of prospectuses to
persons described in Section 7(B) above; (ii) the expenses of preparing,
printing and distributing all other literature in connection with the
solicitation of applications to purchase the contracts including expenses of
filing such literature with the National Association of Securities Dealers,
Inc. provided that Seligman Financial may be reimbursed or otherwise paid for
any such materials by Selling Firms, and further provided that CLAFS and CLNY
will cooperate with Seligman Financial in the development of such materials as
reasonably requested by Seligman Financial; and (iii) expenses of advertising
in connection with such solicitation effort.
CLNY and CLAFS each accept responsibility for, and will bear the cost of,
ensuring that Contract Owners receive on an ongoing basis all reports, notices
and other materials required by applicable provisions of the Federal or State
securities laws, rules of the NASD or any state securities or state insurance
department, including without limitation, annual and semi-annual reports and
prospectuses and statements of additional information for the Fund and Separate
Account. The expenses relating to appointment of agents or producers of
Selling Firms are as set forth in Section III. A. of the Selling Agreement,
attached hereto as Exhibit B.
In addition to any expense hereinabove expressly mentioned, CLNY and CLAFS each
agree to pay all costs associated with the operation of the Separate Account,
including without limitations: all fees and expenses incurred in connection
with the registration of the Separate Account and all units of interest under
the Contracts issued by CLNY under the securities laws of the United States;
all fees and related expenses which may be incurred in connection with the
qualification and registration of the Separate Account and the units of
interest under the Contract for sale in New York; all expense relating to the
filing of all sales literature approved by
3
<PAGE> 5
Seligman Financial with New York regulatory authorities; and any other costs
incurred by CLNY or CLAFS or their receptive employees unless otherwise agreed
upon by the parties in writing and except to the extent such costs are paid by
charges made against the Separate Account assets as set forth in the
Registration Statement.
9. Representations and Warranties of CLNY and CLAFS. CLNY and CLAFS each
hereby represent and warrant that:
A. all actions, including, without limitation, those necessary
under their articles of incorporation and by-laws and applicable federal and
state law, to authorize and establish the Separate Account have been taken;
B. each has taken all actions necessary to authorize the
execution, delivery and performance of this Agreement and all transactions
contemplated hereunder;
C. a Registration Statement relating to the Separate Account and
the Contracts has been or will be filed with the SEC under the 1933 Act and the
1940 Act and one or more amendments may be filed before the Registration
Statement becomes effective;
D. Seligman Financial has been provided with a copy of the
Registration Statement and amendments thereto in the form in which it has been
filed with the Securities and Exchange Commission and is hereby authorized to
use such Registration Statement in the form in which it becomes effective and
the information contained therein (as post- effectively amended and
supplemented from time to time as provided herein) in connection with its
activities as Promotional Agent hereunder and shall be provided with such other
information relating to the Contracts or the Separate Account as it may
reasonably request;
E. such Registration Statement when it becomes effective will
conform in all material respects with he applicable requirements of the 1933
Act and the 1940 Act and the rules and regulations thereunder, and will not
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading;
F each of them will use their best efforts to ensure that so
long as the Separate Account and the units of interest under the Contracts are
the subject of a public offering the Prospectus will continue to conform in all
material respects with the requirements of the 1933 Act and the 1940 Act and
the rules and regulations thereunder and that at no time will the prospectus
include an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading;
G. recognizing that it is the intention of the parties hereto
that CLNY engage in a continuous public offering of units of interest under the
Contracts and interests thereunder in the Separate Account, every effort will
be made of prepare and file on a timely basis with the SEC such post-effective
amendments or supplements as may be necessary to maintain a continuous public
offering of units of interest under the Contracts. Seligman Financial shall be
promptly advised of any proposed amendment or supplement to the Registration
Statement and shall be provided with a copy of such proposed amendment or
supplement sufficiently in advance of the filing of such amendment or
supplement with the SEC to permit its review unless legal or regulatory
requirements would make such review impracticable;
H. Seligman Financial shall be notified as to the date upon which
the Registration Statement as it may be amended becomes effective and shall be
provided with a copy of such Registration Statement in the form in which it
shall become effective. All information reasonably requested by Seligman
Financial in order to provide prospective Contract Owners with a prospectus as
contained in the initially effective Registration Statement or a subsequently
amended or supplemented Prospectus shall be promptly furnished by CLNY and
CLAFS;
I. Seligman Financial shall be promptly notified of the
institution by the SEC of any stop order proceedings in respect of
Registration Statement and CLNY and CLAFS will use their best efforts to
prevent
4
<PAGE> 6
the issuance of any such stop order and to obtain as soon as possible its
lifting if issued;
J. each shall use its best efforts to file and secure approval
for sale of the Contracts in the State of New York, and CLNY further agrees to
maintain such approval. It is understood that each shall make every reasonable
effort to make the Contracts available in the State of New York, as soon as
practicable;
K. all sales material prepared by Seligman Financial and reviewed
and approved by CLNY and CLAFS, will be filed by CLNY with the New York
regulatory authorities as required and CLNY will use its best efforts to effect
prompt review of such material in New York and to provide Seligman Financial
with such assistance as Seligman Financial may reasonably require in order to
develop sales literature in compliance with the laws and regulations of New
York;
L. upon reasonable request, Seligman Financial shall be informed
as to the status of all such sales literature filings and shall be promptly
notified of all approvals or disapproval's of sales literature filings in New
York;
M. Seligman Financial will receive full cooperation in its
efforts to assist the registered representatives of Selling Firms in meeting
the requirements for appointment as CLNY agents for the sale of the Contracts
under New York insurance laws and, upon reasonable request, Seligman Financial
shall be informed as to the status of applications for such appointment;
N. CLNY will use its best efforts to process all completed
applications for such appointment on a timely basis provided that it is
understood that CLNY may decline to appoint a particular registered
representative; and
O. Seligman Financial may be notified in the event CLNY declines
to appoint a particular registered representative and the reason for such
action.
10. Representations and Warranties of Seligman Financial. Seligman
Financial hereby represents and warrants that:
A. it has taken all actions including, without limitation, those
necessary under its articles of incorporation, by-laws and applicable state
corporate law, necessary to authorize the execution, delivery and performance
of this Agreement and all transactions contemplated hereunder;
B. it is and shall remain duly registered as a broker-dealer
under the 1934 Act, is a member in good standing of the NASD, and is duly
registered under applicable state securities laws;
C. Seligman Financial shall only solicit and shall instruct
Selling Firms only to solicit purchases of the Contracts in the State of New
York when the Contracts are approved for sale under applicable securities and
insurance laws;
D. it shall enter into Selling Agreements, substantially in the
Form of Exhibit B hereto, only with such Selling Firms as are duly registered
as broker dealers under the 1934 Act and are members in good standing of the
NASD properly qualified to undertake their responsibilities under the Selling
Agreements, and who represent that they are duly in compliance with applicable
state securities and insurance laws, and shall direct such Selling Firms to
sell only through those associated persons (as that term is defined in Section
3(a)(18) of the 1934 Act) who are duly and appropriately licensed, registered
and otherwise qualified to sell the Contracts under the 1934 Act, applicable
rules of the NASD, applicable state and insurance law and are appointed by CLNY
as insurance agents for the sale on the Contracts.
5
<PAGE> 7
In connection with broker-dealers to distribute the Contracts, Seligman
Financial will use reasonable efforts to ascertain that each broker-dealer
wishing to execute a Selling Agreement is a member firm of the NASD duly
qualified with all federal, state and other regulatory bodies, and otherwise is
a suitable entity to represent CLNY and CLAFS. CLNY and CLAFS may refuse to
enter into a Selling Agreement with a broker-dealer selected by Seligman
Financial if such Selling Firm is deemed by CLNY or CLAFS to be unsuitable for
any reason. Neither CLNY nor CLAFS will incur any obligation to compensate, or
reimburse the expenses of Seligman Financial as a result of any such refusal.
E. Prior to any use with members of the public, Seligman
Financial will provide CLNY and CLAFS copies of all sales literature developed
by Seligman Financial for their review and approval. Such sales literature
shall be reviewed in light of applicable federal securities laws, NASD
requirements and New York insurance laws. Seligman Financial shall file such
sales literature with the NASD in accordance with the rules and regulations of
the NASD. CLNY, CLAFS and Seligman Financial will approve the use of sales
material in New York only if CLNY notifies Seligman Financial that such
material has been submitted by CLNY, as required by applicable law, reviewed
and approved by New York's regulatory authorities;
F. no statement or representation concerning the Contracts shall
be made by Seligman Financial or any associated person thereof in connection
with the Contracts other than those contained in the then current Registration
Statement or in any other sales material released or approved by CLNY or CLAFS
as information supplemental to such Registration Statement; and
G. it shall promptly furnish to CLNY and CLAFS or their agent,
any reports and information which the other party may reasonably request for
the purpose of meeting their reporting and recordkeeping requirements under the
insurance laws of New York, and under the federal and state securities laws
and rules of the NASD.
11. Indemnification.
A. CLNY and CLAFS each agree to indemnify and hold harmless
Seligman Financial, any Selling Firm and each person who controls Seligman
Financial or any such Selling Firm and their agents, subsidiaries and employees
against any and all losses, claims, damages, liabilities or expenses
(including, without limitation, any expenses reasonably incurred in
investigating or defending against any litigation commenced or threatened, or
any claim) arising out of or based upon: (i) any untrue statement or alleged
untrue statement of a material fact contained in (a) the Separate Account
Registration Statement; or (b) any contract, application or other document
filed in any State in order to qualify the Separate Account ins such State or
to qualify the Contracts to be issued thereby for sale in such state or to
maintain such qualifications; or (ii) the omission or alleged omission in such
Registration Statement, written material, application or other such document to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were mad; or (iii) the negligent, improper fraudulent or unauthorized acts
or omissions of CLNY or CLAFS or (iv) any breach of, or failure to comply with,
the representations and warranties made by CLNY and/or CLAFS as set forth
herein. Notwithstanding the foregoing, CLNY and CLAFS shall not indemnify
Seligman Financial, an Selling Firm and each person who controls Seligman
Financial or any such Selling Firm and their agents, subsidiaries and employees
under paragraphs 11(A)(i) and 11(A)(ii) hereof to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in 11(A)(i) such Registration Statement or other sales material in
conformity with written information furnished to them by Seligman Financial or
any of its affiliates specifically for use therein; or 11(A)(ii) in the
prospectus and statement of additional information for the Fund, except for
liability arising out or written information furnished by CLNY or CLAFS
specifically for use therein. This indemnity agreement will be in addition to
any liability which CLNY or CLAFS may otherwise have.
B. Seligman Financial agrees to indemnify and hold harmless CLNY,
CLAFS, each person who controls CLNY or CLAFS and their agents, subsidiaries
and employees against any and all losses, claims, damages, liabilities, or
expenses (including, without limitation any expenses reasonably incurred in
investigating
6
<PAGE> 8
or defending against any litigation commenced or threatened or any claim)
arising out of or based upon: (i) any untrue or alleged untrue statement or
representation made by Seligman Financial in connection with its obligations as
Promotional Agent hereunder or by associated persons of Seligman Financial
(except to the extent that such statements may be made in reliance on any
material relating to the Separate Account or the contracts supplied by CLNY or
CLAFS), or (ii) the omission or alleged omission by Seligman Financial in
connection with its obligations as Promotional Agent hereunder or by associated
persons of Seligman Financial to state any material fact necessary to make
statements made not misleading in light of the circumstances in which they were
made (except to the extent that, in omitting to make such statement, reliance
was placed upon material relating to the Separate Account or the Contracts
supplied by CLNY or CLAFS), or (iii) use of sales literature by Seligman
Financial and associated persons thereof which has not been approved for use by
CLNY and CLAFS and has not been, if necessary, submitted by Seligman Financial
on behalf of CLNY and CLAFS to the NASD; or (iv) the negligent, improper,
fraudulent or unauthorized acts or omissions of Seligman Financial; or (v) any
breach of, or failure to comply with, the representations and warranties made
by Seligman Financial as set forth herein; or (vi) any untrue statement or
alleged untrue statement of a material fact contained in the prospectus and/or
statement of additional information for the Fund; or (vii) the omission or
alleged omission of a material fact contained in the Prospectus and/or
statement of additional information for the Fund.
C. Promptly after receipt by an indemnified party under this
paragraph 11 of notice of the commencement of any action by a third party, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this paragraph 11, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying party
will not relieve the indemnifying part from liability which the indemnifying
party may have to any indemnified party otherwise than under this paragraph 11.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
D. Seligman Financial and CLNY agree to share equally any losses,
including reasonable attorney cost, incurred by CLNY resulting from the breach
by Selling Firms or their associated persons of the Selling Agreements, it
being understood that CLNY and Seligman Financial must promptly notify the
other party upon knowledge of such breach. Notwithstanding the agreement
contained in this subsection D, CLNY may in the course of losses suffered by it
as a result of wire orders accompanied by a telephone facsimile transmission as
described in Section 4 thereof, may deduct the amount of Promotional Agent Fee
due Seligman Financial for sales of the Contracts hereunder. In addition, CLNY
will hold Selling Firm liable for losses under such Contracts when the (i)
allocation instructions provided in the facsimile are different from those
provided in the original application; (ii) purchase payment has been received
and invested, and prior to the Contract being issued it is turned back for
cancellation by the Selling Firm; (iii) Contract is being returned under the
Free Look provision, but more than 30 days from the wire date; and (iv)
application is not received by CLNY within five business days after the wire
date. If CLNY is unable to collect such losses from Selling Firms, then CLNY
and Seligman Financial agree to share equally such losses, including reasonable
attorney costs.
12. Opinion of Counsel; Opinion of Auditors; Opinion of Officers.
A. Prior to the date first above written (the "Closing Date"),
CLNY and CLAFS will provide to Seligman Financial in a form acceptable to it,
an opinion of counsel from David A. Hopkins, Assistant Secretary, to be dated
the Closing Date, to the effect that: (i) CLNY and CLAFS are duly incorporated
and are existing corporations in good standing under their respective state
laws of incorporations; (ii) CLAFS is duly registered as a broker-dealer under
the 1934 Act and is a member in good standing of the NASD; (iii) CLNY and
CLAFS may execute, deliver and perform their respective obligations hereunder
without, as a result, breaching or violating any provision of their
7
<PAGE> 9
respective corporate charters or by-laws, the provisions of any statute, rule,
regulation or order to which either is subject or to which any subsidiary is
subject or any agreement or instrument to which either is a party or by which
either is bound; (iv) CLNY has taken all actions, including, without
limitation, those necessary under its articles of incorporation and by-laws and
applicable state laws, to authorize and establish the Separate Account; (v)
such counsel has no reason to believe that either the Registration Statement or
any amendment or supplement thereto as of the date of the opinion contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; the descriptions in the Registration Statement of statutes, legal
and governmental proceedings and contracts and other documents are accurate and
fairly present the information required to be shown; and such counsel does not
know of any legal or governmental proceedings required to be descried in the
Registration Statement which are not described as required or of any contracts
or documents of a character required to be described in the Registration
Statement or to be filed as exhibits to the Registration Statement which are
not described and filed as required, it being understood that such counsel need
express no opinion as to the financial statement or other financial data
contained in the Registration Statement or on information contained in the
Registration Statement based on written information furnished by Seligman
Financial or any of its affiliates specifically for use therein; and (vi) this
Agreement has been duly authorized, executed and delivered by CLNY and CLAFS .
B. On or before the Closing Date, CLNY will provide to Seligman
Financial a copy of the most recent Report of Independent Auditor prepared by
Ernst & Young to the effect that: (i) Ernst & Young are independent certified
public accountants with respect to CLNY as defined in the Code of Professional
Ethics of the American Institute of Certified Public Accountants and (ii) Ernst
& Young have issued their opinion on the financial statements of CLNY, copies
of which have been furnished to Seligman Financial.
C. On the Closing Date, Seligman Financial will have received a
certificate, dated as of the Closing Date, of the President or any Vice
President, and Secretary or Assistant Secretary of CLNY in which such officers,
to the best of their knowledge after reasonable investigation, shall state that
the representations and warranties of CLNY in this Agreement are true and
current, that CLNY has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
the execution of this Agreement, that subsequent to the date(s) of the most
recent financial statements in the Prospectus, there has been no material
adverse change in the financial position or results or operation of CLNY and
its subsidiaries except as set for in or contemplated by the Prospectus or as
described in such certificate.
D. Prior to the Closing Date, Seligman Financial will provide to
CLNY and CLAFS in a form acceptable to them, an opinion of Nina O. Shenker,
Senior Vice President and General Counsel of J. & W. Seligman and Company,
Inc., to be dated as of the Closing Date, to the effect that: (i) Seligman
Financial is duly incorporated and is an existing corporation in good standing
under the laws of the state in which it is incorporated; (ii) Seligman
Financial is duly registered as a broker-dealer under the 1934 Act and is a
member in good standing of the NASD; (iii) Seligman Financial may execute,
deliver and perform its obligations hereunder without, as a result, breaching
or violating any provision of its corporate charter or by-laws, any provision
of the federal securities laws, rules and regulations, or the NASD Rules of
Fair Practice, applicable to Seligman Financial, or any judicial or
administrative orders in which it or any subsidiary is named or any material
Agreement or instrument to which it is a party or by which it is bound; and
(iv) this Agreement has been duly authorized, executed and delivered by
Seligman Financial.
E. On the Closing Date, Seligman Financial shall provide to CLNY
and CLAFS in a form acceptable to them a certificate, dated as of the Closing
Date, of the President or any Vice President, and a principal financial or
accounting officer of Seligman Financial in which such officers, to the best of
their knowledge after reasonable investigation, shall state that the
representations and warranties of Seligman Financial in this Agreement are true
and current, that Seligman Financial has complied with all Agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to execution of this Agreement.
8
<PAGE> 10
F. CLNY agrees that, so long as this Agreement is in effect, it
will furnish to Seligman Financial, as soon as practicable after the end of
each fiscal year, a copy of its annual report to policyholders for such year,
and CLNY will furnish to Seligman Financial (a) as soon as available, a copy of
each report of CLNY to be mailed to policyholders, and (b) from time to time,
such other financial information concerning CLNY as Seligman Financial may
reasonably request.
13. Term of Agreement. This Agreement may not be assigned by any of the
parties hereto. This Agreement shall continue in full force and effect for a
period of 5 years from the effective date of this Agreement, unless otherwise
mutually agreed upon by the parties to terminate sooner or if terminated for
such reasons as set forth in paragraph 14 below. After such 5 year period, it
will be deemed extended thereafter from year to year subject to termination at
will by any party hereto upon 60 days prior written notice to the other, it
being understood and agreed that the right to terminate this Agreement upon 60
days notice may be exercised for any reason or for no reason.
14. Termination. This Agreement shall terminate:
A. at the option of CLNY or CLAFS upon the institution of formal
proceedings against Seligman Financial or an affiliate by the NASD, the SEC, or
any state securities or insurance department or any other regulatory body
provided that CLNY or CLAFS determines in good faith in either's sole judgment,
that such institution will have a material adverse impact on Seligman Financial
or the affiliate's ability to perform its obligations under this Agreement; or
B. at the option of Seligman upon the institution of formal
proceedings against The Canada Life Assurance Company ("CLA"), CLNY or CLAFS
brought by any Canadian legal or regulatory authority, the NASD, SEC, or any
formal proceedings involving a material matter brought by any state securities
or state insurance department or any other regulatory body regarding CLA, CLNY
or CLAFS provided that Seligman Financial determines in good faith in its sole
judgment that such institution will have a material adverse impact on CLNY's
Financial or CLAFS' ability to perform its obligations under this Agreement or
Seligman Financial's ability to distribute the Contracts; or
C. at the option of Seligman Financial or CLNY upon any material
adverse change in the financial condition of one or the other; or
D. at the option of Seligman Financial, CLNY or CLAFS if the
Buy-Sell Agreement among the Fund, the Separate Account, CLNY and J. & W.
Seligman & Co., Inc. ("JWSI"), the Investment Adviser is terminated.
E. at the option of Seligman Financial, CLNY or CLAFS, mutually
and equally, if senior management of any of the parties to this Agreement so
determines. In that event, termination of the Agreement will occur 30 days
after written notice to that effect has been received by the non-terminating
party(ies).
15. Provisions Surviving Termination. Notwithstanding termination of this
Agreement, and regardless of the cause or reason for such termination, the
provisions of Paragraph 11 (Indemnification) shall survive and be binding upon
the parties for a period of 10 years following such termination.
16. Notices. Any notice required under this Agreement shall be deemed to
have been given to CLNY and CLAFS if mailed to either, sent to the attention of
the Assistant Secretary, Canada Life Insurance Company of New York, 500
Mamaroneck Avenue, Harrison, New York 10583, and notice is deemed given to
Seligman Financial if mailed to Seligman Financial Services, Inc. with a copy
to Senior Vice President and General Counsel, JWSI, 130 Liberty Street, New
York, NY 10006, or at such other address furnished to the other party pursuant
hereto.
17. Nature and Survival of Representations and Warranties. All statements
contained in this Agreement or in connection with the transactions contemplated
hereby shall be deemed representations and warranties by the
9
<PAGE> 11
parties hereunder. All representations and warranties of the parties made in
this Agreement or as provided herein shall survive, regardless of any
investigation made by or on behalf of the parties hereto, until the applicable
statutes of limitations have run, and except if a claim arises under a
representation or warranty and a notice of claim is given prior to the
expiration of the survival period, then such representation or warranty shall
not terminate with respect to such claim until indemnification thereof shall
have been made in accordance with the provisions of this Agreement.
18. Exclusivity of Agreement.
A. CLNY and CLAFS hereby agree not to develop, market or
otherwise engage in the sale of other individual or group variable annuities
distributed through selling agreements with NYSE member firms or other
broker-dealers as agreed to by the parties from time to time, for five years
from the effective date of this Agreement, without prior written consent of
Seligman Financial subject to the following: (i) This provision is not
applicable to and will in no way limit the further development and distribution
of CLNY's existing individual (VariFund) and group (The Canada Life 401(k))
variable annuity products or amendments thereto; (ii) The exclusive nature of
this Agreement will be reassessed by the parties and the exclusive nature of
this Agreement may be terminated by either CLNY or Seligman Financial, upon 180
days notice, if this venture is not successful in achieving the total assets
under management through individual and group annuity sales by the end of the
year specified below.
Year End
1994 $ 50 million
1995 $100 million
1996 $150 million
1997 $250 million
CLNY and Seligman Financial believe that these levels of production are
achievable and will work together in a spirit of cooperation to achieve the
success of this venture.
B. Seligman Financial agrees during the term of this Agreement
not to enter into any distribution agreement with any other insurance company
unaffiliated with CLNY for the development, distribution, marketing or sale of
any other individual or group variable annuity or similar annuity, so long as
Section 18A of this Agreement is in effect, without the express prior written
consent of CLNY or CLAFS.
C. This Section 18 A and B shall be of no effect if this
Agreement is terminated pursuant to Section 14.
19. Miscellaneous
A. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require, or
to impose any duty upon, either of the parties to do anything in violation of
any applicable laws or regulations, and CLNY and Seligman Financial shall each
comply with all applicable Federal and State laws, rules and regulations;
B. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original; and
C. If any provisions of this Agreement shall be held or made
invalid by court decision, statute, rule or otherwise the remainder of this
Agreement shall not be affected thereby.
10
<PAGE> 12
20. Headings: The descriptive headings of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
21. Waivers. The waiver by any party of a breach by any other party of
any of the provisions of this Agreement shall not operate or be deemed as a
waiver of any other provision of this Agreement or of any subsequent breach
thereof by any party.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and may not be modified except in a written
instrument executed by all parties hereto.
IN WITNESS WHEREOF, Seligman Financial, CLNY and CLAFS have
caused this Agreement to be executed by their duly authorized officers as of
the date first above written.
CANADA LIFE INSURANCE COMPANY OF NEW YORK
BY __________________________________________________
BY __________________________________________________
CANADA LIFE OF AMERICA FINANCIAL SERVICES, INC.
BY __________________________________________________
BY __________________________________________________
SELIGMAN FINANCIAL SERVICES, INC.
BY __________________________________________________
11
<PAGE> 13
EXHIBIT C
STATEMENT OF COMPENSATION
As of May, 1993
Subject to the terms and conditions of this Agreement, CLAFS will pay
to Seligman Financial compensation based upon the premiums and
purchase payments received from Selling Firms having a Selling
Agreement with CLAFS as a direct result of Seligman Financial's
efforts. Promotional Agent Fees will be paid to Seligman Financial in
accordance with applicable law, in the percentages shown below: Form
30099
<TABLE>
<CAPTION>
FOR PRE-AUTHORIZED CHECK CASES
------------------------------
Promotional Agent Fee
B/D Concession Paid Paid to Seligman Financial
To Selling Firms as as Master General Agent
Agent General Agent
Policy Years Commission Override Override
- ------------ ---------- -------- --------
<S> <C> <C> <C>
1-10 3.5% 2.5% 1%
11-15 3.5% 2.5% 0.5%
16+ 1.5% -0- 0.5%
</TABLE>
<TABLE>
<CAPTION>
For Other than Pre-Authorized Check Cases
-----------------------------------------
B/D Concession Paid Paid to Seligman Financial
To Selling Firms as as Master General Agent
Agent General Agent
Policy Years Commission Expense Allowance Expense Allowance
- ------------ ---------- ----------------- -----------------
<S> <C> <C> <C>
1-10 3.5% 2.5% 1%
11-15 3.5% 2.5% 0.5%
16+ 1.5% -0- 0.5%
</TABLE>
<TABLE>
To B/D To Seligman Financial
------ ---------------------
<S> <C> <C> <C>
Service Fee at Annuit-
ization if "internal"
annuity rates are used. 3.5% if payout 3.0% .50%
Service Fee is only paid = or > 10 years
on annuitized proceeds that or a life annuity
are past any applicable and amount $0-1
surrender charge/periods. million
1.5% if amount over 1.25% .25%
$1 million
2.35% if payout 2.0% .35%
<10 yrs and
not a life annuity
and amount $0-1
million
1.5% if amount over 1.25% .25%
$1 million
</TABLE>
Promotional Agent Fees will be paid to Seligman Financial based on
premiums or purchase payments paid in cash or check and accepted by
CLNY on contracts specified above, in accordance with the provisions
of this Agreement. The Gross payout above represents total payout
from CLNY, including Selling Concessions paid to Selling Firms.
<PAGE> 14
Chargebacks: (i) In the event a contract is returned to CLNY pursuant to a
"Free Look" provision, the full Promotional Agent Fee paid thereon shall be
charged back to Seligman Financial. (ii) Should any premium or purchase
payment on any contract issued by CLNY be refunded for any reason, Seligman
Financial shall repay or return Promotional Agent Fees 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 Seligman Financial 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 Seligman Financial shall be returned or
repaid. (v) For full or partial withdrawals from the contract: 100% of all
Promotional Agent Fees and 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
Promotional Agent Fees and 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 either
Promotional Agent Fee or B/D Concession. To the extent permitted by law, the
amount so charged back may, at the option of CLNY, be set off against
Promotional Agent Fees otherwise due to Seligman Financial. 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.
EXPENSE ALLOWANCE
Expense Allowances: The company will pay expense allowances to the general
agent for business effected by or through the general agency based on the
formulas in the Schedule of Expense Allowance Payments.
Conditions and Limitations: The payment of all expense allowances to the
general agent is subject to the following conditions and limitations:
1. Lapses and surrenders in the first policy year, and any refunds
of first year premium made by the company, will result in proportionate
chargebacks of any expense allowances paid to the general agent for
said premiums.
2. No expense allowance will be used by the general agent of the
company 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 to a general agent
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, the
company will apply those in a and b above on a "per-policy" basis.
<PAGE> 1
EXHIBIT 3 (b)
FORM OF SELLING AGREEMENT
<PAGE> 2
SELIGMAN
CANADA LIFE INSURANCE COMPANY OF NEW YORK
A wholly-owned subsidiary of
The Canada Life Assurance Company
Home Office
500 Mamaroneck Avenue
Harrison, New York 10528
(914) 835-8400
Annuity Service Office
6201 Powers Ferry Road
Atlanta, Georgia 30339
(800) 905-1959
SELLING AGREEMENT
AGREEMENT by and between Canada Life Insurance Company of New York
(CLNY), a New York Corporation, a wholly- owned subsidiary of The Canada Life
Assurance Company of Canada; Canada Life of America Financial Services, Inc.
(CLAFS), 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) and Seligman Financial Services
Inc. (Seligman Financial) also a registered broker-dealer and member of the
NASD;
________________________________________________________________________________
________________________________________________________________________________
(Selling Broker-Dealer), also a registered broker-dealer 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) and
the Investment Company Act of 1940 (the "1940 Act") (Contracts or Contracts
collectively); and
WHEREAS, CLNY has authorized CLAFS as principal underwriter and
Seligman Financial as promotional agent to enter into agreements, subject to
the consent of CLNY, with Selling Broker-Dealers and General Agents for the
distribution of the Contracts; and
<PAGE> 3
WHEREAS, CLNY and CLAFS have entered into a Promotional Agent Distribution
Agreement with Seligman Financial that Seligman Financial shall secure duly
qualified Selling Broker-Dealers and General Agents to CLNY and CLAFS for the
distribution of the Contracts, refer these Selling Broker-Dealers and General
Agents to CLNY for information in obtaining licenses, registrations and
appointments to enable the registered representatives and producers of these
Selling Broker-Dealers and General Agents to sell the Contracts, and provide
educational meetings to familiarize these Selling Broker-Dealers and General
Agents and their registered representatives and producers with the provisions
and features of the Contracts; and
WHEREAS, Selling Broker-Dealer and General Agent with to participate
in the distribution of the Contracts;
NOW THEREFORE, in consideration of the premises 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.
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
producer is fully licensed under New York insurance laws and, in connection
with securities regulated Contracts, is a fully registered representative 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 New York insurance regulatory authorities in connection with
obtaining necessary licenses and appointments for producers. All fees payable
to New York regulatory authorities in connection with the initial CLNY
appointment of producers who already possess necessary insurance licenses shall
be paid by CLNY. Any renewal license fees due after the initial appointment
and the current renewal, or between the last previous renewal and current
renewal; otherwise, renewal fees shall be paid by General Agent. "Production"
is defined as either a new issued Contract or an additional purchase payment on
a previously issued Contract. General Agent shall periodically provide CLNY
with a list of all producers appointed by General Agent when such producers are
licensed in New York to solicit sales of the contracts. General Agent agrees
to fulfill all requirements set forth in the General Letter of 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.
2
<PAGE> 4
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 New York 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, CLAFS or Seligman Financial. 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, CLAFS or Seligman Financial, 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 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 continued compliance with
such agreement and any procedures, rules or regulations implemented by Selling
Broker-Dealer or General Agent.
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 New York laws to engage in the sale of
securities regulated Contracts when required; 3) provide CLNY and CLAFS, 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 attorney's fees) to CLNY, CLAFS or Seligman Financial,
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.
3
<PAGE> 5
V. AUTHORITY AND DUTIES OF GENERAL AGENT
AND SELLING BROKER DEALER
A. CONTRACTS
The securities and insurance regulated Contracts 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 Contracts 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 indicated 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.
C. RECEIPT OF MONEY
All money payable in connection with any of the Contracts, whether as
premium, purchase payment or otherwise and whether paid by or on behalf of any
contract owner or anyone else having an 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 is 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 by Seligman Financial, 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.
4
<PAGE> 6
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 Schedule I.
Unless otherwise provided in Schedule I, 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. 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, CLNY and Seligman Financial 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, offers to rebate or
withholds any part of any Payments on the Contracts. 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 any indebtedness on
behalf of CLNY, CLAFS or Seligman Financial. 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, CLAFS or Seligman Financial against
any and all amounts otherwise payable to Selling Broker-Dealer or General
Agent.
5
<PAGE> 7
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.
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 the
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 and Seligman Financial, respectively, shall have the authority
to: 1) alter the forms or substitute other forms in place of those prescribed
by CLAFS or Seligman Financial; 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 or
Seligman Financial.
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, CLAFS or Seligman Financial, 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 hod
harmless CLNY, CLAFS and Seligman Financial 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 New York where
the business described herein is to be transacted. Selling Broker-Dealer and
General Agent shall promptly furnish to CLNY and CLAFS or their agent, any
reports and information which the other party may reasonably request for the
purpose of meeting their reporting and recordkeeping requirements under the
insurance laws of New York, and under federal and state securities laws and
rules of the NASD.
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, the 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
6
<PAGE> 8
Contracts or any prospectus included as a part thereof, as from time to time
amended and supplemented. Seligman Financial 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, 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 shares of Seligman Portfolios Inc. (the
"Fund") filed pursuant to the 1933 Act or any prospectus included as part
thereof, as from time to time amended and supplemented.
2) Selling Broker-Dealer and General Agent agree to indemnify and hold
harmless CLAFS, CLNY and Seligman Financial, their affiliates and 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 this Agreement.
G. NOTICES
All notices or communications shall be sent to the 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
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York.
I. AMENDMENT OF AGREEMENT
CLNY reserves the right to amend this Agreement in writing at any
time. The submission of an application for the Contracts by Selling
Broker-Dealer or General Agent five or more business days after notice of any
such amendment has been sent to the other parties shall constitute agreement to
such amendments.
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 and Seligman
Financial 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 and Seligman Financial
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 NOTICES
Address for Canada Life Insurance Company of New York
500 Mamaroneck Avenue
Harrison, New York 10583
Address for Canada Life of America Financial Services, Inc.
6201 Powers Ferry Road, N.W.
Atlanta, Georgia 30339
Address for Seligman Financial
100 Park Avenue
New York, New York 10017
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, Financial Seligman Financial Services, Inc.
Services, Inc.
By: /s/ Frank D'Ambra III President By: /s/ Stephen J. Hodgdon President
--------------------------------- --------------------------------
Frank D'Ambra III Stephen J. Hodgdon
Canada Life Insurance Company of _____________________________________
New York
(General Agent (Please Print)
By: /s/ D. Allen Loney President
---------------------------------
D. Allen Loney
By: __________________________________
(Name and Title - Signature)
______________________________________
(Selling Broker-Dealer Please Print)
By: __________________________________
(Name and Title - Signature)
8
<PAGE> 10
EXHIBIT A
GENERAL LETTER OF RECOMMENDATION
General Agent hereby certifies to Canada Life Insurance Company of New
York (CLNY) that all of the following requirements will be fulfilled in
conjunction with the submission of licensing/appointment papers 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 identity, 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 her
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 property 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 certificate of authority or
license applied for is received.
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> 11
SCHEDULE 1
STATEMENT OF COMPENSATION
AS OF APRIL, 1997
Subject to the terms and conditions of this Agreement, CLAFS will pay to
Selling Firm compensation based upon the premiums and purchase payments
received from such Selling Firm, in accordance with applicable law, in the
percentages shown below: (Form 3099)
FOR PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 0-80
POLICY YEARS BROKER-DEALER CONCESSION
1-10 6.5%
11-15 6.5%
16+ 1/5%
FOR OTHER THAN PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 0-80
POLICY YEARS BROKER- DEALER CONCESSION
1-10 6.5%
11-15 6.5%
16+ 1.5%
................................................................................
FOR PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 81-84
POLICY YEARS BROKER-DEALER CONCESSION
1-10 3.0%
11-15 3.0%
16+ 1.5%
FOR OTHER THAN PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 81-84
POLICY YEARS BROKER- DEALER CONCESSION
1-10 3.0%
11-15 3.0%
16+ 1.5%
<TABLE>
<S> <C>
Service Fee at Annuitization if "internal" annuity rates 3.0% if payout = or > 10 yrs or a life annuity
are used. Service Fee is only paid on annuitized pro- and amount $0-1 million.
ceeds that are past any applicable surrender charge/ 1.25% if amount over $1 million.
period.
2.0% if payout < 10 yrs. & not a life annuity
and amount $0-1 million.
1.25% if amount over $1 million.
</TABLE>
<PAGE> 12
Page 2
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 premiumm 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. (vi) For annuitizations within 6 months of issue, 100% of all B/D
Concession paid to Selling Firm will be returned or repaid, offset by an amount
from 1.25% to 3%, depending on the amount and duration of payout; and for
annuitizations from months 7-12 after issue, 50% of all B/D Concession paid to
Selling Firm shall be returned or repaid, offset by an amount from 1.25% to 3%,
depending on the amount and duration of the payout. 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.
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 3 (c)
AMENDMENT TO DISTRIBUTION AGREEMENT
<PAGE> 2
AMENDMENT NO. 1 TO
DISTRIBUTION AGREEMENT
An AMENDMENT is made this ____ day of ________, 1993 to the
Distribution Agreement (the "Agreement") dated ____________ by and between
Canada Life of American Financial Services, Inc. (the "Distributor"), a Georgia
corporation, and Canada Life Insurance Company of New York (the "Company"), a
New York corporation.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Distributor currently
acts as principal underwriter for certain variable annuity policies issued
through Variable Annuity Account 1 of the Company; and
WHEREAS, the Company and Canada Life of America Variable
Annuity Account 2, 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, as amended, propose to offer for sale
certain variable annuity policies (the "New Policies") which may be deemed to
be securities under the Securities Act of 1933 and the laws of some states; and
WHEREAS, the parties to the Agreement desire that the
Distributor act as principal underwriter for the New Policies, pursuant to and
in accordance with the terms of the Agreement; and
WHEREAS, pursuant to the Promotional Agent Distribution
Agreement among the Company, the Distributor, and Seligman Financial Services,
Inc. ("Seligman Financial"), Seligman Financial shall act as the promotional
distributing agent for the New Policies;
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein, the Distributor and the Company agree that the
Distributor shall act as the principal underwriter for the sale of the New
Policies during the term of the Agreement, pursuant to and in accordance with
the terms of the Agreement, and that pursuant to Section 16 of the Agreement,
the Agreement shall be amended as follows:
1. Paragraph 2, page 1: This paragraph shall be amended to read
as follows:
WHEREAS, the Company and Canada Life of New York Variable
Annuity Account 1 (the "Account") and Canada Life of New York
Variable Annuity Account 2 ("Account 2"), each a separate
investment account established pursuant to Section 4240 of the
New York Insurance Law, and each a registered investment
company under the
<PAGE> 3
Investment Company Act of 1940, as amended (the "1940 Act"),
propose to offer for sale certain classes of variable annuity
policies (the "Policies") which may be deemed to be securities
under the Securities Act of 1933, as amended (the "Act") and
New York law;
2. Paragraph 3, page 1; and Sections 2, 4, 6, 7, 8, 9, and 15 of
the Agreement: This paragraph and these sections shall be
amended to read as follows:
Each reference to "the Account" is amended to read "the
Account and Account 2."
IN WITNESS WHEREOF, the parties to the Agreement have executed
this Amendment thereto on the day and year first above written.
CANADA LIFE OF AMERICA
FINANCIAL SERVICES, INC.
By: ______________________________
[Name]
[Title]
CANADA LIFE INSURANCE COMPANY
OF NEW YORK
By: ______________________________
[Name]
[Title]
By: ______________________________
[Name]
[Title]
<PAGE> 1
EXHIBIT 4 (a)
FORM OF ANNUITY POLICY
<PAGE> 2
EXHIBIT 4(a)
POLICY NUMBER: E2XXXXX
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/ /s/
Secretary President
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
Flexible 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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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
Initial Premium 6
Additional Premiums 6
Net Premium 6
Net Premium Allocation Among Sub-Accounts And
Fixed Account 7
THE VARIABLE ACCOUNT
Variable Account 7
Sub-Accounts 7
Variable Account Value 8
Units 8
Unit Value 8
Net Investment Factor 8
Reserved Rights 9
Change in Investment Policy 9
Valuation Periods and Valuation Days 9
THE FIXED ACCOUNT
Fixed Account 10
Market Value Adjustment 11
Fixed Account Value 12
TRANSFERS
Transfer Privilege 13
Restrictions on Transfers From Fixed Account 13
Transfer Processing Fee 13
POLICY VALUES
Policy Value 13
Cash Surrender Value 13
Partial Withdrawals 14
Surrender Charge 14
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
Policy Administration Charge 15
Annuity Date 16
Termination 16
Basis of Values 17
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS,
CASH SURRENDERS & TRANSFERS - POSTPONEMENT 17
GENERAL PROVISIONS
Contract 17
Incontestability 17
Owner 17
Beneficiary 17
Written Notice 17
Misstatement of Age 17
Periodic Reports 18
Assignment 18
Our Consent 18
Policy Date 18
Effective Date 18
Currency 18
Place of Payment 18
Modification 18
Nonparticipation 19
PAYMENT OPTIONS
Election of Payment Options 19
Payment Dates 19
Age and Survival of Payee 20
Death of Payee 20
Betterment of Income 20
Table of Payments on Basis of $1,000 Net Proceeds 21
</TABLE>
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POLICY DETAILS
POLICY NUMBER E2XXXXX
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
INITIAL PREMIUM $5,000.00
ANNUALIZED MORTALITY AND
EXPENSE CHARGE 1.25%
ANNUALIZED RATE OF DAILY
ADMINISTRATIVE FEE 0.35%
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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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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E2XXXXX
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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E2XXXXX
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
INITIAL PREMIUM
The initial premium is shown in the Policy Details and is payable on or before
the effective date.
ADDITIONAL PREMIUMS
You may make additional premium payments at any time during any annuitant's
lifetime and before the annuity date or maturity date. The amount of
additional premium payments may vary, but is subject to these rules:
1. the minimum additional premium that we will accept is $1,000.
However, we will accept premium payments under a pre-authorized
check agreement with a minimum premium payment of $100 per month
($50 per month if an Individual Retirement Annuity); and
2. 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.
A confirmation statement will be issued to you for financial transactions.
NET PREMIUM
The net premium is the premium paid less any premium tax, if applicable.
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E2XXXXX
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 2 (called "the Variable Account") as a separate investment account
under New York law. The Variable Account is 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 one
portfolio of the Seligman Portfolios, Inc. (the "Fund") 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.
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E2XXXXX
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.
UNIT VALUE
The unit value of each sub-account for the first valuation period is set at a
fixed amount, generally $10, except the Cash Management Sub-Account which is
set at $1. 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.
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E2XXXXX
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 2;
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 Fund 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:
1. the change is approved, if required, by the New York Insurance
Bureau; and
2. a statement of such approval is filed, if required, with the
insurance department of the state in which this policy is delivered.
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.
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E2XXXXX
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
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
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E2XXXXX
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.
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
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E2XXXXX
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 divided by (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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E2XXXXX
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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E2XXXXX
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>
1. Up to 100% of positive investment earnings for each
variable sub-account available at the time the request
is made, once a policy year; plus None
2. Up to 100% of the current policy year's interest on the
Fixed Account at the time the request for the withdrawal
or surrender 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; plus None
5. 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%
At least 6, but less than 7 None
At least 7
</TABLE>
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E2XXXXX
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.
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.
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E2XXXXX
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.
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.
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E2XXXXX
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.
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.
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E2XXXXX
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.
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:
Page 18
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E2XXXXX
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.
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.
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E2XXXXX
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.
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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E2XXXXX
TABLE OF PAYMENTS ON BASIS OF $1,000 NET PROCEEDS
OPTION 1 - LIFE INCOME WITH PAYMENTS FOR 10 YEARS CERTAIN
<TABLE>
<CAPTION>
AGE MONTHLY AGE MONTHLY
<S> <C> <C> <C>
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
63 4.49
</TABLE>
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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E2XXXXX
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HARRISON, NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NY 10528
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
Flexible 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
Page 22
<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.
PAGE 1
<PAGE> 3
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.
PAGE 2
<PAGE> 4
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. Loney
Secretary President
PAGE 3
<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
Page 1
<PAGE> 6
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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<PAGE> 7
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.
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.
David A. Hopkins D.A. Loney
Secretary President
Page 4
<PAGE> 1
EXHIBIT 5
FORM OF APPLICATION
<PAGE> 2
EXHIBIT 5
<TABLE>
<CAPTION>
CANADA LIFE
INSURANCE COMPANY OF NEW YORK APPLICATION FOR
500 MAMARONECK AVENUE FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
HARRISON, NEW YORK 10528
(800) 905-1969
<S> <C>
PLEASE PRINT IN BLACK
- ------------------------------------------------------------- ---------------------------------------------------------------
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 [ ] Check here if you are using __% Cash Management (21)
- ------------------------------------------------------------- Seligman Time Horizon Matrix.(SM) __% Income (22)
Enclose signed letter if more information is required If so, LEAVE INVESTMENT __% Bond (23)
ALLOCATION BLANK IN __% Common Stock (24)
Name* THIS SECTION AND ATTACH __% Capital (25)
-------------------------------------------------------- TIME HORIZON MATRIX (SM) __% International (26)
First Middle Last Relationship ELECTION FORM. __% Communic. & Inform. (27)
__% Global Growth Oppor. (28)
Percentage [ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ] __% Global Smaller Cos. (29)
Social Security Number __% Frontier (41)
Name* __% High Yield Bond (42)
-------------------------------------------------------- __% Global Technology (43)
First Middle Last Relationship
FIXED ACCOUNT OPTIONS (MAY NOT BE AVAILABLE IN ALL STATES)
Percentage [ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number ________% 1 Yr. (201) ________% 7 Yr. (207)
============================================================= ________% 3 Yr. (203) ________% 10 Yr. (210)
CONTINGENT BENEFICIARY ________% 5 Yr. (205)
Name* ---------------------------------------------------------------
-------------------------------------------------------- 6. PRE-AUTHORIZED CHECK (PAC)**
First Middle Last Relationship ---------------------------------------------------------------
[ ] Please check here if you elect this option
Percentage [ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number I authorize the Company to collect $________(MINIMUM $100/$50-
- ------------------------------------------------------------- IRA) starting on____by initiating electronic debit entries to my
5. TYPE OF PLAN (MUST BE COMPLETED) account.
- -------------------------------------------------------------
[ ] Non-Qualified Select One: [ ] Checking [ ] Savings
[ ] IRA Rollover [ ] 401(k) [ ] IRA Tax Year______ (PLEASE ATTACH A VOIDED CHECK FOR CHECKING OR DEPOSIT SLIP
[ ] Qualified Other [ ] Keogh (HR-10) [ ] SEP IRA Tax Year__ FOR SAVINGS)
[ ] IRA Transfer [ ] 403(b) If ERISA [ ] ---------------------------------------------------------------
[ ] Other_______________________________________ 8. FOR AGENTS ONLY
- ------------------------------------------------------------- ---------------------------------------------------------------
7. REPLACEMENT Questions? Contact either your broker/dealer or Investment
- ------------------------------------------------------------- Products at (800) 905-1959, ext. 505.
Will this Annuity replace or change any other insurance or
annuity?
[ ] No [ ] Yes (State company and Policy number in "Remarks"
and attach replacement forms.)
* Unless subsequently changed in accordance with terms of Policy issued.
** 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:
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
- -------------- --------------- -------------- --------------
===============================================================================
/ / PORTFOLIO REBALANCING**
I/We hereby authorize the Company to provide portfolio rebalancing services as
indicated below:
Frequency of Rebalancing: / / Quarterly / / Semi-Annually / / Annually
/ / 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.
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, AND I/WE ANTICIPATE MAKING ADDITIONAL PREMIUM
DEPOSITS.
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.
- -----------------------------------------------------------------------------------------------------------------------------
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 8 (a)
BUY-SELL AGREEMENT
<PAGE> 2
BUY-SELL AGREEMENT
THIS AGREEMENT is made on this ____th day of _____________,
1993 by and among the Canada Life Insurance Company of New York, a New York
corporation ("CLNY") on its own behalf and on behalf of its Variable Annuity
Account 2 (the "Separate Account"), Seligman Portfolios, Inc. (formerly
Seligman Mutual Benefit Portfolios, Inc.) (the "Fund") and J. & W. Seligman &
Co. Incorporated ("JWSI").
WHEREAS, CLNY is a stock life insurance company incorporated
under the laws of the State of New York; and
WHEREAS, the Separate Account is registered as a unit
investment trust under the Investment Company Act of 1940 ( "1940 Act") and it
is intended that certain variable annuity contracts (the "Contracts"), a form
of which is included herein as Exhibit A, shall be funded through the Separate
Account; and
WHEREAS, the Fund is registered as an open-end diversified
management investment company under the 1940 Act and is currently authorized to
issue six separate series of shares (the "Portfolios") and to create additional
Portfolios in the future; and
WHEREAS, JWSI is registered as an investment adviser under the
Investment Advisers Act of 1940 and is the Fund's investment adviser pursuant
to the terms of agreements between JWSI and the Fund dated December 29, 1988
and May 1, 1993 ("Management Agreement"); and
WHEREAS, it is the intention of the parties to this Agreement
that the Fund will serve as the sole funding vehicle for the Separate Account
under the variable accumulation options afforded by the Contracts;
NOW, THEREFORE, in consideration of the covenants, mutual
promises herein contained and other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, and intending
to be legally bound hereby, the parties agree as follows:
1. FUND SHARES.
A. CLNY agrees that the Fund will be the sole funding vehicle for
the Separate Account. The Fund agrees that, except for shares sold to JWSI at
the Fund's initial capitalization, and to The Mutual Benefit Life Insurance
Company through its Mutual Benefit Variable Contract Account 9 ("VCA-9) on
behalf of existing Mutual Benefit Life contract owners, the Fund will sell its
shares only to the Separate Account or to other separate accounts
<PAGE> 3
requests for redemption from Policy owners and receipt by such designee by 4:00
p.m. New York time on a Business Day 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 next business day after the Fund
receives notice from CLNY. Payment shall be in federal funds transmitted by
wire or by a debit against any shares purchased.
E. Transfer of Portfolio 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 Portfolio 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 Fund agrees to provide the
required form of transfer.
F. The Fund shall make the net asset value per share for each
Portfolio available to CLNY on a daily basis as soon as reasonably practicable
after the net asset value per share is calculated. The Fund will instruct its
recordkeeper to use all reasonable efforts to make such net asset value per
share available by 5:30 p.m. New York time, but in no event later than 6 p.m.
New York time. Notwithstanding the foregoing, the parties to this Agreement
recognize that the Fund is ultimately responsible for the pricing of its own
shares.
G. The Fund shall furnish notice on the ex-dividend date to CLNY
of any dividend or distribution payable on any shares underlying Sub-accounts.
All of such dividends and distributions as are payable on shares of a Portfolio
recorded in the title for the corresponding Sub-account shall be automatically
reinvested in additional shares of that Portfolio at the net asset value
computed on its dividend or distribution payable date. The Fund shall notify
CLNY of the number of shares so issued.
2. REPRESENTATIONS AND WARRANTIES OF THE FUND. The Fund
and JWSI hereby represent and warrant that:
A. The Fund is duly incorporated and in good standing under the
laws of the State of Maryland;
B. The Fund is duly registered under the 1940 Act as an open-end
diversified management investment company;
C. All actions necessary to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereunder have
been taken or will be taken prior to any sale hereunder;
- 3 -
<PAGE> 4
D. A Registration Statement on Form N-1A relating to the Fund,
including a Prospectus and statement of additional information, has been
prepared and filed with the SEC in accordance with applicable provisions of the
Securities Act of 1933 ("1933 Act") and the 1940 Act, and is effective;
E. The Registration Statement does not include any untrue
statements of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading;
F. The Fund will use its best efforts to ensure that the
Registration Statement continues to conform in all material respects to the
requirements of the 1933 Act and the 1940 Act and the rules and regulations of
the SEC thereunder and its best efforts to ensure that at no time will the
Registration Statement include an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading.
G. The Fund will promptly furnish CLNY with copies of the Fund's
Registration Statement, all amendments and exhibits thereto, each definitive
Prospectus, each Prospectus supplement, and each periodic report under the 1940
Act, as filed with the SEC;
H. The Fund will promptly advise CLNY of any proposed amendment
to the Registration Statement or supplement to the Prospectus and shall provide
CLNY with a copy of such proposed amendment or supplement in advance of the
filing with the SEC of such amendment or supplement to permit CLNY's review of
such amendment or supplement, unless legal or regulatory requirements would
make such review impractical;
I. The Fund and JWSI represent that each Portfolio except for the
Seligman Henderson Global Portfolio, which expects to be, is currently
qualified as a Regulated Investment Company under Subchapter M of the Internal
Revenue Code of 1986, as amended ("Code"), that they will use reasonable effort
to maintain such qualification (under Subchapter M or any successor or similar
provision), and that they will notify CLNY immediately upon having a reasonable
basis for believing that a Portfolio has ceased to so qualify or that it might
not so qualify in the future, and that it provide to CLNY not later than 14
days following the end of each calendar quarter, a report showing each
Portfolio's continued qualification;
J. The Fund and JWSI represent that each Portfolio except for the
Seligman Henderson Global Portfolio, which expects to be, is currently in
compliance with the provisions of Section 817(h) of the Code and regulations
thereunder concerning diversification
- 4 -
<PAGE> 5
of the assets of the Portfolios of the Fund, and that they will use reasonable
effort to maintain such compliance (under Section 817(h) or any successor or
similar provision), provided that CLNY will promptly advise the Fund of any
changes in such provisions after the date of this Agreement, and that it will
provide to CLNY, not later than 14 days following the end of each calendar
quarter, a report showing each Portfolio's continued compliance;
K. The Fund will as directed in writing by CLNY make every effort
to comply with the requirements of the State of New York concerning permissible
investments for the Separate Account;
L. The Fund shall pay all its expenses incidental to its
performance under this Agreement. The Fund shall see to it that its shares are
continuously registered and authorized for issue in accordance with any
applicable federal and state laws for so long as this Agreement is in effect,
and for so long as CLNY may purchase shares of the Fund. Without limiting the
generality of the foregoing, the Fund shall bear any expenses in connection
with the cost of maintaining registration of Fund shares and a current
registration statement, proxy materials, any solicitation of Fund proxies, 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, to the extent such expenses are incurred. The
parties shall cooperate in the printing of the prospectuses of the Fund and of
any disclosure documents related to the Contracts; however, the cost of
printing prospectuses shall not be borne by the Fund; and
M. The Fund and JWSI represent and warrant that each of the
Fund's officers and employees that is a "covered person" as defined in Rule
17g-1 under the 1940 Act shall at all times be covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less than
the amount of coverage required by Section 17(g) of the 1940 Act and Rule 17g-1
thereunder. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable fidelity insurance company.
3. REPRESENTATIONS AND WARRANTIES OF JWSI. JWSI
represents and warrants that:
A. It will vote Fund shares which it owns in the same proportion
as instructions received from owners of variable contracts backed by the Fund;
B. It will not vote to elect a Director of the Fund unless the
composition of the Board of Directors of the Fund is in compliance with the
1940 Act; and
- 5 -
<PAGE> 6
C. JWSI agrees that in connection with the Fund's compliance with
Section 817(h) of the Code and any regulations thereunder, concerning
diversification of the assets of the Portfolios of the Fund, (i) JWSI will
provide CLNY within 14 days of the end of each quarter of the Fund's fiscal
year, a statement of each Portfolio's assets and (ii) JWSI will provide CLNY
with a copy of the procedures that have been established by JWSI for the
purpose of ascertaining and monitoring the Fund's compliance with the
diversification requirements of Section 817(h) and regulations thereunder.
4. REPRESENTATIONS AND WARRANTIES OF CLNY. CLNY
represents and warrants that:
A. All actions necessary to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereunder have
been taken;
B. All actions required to authorize investment by the Separate
Account in the Fund have been taken;
C. It will comply with applicable law, including state insurance
law, in connection with its obligations hereunder;
D. It will provide to Contract owners voting privileges with
respect to Fund shares attributable to the variable annuity contracts of such
Contract owners. Pass-through voting privileges will be calculated with
reference to the number of shares of the Fund attributable to a particular
Contract or pursuant to any other method of calculation recommended by the SEC
or its staff. CLNY will vote its own shares and shares for which no
instructions have been received in the same proportion as instructions received
from Contract owners for that Portfolio;
E. The shares of the Fund qualify as an eligible investment for
the Separate Account; and
F. The Separate Account has been established in accordance with
Section 4240 of the New York Insurance Law and Regulation 47 thereunder.
(i) Section 4240(a)(1) provides that income, gains and losses,
whether or not realized, from assets allocated to a separate account
shall, in accordance with the applicable agreement or agreements, be
credited to or charged against such account without regard to other
income, gains or losses of the insurer. Section 4240(a)(12) provides
that, if and to the extent so provided in the applicable agreements,
the assets in a separate account shall not be chargeable with
- 6 -
<PAGE> 7
liabilities arising out of any other business of the insurer.
(ii) Subsection 3(a) (2) of Regulation 47 provides that a separate
account annuity contract may provide that the portion of the assets of
the separate account not exceeding the reserves and other contract
liabilities with respect to such Separate Account shall not be
chargeable with liabilities arising out of any other business of the
insurer.
(iii) The Contracts provide that although CLNY owns the assets in
the Separate Account, these assets are held separately from CLNY's
other assets and are not part of CLNY's general account; and the
assets in the Separate Account are used to support the operation of
and provide the variable values and benefits for the Contracts and
similar policies. Further, the Contracts provide that the portion of
the assets of the Separate Account equal to the reserves and other
contract liabilities of the Separate Account will not be charged with
liabilities that arise from any other business that CLNY conducts.
CLNY has the right to transfer to its general account any assets of
the Separate Account which are in excess of such reserves and other
liabilities.
(iv) Section 7435(b) of the New York Insurance Law provides that
every claim under a separate account agreement providing, in effect,
that the assets in the separate account shall not be chargeable with
liabilities arising out of any other business of the insurer shall be
satisfied out of the assets in the separate account equal to the
reserves maintained in such account for such agreement and, to the
extent, if any, not fully discharged thereby, shall be treated as a
class four claim against the estate of the life insurance company.
Section 7435(a) (4) defines a "Class Four" claim as all claims under
insurance policies, annuity contracts and funding agreements, and all
claims of The Life Insurance Company Guaranty Corporation of New York
or any other guaranty corporation or association of the state of New
York or another jurisdiction, other than (i) claims provided for in
paragraph one of subsection (a) of Section 7435, and (ii) claims for
interest. (Paragraph one refers to claims for the actual and
necessary costs of administration of the estate of the insolvent
company.)
(v) Based on the foregoing, CLNY believes that the portion of the
assets of the Separate Account equal to the reserves and other
contract liabilities of the Separate Account will not be charged with
liabilities that arise from any other business that CLNY conducts.
- 7 -
<PAGE> 8
5. INDEMNIFICATION.
A. The Fund and JWSI will indemnify and hold harmless CLNY and
the Separate Account against any and all losses, claims, damages, liabilities
or expenses (including, without limitation, any expenses reasonably incurred in
investigating or defending against any litigation commenced or threatened, or
any claim) to which CLNY or the Separate Account may become subject arising out
of or based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or Prospectus relating to
the Fund or any amendment or supplement thereto; (ii) 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; or (iii) any material
breach of any representation and/or warranty made by the Fund or JWSI in this
Agreement or any material breach of this Agreement by the Fund or JWSI;
provided, however, JWSI and the Fund shall not be liable in any such case under
(i) and (ii) above to the extent that any such loss, claim, damage, liability
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the Registration Statement or
Prospectus relating to the Fund made in good faith reliance upon and in
conformity with written information furnished by CLNY or the Separate Account
specifically for use in the preparation thereof.
B. CLNY will indemnify and hold harmless the Fund and JWSI
against any and all losses, claims, damages, liabilities, or expense (including
without limitation, any expense reasonably incurred in investigating or
defending against any litigation commenced or threatened, or any claim) to
which the Fund or JWSI becomes subject arising out of or based upon (i) any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement or prospectus relating to the Contracts or any
amendment or supplement thereto, or (ii) 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; or (iii) any material breach of any
representation and/or warranty made by CLNY in this Agreement or of any
material breach of this Agreement by CLNY; provided, however, that CLNY shall
not be liable in any such case under (i) and (ii) above to the extent that any
such loss, claim, damage, liability or expense arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
in the registration statement or prospectus relating to the Contracts made in
good faith reliance upon and in conformity with written information furnished
by the Fund or JWSI specifically for use in the preparation thereof; and that
CLNY shall not be liable to the extent that any such loss, claim, damage,
liability or expense arises out of or is based upon the Fund's failure to
- 8 -
<PAGE> 9
comply with the investment policies and restrictions set forth in its
Registration Statement.
C. Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action by a third party, such
indemnified party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 5, notify the indemnifying party of the
commencement thereof. The omission so to notify the indemnifying party shall
not relieve it from liability which it may have to any indemnified party under
this Section 5, 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; however, it shall not
relieve it otherwise. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and, to
the extent that it may wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election to assume the defense thereof,
the indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
6. TERM OF AGREEMENT. This Agreement shall continue in
full force and effect for a period of five (5) years from the effective date of
this Agreement, unless otherwise agreed upon by the parties to terminate sooner
or if terminated for such reasons as set forth in Section 7 below. After such
5 year period, it will be deemed extended thereafter from year to year, subject
to termination at will by any party hereto upon 60 days prior written notice to
the other party.
7. TERMINATION. This Agreement shall terminate:
A. At the option of CLNY, upon the institution of formal
proceedings against the Fund, JWSI, or SFSI by the SEC, the National
Association of Securities Dealers, Inc. ("NASD"), any state securities or
insurance department or any other regulatory body provided that CLNY determines
in good faith in its sole judgment, that such institution will have a material
adverse impact upon the Fund or JWSI's ability to perform its obligations under
this Agreement; or
B. At the option of the Fund, upon the institution of formal
proceedings against The Canada Life Assurance Company ("CLA"), CLNY or Canada
Life of America Financial Services, Inc.
- 9 -
<PAGE> 10
("CLAFS") brought by a Canadian regulatory authority, the SEC, the NASD, or any
formal proceedings involving a material matter brought by any state securities
or state insurance department or any other regulatory body regarding CLNY or
CLAFS provided that the Fund determines in good faith in its sole judgment that
such institution will have a material adverse impact upon CLA's or CLNY's
ability to perform its obligations under this Agreement; or
C. At the option of the Fund, if there is a material adverse
change in the financial condition of CLA or CLNY; or
D. At the option of the Fund, if there is material adverse
publicity regarding CLA or CLNY; or
E. At the option of CLNY, if the Fund fails to meet the
diversification requirements in Section 817(h) of the Code and the regulations
thereunder; or
F. At the option of CLNY, if there is a material adverse change
in the financial condition of the Fund or JWSI; or
G. At the option of CLNY, if there is material adverse publicity
regarding the Fund or JWSI; or
H. At the option of CLNY, if JWSI hires a sub-adviser for a
Portfolio of the Fund without the prior written consent of CLNY. CLNY agrees
that Seligman Henderson Company shall act as sub-adviser for the Seligman
Henderson Global Portfolio of the Fund; or
I. If such action is required by law or by regulatory authorities
having jurisdiction or is, in the discretion of the Board of Directors of CLNY
or the Board of Directors of the Fund acting in good faith and in light of
their fiduciary duties under applicable federal and state laws, necessary in
the best interests of the shareholders of the Fund or Contract owners;
J. At the option of CLNY or the Fund, upon the termination of the
Management Agreements; or
K. At the option of CLNY or the Fund, if the Promotional Agent
Distribution Agreement terminates.
In the event that JWSI shall cease to serve as the Fund's
investment adviser, the obligations of JWSI hereunder shall terminate, provided
only that any liability for action taken by JWSI in accordance with its
representations, warranties, and obligations hereunder during the period that
JWSI served as investment adviser to the Fund shall survive such termination.
- 10 -
<PAGE> 1
EXHIBIT 9
OPINION AND CONSENT OF COUNSEL
<PAGE> 2
DAVID A. HOPKINS
Counsel
United States Division
June 4, 1993
United States Home Office
6201 Powers Ferry Road, NW
Suite 600
Atlanta, GA 30339
(404)953-1959
Canada Life Insurance Company of New York
500 Mamaroneck Avenue
Harrison, New York 10528
RE: Canada Life of New York Variable Annuity Account 2 (the "Account")
Registration Statement on Form N-4
Gentlemen:
In my capacity as Counsel, U.S. Division for The Canada Life Assurance Company
(the "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 disability insurance and
variable annuities/variable life - separate accounts 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 Statement of Additional Information contained in the
Registration Statement. 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.
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 2
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 the Post
Effective Amendment No. 6 to the Registration Statement on Form N-4 (File
No. 33-64240) filed by Canada Life Insurance Company of New York and
Canada Life of New York Variable Annuity Account 2 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
[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. 6 to the registration statement on Form N-4 for
the Canada Life of New York Variable Annuity Account 2 (File No. 33-64240). 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
[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 2 and the Canada Life Insurance Company of New York
included in the Registration Statement [Form N-4, No. 33-64240] and related
Prospectus of Canada Life of New York Variable Annuity Account 2 [dated May 1,
1997].
Toronto, Canada /s/ Ernst & Young
April 24, 1997 Chartered Accountants
<PAGE> 1
Exhibit 13
Sample Performance Data Calculation
<PAGE> 2
EXHIBIT 13
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
CASH MANAGEMENT SELIGMAN PORTFOLIO SUB ACCOUNT
7-DAY CURRENT YIELD
AS AT DECEMBER 31, 1996
<TABLE>
<S> <C> <C>
7-Day Current Yield = (( NCS - ES/UV /7 ) x 365)
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 ont he last day of the
7-day period
= $40,000.00
AUV = the sum of the unit values on the first and last day of
the 7-day period divided by 2
= [ 1.3417 + 1.3427]/ 2 = 1.3422
UV the unit value on the first day of the 7-day period
= 1.3417
- --------------------------------------------------------------------------------
DATE NCS M&E Admin
Dec 25 0.000000000 0.000043716
Dec 26 0.000000000 0.000043716
Dec 27 0.000439000 0.000043716
Dec 30 0.000430000 0.000131148
Dec 31 0.000144000 0.000043716
----------------------------------------------
0.001013 0.000306011 0.000019246 (a) = 0.000688
UV = 1.3417
7 day current yield = (((.001013 - .000306011 - .000019253) / 1.3417)) / 7 x 365
7 - day current yield = 2.672796044 or 2.67%
</TABLE>
<PAGE> 3
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
CASH MANAGEMENT SELIGMAN PORTFOLIO SUB ACCOUNT
7-DAY EFFECTIVE YIELD
AS AT DECEMBER 31, 1996
<TABLE>
<S> <C> <C> <C>
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
365/7-1
7 day effective yield: [(((.000688)/1.3417) + 1) -1] = 2.71%
</TABLE>
<PAGE> 4
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
SELIGMAN PORTFOLIOS, INC.: Cash Management, Income, Bond, Common Stock, Capital, International, Communication and
Information, Frontier, Global Smaller Companies, High Yield, Global Growth
Opportunities and Global Technology Sub-Accounts
AVERAGE ANNUAL TOTAL RETURN (INCLUDING SURRENDER CHARGE)
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
= 3115/365 = Cash Management, Income, Bond, Common Stock, Capital Sub-Accounts
= 1338/365 = International Sub-Account
= 819/365 = Communications and Information, Frontier, Global Small Companies Sub-Accounts
= 610/365 = High Yield 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
= 5.4% for 1995, 1996 inception
= 4.5% for 1993, 1994 inception
= 0.0% for 1988 inception
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) / BUV) / 2 ))
where AAV = Average Accumulated Value of Contracts on the last day of the period
= $40,000
CASH MANAGEMENT SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((1.3427 - 1.0000) / 1.0000 / 2))
= (.006400685) x (1,171.35)
= 7.497442295
ERV = (1,000 x ( (1.3427 - 1.0000) / 1.0000 )) + 1,000
- 7.497442295 - (.00 x 1,0000)
= 1,335.20
(1/ (3115 / 365))
Total Return = (1,335.20 / 1,000) - 1
= 3.45%
-----
</TABLE>
<PAGE> 5
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
INCOME SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((19.1054 - 10.0000) / 10.0000 / 2))
= (.006400685) x (1,455.27)
= 9.314724760
ERV = (1,000 X (19.1054 - 10.0000) / 10.0000)) + 1,000
= 9.314724760 - (.00 x 1,000)
= 1,901.23
(1 / (3115 / 365))
Total Return = (1.901.23 / 1,000) - 1
= 7.82%
-----
BOND SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((15.2212 - 10.0000) / 10.0000 / 2))
= (.006400685) x (1,261.06)
= 8.071647740
ERV = (1,000 x ((15.2212 - 10.0000) / 10.0000 )) + 1,000
- 8.071647740 x (.00 x 1,000)
= 1,514.05
(1/ (3115 / 365))
Total Return = (1,514.05 / 1,000) - 1
= 4.98%
-----
COMMON STOCK SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((27.4182 - 10.0000) / 10.0000 / 2))
= (.006400685) x (1.870.91)
= 11.975105445
ERV = (1,000 x ((27.4182 - 10.0000) / 10.0000 )) + 1,000
- 11.975105445 - (.00 x 1,000)
= 2,729.84
(1/ (3115 / 365))
Total Return = (2,729.84 / 1,000) - 1
= 12.49%
------
</TABLE>
<PAGE> 6
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
CAPITAL SUB ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
= x (1,000 + (1,000 x ((25.7924 - 10.0000 / 10.0000 / 2))
= (.006400685) x (1,789.62)
= 11.454793767
ERV = (1,000 x ((25.7924 - 10.0000) / 10.0000)) + 1.000
- 11.454793767 - (.00 x 1,0000)
= 2,567.79
(1 / (3115 / 365))
Total Return = (2,567.79 / 1,000) - 1
= 11,68%
-----
INTERNATIONAL SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 1338
x (1,000 + 1.000 x ((13.0038 - 10.0000 / 10.0000 / 2))
= (.002749315) x (1,150.19)
= 3.162234699
ERV = (1,000 x ((13.0038 - 10.0000) / 10.0000)) + 1,000
= 3.162234699 - (0.045 x 1,000)
= 1,252.22
(1 / (1338 / 365))
Total Return = (1.252.22 / 1,000) - 1
= 6.33%
-----
COMMUNICATION & INFORMATION SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 819
x (1,000 + (1,000 x ((15.1696 - 10.0000 / 10.000 / 2))
= (.001682877) x (1,258.48)
= 2.117866685
ERV = ( 1,000 x ((15.1696 - 10.0000 )) + 1,000
= - 2.117866685 - (0.045 x 1,000)
= 1,469.84
(1/ (819 / 365))
Total Return = (1,469.84/1,000) - 1
= 18.75%
------
</TABLE>
<PAGE> 7
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
FRONTIER SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 819
x (1,000 + (1,000 x ((16.8644 - 10.0000 / 10.0000 / 2))
= (.001682877) x (1,343.22)
= 2.260473658
ERV = (1,000 x ((16.8644 -10.0000) / 10.0000)) + 1,000
- 2.260473658 - (0.045 x 1,000)
= 1,639.18
(1 / (819 / 365))
Total Return = (1,639.18 / 1,000) - 1
= 24.67%
------
GLOBAL SMALLER COMPANIES SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 819
x (1,000 + (1,000 x ((13.9112 - 10.0000 / 10.0000 / 2))
= (.001682877) x (1,195.56)
= 2.0119800082
ERV = (1,000 x ((13.9112 - 10.0000) /10.0000)) + 1,000
- 2.0119800082 - (0.045 x 1,000)
= 1,344.11
(1/ (819 / 365))
Total Return = ( 1,344.11 / 1,000) - 1
= 14.11%
-------
HIGH YIELD SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 610
x (1,000 + (1,000 x ((11.9943 - 10.0000 / 10.0000 / 2))
= (.001253425) x (1,099.72)
= 1.37846897
ERV = (1,000 x ((11.9943 - 10.0000) / 10.0000)) + 1,000
- 1.378409897 - (0.054 x 1,000)
= 1,144.05
(1/ (610 / 365))
Total Return = (1,144.05 / 1,000) - 1
= 8.43%
-----
</TABLE>
<PAGE> 8
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
The following Sub-Accounts invest in portfolios that have not been in operation
one year as of December 31, 1996, thus, the from inception date returns for
these Sub-Accounts were not annualized.
<TABLE>
<S> <C>
GLOBAL GROWTH OPPORTUNITIES SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 244
x (1,000 + (1,000 x ((9.8180 - 10.0000 / 10.0000 / 2))
= (.000750000) x (990.90)
= 0.743175000
ERV = (1,000 x ((9.8180 - 10.0000) / 10.0000 )) + 1,000
- 0.743175000 - (0.054 x 1,000)
= 927.06
Total Return = (927.06 / 1,000) - 1
= -7.29%
-------
GLOBAL TECHNOLOGY SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 244
x (1,000 + (1,000 x ((10.2919 - 10.0000 / 10.0000 / 2))
= (.000750000) x (1,014.60)
= 0.760946250
ERV = (1,000 x ((10.2919 - 10.0000) / 10.0000)) + 1,000
- 0.760946250 - (0.054 x 1,000)
= 974.43
Total Return = (974.43 / 1,000) - 1
= -2.56 %
-------
</TABLE>
<PAGE> 9
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
SELIGMAN PORTFOLIOS, INC.: Cash Management Income, Bond, Common Stock, Capital, International, Communication
and Information, Frontier, Global Smaller Companies, High Yield, Global Growth
Opportunities and Global Technology Sub-accounts
AVERAGE ANNUAL TOTAL RETURN (EXCLUDING SURRENDER CHARGE)
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
= 3115/365 = Cash Management, Income, Bond, Common Stock, Capital Sub-Accounts
= 1338/365 = International Sub-Account
= 819/365 = Communications and Information, Frontier, Global Small Companies Sub-Accounts
= 610/365 = High Yield 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
= $40,000
CASH MANAGEMENT SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((1.3427 - 1.0000) / 1.0000 / 2))
= (.0064000685) x (1,171.35)
= 7.497442295
ERV = ( 1,000 x ((1.3427 - 1.0000) / 1.0000)) + 1,000
- 7.497442295
= 1,335.20
(1/ (3115/ 365))
Total Return = (1335.20 / 1,000) - 1
= 3.45%
-----
</TABLE>
<PAGE> 10
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
INCOME SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x (( 19.1054 - 10.0000) / 10.0000 /2))
= (.006400685) x (1.455.27)
= 9.314724760
ERV = ( 1,000 x (19.1054 - 10.0000) / 10.0000 )) + 1,000
- 9.314724760
= 1,901.23
(1/ (3115 / 365 ))
Total Return = (1,901.23 / 1,000 ) - 1
= 7.82%
------
BOND SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((15.2212 - 10.0000) / 10.0000 / 2))
= (.006400685) x (1,261.06)
= 8.071647740
ERV = ( 1,000 X ((15.2212 - 10.0000) / 10.0000)) + 1,000
= - 8.071647740
= 1,514.05
(1/ 3115 / 365 ))
Total Return = (1,514.05 / 1,000) - 1
= 4.98%
------
COMMON STOCK SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
= x (1,000 + (1,000 x (( 27.4182 - 10.0000) / 10.0000 / 2))
= (.006400685) x (1,870.91)
= 11.975105445
ERV = ( 1,000 X ((27.4182 - 10.0000) / 10.0000 )) + 1,000
- 11.975105445
= 2,729.84
(1/ (3115 / 365))
Total Return = (2,729.84 / 1,000) - 1
= 12.49%
------
</TABLE>
<PAGE> 11
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
CAPITAL SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 3115
x (1,000 + (1,000 x ((25.7924 - 10.0000 / 10.0000 / 2))
= (.006400685) x (1,789.62)
= 11.454793767
ERV = ( 1,000 x (( 25.7924 - 10.0000) / 10.0000)) + 1,000
- 11.454793767
= 2,567.79
(1/ (3115/ 365))
Total Return = (2,567.79 / 1,000) - 1
= 11.68%
------
INTERNATIONAL SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) X 1338
x ( 1,000 + (1,000 x ((13.0038 - 10.0000 / 10.0000 / 2))
= (.002749315) x (1,150.19)
= 3.162234699
ERV = ( 1,000 X ((13.0038 - 10.0000) / 10.0000)) + 1,000
- 3.162234699
= 1,297.22
(1/ (1338 / 365))
Total Return = (1,297.22 / 1,000) - 1
= 7.36%
-----
COMMUNICATION AND INFORMATION SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) X 819
x (1,000 + (1,000 x ((15.1696 - 10.0000 / 10.0000 / 2))
= (.001682877) x (1,258.48)
= 2.117866685
ERV = ( 1,000 X ((15.1696 - 10.0000) / 10.0000)) + 1,000
- 2.117866685
= 1,514.84
(1/ (819 / 365))
Total Return = (1,514.84 / 1,000) - 1
= 20.33%
------
</TABLE>
<PAGE> 12
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
FRONTIER SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) X 819
x ( 1,000 + (1,000 x ((16.8644 - 10.0000 / 10.0000 / 2))
= (.001682877) x (1,343.22)
= 2.260473658
ERV = (1,000 x ((16.8644 - 10.0000) / 10.0000)) + 1,000
- 2.260473658
= 1,684.18
(1 / (819 / 365))
Total Return = (1,684.18 / 1,000) - 1
= 26.15%
------
GLOBAL SMALLER COMPANIES SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) X 819
x (1,000 + (1,000 x ((13.9112 - 10.0000 / 10.0000 / 2))
= (.001682877) x (1,195.57)
= 2.0119800082
ERV = ( 1,000 X ((13.9112 - 10.0000) / 10.0000)) + 1,000
-2.0119800082
= 1,389.11
(1/ (819 / 365))
Total Return = (1,389.11 / 1,000) - 1
= 15.77%
------
HIGH YIELD SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) x 610
x (1,000 + (1,000 x ((11.9943 - 10.0000 / 10.0000 / 2))
= (.001253425) x (1,099.72)
= 1.378409897
ERV = ( 1,000 X ((11.9943 - 10.0000) / 10.0000)) + 1,000
- 1.378409897
= 1,198.05
(1/ (610 / 365))
Total Return = (1,198.05 / 1,000) - 1
= 11.42%
------
</TABLE>
<PAGE> 13
CANADA LIFE INSURANCE COMPANY OF AMERICA VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<S> <C>
The following Sub-Accounts invest in portfolios that have not been in operation one year as of December 31, 1996, thus,
the from inception date returns for these Sub-Accounts were not annualized.
GLOBAL GROWTH OPPORTUNITIES SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) X 244
x (1,000 x (1,000 x ((9.8180 - 10.0000 / 10.0000 / 2))
= (.000750000) x (990.90)
= 0.743175000
ERV = (1,000 X ((9.8180 - 10.0000) / 10.0000)) + 1,000
- 0.743175000
= 981.06
Total Return = ( 981.06 / 1,000) - 1
= -1.89%
------
GLOBAL TECHNOLOGY SUB-ACCOUNT
ADMIN = (30 / 40,000 / 365) X 244
x 1,000 x (1,000 x ((10.2919 - 10.0000 / 10.0000 / 2 ))
= (.000750000) x (1,014.60)
= 0.760946250
ERV = ( 1,000 X ((10.2919 - 10.0000) / 10.0000)) + 1,000
- 0.760946250
= 1,028.43
Total Return = (1,028.43 / 1,000) - 1
= 2.84%
-----
</TABLE>
