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As filed with the Securities and Exchange Commission on April 28, 1998.
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. 8
and/or
Registration Statement Under the Investment Company Act of 1940
Amendment No. 8
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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 LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
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x on May 1, 1998 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(i)
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pursuant to paragraph (a)(i)
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75 days after filing pursuant to paragraph (a)(ii)
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on ___________ pursuant to paragraph (a)(ii) of Rule 485
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If appropriate check the following box:
this Post-Effective Amendment designates a new effective
--- date for a new effective date for a previously filed
Post-Effective Amendment.
Title of Securities Being Registered: Flexible Premium Variable Deferred Annuity
Policies
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CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Showing Location in Part A (Prospectus) and
Part B (Statement of Additional Information) of Registration
Statement of Information Required by Form N-4
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PART A
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ITEM OF FORM N-4 PROSPECTUS CAPTION
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1. Cover Page Cover Page
2. Definitions DEFINITIONS
3. Synopsis SUMMARY
4. Condensed Financial Information CONDENSED FINANCIAL INFORMATION
5. General Description of Registrant,
Depositor and Portfolio Companies
a. Depositor THE COMPANY
b. Registrant The Variable Account
c. Portfolio Company The Fund
d. Fund Prospectus The Fund
e. Voting Rights VOTING RIGHTS
f. Administrators N/A
6. Deductions and Expenses Charges Against the Policy, Variable Account, & Fund
a. General Charges Against the Policy, Variable Account, & Fund
b. Sales Load % Charges Against the Policy, Variable Account, & Fund -
Surrender Charge
c. Special Purchase Plan N/A
d. Commissions DISTRIBUTION OF POLICIES
e. Expenses - Registrant Charges Against the Policy, Variable Account, & Fund
f. Fund Expenses Charges Against the Policy, Variable Account, & Fund - Other Charges
Including Investment Management Fees
g. Organizational Expenses N/A
7. General Description of Variable
Annuity Contracts
a. Persons with Rights DEFINITIONS - Owner, Joint Owner; Payment of Proceeds;
Payment Options; Partial Withdrawals; Other Policy Provisions;
VOTING RIGHTS
b. (i) Allocation of Premium Payments Premiums
(ii) Transfers Transfers; Payment of Benefits, Partial Withdrawals, Cash
Surrenders, & Transfers - Postponement
(iii) Exchanges N/A
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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
Additional Information CONTENTS
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PART B
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ITEM OF FORM N-4 STATEMENT OF ADDITIONAL INFORMATION CAPTION
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15. Cover Page Cover Page
16. Table of Contents STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
17. General Information and History See Prospectus - THE COMPANY; THE VARIABLE ACCOUNT AND THE FUND
18. Services
a. Fees and Expenses of Registrant N/A
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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 PRINCIPAL UNDERWRITER; See Prospectus - DISTRIBUTION OF POLICIES
19. Purchase of Securities Being Offered See Prospectus - DISTRIBUTION OF POLICIES
20. Underwriter PRINCIPAL UNDERWRITER; See Prospectus - DISTRIBUTION OF POLICIES
21. Calculation of Performance Data CALCULATION OF YIELDS AND TOTAL RETURNS
22. Annuity Payments See Prospectus - Payment Options
23. Financial Statements FINANCIAL STATEMENTS
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PART A
INFORMATION REQUIRED TO BE IN THE PROSPECTUS
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CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NEW YORK 10528
PHONE: (914) 835-8400
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PROSPECTUS
VARIABLE ANNUITY ACCOUNT 2
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY POLICY
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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
fourteen Sub-Accounts of the Canada Life of New York Variable Annuity Account 2
(the "Variable Account") and the Fixed Account or both. The Fixed Account is
part of our general account and guarantees a minimum fixed rate of interest. The
Fixed Account may additionally offer declared rates of interest for specified
periods of time: currently one year, three years, five years, seven years and
ten years (each a "Guarantee Period"). 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 fourteen portfolios: Seligman Bond; Seligman
Capital; Seligman Cash Management; Seligman Common Stock; Seligman
Communications and Information; Seligman Frontier; Seligman Henderson Global
Growth Opportunities; Seligman Henderson Global Smaller Companies; Seligman
Henderson Global Technology; Seligman High-Yield Bond; Seligman Income; Seligman
Henderson International; Seligman Large-Cap Value; and Seligman Small-Cap Value.
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 Guarantee Periods of 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. The
Fixed Account and certain Guarantee Periods may not be available in New York.
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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE POLICIES AND SHARES OF THE FUNDS ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. THEY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK AND ARE
NOT BANK GUARANTEED. THEY ARE SUBJECT TO MARKET FLUCTUATION,
INVESTMENT RISK AND POSSIBLE LOSS OF PRINCIPAL INVESTED
The date of this Prospectus is May 1, 1998.
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TABLE OF CONTENTS
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DEFINITIONS ..................................................... 2
SUMMARY ......................................................... 3
TABLE OF EXPENSES ............................................... 7
CONDENSED FINANCIAL INFORMATION ................................. 10
THE COMPANY ..................................................... 11
THE VARIABLE ACCOUNT, THE FUND AND FIXED ACCOUNT ................ 12
The Variable Account ........................................ 12
The Fund .................................................... 12
Seligman Bond Portfolio ................................ 12
Seligman Capital Portfolio ............................. 13
Seligman Cash Management Portfolio ..................... 13
Seligman Common Stock Portfolio ........................ 13
Seligman Communications and Information Portfolio ...... 13
Seligman Frontier Portfolio ............................ 13
Seligman Henderson Global Growth Opportunities Portfolio 13
Seligman Henderson Global Smaller Companies Portfolio .. 13
Seligman Henderson Global Technology Portfolio ......... 13
Seligman Henderson International Portfolio ............. 13
Seligman High-Yield Bond Portfolio ..................... 13
Seligman Income Portfolio .............................. 14
Seligman Large-Cap Value Portfolio ..................... 14
Seligman Small-Cap Value Portfolio ..................... 14
Reserved Rights ............................................. 14
Change in Investment Objective .............................. 14
The Fixed Account ........................................... 15
Guarantee Amount ............................................ 15
Guarantee Periods ........................................... 15
Market Value Adjustment ..................................... 16
DESCRIPTION OF ANNUITY POLICY ................................... 17
Ten Day Right to Examine Policy ............................. 17
Premiums .................................................... 17
Initial Premium ........................................ 17
Additional Premiums .................................... 17
Pre-Authorized Check Plan .............................. 18
Wire Transmittal Privilege ............................. 18
Electronic Data Transmission of Application Information 18
Net Premium Allocation ................................. 18
Termination ................................................. 18
Variable Account Value ...................................... 19
Units .................................................. 19
Unit Value ............................................. 19
Net Investment Factor .................................. 19
Transfers ................................................... 20
Transfer Privilege ..................................... 20
Telephone Transfer Privilege ........................... 20
Intouch(TM)Voice Response System ....................... 20
Dollar Cost Averaging Privilege ........................ 20
Restrictions on Transfers from Fixed Account ........... 21
Transfer Processing Fee ................................ 21
Payment of Proceeds ......................................... 21
Proceeds ............................................... 21
Proceeds on Annuity Date or Maturity Date .............. 21
Proceeds on Surrender .................................. 22
Proceeds on Death of Last Surviving Annuitant Before
Annuity Date or Maturity Date (The Death
Benefit) ...................................... 22
Proceeds on Death of Any Owner Before or After Annuity
Date or Maturity Date ......................... 23
Partial Withdrawals ......................................... 24
Systematic Withdrawal Privilege ("SWP") ................ 24
Seligman Time Horizon Matrix(SM) ............................ 25
Portfolio Rebalancing ("Rebalancing") ....................... 25
Loans ....................................................... 25
Payment of Benefits, Partial Withdrawals, Cash Surrenders &
Transfers - Postponement ............................... 26
Charges Against the Policy, Variable Account, and Fund ...... 26
Surrender Charge ....................................... 26
Policy Administration Charge ........................... 27
Daily Administration Fee ............................... 27
Transfer Processing Fee ................................ 27
Annualized Mortality and Expense Risk Charge ........... 27
Reduction or Elimination of Surrender Charges and Policy
Administration Charges ........................ 28
Taxes .................................................. 28
Other Charges Including Investment Management Fees ..... 28
Payment Options ............................................. 29
Election of Options .................................... 29
Description of Payment Options ......................... 29
Payment Dates .......................................... 29
Age and Survival of Payee .............................. 30
Death of Payee ......................................... 30
Other Policy Provisions ..................................... 30
Owner or Joint Owner ................................... 30
Beneficiary ............................................ 30
Written Notice ......................................... 30
Periodic Reports ....................................... 30
Assignment ............................................. 31
Modification ........................................... 31
YIELDS AND TOTAL RETURNS ........................................ 31
TAX DEFERRAL .................................................... 32
FEDERAL TAX STATUS .............................................. 33
Introduction ................................................ 33
The Company's Tax Status .................................... 33
Tax Status of the Policy .................................... 33
Diversification Requirements ........................... 33
Owner Control .......................................... 34
Required Distributions ................................. 34
Taxation of Annuities ....................................... 34
In General ............................................. 34
Withdrawals/Distributions .............................. 35
Annuity Payments ....................................... 35
Taxation of Death Benefit Proceeds ..................... 35
Penalty Tax on Certain Withdrawals ..................... 35
Transfers, Assignments, or Exchanges of a Policy ............ 36
Withholding ................................................. 36
Multiple Policies ........................................... 36
Possible Tax Changes ........................................ 36
Taxation of Qualified Plans ................................. 36
Individual Retirement Annuities and Simplified Employee
Pensions (SEP/IRAs) ........................... 37
SIMPLE Individual Retirement Annuities ................. 37
ROTH Individual Retirement Annuities ................... 37
Minimum Distribution Requirements ("MDR") .............. 37
Corporate And Self-Employed (H.R.10 and Keogh) Pension
And Profit-Sharing Plans ...................... 38
Deferred Compensation Plans ............................ 38
Tax-Sheltered Annuity Plans ............................ 39
Other Tax Consequences ...................................... 39
DISTRIBUTION OF POLICIES ........................................ 39
LEGAL PROCEEDINGS ............................................... 39
VOTING RIGHTS ................................................... 40
PREPARING FOR YEAR 2000 ......................................... 40
FINANCIAL STATEMENTS ............................................ 40
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS ........... 42
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DEFINITIONS
ANNUITANT: Any natural person whose life is used to determine the duration of
any payments made under a payment option involving life contingencies. The term
Annuitant also includes any Joint-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.
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 fourteen portfolios in which the corresponding Sub-Accounts of
the Variable Account are invested.
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.
JOINT-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
Joint-Annuitant. A Joint-Annuitant: 1) is allowed but not required under a
non-Qualified Policy and 2) is not allowed under a Qualified Policy and any
designation of a Joint-Annuitant under a Qualified Policy will be of no effect.
JOINT OWNER: A term used solely for the purpose of referring to more than one
Owner. There is no other distinction between the terms Owner and Joint Owner.
LAST SURVIVING ANNUITANT: The Annuitant or Joint-Annuitant that survives the
other.
MARKET VALUE ADJUSTMENT: A positive or negative adjustment that may apply to any
portion of a Guarantee Amount upon the surrender, withdrawal, or transfer of
such portion of the Guarantee Amount before the expiration of the Guarantee
Period applicable to that Guarantee Amount.
MATURITY DATE: The first day of the month after the Last Surviving Annuitant's
85th birthday (90th birthday pending regulatory approval).
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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,
408A, or 457 of the Code. See "FEDERAL TAX STATUS".
SUB-ACCOUNT: The Variable Account has fourteen Sub-Accounts: Bond; Capital; Cash
Management; Common Stock; Communications and Information; Frontier; Global
Growth Opportunities; Global Smaller Companies; Global Technology; High-Yield
Bond; Income; International; Large-Cap Value; and Small-Cap Value. The assets of
these Sub-Accounts are invested in the corresponding portfolio of the Fund.
UNIT: 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.
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.
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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 fourteen
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 fourteen portfolios: Seligman Bond; Seligman
Capital; Seligman Cash Management; Seligman Common Stock; Seligman
Communications and Information; Seligman Frontier; Seligman Henderson Global
Growth Opportunities; Seligman Henderson Global Smaller Companies; Seligman
Henderson Global Technology; Seligman High-Yield Bond; Seligman Income; Seligman
Henderson International; Seligman Large-Cap Value and Seligman Small-Cap Value .
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 one or
more Guarantee Periods, as available. We may offer Guarantee Periods with
durations of one, three, five, seven, and ten years. If the amount allocated or
transferred remains in a Guarantee Period until the expiration date of a
Guarantee Period, its value will be equal to the amount originally allocated or
transferred, multiplied on an annually compounded basis, by its Guaranteed
Interest Rate. Except for the one year Guarantee Period, any surrender,
withdrawal, or transfer made before the expiration of a Guarantee Period will be
subject to a Market Value Adjustment that may increase or decrease the Guarantee
Amount (or portion thereof) being surrendered, withdrawn, or transferred.
Because of this adjustment and for other reasons, the amount payable upon
surrender, withdrawal, or transfer may be 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").
The Fixed Account and certain Guarantee Periods may not be available in New
York.
TRANSFERS
You may transfer all or part of an amount in a Sub-Account or the Fixed Account
to another Sub-Account(s) or the Fixed Account, subject to certain restrictions.
See "Transfers".
DEATH BENEFIT
If We receive Due Proof of Death ("Due Proof") of the Last Surviving Annuitant
before the Annuity Date or Maturity Date, we will pay the Beneficiary a Death
Benefit.
THE FOLLOWING APPLIES TO CERTAIN POLICIES ISSUED ON OR AFTER NOVEMBER 26, 1997:
The Death Benefit is the greatest of:
1. the premiums paid, less a) any partial withdrawals, including
applicable surrender charges; and b) any incurred taxes; or
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2. the Policy Value on the date We receive Due Proof; or
3. the greatest Policy Value on any Policy Anniversary preceding
both the date the Last Surviving Annuitant attained age 81 and
the date We receive Due Proof of the Annuitant's death,
adjusted for any of the following items that occur after such
Policy Anniversary: a) less any partial withdrawals, including
applicable surrender charges; b) less any incurred taxes; and
c) plus any premiums paid.
If on the date the policy was issued, any Annuitant under the Policy was
attained age 81 or older, the Death Benefit is the Policy Value.
The Owner(s) of a policy issued prior to November 26, 1997 will be entitled to
the Death Benefit described above, after such date as regulatory approval is
received for such provision from the Owner's state of residence, unless the
Owner(s) elects not to accept this provision. The Company will not assess a
charge in connection with the election of this Death Benefit.
THE FOLLOWING APPLIES ONLY TO CERTAIN POLICIES ISSUED FROM MAY 1, 1996 THROUGH
NOVEMBER 26, 1997 AS APPLICABLE REGULATORY APPROVALS WERE OBTAINED IN THE
JURISDICTION IN WHICH THE POLICIES ARE OFFERED:
If We receive Due Proof during the first five years, the Death Benefit
is the greater of:
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any
incurred taxes; or
2. the Policy Value on the date We receive Due Proof of
Last Surviving Annuitant's death.
If We receive 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 under the Policy
were attained age 80 or less, then after any such 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 under the Policy 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 WAS OBTAINED IN THE
JURISDICTION IN WHICH THE POLICIES ARE OFFERED:
If we receive 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 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 Any Owner Before or After Annuity Date or Maturity
Date."
PARTIAL WITHDRAWALS AND CASH SURRENDERS
5
<PAGE> 12
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 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, PLUS..............................................................................None
2. Up to 100% of interest on the FIXED ACCOUNT at the time the
request for surrender/withdrawal is made, 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
$35,000 or more, we will waive the policy administration charge for the prior
Policy Year. We will also deduct this charge for the current Policy Year if the
policy is surrendered for its Cash Surrender Value, unless the surrender occurs
on the Policy Anniversary. See "Policy Administration Charge".
At each Valuation Period, we also deduct a daily administration fee at an
effective annual rate of 0.15% from the assets of the Variable Account. See
"Daily Administration Fee".
The first 12 transfers during each Policy Year are free under our current
Company policy, which we reserve the right to change. The Company currently
assesses a $25 transfer fee for the 13th and each additional transfer in a
Policy Year. See "Transfer Processing Fee".
We deduct a mortality and expense risk charge at each Valuation Period from the
assets of the Variable Account at an effective annual rate of 1.25%. This charge
is not made after the Annuity Date or Maturity Date, or against any amounts in
the Fixed Account. See "Annualized Mortality and Expense Risk Charge".
No premium tax is currently payable under New York law. We reserve the right to
deduct any premium taxes payable in respect of future premiums in the event New
York law should change. See "Taxes".
6
<PAGE> 13
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 Seligman Bond, Seligman
Capital, Seligman Cash Management (currently waived), Seligman Common Stock, and
Seligman Income; 0.50% for Seligman High-Yield Bond; 0.75% for Seligman
Communications and Information, and Seligman Frontier; 0.80% for Seligman
Large-Cap Value; and 1.00% for Seligman Henderson Global Growth Opportunities,
Seligman Henderson Global Smaller Companies, Seligman Henderson Global
Technology, Seligman Henderson International, and Seligman Small-Cap Value . 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
The following information regarding expenses assumes that the entire Policy
Value is in the Variable Account.
<TABLE>
<S> <C>
POLICYOWNER TRANSACTION EXPENSES*
Sales load on purchase payments.......................................................................................None
Maximum contingent deferred sales charge as a percentage of amount surrendered
(10% of total premiums still subject to a surrender charge and 100% of earnings are free
of any sales load. See "Policy Charges" )..........................................................................6.00%
Transfer fee
Current policy - First 12 transfers each Policy Year:.............................................................No fee
Each transfer thereafter:...............................................................................$25 per transfer
</TABLE>
7
<PAGE> 14
<TABLE>
<S> <C>
POLICY ADMINISTRATION CHARGE
Per Policy per Policy Year:.............................................................................................$30
(waived for the prior Policy Year if the Policy Value is $35,000 or more on the Policy anniversary)
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and expense risk charges....................................................................................1.25%
Effective annual rate of daily administration fee.................................................................... 0.15%
Total Variable Account annual expenses................................................................................1.40%
</TABLE>
SELIGMAN PORTFOLIOS, INC. (THE "FUND")
ANNUAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 1997**
(as a percentage of average net assets)
<TABLE>
<CAPTION>
OTHER EXPENSES TOTAL
PORTFOLIO MANAGEMENT AFTER ANNUAL
FEES REIMBURSEMENT** EXPENSES
---- --------------- --------
<S> <C> <C> <C>
Seligman Bond 0.40% 0.20% 0.60%
Seligman Capital 0.40% 0.20% 0.60%
Seligman Cash Management 0.00% 0.00% 0.00%
Seligman Common Stock 0.40% 0.13% 0.53%
Seligman Communications and Information
0.75% 0.12% 0.87%
Seligman Frontier 0.75% 0.14% 0.89%
Seligman Henderson Global Growth
Opportunities 1.00% 0.40% 1.40%
Seligman Henderson Global Smaller Companies
1.00% 0.40% 1.40%
Seligman Henderson Global Technology
1.00% 0.40% 1.40%
Seligman High-Yield Bond 0.50% 0.20% 0.70%
Seligman Income 0.40% 0.20% 0.60%
Seligman Henderson International 1.00% 0.40% 1.40%
Seligman Large-Cap Value 0.80%*** 0.00% 0.80%
Seligman Small-Cap Value 1.00%**** 0.00% 1.00%
</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. The Market Value Adjustment and certain Guarantee
Periods may not be available in New York.
** 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 1997. With respect to Seligman Bond, Seligman Capital, Seligman
Cash Management, Seligman Common Stock, Seligman Communications and
Information, Seligman Frontier, Seligman High-Yield Bond, and Seligman
Income, the percentage listed under "Other Expenses After Expense
Reimbursement" is based on the fact that annual expenses (other than
the management fee) exceeding 0.20% (0.00% for Cash Management) will be
reimbursed by the Fund's Manager by voluntary agreement of the Manager.
With respect to Seligman Large-Cap Value and Seligman Small-Cap Value,
the 0.00% following "Other Expenses After Expense Reimbursement" is
based on the fact that total annual expenses (including the management
fee) that exceed .80% and 1.00%, respectively, will be reimbursed by
the Fund's Manager by voluntary agreement of the Manager. With respect
to Seligman Henderson International, Seligman Henderson Global
8
<PAGE> 15
Smaller Companies, Seligman Henderson Global Technology and Seligman
Henderson 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. Absent such waivers or reimbursements, the
Fund's "Other Expenses" would be higher, and during 1997 would have
been: Seligman Bond 0.43%; Seligman Capital 0.22%; Seligman Cash
Management 0.39%; Seligman Henderson Global Growth Opportunities 1.11%;
Seligman Henderson Global Smaller Companies 0.56%; Seligman Henderson
Global Technology 1.10%; Seligman High-Yield Bond 0.29%; Seligman
Income 0.23%; and Seligman Henderson International 1.07%. Expenses for
Seligman Common Stock, Seligman Communications and Information and
Seligman Frontier did not exceed the reimbursement level of 0.20%. It
is estimated that "Other Expenses" for Seligman Large-Cap Value and
Seligman Small-Cap Value would be 0.66% and 0.66%, respectively, absent
any reimbursement and are based on estimated amounts for the current
fiscal year.
There is no assurance that these waiver or reimbursement policies will
be continued in the future. In the event that any of these waivers or
reimbursements are discontinued, they will be reflected in an updated
prospectus.
*** The annual rate of 0.80% applies to the portfolio's first $500 million
in average daily net assets. The rate declines to 0.70% of the
portfolio's average daily net assets on the next $500 million in net
assets, and to 0.60% of the portfolio's average daily net assets in
excess of $1 billion. As the inception date for this portfolio is May
1, 1998, such expenses are estimations.
**** The annual rate of 1.00% applies to the portfolio's first $500 million
in average daily net assets. The rate declines to 0.90% of the
portfolio's average daily net assets on the next $500 million in net
assets, and to 0.80% of the portfolio's average daily net assets in
excess of $1 billion. As the inception date for this portfolio is May
1, 1998, such expenses are estimations.
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.
The purpose of the above Table of Expenses is to assist you in understanding the
various costs and expenses that you will bear directly or indirectly. The Table
of Expenses reflects expenses of the separate account as well as the Fund.
For a more complete description of the various costs and expenses, see "Charges
Against the Policy, Variable Account, and Fund" and the Prospectus for the Fund.
In addition to the expenses listed above, premium taxes may be applicable, which
currently range between 0.5% to 3.5%, according to the jurisdiction. No premium
tax is currently payable under New York law.
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 ......................... $75 $110 $147 $240
Capital ...................... $75 $110 $147 $240
Cash Management .............. $69 $ 91 $116 $175
Common Stock ................. $74 $108 $144 $232
Communications and Information $78 $118 $161 $267
Frontier ..................... $78 $119 $162 $269
Global Growth Opportunities .. $83 $134 $187 $319
Global Smaller Companies ..... $83 $134 $187 $319
Global Technology ............ $83 $134 $187 $319
High-Yield Bond .............. $76 $113 $152 $250
Income ....................... $75 $110 $147 $240
International ................ $83 $134 $187 $319
Large-Cap Value .............. $77 $116 * *
Small-Cap Value .............. $79 $122 * *
</TABLE>
* Pursuant to regulations set forth by the Securities and Exchange
Commission, examples for 5 and 10 Year periods have not been provided
for Sub-Accounts commencing operations on or after May 1, 1998.
9
<PAGE> 16
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 ......................... $21 $65 $111 $240
Capital ...................... $21 $65 $111 $240
Cash Management .............. $15 $46 $ 80 $175
Common Stock ................. $20 $63 $108 $232
Communications and Information $24 $73 $125 $267
Frontier ..................... $24 $74 $126 $269
Global Growth Opportunities .. $29 $89 $151 $319
Global Smaller Companies ..... $29 $89 $151 $319
Global Technology ............ $29 $89 $151 $319
High-Yield Bond .............. $22 $68 $116 $250
Income ....................... $21 $65 $111 $240
International ................ $29 $89 $151 $319
Large-Cap Value .............. $23 $71 * *
Small-Cap Value .............. $25 $77 * *
</TABLE>
* Pursuant to regulations set forth by the Securities and Exchange Commission,
examples for 5 and 10 Year periods have not been provided for Sub-Accounts
commencing operations on or after May 1, 1998.
The examples provided above assume that no transfer charge or Market Value
Adjustment has been assessed. The examples also reflect a Policy administration
charge of .07% 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, 1997. Accumulation Unit Values will not be provided for any date prior to
the inception of the Variable Account.
As of December 31, 1997, Large-Cap Value and Small-Cap Value had not commenced
operations. Accordingly, condensed financial information is not available for
these Sub-Accounts.
10
<PAGE> 17
ACCUMULATION UNIT VALUE
<TABLE>
<CAPTION>
AS OF AS OF AS OF
SUB-ACCOUNT 12/31/97 12/31/96 INCEPTION DATE
----------- -------- -------- --------------
<S> <C> <C> <C>
Bond $16.33 $15.21 $15.40
Capital $30.81 $25.79 $22.63
Cash Management $ 1.40 $ 1.34 $ 1.30
Common Stock $32.75 $27.42 $23.44
Communications and Information $18.26 $15.17 $13.61
Frontier $19.32 $16.86 $17.32
Global Growth Opportunities $10.88 $ 9.82 $10.00
Global Smaller Companies $14.17 $13.91 $14.16
Global Technology $12.11 $10.29 $10.00
High-Yield Bond $13.59 $11.99 $11.21
Income $21.45 $19.11 $18.40
International $13.87 $13.00 $12.35
</TABLE>
NUMBER OF UNITS OUTSTANDING
AT END OF PERIOD
<TABLE>
<CAPTION>
AS OF AS OF
SUB-ACCOUNT 12/31/97 12/31/96
----------- -------- --------
<S> <C> <C>
Bond* 11,449 1,008
Capital* 13,870 4,295
Cash Management* 80,615 107,526
Common Stock* 24,355 7,651
Communications and Information* 53,475 13,615
Frontier* 39,062 20,321
Global Growth Opportunities* 23,053 2,878
Global Smaller Companies* 48,900 23,204
Global Technology** 6,972 3,596
High-Yield Bond* 55,396 10,064
Income* 9,543 4,576
International* 8,667 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, 1997 of approximately $282
million. We were incorporated under New York law on June 7, 1971, and our Home
Office is located at 500 Mamaroneck Avenue, Harrison, New York 10528. We
currently are principally engaged in issuing and reinsuring annuity policies in
the state of New York.
We share our A.M. Best 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.
11
<PAGE> 18
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. It is one of the largest life insurance companies in
North America with consolidated assets as of December 31, 1997 of approximately
$27.7 billion (U.S. dollars).
Obligations under the policies are obligations of Canada Life Insurance Company
of New York.
We are subject to regulation and supervision by the New York Insurance Bureau,
as well as the applicable laws and regulations of all jurisdictions in which we
are authorized to do business.
THE VARIABLE ACCOUNT, THE 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 fourteen 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 fourteen portfolios:
Seligman Bond; Seligman Capital; Seligman Cash Management; Seligman Common
Stock; Seligman Communications and Information; Seligman Frontier; Seligman
Henderson Global Growth Opportunities; Seligman Henderson Global Smaller
Companies; Seligman Henderson Global Technology; Seligman High-Yield Bond;
Seligman Income; Seligman Henderson International; Seligman Large-Cap Value and
Seligman Small-Cap Value. 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 Seligman Henderson Global Growth Opportunities, Seligman
Henderson Global Smaller Companies, Seligman Henderson Global Technology and
Seligman Henderson International 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 NO ASSURANCE
THAT THE INVESTMENT OBJECTIVE OF ANY PORTFOLIO 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
12
<PAGE> 19
SELIGMAN BOND PORTFOLIO
This Portfolio seeks favorable current income by investing in a diversified
portfolio of debt securities, primarily of investment grade, including
convertible issues and preferred stocks, with capital appreciation as a
secondary consideration.
SELIGMAN CAPITAL PORTFOLIO
This Portfolio seeks 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 and rights, in debt securities
and in preferred stocks believed to provide capital appreciation opportunities.
SELIGMAN CASH MANAGEMENT PORTFOLIO
This Portfolio seeks 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
This Portfolio seeks 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
This Portfolio seeks to produce capital gain, not income, by investing primarily
in securities of companies operating in the communications, information and
related industries.
SELIGMAN FRONTIER PORTFOLIO
This Portfolio seeks to produce growth in capital value; income may be
considered but will be only incidental to the Portfolio's investment objective.
The Portfolio invests primarily in equity securities of companies selected for
their growth prospects.
SELIGMAN HENDERSON GLOBAL GROWTH OPPORTUNITIES PORTFOLIO
This Portfolio seeks to achieve long-term capital appreciation by investing
primarily in equity securities of companies that have the potential to benefit
from global economic or social trends.
SELIGMAN HENDERSON GLOBAL SMALLER COMPANIES PORTFOLIO
This Portfolio seeks to achieve long-term capital appreciation primarily through
global investments in securities of companies with small to medium market
capitalizations.
SELIGMAN HENDERSON GLOBAL TECHNOLOGY PORTFOLIO
This Portfolio seeks to achieve long-term capital appreciation by making global
investments of at least 65% of its assets in securities of companies with
business operations in technology and technology-related industries.
SELIGMAN HENDERSON INTERNATIONAL PORTFOLIO
This Portfolio seeks to achieve long-term capital appreciation primarily through
international investments in securities of medium to large-sized companies.
SELIGMAN HIGH-YIELD BOND PORTFOLIO
This Portfolio seeks 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
13
<PAGE> 20
Standard & Poor's Rating Service ("S&P") or Moody's Investors Service, Inc.
("Moody's"). The Portfolio will 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 Portfolio 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
This Portfolio seeks 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.
SELIGMAN LARGE-CAP VALUE PORTFOLIO
This Portfolio seeks capital appreciation by investing in equity securities of
companies with large market capitalizations deemed to be value companies by the
investment manager.
* The offering of this Portfolio is subject to regulatory approval. Please check
with our Home Office for availability.
SELIGMAN SMALL-CAP VALUE PORTFOLIO
This Portfolio seeks capital appreciation by investing in equity securities of
companies with small market capitalizations deemed to be value companies by the
investment manager.
* The offering of this Portfolio is subject to regulatory approval. Please check
with our Home Office for availability.
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 portfolios.
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 BEFORE
INVESTING.
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
objective; 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.
14
<PAGE> 21
CHANGE IN INVESTMENT OBJECTIVE
The investment objective 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.
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, as available
(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 Market Value
Adjustment and certain Guarantee Periods may not be available in New York.
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 is 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. 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
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<PAGE> 22
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.
From time to time we may offer an additional one year Guarantee Period whereby
you may elect to automatically transfer specified additional premium from this
account to any variable Sub-Account(s) and/or any Guarantee Period(s) under the
Fixed Account on a periodic basis, for a period not to exceed twelve months,
subject to our administrative procedures and the restrictions disclosed in the
"Transfer Privilege" section. A special interest rate may be offered for this
Guarantee Period, which may differ from that offered for any other one year
Guarantee Period. The available interest rate will always be equal to or greater
than an effective annual interest rate of 3%. This Guarantee Period is used
solely in connection with the "Dollar Cost Averaging" privilege (see "Dollar
Cost Averaging Privilege").
The Market Value Adjustment and certain Guarantee Periods may not be available
in New York.
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, the
surrender, withdrawal or transfer of a Guarantee Amount is from the one year
Guarantee Period, or the surrender, withdrawal or transfer is to provide death
benefits, nursing home benefits, terminal illness benefits or annuitization. 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.
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<PAGE> 23
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:
Market Value Adjustment Factor = Lesser of
(a) (1 + i) n/12
----------------- - 1
(1 +r + .005)n/12
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.
The Market Value Adjustment and certain Guarantee Periods may not be available
in New York.
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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<PAGE> 24
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.
PRE-AUTHORIZED CHECK PLAN
You may elect, in writing, to have monthly premiums automatically collected from
your checking account or savings account pursuant to a Pre-Authorized Check Plan
("PAC"). This plan may be terminated by you or us after 30 days Written Notice,
or at any time by us if a payment has not been paid by your bank. This option is
not available on the 29th, 30th or 31st day of each month. There is no charge
for this feature.
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
Subject to regulatory approval, 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 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.
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<PAGE> 25
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:
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> 26
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.
Excessive trading (including short-term "market timing" trading) may adversely
affect the performance of the variable Sub-Accounts. If a pattern of excessive
trading by a policyholder or the policyholder's agent develops and the Funds'
inform us that they are unwilling to issue shares of the relevant Fund in
connection with a particular transaction because of excessive trading, we
reserve the right not to process your transfer request. Accordingly, if your
request is not processed, it will not be counted as a transfer for purposes of
determining the number of free transfers executed.
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. In addition, we cannot accept or process
transfer requests left on our voice mail system, although transfers through our
IntouchTM Voice Response System are acceptable.
INTOUCH(TM) VOICE RESPONSE SYSTEM
You may obtain current account information, including Sub-Account balances,
policy and unit values, and the current Fixed Account interest rate, through an
interactive voice response system accessed by your touch tone telephone (the
"Intouch Voice Response System"). In addition, you may change your Sub-Account
allocation and effect transfers between Sub-Accounts or to the Fixed Account.
Transfers from the Fixed Account, other than from the one-year Guarantee Period,
are not permitted under the Intouch Voice Response System. Your Policy number
and Personal Identification Number, issued by us to ensure security, are
required for any transfers and/or allocation changes.
When using the Intouch Voice Response System, you will not be assessed a
transfer processing fee regardless of the number of transfers made per Policy
Year.
DOLLAR COST AVERAGING PRIVILEGE
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(s) 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"
("DCA"), a
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<PAGE> 27
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, 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. This option is not available on the 29th, 30th or 31st day of
each month. There is no charge for this feature.
RESTRICTIONS ON TRANSFERS FROM FIXED ACCOUNT
Other than transfers made pursuant to DCA, you may transfer an amount from a
Guarantee Period under the Fixed Account subject to these additional
restrictions:
1. Transfers from a Guarantee Period other than the one year
Guarantee Period may be subject to a Market Value Adjustment.
2. Transfers from one Guarantee Period to another are prohibited
other than within the 30 day window.
Under our current procedures, the transfer will be made on the valuation date
that occurs on or next following the date we receive your transfer request at
our Home Office.
TRANSFER PROCESSING FEE
There is no limit to the number of transfers that you can make between
Sub-Accounts or to the Fixed Account. The first 12 transfers during each Policy
Year are free under our current policy, which we reserve the right to change.
The Company currently assesses a $25 transfer fee for the 13th and each
additional transfer in a Policy Year. For the purposes of assessing the fee,
each transfer request (which includes a Written Notice or telephone call, but
does not include automatic transfers, including 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. The $25 transfer fee is waived when using the IntouchTM Voice Response
System.
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." If the proceeds are paid in a lump
sum on the Annuity Date, we will pay the Cash Surrender Value.
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).
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<PAGE> 28
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 ("Due Proof") of the Last Surviving Annuitant
before the Annuity Date or Maturity Date, we will pay the Beneficiary a Death
Benefit.
THE FOLLOWING APPLIES TO CERTAIN POLICIES ISSUED ON OR AFTER NOVEMBER 26, 1997:
The Death Benefit is the greatest 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; or
3. the greatest Policy Value on any Policy Anniversary preceding
both the date the Last Surviving Annuitant attained age 81 and
the date we receive Due Proof of the Annuitant's death,
adjusted for any of the following items that occur after such
Policy Anniversary: a) less any partial withdrawals, including
applicable surrender charges; b) less any incurred taxes; and
c) plus any premiums paid.
If on the date the Policy was issued, any Annuitant under the Policy was
attained age 81 or older, the Death Benefit is the Policy value.
The Owner(s) of a Policy issued prior to November 26, 1997 will be entitled to
the Death Benefit described above, after such date as regulatory approval is
received for such provision from the Owner's state of residence, unless the
Owner(s) elects not to accept this provision. The Company will not assess a
charge in connection with the election of this Death Benefit.
THE FOLLOWING APPLIES ONLY TO CERTAIN POLICIES ISSUED FROM MAY 1, 1996 THROUGH
NOVEMBER 25, 1997, AS APPLICABLE REGULATORY APPROVALS WERE OBTAINED IN THE
JURISDICTION IN WHICH THE POLICIES ARE OFFERED:
If we receive Due Proof during the first five years, the Death Benefit
is the greater of:
1. the premiums paid, less: a) any partial withdrawals,
including applicable surrender charges; and b) any
incurred taxes; or
2. the Policy Value on the date we receive Due Proof of
Last Surviving Annuitant's death.
If we receive 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
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<PAGE> 29
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 under the Policy
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 under the Policy 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 WAS OBTAINED IN THE
JURISDICTION IN WHICH THE POLICIES ARE OFFERED:
If we receive 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 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
23
<PAGE> 30
Policy) will be treated as an Owner for purposes of these distribution
requirements, and any change in the primary Annuitant will be treated as the
death of an Owner.
PARTIAL WITHDRAWALS
You may withdraw part of the Cash Surrender Value at any time before the earlier
of the death of the Last Surviving Annuitant, the Annuity Date or Maturity Date,
subject to these limits:
1. the Company's minimum partial withdrawal, currently $250;
2. the maximum partial withdrawal is the amount that would leave
a Cash Surrender Value of $5,000;
3. a partial withdrawal request which would reduce the amount in
a Sub-Account or a Guarantee Period under the Fixed Account
below $500 will be treated as a request for a full withdrawal
of the amount in that Sub-Account or a Guarantee Period; and
4. a partial withdrawal request for an amount exceeding $10,000
must be accompanied by a guarantee of the Owner's signature by
a commercial bank, 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, semi-annual
or 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 to
elect the Systematic Withdrawal Privilege, 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 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 may be subject to a Market Value
Adjustment.
When no Surrender Charges are applicable, the entire Policy is available for
systematic withdrawal. Once an amount has been selected for withdrawal, it will
remain fixed until the earlier of the next Policy Anniversary or termination of
the privilege. A written request to change the withdrawal amount for the
following Policy Year must be received no later than 7 days prior to the Policy
Anniversary date. 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 $2,000*; 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 to withdraw premium counts as your annual free
withdrawal of up to 10% of total premiums
24
<PAGE> 31
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. This option is not available on the 29th, 30th or 31st day
of each month. The Company reserves the right to change its minimum systematic
withdrawal amount requirements.
In certain circumstances, amounts withdrawn pursuant to a systematic withdrawal
option may be included in a policy owner's gross income and may be subject to
penalty taxes.
* If the Cash Surrender Value is reduced to $2,000, your Policy may terminate.
See "Termination."
SELIGMAN TIME HORIZON MATRIX(SM)
You may elect to participate in Seligman Time Horizon Matrix(SM) (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 & Co. Incorporated, that seek a wide range of financial goals for an
investor's specific time horizon. Each J. & W. Seligman & Co. Incorporated model
portfolio represents a predetermined allocation of your Policy Value 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 & Co. Incorporated 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 & Co. Incorporated 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. This option is not available on
the 29th, 30th or 31st day of each month. There is no charge for this feature.
LOANS
If loans are offered, the Company will make a loan on the sole security of the
policy within seven days of receiving the owner's properly completed loan
application, subject to postponement under the same circumstances that payment
of withdrawals may be postponed. The maximum loan value is determined under the
Code but is no more than 80% of policy value, less outstanding loans and accrued
interest. The amount of the loan is withdrawn from the owner's investment in the
investment accounts, in accordance with the rules for making partial withdrawals
unless the owner designates otherwise. (See "Partial Withdrawals"). The loan
amount is transferred to the loan account, which is part of the Company's
general account, and is credited with interest at the rate of 4% per year. The
Company charges interest on policy loans of 6% per year payable in arrears, and
if not paid the interest is added to the amount of the loan, is transferred from
the investment accounts to the loan account on the Policy Anniversary, and bears
interest at 6% as well. If on any date the loan amount plus accrued interest
25
<PAGE> 32
exceeds the policy value, the policy will be in default, the owner will receive
a notice from the Company, and if the default amount is not repaid within a
thirty-one day grace period, the policy will be foreclosed (terminated without
value). Loans generally must be repaid within five years, in substantially equal
quarterly installments, although additional repayment in whole or in part will
be accepted at any time during the repayment period. The amount repaid is
transferred from the loan account and allocated to the investment accounts in
the same manner as the owner's most recent premium, unless the owner designates
otherwise.
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.
If the cash surrender value payable at a surrender, partial withdrawal or in a
lump sum on the annuity date is not mailed or delivered within ten working days
after we receive the documentation necessary to complete the transaction, we
will add interest from the date we receive the necessary documentation, unless
the amount of such interest is less than $25. The rate of interest we will apply
is the rate the company pays for dividends on deposit in our whole life
insurance portfolio. We guarantee that the interest rate will never be less than
2.5%.
We have the right to defer payment of any partial withdrawal, cash surrender, or
transfer from the Fixed Account for up to six months from the date we receive
your Written Notice for a withdrawal, surrender or transfer.
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 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 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, PLUS...............................................................................None
2. Up to 100% of interest on the FIXED ACCOUNT at the time the
request for surrender/withdrawal is made, 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:.................................................................................
</TABLE>
26
<PAGE> 33
<TABLE>
<CAPTION>
Policy Years Since Premium Was Paid
-----------------------------------
<S> <C>
Less than 1.....................................................................................................6%
At least 1, but less than 2.....................................................................................6%
At least 2, but less than 3.....................................................................................5%
At least 3, but less than 4.....................................................................................5%
At least 4, but less than 5.....................................................................................4%
At least 5, but less than 6.....................................................................................3%
At least 6, but less than 7.....................................................................................2%
At least 7....................................................................................................None
</TABLE>
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 premium(s) withdrawn. If the premium 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 $35,000 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.
DAILY ADMINISTRATION FEE
At each Valuation Period, we also deduct a daily administration fee at an
effective annual rate of 0.15% from the assets of each Sub-Account of the
Variable Account. This daily administration fee is intended to reimburse us for
other administrative costs under the policies.
TRANSFER PROCESSING FEE
The first 12 transfers during each Policy Year are free under our current
policy, which we reserve the right to change. The Company currently assesses a
$25 transfer fee for the 13th and each additional transfer in a Policy Year. For
the purposes of assessing the fee, each transfer request (which includes a
Written Notice or telephone call, but does not include automatic transfers,
including dollar cost averaging automatic transfers) is considered to be one
transfer, regardless of the number of Sub-Accounts or Guarantee Periods under
the Fixed Account 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
We assess an annual mortality and expense risk charge, deducted at each
Valuation Period from the assets of the Variable Account, at an effective annual
rate of 1.25% of the average daily value of the net assets in the Variable
Account. This charge is assessed during the Accumulation Period, but 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. We guarantee not to increase this charge for the duration of the Policy.
This charge is assessed daily when determining the value of an Accumulation
Unit.
The mortality risk we assume arises from our obligation to make annuity payments
(determined in accordance with the annuity tables and other provisions contained
in the Policy) for the full life of all Annuitants regardless of how long all
Annuitants or any individual Annuitant might live. Accordingly, 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
27
<PAGE> 34
Annuitant is assured that neither his or her longevity, nor an improvement in
life expectancy generally, will have any adverse effect on the annuity payments
received under the Policy. This, therefore, relieves the Annuitant from the risk
that he or she will outlive the funds accumulated for retirement. 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. No surrender
charge is assessed against the payment of the Death Benefit, which also
increases the mortality risk.
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. If the mortality and expense
charges are sufficient to cover such costs and risks, any excess will be profit
to the Company, and a portion of such profit, if any, may be used to finance
distribution expenses. However, if the amounts deducted prove to be
insufficient, the loss will be borne by us.
REDUCTION OR ELIMINATION OF SURRENDER CHARGES AND POLICY ADMINISTRATION CHARGES
The amount of the surrender charge and/or policy administration charge on a
Policy may be reduced or eliminated when some or all of the policies are to be
sold to an individual or a group of individuals in such a manner that results in
savings of sales and/or administrative expenses. In determining whether to
reduce or eliminate such expenses, the Company will consider certain factors
including the following:
1. the size and type of group to which the administrative services are to
be provided and the sales are to be made will be considered. Generally,
sales and administrative 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. For example, certain broker/dealers may offer policies in
connection with financial planning programs offered on a fee for
service basis. In view of the financial planning fees, such
broker/dealers may elect to receive lower commissions for sales of the
policies, thereby reducing the Company's sales expenses.
If, after consideration of the foregoing factors, it is determined that there
will be a reduction or elimination in sales expenses and/or administration
expenses, the Company will provide a reduction in the surrender charge and/or
the policy administration charge. Such charges may also be eliminated when a
Policy is issued to an officer, director, employee, registered representative or
relative thereof of: the Company; The Canada Life Assurance Company; J. & W.
Seligman & Co. Incorporated; any selling Broker/Dealer; or any of their
affiliates. In no event will reduction or elimination of the surrender charge
and/or policy administration charge be permitted where such reduction or
elimination will be discriminatory to any person.
In addition, if the Policy Value on the Policy Anniversary is $35,000 or more,
we will waive the policy administration charge for the prior Policy Year.
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.
28
<PAGE> 35
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 Seligman Bond, Seligman
Capital, Seligman Cash Management (currently waived), Seligman Common Stock, and
Seligman Income; 0.50% for Seligman High-Yield Bond; 0.75% for Seligman
Communications and Information, and Seligman Frontier; 0.80% for Seligman
Large-Cap Value; and 1.00% for Seligman Henderson Global Growth Opportunities,
Seligman Henderson Global Smaller Companies, Seligman Henderson Global
Technology, Seligman Henderson International, (of which the Manager in turn pays
0.90% to Seligman Henderson Co., the Sub-Adviser to these four portfolios); and
Seligman Small-Cap Value, 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
Seligman Henderson International, Seligman Henderson Global Smaller Companies,
Seligman Henderson Global Technology, and Seligman Henderson 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." We require the surrender of your Policy so that we may pay the
Cash Surrender Value or issue a supplemental contract for the applicable payment
option. The term "payee" means a person who is entitled to receive payment under
this section.
ELECTION OF OPTIONS
You may elect an option or revoke or change your election at any time before the
Annuity Date or Maturity Date while any Annuitant is living. If an election is
not in effect at 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 or assignee.
An option may not be elected and we will pay the proceeds in one sum if either
of the following conditions exist:
1. the amount to be applied under the option is less than $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.
29
<PAGE> 36
AGE AND SURVIVAL OF PAYEE
We have the right to require proof of age of the payee(s) before making any
payment. When any payment depends on the payee's survival, we will have the
right, before making the payment, to require proof satisfactory to us that the
payee is alive.
DEATH OF PAYEE
At the death of the payee, or the last survivor of the payees, any amount
remaining to be paid under this section will become payable in one sum, unless
specified otherwise.
BETTERMENT OF INCOME
The annuity benefits at the time the Policy Value is applied under a payment
option will not be less than those that would be provided by the application of
an amount defined in the Policy to purchase any single premium annuity Policy
offered by us at the time to the same class of Annuitants. Such amount will be
the greater of the Cash Surrender Value or 95% of what the Cash Surrender Value
would be if there were no surrender charge.
OTHER POLICY PROVISIONS
OWNER OR JOINT OWNER
During any Annuitant's lifetime and before the earlier of the Annuity Date or
Maturity Date, you have all the rights and privileges granted by the Policy. If
you appoint an irrevocable Beneficiary or assignee, then your rights will be
subject to those of that Beneficiary or assignee.
During any Annuitant's lifetime and before the earlier of the Annuity Date or
Maturity Date, you may name a new Owner, Joint Owner or Annuitant by giving us
Written Notice.
With respect to Qualified Policies generally, however, the contract may not be
assigned (other than to us), Joint Ownership is not permitted, and the Owner
must be the Annuitant.
BENEFICIARY
We will pay the Beneficiary any proceeds payable on your death or the death of
the Last Surviving Annuitant. During any Annuitant's lifetime and before the
earlier of the Annuity Date or Maturity Date, you may name and change one or
more beneficiaries by giving us Written Notice. However, we will require Written
Notice from any irrevocable Beneficiary or assignee specifying their consent to
the change.
We will pay the proceeds under the Beneficiary appointment in effect at the date
of death. If you have not designated otherwise in your appointment, the proceeds
will be paid to the surviving Beneficiary(ies) equally. If no Beneficiary is
living when you die or the Last Surviving Annuitant dies, or if none has been
appointed, the proceeds will be paid to you or 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;
30
<PAGE> 37
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.
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.
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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
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.
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We may also distribute sales literature or other information including the
effect of tax-deferred compounding on a Sub-Account's investment returns, or
returns in general, which may be illustrated by tables, graphs, charts or
otherwise, and which may include a comparison, at various points in time, of the
return from an investment in a Policy (or returns in general) on a tax-deferred
basis (assuming one or more tax rates) with the return on a currently taxable
basis where allowed by state 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.
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, 408A 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
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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.
OWNER CONTROL
In certain circumstances, variable annuity policyowners may be considered the
Owners, for federal income tax purposes, of the assets of the separate account
used to support their policies. In those circumstances, income and gains from
the separate account assets would be includable in the variable annuity
policyowner's gross income. Several years ago, the IRS stated in published
rulings that a variable policyowner will be considered the Owner of separate
account assets if the policyowner possesses incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. More
recently, the Treasury Department announced, in connection with the issuance of
regulations concerning investment diversification, that those regulations "do
not provide guidance concerning the circumstances in which investor control of
the investments of a segregated asset account may cause the investor, rather
than the insurance company, to be treated as the Owner of the assets in the
account." This announcement also stated that guidance would be issued by way of
regulations or rulings on the "extent to which policyholders may direct their
investments to particular Sub-Accounts without being treated as Owners of the
underlying assets."
The ownership rights under the Policy are similar to, but different in certain
respects from, those described by the IRS in rulings in which it was determined
that policyowners were not Owners of separate account assets. For example, the
Owner of the Policy has the choice of more subdivisions to which to allocate
premiums and Policy Values than such rulings, has a choice of investment
strategies different from such rulings, and may be able to transfer among
subdivisions more frequently than in such rulings. These differences could
result in the policyowner being treated as the Owner of the assets of the
Variable Account. In addition, we do not know what standards will be set forth
in the regulations or rulings which the Treasury Department has stated it
expects to issue. We therefore reserve the right to modify the Policy as
necessary to attempt to prevent the policyowner from being considered the Owner
of the assets of the Variable Account.
REQUIRED DISTRIBUTIONS
In addition to the requirements of Section 817(h) of the Code, in order to be
treated as an annuity Policy for federal income tax purposes, Section 72(s) of
the Code requires any Nonqualified Policy to provide that (a) if any Owner dies
on or after the Annuity 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 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 proceeds of the
Policy passes by reason of death and must be a natural person. However, if the
Owner's "Designated Beneficiary" is the surviving spouse of the Owner, the
Policy may be continued with the surviving spouse as the new Owner.
The Nonqualified Policies contain provisions which are intended to comply with
the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. We intend to review such
provisions and modify them if necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by regulation or otherwise.
Other rules may apply to Qualified Policies (see "Minimum Distribution
Requirements ["MDR"] for 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
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(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.
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. The treatment of Market Value Adjustments for
purposes of these rules is unclear. A tax adviser should be consulted if a
distribution occurs to which a Market Value Adjustment applies.
ANNUITY PAYMENTS
Although tax consequences may vary depending on the annuity option elected under
an annuity Policy, under Code Section 72(b), generally gross income does not
include that part of any amount received as an annuity under an annuity Policy
that bears the same ratio to such amount as the investment in the contract bears
to the expected return at the annuity starting date. For variable income
payments, in general, the taxable portion (prior to recovery of the investment
in the contract) is determined by a formula which establishes the specific
dollar amount of each annuity payment that is not taxed. The dollar amount is
determined by dividing the "investment in the contract" by the total number of
expected periodic payments. For fixed income payments (prior to recovery of the
investment in the contract), in general, there is no tax on the amount of each
payment which represents the same ratio that the "investment in the contract"
bears to the total expected value of the annuity payments for the term of the
payments; however, the remainder of each income payment is taxable. In all
cases, after the "investment in the contract" is recovered, the full amount of
any additional annuity payments is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Policy because of the death of an Owner or the
Last Surviving Annuitant. Generally, such amounts are includable in the income
of the recipient as follows:
1. if distributed in a lump sum, they are taxed in the same
manner as a 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);
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3. attributable to the Owner becoming disabled;
4. as part of a series of substantially equal periodic payments
(not less frequently than annually) for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life
expectancies) of the taxpayer and Beneficiary;
5. made under an annuity Policy that is purchased with a single
premium when the annuity starting date is no later than a year
from purchase of the annuity and substantially equal periodic
payments are made, not less frequently than annually, during
the annuity period; and
6. made under certain annuities issued in connection with
structured settlement agreements.
Other tax penalties may apply to certain distributions under a Qualified Policy,
as well as to certain contributions, loans and other circumstances.
TRANSFERS, ASSIGNMENTS, OR EXCHANGES OF A POLICY
A transfer of ownership, the designation of an Annuitant or other Beneficiary
who is not also the Owner, the designation of certain annuity starting dates, or
the exchange of a Policy may result in certain tax consequences to the Owner
that are not 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. "Eligible rollover distributions" from section 401(a) plans and
section 403(b) tax-sheltered annuities are subject to a mandatory federal income
tax withholding of 20%. An eligible rollover distribution is the taxable portion
of any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
MULTIPLE POLICIES
Section 72(e)(11) of the Code treats all nonqualified deferred annuity policies
entered into after June 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
Although the likelihood of legislative change is uncertain, there is always the
possibility that the tax treatment of the polices could change by legislation or
other means. For instance, the President's 1999 Budget Proposal recommended
legislation that, if enacted, would adversely modify the federal taxation of the
policies. It is also possible that any change could be retroactive (that is,
effective prior to the date of the change). A tax adviser should be consulted
with respect to legislative developments and their effect on the policy.
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; 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
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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 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 disclosure 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.
SIMPLE INDIVIDUAL RETIREMENT ANNUITIES
Beginning January 1, 1997, certain small employers may establish SIMPLE plans as
provided by Section 408(p) of the Code, under which employees may elect to defer
a percentage of compensation up to $6,000 (as increased for cost of living
adjustments). The sponsoring employer is required to make matching or
non-elective contributions on behalf of employees. Distributions from SIMPLE
IRAs are subject to the same restrictions that apply to IRA distributions and
are taxed as ordinary income. Subject to certain exceptions, premature
distributions prior to age 59 1/2 are subject to a 10 percent penalty tax, which
is increased to 25 percent if the distribution occurs within the first two years
after the commencement of the employee's participation in the plan.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Effective January 1, 1998, section 408A of the Code permits certain eligible
individuals to contribute to a Roth IRA. Contributions to a Roth IRA, which are
subject to certain limitations, are not deductible and must be made in cash or
as a rollover or transfer from another Roth IRA or other IRA. A rollover from or
conversion of an IRA to a Roth IRA may be subject to tax and other special rules
may apply. Distributions from a Roth IRA generally are not taxed, except that,
once aggregate distributions exceed contributions to the Roth IRA, income tax
and a 10 percent penalty tax may apply to distributions made (1) before age 59
1/2 (subject to certain exceptions) and/or (2) during the five taxable years
starting with the year in which the first contribution is made to the Roth IRA.
MINIMUM DISTRIBUTION REQUIREMENTS ("MDR")
The Code requires that minimum distribution from an IRA begin no later than
April 1 of the year following the year in which the Owner attains age 70 1/2.
Failure to do so results in a penalty of 50% of the amount not withdrawn. This
penalty is in addition to normal income tax. We will calculate the MDR only for
funds invested in this Policy and subject to our administrative guidelines,
including but not limited to: 1) minimum withdrawal amount of $250; 2) while
surrender charges are applicable, up to 10% of total premium plus 100% of any
Sub-Account earnings and 100% of Fixed Account interest may be withdrawn; and 3)
use of MDR counts as the once a Policy Year free withdrawal.
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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).
No minimum distribution is required from a Roth IRA during your life, although
upon your death certain distribution requirements apply.
The Code Minimum Distribution Requirements also apply to distribution from
qualified plans other than IRAs. 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 April 1 of the calendar year following
the calendar year in which the Owner (or plan participant) (i) reaches age
70 1/2 or (ii) retires, and must be made in a specified form or manner. If the
plan participant is a "5% Owner" (as defined in the Code), distributions
generally must begin no later than the date described in (i). You are
responsible for ensuring that distributions from such plans satisfy the Code
minimum distribution requirements.
CORPORATE AND SELF-EMPLOYED (H.R.10 AND KEOGH) PENSION AND PROFIT-SHARING PLANS
Sections 401(a), 401(k) and 403(a) of the Code permit corporate employers to
establish various types of tax-favored retirement plans for employees. The
Self-Employed Individual Tax Retirement Act of 1962, as amended, commonly
referred to as "H.R.10" or "Keogh," permits self-employed individuals also to
establish such tax-favored retirement plans for themselves and their employees.
Such retirement plans may permit the purchase of the policies in order to
accumulate retirement savings under the plans. Adverse tax consequences to the
plan, to the participant or to both may result if this policy is assigned or
transferred to any individual as a means to provide benefit payments. Employers
intending to use the policy in connection with such plans should seek advice.
The policy includes a Death Benefit that in some cases may exceed the greater of
the premium payments or the Policy Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the Death Benefit may exceed this
limitation, employers using the policy in connection with such plans should
consult their tax adviser.
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.
38
<PAGE> 45
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. The policy includes a Death Benefit that in some
cases may exceed the greater of the premium payments or the Policy Value. The
Death Benefit could be characterized as an incidental benefit, the amount of
which is limited in any tax-sheltered annuity under section 403(b). Because the
Death Benefit may exceed this limitation, employers using the policy in
connection with such plans should consult their tax adviser. 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, are not expected to exceed 6.5% of premium payments
under the policies. We or 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
Certain affiliates of the Company, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement
39
<PAGE> 46
payments have been made. Although the outcome of any litigation cannot be
predicted with certainty, the Company believes that at the present time there
are no pending or threatened lawsuits that are reasonably likely to have a
material adverse impact on the Separate Account or the Company.
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.
PREPARING FOR YEAR 2000
Like all financial services providers, the Company utilizes systems that may be
affected by Year 2000 transition issues and it relies on service providers,
including the Funds, that also may be affected. The Company and its affiliates
have developed, and are in the process of implementing, a Year 2000 transition
plan, and are confirming that its service providers are also so engaged. The
resources that are being devoted to this effort are substantial. It is difficult
to predict with precision whether the amount of resources ultimately devoted, or
the outcome of these efforts, will have any negative impact on the Company.
However, as of the date of this Prospectus, it is not anticipated that
Policyholders will experience negative effects on their investment, or on the
services provided in connection therewith, as a result of Year 2000 transition
implementation. The Company currently anticipates that its systems will be Year
2000 compliant prior to the end of 1999, but there can be no assurance that the
Company will be successful, or that interaction with other service providers
will not impair the Company's services at that time.
FINANCIAL STATEMENTS
Our balance sheets as of December 31, 1997 and 1996, and the related statements
of operations, accumulated surplus (deficit), and cash flows for each of the
three years in the period ended December 31, 1997, as well as the Report of
Independent Auditors, are contained in the Statement of Additional Information.
The Variable Account's statement of net assets as of December 31, 1997, 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.
40
<PAGE> 47
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.
41
<PAGE> 48
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL POLICY PROVISIONS.................................................... 2
Contract.................................................................... 2
Incontestability............................................................ 2
Misstatement of Age......................................................... 2
Currency.................................................................... 3
Place of Payment............................................................ 3
Non-Participation........................................................... 3
Our Consent................................................................. 3
PRINCIPAL
UNDERWRITER..................................................................... 3
CALCULATION OF YIELDS AND TOTAL
RETURNS......................................................................... 3
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............................................................. 8
LEGAL MATTERS................................................................... 8
EXPERTS......................................................................... 8
OTHER INFORMATION............................................................... 8
FINANCIAL STATEMENTS............................................................ 8
</TABLE>
42
<PAGE> 49
PART B
INFORMATION REQUIRED TO BE IN THE
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, 1998.
<PAGE> 51
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ADDITIONAL POLICY PROVISIONS....................................................... 2
Contract ................................................................. 2
Incontestability.......................................................... 2
Misstatement Of Age....................................................... 2
Currency ................................................................. 3
Place Of Payment.......................................................... 3
Non-Participation......................................................... 3
Our Consent............................................................... 3
PRINCIPAL UNDERWRITER.............................................................. 3
CALCULATION OF YIELDS AND TOTAL RETURNS............................................ 3
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................................................................... 8
RECORDS AND REPORTS................................................................ 8
LEGAL MATTERS...................................................................... 8
EXPERTS ........................................................................... 8
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.
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.
2
<PAGE> 52
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.
PRINCIPAL UNDERWRITER
Canada Life of America Financial Services, Inc. ("CLAFS"), an affiliate of
Canada Life Insurance Company of New York ("CLNY"), is the principal underwriter
of the variable annuity policies described herein. The offering of the policies
is continuous, and CLNY does not anticipate discontinuing the offering of the
policies. However, CLNY does reserve the right to discontinue the offering of
the policies.
CLAFS did not receive nor retain any commissions for 1997, 1996, or 1995 for
serving as principal underwriter of the variable annuity policies.
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, or income other than investment income, 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,
and exclusive of income other than investment income) 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 administration charge of
$30 per year deducted at the end of each policy year. Current Yield will be
calculated according to the following formula:
3
<PAGE> 53
Current Yield = ((NCS-ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the portfolio (exclusive
of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation, and exclusive of
income other than investment income) for the 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.
The current yield for the 7 day period ended December 31, 1997 was 2.52%.
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:
NCS = the net change in the value of the portfolio (exclusive
of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation, and exclusive of
income other than investment income) for the 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.
The effective yield for the 7 day period ended December 31, 1997 was 2.56%.
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:
4
<PAGE> 54
6
Yield = 2 x ((((NI-ES)/(U x UV)) + 1) - 1)
Where:
NI = net income of the portfolio for the 30 day or one month
period attributable to the Sub-Account's units.
ES = expenses of the Sub-Account for the 30 day or one month
period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in
the 30 day or one month period.
Because of the charges and deductions imposed under the policies, the yield for
the Sub-Account will be lower than the yield for the corresponding portfolio.
The yield on the amounts held in the Sub-Accounts normally will fluctuate over
time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. The
Sub-Account's actual yield is affected by the types and quality of portfolio
securities held by the portfolio, and its operating expenses.
Yield calculations do not take into account the surrender charge under the
policy. The surrender charge is equal to 6% of premiums paid during that current
policy year and the previous 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:
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.
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* 12/31/97 12/31/97 TO 12/31/97 INCEPTION DATE
- ------------ -------- -------- ----------- --------------
<S> <C> <C> <C> <C>
Bond 1.83% 4.16% 5.20% 06/21/88
Capital 13.96% 11.02% 12.45% 06/21/88
Cash Management (1.56)% 2.32% 3.48% 06/21/88
Common Stock 13.97% 13.59% 13.17% 06/21/88
Communications and Information 14.86% ** 19.39% 10/04/94
Frontier 9.07% ** 21.54% 10/04/94
Global Growth Opportunities 5.36% ** 1.97% 05/01/96
Global Smaller Companies (3.64)% ** 10.16% 10/04/94
Global Technology 12.21% ** 9.12% 05/01/96
High-Yield Bond 7.85% ** 10.70% 05/01/95
Income 6.79% 6.43% 8.25% 06/21/88
International 1.21% ** 6.59% 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 five
years as of December 31, 1997, and accordingly, no five year average annual
total return is available.
As of December 31, 1997, the Large-Cap Value and Small-Cap Value Sub-Accounts
had not commenced operations. Accordingly, we have not provided average annual
total return information for these Sub-Accounts.
We may, from time to time, also quote in sales literature or advertisements,
total returns that do not reflect the surrender charge. These are calculated in
exactly the same way as average annual total returns described above, except
that the ending redeemable value of the hypothetical account for the period is
replaced with an ending value for the period that does not take into account any
charge on amounts surrendered or withdrawn.
6
<PAGE> 56
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* 12/31/97 12/31/97 TO 12/31/97 INCEPTION DATE
------------ -------- -------- ----------- --------------
<S> <C> <C> <C> <C>
Bond 7.23% 4.62% 5.20% 06/21/88
Capital 19.36% 11.37% 12.45% 06/21/88
Cash Management 3.84% 2.81% 3.48% 06/21/88
Common Stock 19.37% 13.91% 13.17% 06/21/88
Communications and Information 20.26% ** 20.31% 10/04/94
Frontier 14.47% ** 22.42% 10/04/94
Global Growth Opportunities 10.76% ** 5.12% 05/01/96
Global Smaller Companies 1.76% ** 11.26% 10/04/94
Global Technology 17.61% ** 12.10% 05/01/96
High-Yield Bond 13.25% ** 12.10% 05/01/95
Income 12.19% 6.85% 8.25% 06/21/88
International 6.61% ** 7.19% 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 five
years as of December 31, 1997, and accordingly, no five year average annual
total return is available.
As of December 31, 1997, the Large-Cap Value and Small-Cap Value Sub-Accounts
had not commenced operations. Accordingly, we have not provided average annual
total return information for these Sub-Accounts.
EFFECT OF THE POLICY ADMINISTRATION CHARGE ON PERFORMANCE DATA
The policy provides for a $30 policy administration charge to be assessed
annually on each policy anniversary proportionately from any Sub-Accounts and
Fixed Account in which you are invested. If the policy value on the policy
anniversary is $35,000 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 Charles MacPhaul. Sutherland, Asbill & Brennan LLP of Washington,
DC, has provided advice on certain matters relating to the federal securities
laws.
EXPERTS
Our balance sheets as of December 31, 1997 and 1996, and the related statements
of operations, accumulated surplus, and cash flows for each of the three years
in the period ended December 31, 1997, 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, 1997, 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.
FINANCIAL STATEMENTS
The Variable Account's statement of net assets as of December 31, 1997, 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
herein. Ernst & Young, Chartered Accountants, serves as independent auditors for
the Variable Account.
Our balance sheets as of December 31, 1997 and 1996, and the related statements
of operations, accumulated surplus (deficit), and cash flows for each of the
three years in the period ended December 31, 1997, 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.
8
<PAGE> 58
INDEX TO FINANCIAL STATEMENTS
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors ......................................... 1
Audited Financial Statements
Statement of Net Assets as at December 31, 1997 ........................ 2
Statements of Operations for the
year ended December 31, 1997 ..................................... 4
Statements of Changes in Net Assets for the
year ended December 31, 1997 ..................................... 6
Notes to Financial Statements .......................................... 8
</TABLE>
CANADA LIFE INSURANCE COMPANY OF NEW YORK
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Auditors ......................................... 1
Audited Financial Statements
Balance Sheets as at December 31, 1997 ................................. 3
Statements of Operations for the
years ended December 31, 1997, 1996 and 1995 ..................... 4
Statements of Accumulated Surplus (Deficit) for the
years ended December 31, 1997, 1996 and 1995 ..................... 5
Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995 .................... 6
Notes to Financial Statements .......................................... 8
</TABLE>
<PAGE> 59
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
FINANCIAL STATEMENTS
December 31, 1997
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> 60
[ERNST & YOUNG LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
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, 1997, 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, 1997, 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.
/s/ Ernst & Young
Toronto, Canada
February 13, 1998 Chartered Accountants
<PAGE> 61
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
CASH COMMON COMMUNICATIONS
BOND CAPITAL MANAGEMENT STOCK AND INFORMATION
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 value
(see Note 3 for cost values) $209,582 $441,749 $203,924 $856,572 $1,036,453
Due (to) from Canada Life
Insurance Company of
New York (Note 6) (22,645) (14,234) (92,656) (61,884) 7,761
Receivable (payable) for
investments sold (purchased) 67 226 1,215 2,977 (67,987)
-------------------------------------------------------------------------------
NET ASSETS $187,004 $427,289 $112,483 $797,665 $ 976,227
===============================================================================
NET ASSETS ATTRIBUTABLE TO:
Policyholders' liability reserve $187,004 $427,289 $112,483 $797,665 $ 976,227
-------------------------------------------------------------------------------
NET ASSETS $187,004 $427,289 $112,483 $797,665 $ 976,227
===============================================================================
NUMBER OF UNITS OUTSTANDING 11,449 13,870 80,615 24,355 53,475
===============================================================================
NET ASSET VALUE PER UNIT $16.3337 $30.8067 $ 1.3953 $32.7516 $ 18.2558
===============================================================================
</TABLE>
See accompanying notes
2
<PAGE> 62
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
DECEMBER 31, 1997
<TABLE>
<CAPTION>
GLOBAL GLOBAL
GROWTH SMALLER GLOBAL HIGH-YIELD
FRONTIER OPPORTUNITIES COMPANIES TECHNOLOGY INTERNATIONAL BOND INCOME SUB-ACCOUNTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 795,896 $ 281,916 $ 615,992 $ 84,540 $ 130,715 $ 777,129 $ 205,405 $ 5,639,873
(42,613) (30,661) 77,001 (87) (10,379) (28,253) (4,690) (223,340)
1,276 (385) (217) -- (99) 4,093 3,990 (55,296)
- ----------------------------------------------------------------------------------------------------------------------------------
$ 754,559 $ 250,870 $ 692,776 $ 84,453 $ 120,237 $ 752,969 $ 204,705 $ 5,361,237
==================================================================================================================================
$ 754,559 $ 250,870 $ 692,776 $ 84,453 $ 120,237 $ 752,969 $ 204,705 $ 5,361,237
- ----------------------------------------------------------------------------------------------------------------------------------
$ 754,559 $ 250,870 $ 692,776 $ 84,453 $ 120,237 $ 752,969 $ 204,705 $ 5,361,237
==================================================================================================================================
39,062 23,053 48,900 6,972 8,667 55,396 9,543 375,357
==================================================================================================================================
$ 19.3170 $ 10.8823 $ 14.1672 $ 12.1132 $ 13.8730 $ 13.5925 $ 21.4508
==================================================================================================================================
</TABLE>
3
<PAGE> 63
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
CASH COMMON COMMUNICATIONS
BOND CAPITAL MANAGEMENT STOCK AND INFORMATION
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME:
Dividend and capital gain
distributions $10,464 $29,305 $9,917 $132,673 $250,529
Less mortality and expense
risk charges (Note 6) 1,675 4,355 2,869 8,866 9,195
-----------------------------------------------------------------------------
Net investment income 8,789 24,950 7,048 123,807 241,334
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from
investments 125 1,380 -- 7,443 105,821
Net unrealized appreciation
(depreciation) from investments 1,028 23,359 -- (43,433) (226,986)
-----------------------------------------------------------------------------
Net realized and unrealized
gain from investments 1,153 24,739 -- (35,990) (121,165)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS RESULTING
FROM OPERATIONS $ 9,942 $49,689 $7,048 $ 87,817 $120,169
=============================================================================
</TABLE>
See accompanying notes
4
<PAGE> 64
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GLOBAL GLOBAL
GROWTH SMALLER GLOBAL HIGH-YIELD
FRONTIER OPPORTUNITIES COMPANIES TECHNOLOGY INTERNATIONAL BOND INCOME SUB-ACCOUNTS
SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT SUB-ACCOUNT COMBINED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 72,551 $3,129 $ 15,034 $ 11,644 $ 4,642 $ 61,145 $ 20,652 $ 621,685
9,025 2,511 7,613 1,409 1,334 6,947 2,127 57,926
--------------------------------------------------------------------------------------------------------------------------
63,526 618 7,421 10,235 3,308 54,198 18,525 563,759
--------------------------------------------------------------------------------------------------------------------------
40,992 553 (1,052) 4,910 3,469 22,684 89 186,414
(24,455) 3,000 (5,928) (1,380) (6,215) (9,080) (4,938) (295,028)
--------------------------------------------------------------------------------------------------------------------------
16,537 3,553 (6,980) 3,530 (2,746) 13,604 (4,849) (108,614)
--------------------------------------------------------------------------------------------------------------------------
$ 80,063 $4,171 $ 441 $ 13,765 $ 562 $ 67,802 $ 13,676 $ 455,145
==========================================================================================================================
</TABLE>
5
<PAGE> 65
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Bond Capital Cash Management
Sub-Account Sub-Account Sub-Account
------------------------ ------------------------- -------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 8,789 $ 802 $ 24,950 $ 6,270 $ 7,048 $ 1,848
Net realized gain (loss) on
investments 125 -- 1,380 3 -- --
Net unrealized appreciation
(depreciation) on investments 1,028 (714) 23,359 (5,135) -- --
----------------------- ------------------------ ------------------------
Net increase (decrease) in net
assets resulting from operations 9,942 88 49,689 1,138 7,048 1,848
----------------------- ------------------------ ------------------------
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions (Note 5) 161,726 15,248 266,831 109,631 (38,941) 142,528
----------------------- ------------------------ ------------------------
Net increase (decrease) in net assets
arising from capital transactions 161,726 15,248 266,831 109,631 (38,941) 142,528
----------------------- ------------------------ ------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 171,668 15,336 316,520 110,769 (31,893) 144,376
NET ASSETS, BEGINNING OF PERIOD 15,336 -- 110,769 -- 144,376 --
----------------------- ------------------------ ------------------------
NET ASSETS, END OF PERIOD $ 187,004 $ 15,336 $ 427,289 $ 110,769 $ 112,483 $ 144,376
======================= ======================== ========================
<CAPTION>
Global Growth Opportunities Global Smaller Companies Global Technology
Sub-Account Sub-Account Sub-Account
--------------------------- ------------------------ ------------------------
Year 5/1/96* Year Year Year 5/1/96*
Ended to Ended Ended Ended to
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 618 $ (63) $ 7,421 $ 20,396 $ 10,235 $ (45)
Net realized gain (loss) on
investments 553 (1) (1,052) 25 4,910 7
Net unrealized appreciation
(depreciation) on investments 3,000 224 (5,928) (18,969) (1,380) 2,546
----------------------- ------------------------ ------------------------
Net increase in net assets resulting
from operations 4,171 160 441 1,452 13,765 2,508
----------------------- ------------------------ ------------------------
CAPITAL TRANSACTIONS:
Net increase (decrease) from unit
transactions (Note 5) 218,444 28,095 369,544 321,339 33,680 34,500
----------------------- ------------------------ ------------------------
Net increase (decrease) in net assets
arising from capital transactions 218,444 28,095 369,544 321,339 33,680 34,500
----------------------- ------------------------ ------------------------
TOTAL INCREASE IN NET ASSETS 222,615 28,255 369,985 322,791 47,445 37,008
NET ASSETS, BEGINNING OF PERIOD 28,255 -- 322,791 -- 37,008 --
----------------------- ------------------------ ------------------------
NET ASSETS, END OF PERIOD $ 250,870 $ 28,255 $ 692,776 $ 322,791 $ 84,453 $ 37,008
======================= ======================== ========================
</TABLE>
See accompanying notes
*From commencement of operations
6
<PAGE> 66
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
<TABLE>
<CAPTION>
Common Stock Communications and Frontier
Sub-Account Information Sub-Account Sub-Account
------------------------ ------------------------ ------------------------
Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 123,807 $ 28,278 $ 241,334 $ (438) $ 63,526 $ 34,310
7,443 3,926 105,821 17,049 40,992 5,843
(43,433) (17,345) (226,986) 4,387 (24,455) (23,822)
------------------------ ------------------------ ------------------------
87,817 14,859 120,169 20,998 80,063 16,331
------------------------ ------------------------ ------------------------
500,077 194,912 649,524 185,536 331,795 326,370
------------------------ ------------------------ ------------------------
500,077 194,912 649,524 185,536 331,795 326,370
------------------------ ------------------------ ------------------------
587,894 209,771 769,693 206,534 411,858 342,701
209,771 -- 206,534 -- 342,701 --
------------------------ ------------------------ ------------------------
$ 797,665 $ 209,771 $ 976,227 $ 206,534 $ 754,559 $ 342,701
======================== ======================== ========================
<CAPTION>
International High-Yield Bond Income Sub-Accounts
Sub-Account Sub-Account Sub-Account Combined
------------------------ ------------------------ ------------------------ ----------------------------
Year Year Year Year Year Year Year Year
Ended Ended Ended Ended Ended Ended Ended Ended
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
--------- --------- --------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 3,308 $ 743 $ 54,198 $ 8,201 $ 18,525 $ 5,060 $ 563,759 $ 105,362
3,469 (1) 22,684 5 89 13 186,414 26,869
(6,215) 64 (9,080) (4,577) (4,938) (2,202) (295,028) (65,543)
------------------------ ------------------------ ------------------------ ----------------------------
562 806 67,802 3,629 13,676 2,871 455,145 66,688
------------------------ ------------------------ ------------------------ ----------------------------
88,948 29,921 564,457 117,081 103,599 84,559 3,249,684 1,589,720
------------------------ ------------------------ ------------------------ ----------------------------
88,948 29,921 564,457 117,081 103,599 84,559 3,249,684 1,589,720
------------------------ ------------------------ ------------------------ ----------------------------
89,510 30,727 632,259 120,710 117,275 87,430 3,704,829 1,656,408
30,727 -- 120,710 -- 87,430 -- 1,656,408 --
------------------------ ------------------------ ------------------------ ----------------------------
$ 120,237 $ 30,727 $ 752,969 $ 120,710 $ 204,705 $ 87,430 $ 5,361,237 $ 1,656,408
======================== ======================== ======================== ============================
</TABLE>
7
<PAGE> 67
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 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.
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 Bond, Capital, Common Stock,
Communications and Information, Frontier, Global Growth Opportunities, Global
Smaller Companies, Global Technology, International, 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
portfolio of the 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.
8
<PAGE> 68
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>
Bond 20,467 $10.24 $ 209,582 $ 209,268
Capital 24,406 18.10 441,749 423,525
Cash Management 203,924 1.00 203,924 203,924
Common Stock 52,615 16.28 856,572 917,350
Communications and Information 79,179 13.09 1,036,453 1,259,052
Frontier 50,437 15.78 795,896 844,173
Global Growth Opportunities 25,559 11.03 281,916 278,692
Global Smaller Companies 47,457 12.98 615,992 640,889
Global Technology 7,983 10.59 84,540 83,374
International 9,654 13.54 130,715 136,866
High-Yield Bond 65,470 11.87 777,129 790,786
Income 19,019 10.80 205,405 212,545
-------------------------
$5,639,873 $6,000,444
=========================
</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>
Bond $ 199,945 $ 6,877
Capital 321,802 15,620
Cash Management 3,390,768 3,331,350
Common Stock 1,173,780 491,138
Communications and Information 2,307,113 1,355,864
Frontier 1,202,026 765,020
Global Growth Opportunities 256,958 6,868
Global Smaller Companies 722,468 422,474
Global Technology 79,603 35,629
International 422,315 319,601
High-Yield Bond 1,330,922 688,189
Income 131,899 9,136
----------- ----------
$11,539,599 $7,447,766
=========== ==========
</TABLE>
9
<PAGE> 69
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 Global Growth
Opportunities and Global Technology Sub-Accounts commenced operations on May 1,
1996.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
BOND SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 13,275 $ 207,472 1,008 $ 15,248
Terminated contracts & net transfers out (2,834) (45,746) -- --
-------------------------------------------------------------
10,441 161,726 1,008 15,248
=============================================================
CAPITAL SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 10,541 295,558 4,295 109,631
Terminated contracts & net transfers out (966) (28,727) -- --
-------------------------------------------------------------
9,575 266,831 4,295 109,631
=============================================================
CASH MANAGEMENT SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 2,519,023 3,447,210 547,032 727,407
Terminated contracts & net transfers out (2,545,934) (3,486,151) (439,506) (584,879)
-------------------------------------------------------------
(26,911) (38,941) 107,526 142,528
=============================================================
COMMON STOCK SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 36,236 988,387 10,072 260,881
Terminated contracts & net transfers out (19,532) (488,310) (2,421) (65,969)
-------------------------------------------------------------
16,704 500,077 7,651 194,912
=============================================================
COMMUNICATIONS AND INFORMATION
SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 119,229 2,026,980 36,158 528,539
Terminated contracts & net transfers out (79,369) (1,377,456) (22,543) (343,003)
-------------------------------------------------------------
39,860 649,524 13,615 185,536
=============================================================
</TABLE>
10
<PAGE> 70
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 YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
UNITS AMOUNT UNITS AMOUNT
----- ------ ----- ------
<S> <C> <C> <C> <C>
FRONTIER SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 62,060 $ 1,162,022 27,406 $ 447,643
Terminated contracts & net transfers out (43,319) (830,227) (7,085) (121,273)
----------------------------------------------------------
18,741 331,795 20,321 326,370
==========================================================
GLOBAL GROWTH OPPORTUNITIES
SUB-ACCOUNT*
Accumulation Units:
Contract purchases and net transfers in 26,025 281,529 2,878 28,095
Terminated contracts & net transfers out (5,850) (63,085) -- --
----------------------------------------------------------
20,175 218,444 2,878 28,095
==========================================================
GLOBAL SMALLER COMPANIES
SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 47,487 678,015 23,242 321,864
Terminated contracts & net transfers out (21,791) (308,471) (38) (525)
----------------------------------------------------------
25,696 369,544 23,204 321,339
==========================================================
GLOBAL TECHNOLOGY
SUB-ACCOUNT*
Accumulation Units:
Contract purchases and net transfers in 6,212 67,114 3,596 34,500
Terminated contracts & net transfers out (2,836) (33,434) -- --
----------------------------------------------------------
3,376 33,680 3,596 34,500
==========================================================
INTERNATIONAL SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 31,588 428,123 2,363 29,921
Terminated contracts & net transfers out (25,284) (339,175) -- --
----------------------------------------------------------
6,304 88,948 2,363 29,921
==========================================================
HIGH-YIELD BOND SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 96,930 1,229,026 10,064 117,081
Terminated contracts & net transfers out (51,598) (664,569) -- --
----------------------------------------------------------
45,332 564,457 10,064 117,081
==========================================================
INCOME SUB-ACCOUNT
Accumulation Units:
Contract purchases and net transfers in 5,301 110,707 4,576 84,559
Terminated contracts & net transfers out (334) (7,108) -- --
----------------------------------------------------------
4,967 103,599 4,576 84,559
==========================================================
Net increase from unit transactions $ 3,249,684 $ 1,589,720
=========== ===========
</TABLE>
*From commencement of operations
11
<PAGE> 71
CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 from
January 1, 1997 through September 30, 1997, an effective annual rate of
0.35% of the net asset value of each Sub-Account was deducted as daily
administration fees. Effective October 1, 1997, the daily
administration fee was lowered to 0.15% of the net asset value of each
Sub-Account.
7. NET ASSETS
Net assets at December 31, 1997 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 NET
SUB-ACCOUNT TRANSACTIONS CHARGES GAINS INVESTMENTS INVESTMENTS ASSETS
----------- ------------ ------- ----- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Bond $ 176,974 $ (1,700) $ 11,291 $ 125 $ 314 $ 187,004
Capital 376,462 (4,949) 36,169 1,383 18,224 427,289
Cash Management 103,587 (3,875) 12,771 -- -- 112,483
Common Stock 694,989 (10,187) 162,272 11,369 (60,778) 797,665
Communications &
Information 835,060 (10,579) 251,475 122,870 (222,599) 976,227
Frontier 658,165 (11,397) 109,233 46,835 (48,277) 754,559
Global Growth
Opportunities 246,539 (2,604) 3,159 552 3,224 250,870
Global Smaller
Companies 690,883 (9,368) 37,185 (1,027) (24,897) 692,776
Global Technology 68,180 (1,684) 11,874 4,917 1,166 84,453
International 118,869 (1,490) 5,541 3,468 (6,151) 120,237
High-Yield Bond 681,538 (7,293) 69,692 22,689 (13,657) 752,969
Income 188,158 (2,715) 26,300 102 (7,140) 204,705
-------------------------------------------------------------------------------------------
$4,839,404 $(67,841) $736,962 $213,283 $(360,571) $5,361,237
===========================================================================================
</TABLE>
8. UNIT VALUE
Unit Values as reported are calculated as total net assets divided by
total units for each Sub-account.
12
<PAGE> 72
[CANADA LIFE LETTERHEAD]
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 sheet at December 31, 1997 and 1996, and its
statement of operations for the years ended December 31, 1997, 1996 and 1995.
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 K.T. Ledwos, FSA, MAAA
February 17, 1998 Actuary
<PAGE> 73
CANADA LIFE INSURANCE COMPANY OF NEW YORK
FINANCIAL STATEMENTS
December 31, 1997
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors ........................................................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
</TABLE>
<PAGE> 74
[ERNST & YOUNG LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholder, Directors and Policyholders 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, 1997 and 1996, and the related
statutory-basis statements of operations, accumulated surplus, and cash flows
for each of the three years in the period ended December 31, 1997. 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.
<PAGE> 75
[ERNST& YOUNG LETTERHEAD]
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,
1997 and 1996, or the results of its operations or its cash flows for each of
the three years in the period ended December 31, 1997.
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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with accounting practices prescribed or
permitted by the Insurance Department of the State of New York.
/s/ Ernst & Young
Toronto, Canada
February 18, 1998 Chartered Accountants
<PAGE> 76
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 1997 1996
- ----------------------------------------------------------------------------------------------------------
ASSETS
INVESTMENTS [note 3]
<S> <C> <C>
Bonds, at amortized cost less write-downs [fair value - 1997 - $152,858
1996 - $147,774] $ 142,641 $ 142,002
Mortgage loans, at amortized cost less write-downs 98,854 79,900
Preferred stocks, at cost [fair value - 1997 - $0; 1996 - $21] -- 15
Common stocks, at fair value [cost - 1997 - $4,971; 1996 - $4,442] 10,208 8,336
Policy loans 12,821 12,264
Short-term investments, at cost 600 5,495
Cash and interest-bearing deposits 1,422 2,027
- ----------------------------------------------------------------------------------------------------------
TOTAL CASH AND INVESTMENTS 266,546 250,039
Deferred premiums and premiums in the course of collection 2,362 2,798
Investment income due and accrued 3,243 3,581
Other assets [including federal tax recoverable] 1,203 1,315
Assets held in separate accounts [note 6[c]] 9,118 3,258
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 282,472 $ 260,991
==========================================================================================================
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES
Actuarial reserves $ 241,831 $ 226,919
Benefits in course of payment and provision for unreported claims 903 362
Policyholders' amounts left on deposit at interest 3,332 3,764
Provisions for future policy dividends 2,566 2,539
Transfers to separate accounts due or accrued (net) (77) (59)
- ----------------------------------------------------------------------------------------------------------
POLICY BENEFIT LIABILITIES 248,555 233,525
Interest maintenance reserve 98 469
Amounts payable to parent company [note 6[b]] 1,644 1,245
Unallocated amounts 133 396
Miscellaneous liabilities
[including provision for outstanding taxes and expenses] 3,938 4,821
Asset valuation reserve 3,637 3,069
Liabilities from separate accounts 9,118 3,258
- ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 267,123 246,783
- ----------------------------------------------------------------------------------------------------------
CAPITAL AND SURPLUS [note 8J]
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 11,499 10,358
- ----------------------------------------------------------------------------------------------------------
TOTAL CAPITAL AND SURPLUS 15,349 14,208
- ----------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND CAPITAL AND SURPLUS $ 282,472 $ 260,991
==========================================================================================================
</TABLE>
See accompanying notes
3
<PAGE> 77
CANADA LIFE INSURANCE COMPANY OF NEW YORK
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS - STATUTORY BASIS
[in thousands of dollars]
YEARS ENDED DECEMBER 31
1997 1996 1995
- ---------------------------------------------------------------------------------------------------
REVENUES
<S> <C> <C> <C>
Premiums for insurance and annuity considerations [note 6] $ 39,204 $ 37,423 $ 23,045
Considerations for supplementary contract
and dividends left on deposit 211 1,006 262
Net investment income [note 3[a]] 20,215 18,793 18,109
Other income 253 11 9
Adjustments on reinsurance ceded 731 1,946 (476)
- ---------------------------------------------------------------------------------------------------
TOTAL REVENUES 60,614 59,179 40,949
- ---------------------------------------------------------------------------------------------------
EXPENDITURES
Death benefits, disability benefits and matured
endowments on insurance 2,135 1,687 1,486
Annuity benefits 15,965 13,802 12,861
Surrender benefits 8,608 7,074 4,352
Payments on supplementary contracts and
dividends left on deposit 790 745 765
Interest on policy or contract funds 473 469 132
Dividends to policyholders 2,777 2,706 2,377
- ---------------------------------------------------------------------------------------------------
TOTAL PAYMENTS TO POLICYHOLDERS AND BENEFICIARIES 30,748 26,483 21,973
Increase in actuarial reserves 14,480 20,802 11,274
Commissions to agents 3,126 2,847 2,128
General insurance expenses 5,079 4,891 3,994
Taxes, licenses and fees 572 556 632
Other disbursements 414 276 160
Transfers to separate accounts 4,644 2,073 217
- ---------------------------------------------------------------------------------------------------
TOTAL EXPENDITURES 59,063 57,928 40,378
- ---------------------------------------------------------------------------------------------------
Income from operations before federal income
taxes and net realized capital gains (losses) 1,551 1,251 571
Provision for federal income taxes [note 4] 572 599 534
- ---------------------------------------------------------------------------------------------------
Income from operations before
net realized capital gains (losses) 979 652 37
Net realized capital gains (losses)[note 3[b]] (117) 476 187
- ---------------------------------------------------------------------------------------------------
NET INCOME $ 862 $ 1,128 $ 224
===================================================================================================
</TABLE>
See accompanying notes
4
<PAGE> 78
CANADA LIFE INSURANCE COMPANY OF NEW YORK
<TABLE>
<CAPTION>
STATEMENTS OF ACCUMULATED SURTLUS - STATUTORY BASIS
[in thousands of dollars]
YEARS ENDED DECEMBER 31
1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ACCUMULATED SURPLUS, BEGINNING OF YEAR $ 10,358 $ 9,012 $ 8,195
Net income 862 1,128 224
Change in net unrealized capital gains 1,508 665 1,691
Change in surplus on account of:
Non-admitted assets (33) (239) 425
Actuarial valuation basis -- (172) (193)
Asset valuation reserve (568) (35) (929)
Provision for postretirement benefits [note 10] -- -- (401)
Adjustment for loss in currency exchange (64) (1)
Prior year federal income tax adjustment (564) -- --
- ------------------------------------------------------------------------------------------
ACCUMULATED SURPLUS, END OF YEAR $ 11,499 $ 10,358 $ 9,012
==========================================================================================
</TABLE>
See accompanying notes
5
<PAGE> 79
<TABLE>
<CAPTION>
CANADA LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS - STATUTORY BASIS
[in thousands of dollars]
YEARS ENDED DECEMBER 31
1997 1996 1995
- --------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C> <C>
Premiums, policy proceeds, and other considerations
received $ 40,813 $ 39,668 $ 22,247
Net investment income received 19,453 16,964 16,953
Benefits paid (27,429) (23,721) (19,952)
Insurance expenses paid (9,521) (8,445) (6,780)
Dividends paid to policyholders (2,751) (2,440) (2,145)
Federal income taxes paid (850) (599) (534)
Net increase in policy loans (557) (99) (241)
Net transfers to Separate Accounts (4,662) (2,130) (219)
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 14,496 19,198 9,329
- --------------------------------------------------------------------------------------------------------
PROCEEDS FROM SALES, MATURITIES, OR
REPAYMENTS OF INVESTMENTS
Bonds 51,078 49,924 45,262
Preferred stocks -- 1 1
Common stocks 2,203 3,690 2,070
Mortgage loans 5,939 3,812 3,759
Real estate -- 536 273
Miscellaneous proceeds 73 122 73
- --------------------------------------------------------------------------------------------------------
Total investments proceeds 59,293 58,085 51,438
Taxes paid on capital gains 615 517 520
- --------------------------------------------------------------------------------------------------------
Net PROCEEDS FROM SALES, MATURITIES, OR REPAYMENTS OF
INVESTMENTS 58,678 57,568 50,918
- --------------------------------------------------------------------------------------------------------
OTHER CASH PROVIDED
Other sources 1,593 4,360 1,406
- --------------------------------------------------------------------------------------------------------
Total other cash provided 1,593 4,360 1,406
- --------------------------------------------------------------------------------------------------------
TOTAL CASH PROVIDED 74,767 81,126 61,653
- --------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 80
CANADA LIFE INSURANCE COMPANY OF NEW YORK
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS - STATUTORY BASIS (CONTINUED)
[in thousands of dollars]
YEARS ENDED DECEMBER 31
1997 1996 1995
- --------------------------------------------------------------------------------------
COST OF INVESTMENTS ACQUIRED
<S> <C> <C> <C>
Bonds 49,082 64,961 48,700
Common stocks 1,981 2,592 1,101
Mortgage loans 24,905 9,682 7,725
Real estate -- 31 15
Miscellaneous applications 1,891 59 437
- --------------------------------------------------------------------------------------
TOTAL COST OF INVESTMENTS ACQUIRED 77,859 77,325 57,978
- --------------------------------------------------------------------------------------
OTHER CASH APPLIED
Other applications, net 2,408 464 2,424
- --------------------------------------------------------------------------------------
Total other cash applied 2,408 464 2,424
- --------------------------------------------------------------------------------------
TOTAL CASH USED 80,267 77,789 60,402
- --------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
INVESTMENTS (5,500) 3,337 1,251
- --------------------------------------------------------------------------------------
CASH AND SHORT-TERM INVESTMENTS
Beginning of year 7,522 4,185 2,934
- --------------------------------------------------------------------------------------
END OF YEAR $ 2,022 $ 7,522 $ 4,185
======================================================================================
</TABLE>
See accompanying notes
7
<PAGE> 81
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. ORGANIZATION
Canada Life Insurance Company of New York (the "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 (the "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 in the process of codifying statutory accounting practices ("Codification").
Codification 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-basis financial statements. Codification, which is
expected to be approved by the NAIC in 1998, will require adoption by the
various states before it becomes the prescribed statutory basis of accounting
for insurance companies domesticated within those states. Accordingly, before
Codification becomes effective for the Company, the Insurance Department of the
State of New York must adopt Codification as the prescribed basis of accounting
on which domestic insurers must report their statutory-basis results to the
Insurance Department. At this time it is unclear whether the Insurance
Department of the State of New York will adopt Codification. The impact of
Codification 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. Pursuant to FASB
Interpretation 40, Applicability of Generally Accepted Accounting Principles to
Mutual Life Insurance and Other Enterprises ("FIN 40"), as amended, which was
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
8
<PAGE> 82
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
2, BASIS OF ACCOUNTING (CONT'D)
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. 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
9
<PAGE> 83
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
2. BASIS OF ACCOUNTING (CONT'D)
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 longduration 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
10
<PAGE> 84
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
2. BASIS OF ACCOUNTING (CONT'D)
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.
[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, end
the contractholder bears the investment risk. Separate account assess are
11
<PAGE> 85
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
2. BASIS OF ACCOUNTING (CONT'D)
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.
[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 1996 have
been reclassified to conform with 1997 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.
12
<PAGE> 86
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
2. BASIS OF ACCOUNTING (CONT'D)
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.
3. INVESTMENTS
[a] Additional information with respect to net investment income is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Interest and dividends on fixed maturities $10,427 $10,145 $ 9,653
Income on real estate 52 47 17
Dividends on equity securities 227 165 145
Amortization of interest maintenance reserve 167 189 132
Interest on:
Mortgage loans 8,699 7,730 7,536
Policy loans 755 722 704
Short-term investments 344 264 388
Other income 84 28 28
- ------------------------------------------------------------------------------------------------------------
20,755 19,290 18,603
Less investment expenses 540 497 494
- ------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME $20,215 $18,793 $18,109
============================================================================================================
</TABLE>
[b] Summary of realized capital gains (losses):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------
[in thousands of dollars]
Realized capital gains (losses):
<S> <C> <C> <C>
Fixed maturities $ 1,073 $ 440 $ 1,146
Equity securities 736 1,053 775
Mortgage loans -- (264) (62)
Real estate -- 27 31
Derivative instruments (1,515) 122 (359)
- ------------------------------------------------------------------------------------------------------------
294 1,378 1,531
Income tax expense (615) (517) (521)
Transfer from (to) interest maintenance reserve 204 (385) (823)
- ------------------------------------------------------------------------------------------------------------
NET REALIZED CAPITAL(LOSSES)GAINS $ (117) $ 476 $ 187
============================================================================================================
</TABLE>
13
<PAGE> 87
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
3. INVESTMENTS (CONT'D)
Proceeds from sales and maturities of fixed maturity investments for the years
ended December 31, 1997, 1996 and 1995 were $51,078,000, $49,924,000 and
$45,262,000, respectively. Gross gains of $1,373,000, $809,000 and $1,679,000
and gross losses of $300,000, $369,000, and $534,000, respectively, were
realized on those sales for the years ended December 31, 1997, 1996 and 1995.
Gross gains of $794,000, $1,122,000 and $933,000 and gross losses of $58,000,
$69,000 and $158,000, respectively, were realized on sales of equity securities
for the years ended December 31, 1997, 1996 and 1995.
[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, 1997
------------------------------------------------------------
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 $ 48,376 $ 48,376 $ 8,822 $ (3) $ 57,195
Public utilities 11,283 11,283 221 -- 11,504
Mortgage-backed securities 9,669 9,669 -- -- 9,669
All other corporate bonds 73,313 73,313 1,177 -- 74,490
- -----------------------------------------------------------------------------------------------
TOTAL FIXED MATURITIES $142,641 $142,641 $ 10,220 $ (3) $152,858
===============================================================================================
</TABLE>
<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 end authorities $ 62,281 $ 62,281 $ 4,711 $ (66) $ 66,926
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
===============================================================================================
</TABLE>
14
<PAGE> 88
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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, 1997, 1996 and 1995, there were changes
in net unrealized gains and (losses) on fixed maturities of $4,446,000,
$(3,617,000) and $9,417,000, 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, 1997
-----------------
CARRYING VALUE FAIR VALUE
- -------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C>
1 year or less $ 4,545 $ 4,564
Over 1 year through 5 years 27,698 27,917
Over 5 years through 10 years 35,679 36,465
Over 10 years 74,719 83,913
- -------------------------------------------------------------
$142,641 $152,859
=============================================================
</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 on
marketable equity securities were $1,343,000, $653,000 and $1,077,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. The
accumulated gross unrealized gains and accumulated gross unrealized losses
on marketable equity securities were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Accumulated gross unrealized gains $ 5,286 $ 3,912 $ 3,250
Accumulated gross unrealized losses (48) (18) (9)
- ---------------------------------------------------------------------------
Net unrealized gains $ 5,238 $ 3,894 $ 3,241
===========================================================================
</TABLE>
15
<PAGE> 89
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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, 1997:
<TABLE>
<CAPTION>
CARRYING VALUE FAIR VALUE
-------------------------------
[in thousands of dollars]
<S> <C> <C>
Commercial mortgages $99,048 $109,289
Residential mortgages 2 2
Write-downs on mortgage loans (196) --
- ---------------------------------------------------------------
98,854 109,291
===============================================================
Policy loans $12,821 $ 12,821
===============================================================
</TABLE>
The Company's distribution of mortgage loans by property type and by the ten
most significant states follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
- ---------------------------------------------------------------
AMOUNT PERCENT
- ---------------------------------------------------------------
[in thousands of dollars]
PROPERTY TYPE
<S> <C> <C>
Apartments and townhomes $36,739 37.2%
Residential 2 0.0%
Retail 29,363 29.8%
General office buildings 11,909 12.0%
Industrial and warehouse 18,518 18.7%
Other 2,519 2.5%
Write-downs on mortgage loans (196) (0.2)%
- ---------------------------------------------------------------
Total $98,854 100.0%
===============================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
- ---------------------------------------------------------------
AMOUNT PERCENT
- ---------------------------------------------------------------
[in thousands of dollars]
STATE
<S> <C> <C>
California $20,089 20.3%
Pennsylvania 11,472 11.6%
Ohio 9,646 9.8%
Michigan 7,650 7.7%
Illinois 6,367 6.4%
New York 5,660 5.7%
Wisconsin 5,142 5.2%
New Jersey 5,063 5.1%
Minnesota 3,972 4.0%
Utah 3,932 4.0%
Other 20,057 20.4%
Write-downs on mortgage loans (196) (0.2)%
- ---------------------------------------------------------------
Total $98,854 100.0%
===============================================================
</TABLE>
16
<PAGE> 90
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 $4,000,
$192,000 and $0 and decreases of $0, $202,000 and $62,000, respectively,
were made to the mortgage loan loss reserve for the years ended December
31, 1997, 1996 and 1995.
No investment in any persons or their affiliates exceeded 10% of capital
and surplus as of December 31, 1997 and 1996.
The maximum and minimum lending rates for commercial mortgage loans during
1997 was 8.625% and 7.750%, 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, 1997, the Company held two mortgages with a carrying value
of $623,309 on which interest of $216,615 was more than one year overdue.
At December 31, 1996, the Company held mortgages with a carrying value of
$621,735 on which interest of $148,180 was more than one year overdue.
During 1997, the Company did not reduce interest rates on any outstanding
mortgage loans. At December 31, 1997, 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, 1997, the Company had no outstanding amounts
which had been advanced by the Company. Except as noted above at December
31, 1997, 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, 1997 was $216,615. The amount excluded for
1996 was $148,180.
17
<PAGE> 91
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
3. INVESTMENTS (CONT'D)
[g] The following tables represent a summary of investments held as of
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
AMORTIZED COST FAIR VALUE CARRYING VALUE
----------------------------------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Fixed maturities [note 3[c]] $142,641 $152,859 $142,641
Preferred stocks -- -- --
Common stocks 4,971 10,208 10,208
Mortgage loans on real estate 98,050 109,291 98,854
Policy loans 12,821 12,821 12,821
Short-term investments 600 600 600
- -------------------------------------------------------------------------------------------------------------
Total investments $259,083 $285,779 $265,124
=============================================================================================================
</TABLE>
<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
=============================================================================================================
</TABLE>
[b] 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
-----------
1997 1996
-------------------------------------------------------------
FAIR CARRYING FAIR CARRYING
VALUE VALUE VALUE VALUE
----- ----- ----- -----
[in thousands of dollars]
<S> <C> <C> <C> <C>
Investment contracts $30,694 $28,878 $24,976 $24,626
===================================================================================================
</TABLE>
18
<PAGE> 92
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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
1997 1996 1995
---------------------------------
[in thousands of dollars]
<S> <C> <C> <C>
Computed income taxes at statutory rate $ 527 $ 425 $ 194
Increase (decrease) in income taxes resulting from:
Policyholder dividends 9 86 71
Actuarial reserves 257 385 230
Prior year income tax under (over) provision -- (29) 111
Deferred acquisition cost tax 150 232 65
Accrual of bond discount (6) (298) --
Other (365) (202) (137)
- ----------------------------------------------------------------------------------------------
$ 572 $ 599 $ 534
==============================================================================================
</TABLE>
As of December 31, 1997 and 1996, the federal income taxes receivable were
$713,000 and $999,000, respectively.
During 1997, 1996 and 1995, the Company made cash payments on behalf of federal
income taxes of $1,564,000, $525,000 and $2,116,000, respectively.
5. PARTICIPATING INSURANCE
Participating insurance accounted for 83%, 78% and 76% of total ordinary
insurance in force, and premium income from ordinary life participating policies
amounted to 97%, 96% and 96% of total life insurance premiums during 1997, 1996
and 1995, respectively.
19
<PAGE> 93
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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 1997 were $3,949,000
(1996 - $4,184,000; 1995 - $1,495,000). 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
1997 PREMIUMS 1996 PREMIUMS 1995 PREMIUMS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Direct premiums $43,153 110.1% $41,607 111.2% $24,324 105.6%
Assumed
premiums -- -- -- -- 216 .9%
Ceded premiums (3,949) (10.1)% (4,184) (11.2)% (1,495) (6.5)%
- ---------------------------------------------------------------------------------------------------
Net premiums for
insurance and
annuity contracts $39,204 100.0% $37,423 100.0% $23,045 100.0%
===================================================================================================
</TABLE>
Direct premiums above represent premiums earned from sales of individual and
group life, health and investment products.
20
<PAGE> 94
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
6. RELATED PARTY TRANSACTIONS (CONT'D)
Information regarding life insurance in force is as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31
-----------------
[in thousands of dollars]
PERCENTAGE PERCENTAGE
OF TOTAL OF TOTAL
1997 IN FORCE 1996 IN FORCE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Direct life insurance in force $1,010,058 320.4% $1,020,325 267.6%
Ceded life insurance in
force (694,800) (220.4)% (639,078) (167.6)%
- ----------------------------------------------------------------------------------------------------------------
Total life insurance in force $ 315,258 100.0% $ 381,247 100.0%
================================================================================================================
</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, 1997, 1996 and 1995, the net cost of these services to the Company
amounted to $1,948,000, $1,909,000 and $ 1,611,000, respectively. As of December
31, 1997 and 1996, the amounts payable to the Parent were $1,644,000 and
$1,245,000, 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> 95
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
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
1997 1996
- ----------------------------------------------------------------------------------------
[in thousands of dollars]
<S> <C> <C>
Premiums, considerations, or deposits received $5,528 $2,149
========================================================================================
Liabilities, including reserves, subject to discretionary
withdrawal, at market value with current surrender charges 9,118 3,258
========================================================================================
</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
1997 1996 1995
- -----------------------------------------------------------------------------------------
[in thousands of dollars]
Transfers as reported in the Summary
of Operations of the Separate
Accounts Statements:
<S> <C> <C> <C>
Transfers to separate accounts $5,528 $2,149 $353
Transfers from separate accounts 922 77 136
- -----------------------------------------------------------------------------------------
Net transfers to separate
accounts 4,606 2,072 217
Reconciling Adjustments:
Gains transferred 38 1 0
- -----------------------------------------------------------------------------------------
Transfers as reported in the
Summary of Operations of the
Life, Accident & Health Annual
Statement $4,644 $2,073 $217
=========================================================================================
</TABLE>
22
<PAGE> 96
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
7. 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 $222,790,000 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> 97
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
7. ACTUARIAL RESERVES (CONT'D)
Withdrawal characteristics of annuity actuarial reserves and deposit liabilities
as at December 31, 1997 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 $ 26,402,900 15.7%
------------ -----------
Subtotal 26,402,900 15.7%
Subject to discretionary withdrawal without adjustment
At book value (minimal or no charge adjustment) 3,761,614 2.2%
Not subject to discretionary withdrawal provision 138,572,310 82.1%
------------ -----------
Total annuity actuarial reserves and deposit fund liabilities (gross) 168,736,824 100.0%
------------ -----------
Less: reinsurance --
------------
Total annuity actuarial reserves and deposit fund liabilities (net) $168,736,824
============
</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 recognized an additional expense of $185,000 in 1997 to complete the
phase in of AG 33.
24
<PAGE> 98
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
8. 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 50% of such
capital.
In accordance with statutory requirements, bonds carried at a value of $350,000
and $349,000 were on deposit with insurance regulatory authorities as of
December 31, 1997 and 1996, respectively.
9. 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, 1997.
The notional amounts and the carrying amounts of outstanding derivative
instruments are as follows:
<TABLE>
<CAPTION>
NATIONAL AMOUNT FAIR VALUE CARRYING VALUE
DECEMBER 31 DECEMBER 31 DECEMBER 31
1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------
[in thousands of dollars] [in thousands of dollars] [in thousands of dollars]
<S> <C> <C> <C> <C> <C> <C>
Futures (govern-
ment bonds) $12,300 $300 $14,747 $320 $14,722 $321
Currency swaps 998 503 (40) (43) (1,103) 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.
10. 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> 99
CANADA LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
10. POSTRETIREMENT BENEFITS (CONT'D)
Postretirement benefit cost for the year ended December 31, 1997 was $95,000.
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 $8,000 in 1997, as claims were
incurred.
At December 31, 1997, 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 $672,000. 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, 1997, by $69,000 and the estimated
eligibility cost and interest components of net periodic postretirement benefit
cost for 1997 by $9,000.
11. IMPACT OF YEAR 2000 COMPUTER SOFTWARE MODIFICATION COSTS
Year 2000 concerns revolve around some computer programs using two digits,
rather than four, to denote years. The company has analyzed its computer systems
and formulated an action plan to ensure all systems will be able to process date
data correctly in the year 2000 and beyond. Modification costs are born by the
systems' providers and the cost to the Company is inherent in the data
processing charges for using these systems.
26
<PAGE> 100
PART C
OTHER INFORMATION
<PAGE> 101
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**
(e) Amendment to Selling Agreement
(f) Amendment to Selling Agreement
(g) Amendment to Selling Agreement
(h) Amendment to Selling Agreement
(4) (a) Form of Annuity Policy
(b) Riders and Endorsements
(5) Form of Application
(6) (a) Certificate of Incorporation of Canada Life Insurance
Company of New York*
(b) By-Laws of Canada Life Insurance Company of New York*
(c) Amendment to the By-Laws of Canada Life Insurance Company
of New York passed by the Board on November 19, 1993*
(d) Amendment to the By-Laws of Canada Life Insurance Company
of New York passed by the Board on September 4, 1997
(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 omitted from Item 23.
(12) Not applicable
(13) Sample Performance Data Calculation
- --------------------
* 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.
** Incorporated herein by reference to the filing of Post Effective
Amendment No. 6 of this Registration Statement on Form N-4 (File No.
33-64240) made April 29, 1997.
<PAGE> 102
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
Ron E. Beettam (2) President and Director
Paul R. McCadam (3) Vice-President and Chief Operating Officer
Mary L. Craft (2) Director of Human Resources
Dr. Robert W. Lund (2) Medical Director
Robert R. Beck (3) Director of Marketing
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) Illustration Actuary
John W. Pratt (2) Actuarial Associate
Jane W. Elliott (2) Internal Auditor
Roy W. Linden (1) Assistant Secretary
Henry A. Rachfalowski Treasurer
George N. Isaac (1) Assistant Treasurer
Edward P. Ovsenny (1) Assistant Treasurer
Brian J. Lynch (1) Assistant Treasurer
Kevin A. Phelan Assistant Treasurer
Wendy M. Michaud (3) Chief Underwriter
Gordon N. Farquhar (4) Director
Christopher T. Green (5) Director
Alfred F. Kelly (6) Director
D. Allen Loney (1) Director
William B. Morris (7) Director
Harry Van Benschoten (8) Director
Julius Vogel (9) Director
Alan R. Wentzel (10) Director
</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 Apt. 10K, 315 East 70th Street, New York, New
York, 100721
(8) The business address is 105 Seminary Street, New Canaan, Connecticut,
USA 06840
(9) The business address is 72 Colt Road, Summit, New Jersey, USA 07901
(10) The business address is 320 Park Avenue, New York, NY, USA 10022-6815
<PAGE> 103
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant
<TABLE>
<CAPTION>
NAME JURISDICTION PERCENT OF PRINCIPAL
- ---- ------------ VOTING SECURITIES OWNED BUSINESS
----------------------- --------
<S> <C> <C> <C>
The Canada Life Assurance Canada Mutual Company Life and Health
Company 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 Canada Ownership of all voting securities Mortgage Portfolios
Ltd. through Canada Life
The CLGB Property Company England Ownership of all voting securities Real Estate Investment
Limited through Canada Life Irish Operations
CLASSCO Benefit Services Limited Canada Ownership of all voting securities Administrative Services
through Canada Life
Canada Life Casualty Insurance Canada Ownership of all voting securities Property and Casualty
Company through Canada Life Insurance Insurance
INDAGO Capital Management Inc. Canada Ownership of 50% of voting securities Investment Counseling
through INDAGO Capital Management Inc.
and 50% by the executive employees
Sherway Centre Limited Canada Ownership of all voting securities Real Estate Broker
through Canada Life
The Canada Life Assurance Rep. of Ireland Ownership of all voting securities Life and Health
Company of Ireland Limited through Canada Life Irish Operations Insurance
Canlife - IBI Investment Rep. of Ireland Ownership of 50% of voting securities Unit Trust Management
Services Limited 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 (Ireland) Management
Limited
Canada Life Insurance Company US Canada Life Life and Health
of America Insurance
Canada Life of America Georgia Ownership of all voting securities Broker Dealer
Financial Services Inc. through CLICA
Canada Life of America Series Maryland Ownership of all voting securities Mutual Fund
Fund, Inc. through CLICA
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
NAME JURISDICTION PERCENT OF PRINCIPAL
- ---- ------------ VOTING SECURITIES OWNED BUSINESS
----------------------- --------
<S> <C> <C> <C>
CLMS Realty Ltd. Canada 99% of the common shares and 100% of the Realtor
convertible preference shares are owned
by Canada Life
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 Holdings Management, and
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 Life Pension, and Annuity
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 Canada Ownership of all voting securities Holding Company
Corporation Inc. through Canada Life
The Canada Life Group (UK) England Ownership of all voting securities Holding Company
Limited through Canada life
Canada Life Holdings (UK) England The Canada Life Group (UK) Limited Holding Company
Limited
The Canada Life Assurance England The Canada Life Group (UK) Limited Life and Health
Company 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 Services
Limited
Canada Life Trustee Services England The Canada Life Group (UK) Limited Trustee Services
(UK) Limited
Canada Life Ireland Holdings Ireland Canada Life Irish Operations Limited Holding Company
Limited
MetLife (UK) Limited England Ownership of all voting securities Holding Company
through Canada Life
MetLife Group Services Limited England Ownership of all voting securities Administrative Services
through MetLife (UK) Limited
Metropolitan Unit Trust England Ownership of all voting securities Unit Trust Services
Managers Limited through MetLife (UK) Limited
Albany International Assurance England Ownership of all voting securities Unit Investment Products
Limited through MetLife (UK) Limited
Albany Life Assurance Company England Ownership of all voting securities Unit Life and Pension
Limited through MetLife (UK) Limited Insurance
Albany Pension Managers and England Ownership of all voting securities Trustee Services
Trustees Limited through Albany Life Assurance Company
Limited
</TABLE>
Item 27. Number of Policy Owners
As of April 15, 1998 there were 91 Non-Qualified and 23 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
<PAGE> 105
capacity or arising out of his or her status as such, whether or not the
corporation would have power to indemnify 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 opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the questions whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
Item 29. Principal Underwriter
Canada Life of America Financial Services, Inc. (CLAFS) is the principal
underwriter of the Policies as defined in the Investment Company Act of 1940.
The following table provides certain information with respect to each director
and officer of CLAFS.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH UNDERWRITER
- ---------------- ----------------
<S> <C>
R.E. Beettam** Chairman and Director
D.V. Rough* Treasurer
R.W. Linden* Assistant Secretary
K.T. Ledwos** Administrative Officer and Director
G.E. Hughes** President and Director
K.J. Fillman** Administrative Officer
D.D. Myers** Accounting 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.
<PAGE> 106
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 Statement of Additional Information.
(c) Registrant undertakes to deliver any Statement of Additional
Information and any financial statements required to be made available
under this Form promptly upon written or oral request to CLICA at the
address or phone number listed in the Prospectus.
(d) Depositor undertakes to preserve on behalf of itself and Registrant the
books and records required to be preserved by such companies pursuant
to Rule 31a-2 under the Investment Company Act of 1940 and to permit
examination of such books and records at any time or from time to time
during business hours by examiners or other representatives of the
Securities and Exchange Commission, and to furnish to said Commission
at its principal office in Washington, D.C., or at any regional office
of said Commission specified in a demand made by or on behalf of said
Commission for copies of books and records, true, correct, complete,
and current copies of any or all, or any part, of such books and
records.
(e) The Registrant is relying on a letter issued by the staff of the
Securities and Exchange Commission to the American Council of Life
Insurance on November 28, 1988 (Ref. No. IP-6-88) stating that it would
not recommend to the Commission that enforcement action be taken under
Section 22(e), 27(c)(1), or 27(d) of the Investment Company Act of 1940
if the Registrant, in effect, permits restrictions on cash
distributions from elective contributions to the extent necessary to
comply with Section 403(b)(11) of the Internal Revenue Code of 1986 in
accordance with the following conditions:
(1) include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each registration
statement, including the prospectus, used in connection with the offer
of the policy;
(2) include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales literature used
in connection with the offer of the policy;
(3) instruct sales representatives who may solicit individuals to
purchase the policies specifically to bring the redemption restrictions
imposed 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> 107
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
3 (e) Amendment to Selling Agreement
3 (f) Amendment to Selling Agreement
3 (g) Amendment to Selling Agreement
3 (h) Amendment to Selling Agreement
4 (a) Form of Annuity Policy
4 (b) Riders and Endorsements
5 Form of Application
6 (d) Amendment to the By-Laws of Canada Life Insurance Company of
New York passed by the Board on September 4, 1997
10 (a) Consent of Counsel
10 (b) Consent of Independent Counsel
10 (c) Consent of Independent Auditors
13 Sample Performance Data Calculation
</TABLE>
<PAGE> 108
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 8
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 24 day of April 1998.
CANADA LIFE INSURANCE COMPANY OF NEW YORK
VARIABLE ANNUITY ACCOUNT 2
By /s/ Ron Beettam
-----------------------------------------
R. E. Beettam, President
Canada Life Insurance Company of New York
CANADA LIFE INSURANCE COMPANY OF NEW YORK
By /s/ Ron Beettam
-----------------------------------------
R. E. Beettam, President
As required by the Securities Act of 1933, this Post-Effective Amendment Number
8 has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
D. A. Nield Chairman and Director April 24, 1998
- -------------------------
D. A. Nield
/s/ Ron Beettam President and Director April 24, 1998
- -------------------------
R. E. Beettam
/s/ Gordon N. Farquhar Director April 24, 1998
- -------------------------
G. N. Farquhar
/s/ Christopher Greene Director April 24, 1998
- -------------------------
C. T. Greene
/s/ A. F. Kelly Director April 24, 1998
- -------------------------
A. F. Kelly
</TABLE>
<PAGE> 109
<TABLE>
<S> <C> <C>
/s/ D. Allen Loney Director April 24, 1998
- ---------------------------
D. A. Loney
/s/ William B. Morris Director April 24, 1998
- ---------------------------
W. B. Morris
/s/ H. Van Benschoten Director April 24, 1998
- ---------------------------
H. Van Benschoten
/s/ Julius Vogel Director April 24, 1998
- ---------------------------
J. Vogel
/s/ Alan R. Wentzel Director April 24, 1998
- ---------------------------
A. R. Wentzel
/s/ Don D. Myers Accounting Officer April 24, 1998
- ---------------------------
D. D. Myers
/s/ H. A. Rachfalowski Treasurer April 24, 1998
- ---------------------------
H. A. Rachfalowski
</TABLE>
<PAGE> 1
EXHIBIT 3 (e)
AMENDMENT TO SELLING AGREEMENT
<PAGE> 2
SCHEDULE I
STATEMENT OF COMPENSATION
As of April, 1997
Subject to the terms and conditions of this Agreement, CLAPS will pay to Selling
Firm compensation by upon the premiums ant 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
<TABLE>
<CAPTION>
Policy Years Broker-Dealer Concession
- ------------ ------------------------
<S> <C>
1-10 6.5%
11-15 6.5%
16+ 1/5%
</TABLE>
FOR OTHER THAN PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 0-80
<TABLE>
<CAPTION>
Policy Years Broker-Dealer Concession
- ------------ ------------------------
<S> <C>
1-10 6.5%
11-15 6.5%
16+ 1.5%
</TABLE>
- --------------------------------------------------------------------------------
FOR PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 81-4
<TABLE>
<CAPTION>
Policy Years Broker-Dealer Concession
- ------------ ------------------------
<S> <C>
1-10 3.0%
11-l5 3.0%
16+ 1.5%
</TABLE>
FOR OTHER THAN PRE-AUTHORIZED CHECK CASES - OWNER ISSUE AGE 81-84
<TABLE>
<CAPTION>
Policy Years Broker-Dealer Concession
- ------------ ------------------------
<S> <C> <C>
1-10 3.0%
11-l5 3.0%
16+ 1.5%
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 proceeds and amount $0-1 million.
that are past any applicable surrender charge/period. 1.25% if amount over $1 million.
2.0% if payout < 10 yrs. & not a life annuity
and amount $0-1 million.
1.25% if amount over $1 million.
</TABLE>
<PAGE> 3
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 premium or purchased payment shall be charged
back to Selling Firm. (ii) Should any premium or purchase payment on any
Contract issued by CLNY be refunded for any reason, Selling Firm shall repay or
return B/D Concession received by it with respect to such premium or purchase
payment. (iii) If a Contract was not issued as a result of failure by Selling
Firm to submit to CLNY an application sufficient to satisfy state insurance laws
or CLNY eligibility requirements then amounts paid to Selling Firm shall be
returned or repaid. (iv) If a Contract was tendered to CLNY for redemption
within ten business days of the date of activity then amounts paid to Selling
Firm shall be returned or repaid. (v) For full or partial withdrawals from the
Contract other than those made pursuant to a systematic and/or free withdrawal
privilege: 100% of all B/D Concessions paid to Selling Firms on amount(s)
withdrawn within 6 months of such amount(s) being paid to CLNY and 50% of all
B/D Concessions paid to Selling Firm on amount(s) withdrawn from 7-12 months of
such amount(s) being paid to CLNY shall be returned or repaid. (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 magnum 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(f)
AMENDMENT TO SELLING AGREEMENT
<PAGE> 2
TRILLIUM SCHEDULE I
CANADA LIFE INSURANCE COMPANY OF NEW YORK
PAYMENT SCHEDULE AS OF JUNE 9, 1997
Subject to the terms and conditions of this Agreement, CLAFS will make payments
of commission and expense allowance to Selling Firms based upon the premiums and
purchase payments received from such Selling Firms, in accordance with
applicable law, in the percentages shown below:
BROKER DEALER CONCESSION
<TABLE>
<S> <C>
OWNER'S ISSUE AGE 0-80 OWNER'S ISSUE AGE 81-85
Option A1: 5% of premium plus .25%, on an Option A2: 2.25% of premium plus .25% annual
annual basis, based on account value of associated trail, calculated as in Option A1.
premium, .0625% first payable at end of 5th quarter Option B2: 3% of premium, no trail.
of the associated premium, end of following quarters
thereafter.
Option B1: 6.5% of premium, no trail.
Option C: 2% of premium plus .75% annual
trail, calculated as in Option A1.
</TABLE>
NOTE: ALL ASSET BASED PAYMENTS START BEING PAID IN THE FIFTH QUARTER AFTER THE
POLICY IS ISSUED, ARE PAYABLE QUARTERLY THEREAFTER, AND ARE BASED ON POLICY
VALUE AT THE TIME OF ASSET BASED PAYMENT CALCULATION.
ALL PAYMENTS IN THIS SCHEDULE, INCLUDING TRAIL PAYMENTS, ARE 50% COMMISSION AND
50% EXPENSE ALLOWANCE.
Chargebacks: (i) In the event a Contract is returned to CLNY pursuant to a "Free
Look" provision, the full B/D concession paid thereon or retained by Selling
Firm pursuant to net submission of premium or purchased payments 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 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.
Note: If there is more than one owner of a policy, the age of the oldest owner
determines the level of payment.
<PAGE> 3
Page 2
EXPENSE ALLOWANCE
Total payments 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(g)
AMENDMENT TO SELLING AGREEMENT
<PAGE> 2
TRILLIUM SCHEDULE I
CANADA LIFE INSURANCE COMPANY OF NEW YORK
PAYMENT SCHEDULE AS OF OCTOBER 1, 1997
Subject to the terms and conditions of this Agreement, CLAFS will make payments
of commission and expense allowance to Selling Firms based upon the premiums
and purchase payments received from such Selling Firms, in accordance with
applicable law, in the percentages shown below:
BROKER DEALER CONCESSION
------------------------
<TABLE>
<CAPTION>
OWNER'S ISSUE AGE 0-80 OWNER'S ISSUE AGE 81-85
- ---------------------- -----------------------
<S> <C>
Option A1: 5% of premium plus .25%, on Option A2: 2.25% of premium plus .25%
an annual basis, based on account annual trail, calculated as in Option
value of associated premium, .0625% A1.
first payable at end of 5th quarter
of the associated premium, end of Option B2: 3% of premium, no trail.
following quarters thereafter.
Option B1: 6.5% of premium, no trail.
Option C: 2% of premium plus .75%
annual trail, calculated as in Option
A1.
</TABLE>
NOTE: ALL ASSET BASED PAYMENTS START BEING PAID IN THE FIFTH QUARTER AFTER THE
POLICY IS ISSUED, ARE PAYABLE QUARTERLY THEREAFTER, AND ARE BASED ON POLICY
VALUE AT THE TIME OF ASSET BASED PAYMENT CALCULATION.
ALL PAYMENTS IN THIS SCHEDULE, INCLUDING TRAIL PAYMENTS, ARE 50% COMMISSION AND
50% EXPENSE ALLOWANCE.
Chargebacks: (i) In the event a Contract is returned to CLNY pursuant to a "Free
Look" provision, the full B/D concession paid thereon or retained by Selling
Firm pursuant to net submission of premium or purchased payments 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 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 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 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.
NOTE: If there is more than one owner of a policy, the age of the oldest owner
determines the level of payment.
OVER
<PAGE> 3
PAGE 2
EXPENSE ALLOWANCE
Total payments 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(h)
AMENDMENT TO SELLING AGREEMENT
<PAGE> 2
TRILLIUM SCHEDULE I
CANADA LIFE INSURANCE COMPANY OF NEW YORK
PAYMENT SCHEDULE AS OF FEBRUARY 6, 1998
Subject to the terms and conditions of this Agreement, CLAFS will make payments
of commission and expense allowance to Selling Firms based upon the premiums and
purchase payments received from such Selling Firms, in accordance with
applicable law, in the percentages shown below:
BROKER DEALER CONCESSION
<TABLE>
<CAPTION>
OWNER'S ISSUE AGE 0-80 OWNER'S ISSUE AGE 81-85
- ---------------------- -----------------------
<S> <C>
Option A1: 5% of premium plus .25%, on an Option A2: 2.25% of premium plus .25% annual
annual basis, based on account value of trail, calculated as in Option A1.
associated premium, .0625% first payable at Option B2: 3% of premium, no trail.
end of 5th quarter of the associated premium,
end of following quarters thereafter.
Option B1: 6.5% of premium, no trail.
Option C: 2% of premium plus .75% annual
trail, calculated as in Option A1.
</TABLE>
NOTE: ALL ASSET BASED PAYMENTS START BEING PAID IN THE FIFTH QUARTER AFTER THE
POLICY IS ISSUED, ARE PAYABLE QUARTERLY THEREAFTER, AND ARE BASED ON POLICY
VALUE AT THE TIME OF ASSET BASED PAYMENT CALCULATION.
ALL PAYMENTS IN THIS SCHEDULE, INCLUDING TRAIL PAYMENTS, ARE 50% COMMISSION AND
50% EXPENSE ALLOWANCE.
Chargebacks: (i) In the event a Contract is returned to CLNY pursuant to a "Free
Look" provision, the full B/D concession paid thereon or retained by Selling
Firm pursuant to net submission of premium or purchased payments 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 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 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.
OVER
<PAGE> 3
Page 2
ADJUSTMENTS FOR ADVANCE BROKER DEALER CONCESSIONS ON 1035 EXCHANGES &/OR OTHER
TRANSFERS: CLNY will advance broker dealer concessions on 1035 exchanges &/or
other transfers (the "Advance"), subject to our administrative procedures, for
amounts of $50,000 or greater. (Amount subject to change without notice) When
the actual premiums are received, there will be an adjustment, either positive
or negative, to the actual broker dealer concession previously paid. If dollar
amounts are consistently over-estimated, this privilege will be discontinued.
CLNY reserves the right to discontinue this practice at any time. Such
Advance(s) must be repaid upon CLNY's demand. All advances are secured and
collateralized against any future commissions or compensation payable to the
broker dealer, and CLNY may offset any indebtedness of the broker dealer from
such commissions or compensation.
Note: If there is more than one owner of a policy, the age of the oldest owner
determines the level of payment.
EXPENSE ALLOWANCE
Total payments 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 contacts,
or the overall 7% of premium limit.
In monitoring the maximum allowances rules in this paragraph 4, CLNY will apply
those in a. and b., above, on a "per-policy" basis.
<PAGE> 1
EXHIBIT 4(a)
FORM OF ANNUITY POLICY
<PAGE> 2
POLICY NUMBER: E1XXXXX
INSURED JOHN DOE
CANADA LIFE INSURANCE COMPANY OF NEW YORK
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.
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 HOME OFFICE OR TO THE AGENT FROM
WHOM YOU BOUGHT IT. WE SHALL CANCEL THE POLICY FROM THE POLICY DATE AND YOU
SHALL BE ENTITLED TO A PREMIUM REFUND EQUAL TO THE SUM OF:
1. THE DIFFERENCE BETWEEN THE PREMIUMS PAID, INCLUDING ANY
POLICY FEES OR OTHER CHARGES AND THE AMOUNTS ALLOCATED TO ANY
SEPARATE ACCOUNTS UNDER THE POLICY; AND
2. THE VALUE OF THE AMOUNTS ALLOCATED TO ANY SEPARATE ACCOUNTS
UNDER THE POLICY ON THE DATE THE POLICY IS MAILED OR DELIVERED TO THE
HOME OFFICE.
/s/ /s/
Assistant 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. After the Annuity Date or Maturity Date, payment options
are on a guaranteed basis. Death Benefit payable upon death of the last
surviving annuitant before the Annuity Date or Maturity Date.
Nonparticipating - Not eligible for dividends
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<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
POLICY DETAILS 5
DEFINITIONS 7
PAYMENT OF PROCEEDS 7
PROCEEDS 7
PROCEEDS ON ANNUITY DATE 7
PROCEEDS ON MATURITY DATE 8
PROCEEDS ON SURRENDER 8
PROCEEDS ON DEATH OF THE LAST SURVIVING ANNUITANT BEFORE ANNUITY
DATE OR MATURITY DATE (THE DEATH BENEFIT) 8
PROCEEDS ON DEATH OF ANY OWNER BEFORE OR AFTER THE ANNUITY DATE OR
BEFORE THE MATURITY DATE 8
CONFORMITY WITH LAWS 9
PREMIUMS 9
INITIAL PREMIUM 9
ADDITIONAL PREMIUMS 9
NET PREMIUM 9
NET PREMIUM ALLOCATION AMONG SUB-ACCOUNTS AND FIXED ACCOUNT 9
THE VARIABLE ACCOUNT 10
VARIABLE ACCOUNT 10
SUB-ACCOUNTS 10
VARIABLE ACCOUNT VALUE 10
UNITS 10
UNIT VALUE 11
NET INVESTMENT FACTOR 11
RESERVED RIGHTS 11
CHANGE IN INVESTMENT POLICY 11
VALUATION PERIODS AND VALUATION DAYS 12
THE FIXED ACCOUNT 12
FIXED ACCOUNT 12
FIXED ACCOUNT VALUE 12
TRANSFERS 12
TRANSFER PRIVILEGE 12
TRANSFER PROCESSING FEE 13
POLICY VALUES 13
POLICY VALUE 13
CASH SURRENDER VALUE 13
PARTIAL WITHDRAWALS 13
SURRENDER CHARGE 14
POLICY ADMINISTRATION CHARGE 14
ANNUITY DATE 14
TERMINATION 15
BASIS OF VALUES 15
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS & TRANSFERS -
POSTPONEMENT 15
GENERAL PROVISIONS 15
CONTRACT 15
INCONTESTABILITY 16
OWNER 16
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
BENEFICIARY 16
WRITTEN NOTICE 16
MISSTATEMENT OF AGE OR SEX 17
PERIODIC REPORTS 17
ASSIGNMENT 17
OUR CONSENT 17
POLICY DATE 17
EFFECTIVE DATE 17
CURRENCY 17
PLACE OF PAYMENT 18
MODIFICATION 18
NON-PARTICIPATION 18
PAYMENT OPTIONS 18
ELECTION OF PAYMENT OPTIONS 18
PAYMENT DATES 19
AGE AND SURVIVAL OF PAYEE 19
DEATH OF PAYEE 19
BETTERMENT OF INCOME 19
TABLE OF PAYMENTS ON BASIS OF $1,000 NET PROCEEDS 21
</TABLE>
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<PAGE> 5
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<PAGE> 6
POLICY DETAILS
<TABLE>
<S> <C>
POLICY NUMBER E1XXXXX
ANNUITANT JOHN DOE
AGE 35
POLICY DATE APRIL 1, 1997
EFFECTIVE DATE APRIL 1, 1997
ANNUITY DATE APRIL 1, 2027
MATURITY DATE APRIL 1, 2062
OWNER JOHN DOE
INITIAL PREMIUM $5,000.00
ANNUALIZED MORTALITY AND
EXPENSE CHARGE 1.25%
ANNUALIZED RATE OF DAILY
ADMINISTRATIVE FEE 0.15%
ANNUAL ADMINISTRATION CHARGE $30.00*
</TABLE>
* If the policy value on the policy anniversary is $35,000 or more, we will
waive the policy administration charge for the prior policy year.
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This page intentionally left blank.
Page 6
<PAGE> 8
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" or "Joint-Annuitant" means the natural person (or persons) whose
life (or lives) is used to determine the duration of any payments made under a
payment option involving life contingencies.
"Annuity Date" means the date you have elected for the commencement of annuity
payment or the date that a lump sum payment is to be made. The amount of the
annuity payments will be determined by the policy value 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 100th birthday or any earlier date required by law.
"Proceeds" means an amount payable to you. This amount may be the policy value,
cash surrender value, or the death benefit, depending on events surrounding the
payment as described below.
"Cash Surrender Value" means the policy value, less 1) any applicable surrender
charge; and 2) the annual administration charge.
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.
For any annuity benefit with payments of five years or more, such annuity
benefits at the time the policy value is applied under a payment option will not
be less than those that would be provided by the application of an amount to
purchase any single premium immediate annuity policy offered by us at the time
to the same class of annuitants. Such amount shall be the greater of the cash
surrender value or 95% of what the cash surrender value would be if there were
no surrender charge.
PROCEEDS ON ANNUITY DATE
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<PAGE> 9
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.
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. 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; or
3. the highest anniversary value immediately preceding the date
of death. The highest anniversary value is equal to the greatest
anniversary value attained from the following: As of the date of
receipt of due proof of death, the Company will calculate an
anniversary value for each policy anniversary prior to the
deceased's attained age 81. The anniversary value is equal to the
policy value on a policy anniversary, increased by the dollar amount
of any premium payment made since that anniversary and reduced by
the dollar amount of any partial surrenders since that anniversary.
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 there is more than one owner, this provision will apply upon the death of the
first owner. If you die prior to the annuity 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 or joint-annuitant. If a
joint-annuitant has been designated, and you die prior to the annuity date, then
a distribution will also be required by Federal tax law. In the event of your
death prior to the annuity date, the following rules shall apply:
1. If we receive due proof of your death before the annuity date and you
are not the last surviving annuitant, the proceeds we will pay to the
beneficiary is the policy value as of the date of your death.
2. If we receive due proof of your death before the annuity date and you
are the last surviving annuitant, the proceeds we will pay to the
beneficiary is the death benefit described in the "Proceeds on Death
of Last Surviving Annuitant Before Annuity Date" provision.
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<PAGE> 10
SPOUSE AS DESIGNATED BENEFICIARY
If you die prior to the annuity date and your spouse is the designated
beneficiary, the policy may be continued with your spouse as the owner of the
policy. In such event, no distribution would be required by federal tax law.
OWNER'S DEATH AFTER ANNUITY DATE
If you die on or after the annuity 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 primary annuitant will
be treated as the death of the owner.
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. 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 that the applicable
jurisdiction levies on us relating to the policy for the year the premium is
paid. Currently, no premium tax is levied in New York.
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 the Fixed Account. Any additional net
premiums will be allocated in the same manner
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unless at the time of payment we have received your written notice to the
contrary. The total allocation must equal 100%.
THE VARIABLE ACCOUNT
VARIABLE ACCOUNT
We established the Canada Life Insurance Company of New York Variable Annuity
Account 1 (called "the Variable Account") as a separate investment account under
New York law. The Variable Account is 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
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.
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
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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. The unit value for each subsequent valuation period
is determined by multiplying the unit value at the end of the immediately
preceding valuation period by the net investment factor for the valuation period
for which the value is being determined.
The unit value for a valuation period applies to each day in that period. The
unit value may increase or decrease from one valuation period to the next.
NET INVESTMENT FACTOR
The net investment factor is an index that measures the investment performance
of a sub-account from one valuation period to the next. Each sub-account has a
net investment factor which may be greater than or less than 1.
The net investment factor for each sub-account for a valuation period equals 1
plus the rate of return earned by the relevant portfolio of the Fund adjusted
for the effect of taxes charged or credited to the sub-account, the mortality
and expense risk charge and the daily administration fee. The annualized rate of
the daily administration fee is shown on the Policy Details.
The rate of return of the relevant portfolio is equal to the fraction obtained
by dividing (a) by (b) where:
(a) is the next investment income and net gains, realized and unrealized,
credited during the current valuation period; and
(b) is the value of the net assets of the relevant series at the end of the
preceding valuation period, adjusted for the net capital transactions
and dividends declared during the current valuation period.
RESERVED RIGHTS
When permitted by law, and subject to prior approval, if required, of the New
York Superintendent of Insurance, we reserve the right to:
1. create new variable accounts;
2. combine variable accounts, including the Canada Life Insurance
Company of New York Variable Annuity Account 1;
3. remove, combine or add sub-accounts and make the new sub-accounts
available to policyowners at our discretion;
4. add new portfolios of the Funds or of other registered investment
companies;
5. deregister the Variable Account under the Investment Company Act of
1940 if registration is no longer required;
6. make any changes required by the Investment Company Act of 1940; 7.
operate the Variable Account as a managed investment company
under the Investment Company Act of 1940 or any other form permitted
by law; and
8. substitute shares of another portfolio of the Fund or shares of another
registered open-end investment company or any other reserved rights as
detailed in the prospectus.
If a change is made, we will send you a revised prospectus and any notice
required by law.
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CHANGE IN INVESTMENT POLICY
The investment policy for a sub-account in the Variable Account may not be
changed unless the change is approved, if required, by the New York Insurance
Department.
VALUATION PERIODS AND VALUATION DAYS
A valuation period for each sub-account is the period that starts at the close
of business on one valuation day and ends at the close of business on the next
succeeding valuation day. The close of business is when the New York Stock
Exchange closes, usually at 4:00 p.m. Eastern Time.
A valuation day is each day on which valuation of the assets is required by
applicable law, which currently is each day the New York Stock Exchange is open
for trading.
THE FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account provides values and benefits based only upon the net premium
payments and policy values allocated to the Fixed Account, the Guaranteed
Interest Rate credited on such amounts, and any charges 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.
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%. Any higher current interest rate that we are
crediting to the Guarantee Amount as of your policy anniversary will remain in
effect until your next policy anniversary.
The Guarantee Amount is equal to:
1. an amount equal to that part of any net premium allocated to or
policy value transferred to the Fixed Account;
2. any policy value transferred to the Fixed Account; plus
3. interest at the Guaranteed Interest Rate on 1 and 2 above; minus
4. any cash surrender value withdrawn from the Fixed Account; minus 5. any
amount transferred from the Fixed Account; minus
6. any applicable premium tax charge; minus
7. any policy administration charge; minus
8. any applicable surrender charges.
FIXED ACCOUNT VALUE
This policy's Fixed Account value before the annuity date or maturity date is
the Guarantee Amount.
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:
1. the minimum transfer amount is $250; and
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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
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 Fixed Account affected by the transfer. The processing fee will be charged
proportionately to the receiving sub-account(s) and/or the Fixed Account.
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.
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 the Fixed Account below $500 will be treated as a
request for a full withdrawal of the amount in that sub-account or the
Fixed Account; 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 the
Fixed Account. If you do not provide this information to us, we will withdraw
proportionately from the sub-accounts and 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 Fixed Account is inadequate to comply with your
withdrawal request, we will first withdraw from the specified sub-accounts and
the Fixed Account. The remaining balance will be withdrawn proportionately from
the other sub-accounts and the Fixed Account in which you are invested.
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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 in the following order:
<TABLE>
<CAPTION>
Surrender Charge
----------------
<S> <C>
1. Up to 100% of positive investment earnings for each
variable sub-account available at the time the request
is made; plus None
2. Up to 100% of the interest on the Fixed Account at the
time the request for the withdrawal or surrender is
made; plus None
3. Up to 10% of total premiums still subject to a surrender
3. 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:
</TABLE>
<TABLE>
<CAPTION>
Policy Years Since Premiums Were Paid:
--------------------------------------
<S> <C>
Less than 1 6%
At least 1, but less than 2 6%
At least 2, but less than 3 5%
At least 3, but less than 4 5%
At least 4, but less than 5 4%
At least 5, but less than 6 3%
At least 6, but less than 7 2%
At least 7 None
</TABLE>
Any surrender charge will be deducted proportionately from the sub-account(s)
and the Fixed Account being surrendered or partially withdrawn in relation to
the premium (s) withdrawn. If the premium remaining in a sub-account or the
Fixed Account 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 Fixed Account 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 $35,000 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 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
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1. we must receive your written notice at our Home Office at least
30 days before the current annuity date;
2. the requested annuity date must be a date that is at least 30 days
after we receive your written request; and
3. the requested annuity date cannot be any later than the maturity date.
TERMINATION
We may pay you the cash surrender value and end this policy if before the
annuity date or maturity date all of these events simultaneously exists:
1. you have not paid any premiums for at least two years; and
2. the policy value is less than $2,000; and
3. the total premiums paid, less any partial withdrawals, is less
than $2,000.
We will mail you a notice of our intention to terminate this policy at least six
months in advance. This policy will automatically terminate on the date
specified in the notice, unless we receive an additional premium before the
termination date specified in the notice. The additional premium must be at
least the minimum amount specified in the Additional Premiums provision.
BASIS OF VALUES
Any paid up annuity cash surrender or death benefits that may be available are
at least equal to the minimum required by law in the state in which this policy
is delivered. A detailed statement of the method used to compute the minimum
values has been filed, where required, with the insurance officials of the
jurisdiction in which this policy is delivered.
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS & TRANSFERS -
POSTPONEMENT
We will usually pay any proceeds, partial withdrawals, or cash surrenders within
seven calendar day 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.
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GENERAL PROVISIONS
CONTRACT
We have issued this policy in consideration of your application and your payment
of the initial premium. The entire contract is made up of this policy and the
attached copy of the application. The statements made in the application are
deemed representations and not warranties. We cannot use any statement in
defense to a claim or to void this policy unless it is contained in the
application and a copy of the application is attached to the policy at issue.
Only our President, Secretary or Actuary may modify this policy or waive any of
our rights or requirements.
Any change in this policy must be in writing. The change must bear the signature
or a reproduction of the signature of one or more of the above officers.
INCONTESTABILITY
We will not contest this policy after it has been in force during any
annuitant's lifetime for two years from the date of issue of this policy.
OWNER
During any annuitant's lifetime and before the earlier of the annuity date or
maturity date, you have all the rights and privileges granted by this policy. If
you appoint an irrevocable beneficiary, then your rights will be subject to
those of that beneficiary.
During any annuitant's lifetime and before the annuity date, you may name a new
owner, joint owner or annuitant by giving us written notice.
If you die before the annuity date and before the last surviving annuitant,
ownership will pass to your surviving designated beneficiary, if any; otherwise
to your estate.
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.
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MISSTATEMENT OF AGE OR SEX
If the age or sex of any annuitant has been misstated, we will pay the amount
which the proceeds would have purchased at the correct age and sex.
If we make an overpayment because of an error in age or sex, 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 or sex, any unpaid
payments will be recalculated at the correct age and sex and future payments
will be adjusted. The underpayment with interest at 3% compounded annually will
be paid in a single sum.
PERIODIC REPORTS
We will mail you a report showing the following items:
1. the number of units credited to this policy and the dollar value
of those units;
2. the policy value;
3. any premiums paid, withdrawals and charges made since the last report;
and
4. any information required by law.
The information in the report will be as of a date not more than two months
before the date of the mailing. We will mail the report to you:
1. at least annually or more often as required by law; and
2. to your last address known to us.
ASSIGNMENT
You may assign a nonqualified policy or an interest in it at any time before the
earlier of the annuity date or maturity date during any annuitant's lifetime. An
assignment must be in written notice acceptable to us. It will not be binding on
us until we receive and file it at our Home Office. We are not responsible for
the validity of any assignment. Your rights and the rights of any beneficiary
will be affected by an assignment.
An assignment of a nonqualified policy may result in tax consequences for you.
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.
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PLACE OF PAYMENT
All amounts payable by us will be payable at our Home Office.
MODIFICATION
Subject to prior approval, if required, of the New York Superintendent of
Insurance and upon notice to you, we reserve the right to modify the policy, but
only if such modification:
1. is necessary to make the policy or the Variable Account comply
with any law or regulation issued by a governmental agency to which we
are subject; or
2. is necessary to assure continued qualification of the policy under the
Internal Revenue Code or other federal or state laws relating to
retirement annuities or variable annuity policies; or
3. is necessary to reflect a change in the operation of the Variable
Accounts; or
4. provides additional variable account and/or fixed accumulation options.
In event of such modification, we may make appropriate endorsement to the
policy.
NON-PARTICIPATION
This policy is not eligible for dividends and will not participate in our
divisible surplus.
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. If an election is not in effect
at the last surviving annuitant's death, 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
$2,000; or
2. any periodic payment under the election would be less than $20.
PAYMENT OPTION 1: LIFE INCOME
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.
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PAYMENT OPTION 2: MUTUAL AGREEMENT
We will pay the proceeds according to other terms, if those terms are mutually
agreed upon.
PAYMENT DATES
The payment dates of the payment options will be calculated from the date on
which the proceeds become payable.
AGE AND SURVIVAL OF PAYEE
We have the right to require proof of age and sex 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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TABLE OF PAYMENTS ON BASIS OF $1,000 NET PROCEEDS
OPTION 1 - LIFE INCOME
<TABLE>
<CAPTION>
AGE MONTHLY AGE MONTHLY
<S> <C> <C> <C>
41 3.15 66 4.86
42 3.18 67 5.00
43 3.21 68 5.15
44 3.25 69 5.31
45 3.29 70 5.49
46 3.33 71 5.68
47 3.37 72 5.88
48 3.42 73 6.10
49 3.47 74 6.35
50 3.52 75 6.61
51 3.57 76 6.89
52 3.62 77 7.20
53 3.68 78 7.53
54 3.74 79 7.89
55 3.81 80 8.28
56 3.87 81 8.71
57 3.95 82 9.18
58 4.03 83 9.68
59 4.11 84 10.24
60 4.20 85 10.84
61 4.29 86 11.49
62 4.39 87 12.21
63 4.49 88 12.98
64 4.61 89 13.82
65 4.73 90 14.71
</TABLE>
The Table is based on the following assumptions: 1983(a) Projection G, Year Of
Purchase = 1995, Interest = 3%, Load = 3%. 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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CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE: 500 MAMARONECK AVENUE, HARRISON, NY 10528
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY Flexible premiums
as stated in the Additional Premims Provision.
Accumulation benefits and values are variable, except for amounts in the Fixed
Account.
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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POLICY NUMBER: E1XXXXX
INSURED JOHN DOE
CANADA LIFE INSURANCE COMPANY OF 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.
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 HOME OFFICE OR TO THE AGENT FROM
WHOM YOU BOUGHT IT. WE SHALL CANCEL THE POLICY FROM THE POLICY DATE AND YOU
SHALL BE ENTITLED TO A PREMIUM REFUND EQUAL TO THE SUM OF:
1. THE DIFFERENCE BETWEEN THE PREMIUMS PAID, INCLUDING ANY POLICY
FEES OR OTHER CHARGES AND THE AMOUNTS ALLOCATED TO ANY
SEPARATE ACCOUNTS UNDER THE POLICY; AND
2. THE VALUE OF THE AMOUNTS ALLOCATED TO ANY SEPARATE ACCOUNTS
UNDER THE POLICY ON THE DATE THE POLICY IS MAILED OR DELIVERED
TO THE HOME OFFICE.
/s/ /s/
ASSISTANT SECRETARY PRESIDENT
FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
Flexible premiums as stated in the
Additional Premims Provision. Accumulation
benefits and values are variable, except for
amounts in the Fixed Account.
After The Annuity Date or Maturity Date,
payment options are on a guaranteed basis. Death
Benefit payable upon death of the last surviving
annuitant before the Annuity Date or Maturity Date.
Nonparticipating - Not eligible for dividends
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<PAGE> 26
TABLE OF CONTENTS
<TABLE>
<S> <C>
POLICY DETAILS 5
DEFINITIONS 7
PAYMENT OF PROCEEDS 7
PROCEEDS 7
PROCEEDS ON ANNUITY DATE 7
PROCEEDS ON MATURITY DATE 8
PROCEEDS ON SURRENDER 8
PROCEEDS ON DEATH OF THE LAST SURVIVING ANNUITANT BEFORE ANNUITY
DATE OR MATURITY DATE (THE DEATH BENEFIT) 8
PROCEEDS ON DEATH OF ANY OWNER BEFORE OR AFTER THE ANNUITY DATE OR
BEFORE THE MATURITY DATE 8
CONFORMITY WITH LAWS 9
PREMIUMS 9
INITIAL PREMIUM 9
ADDITIONAL PREMIUMS 9
NET PREMIUM 9
NET PREMIUM ALLOCATION AMONG SUB-ACCOUNTS AND FIXED ACCOUNT 9
THE VARIABLE ACCOUNT 10
VARIABLE ACCOUNT 10
SUB-ACCOUNTS 10
VARIABLE ACCOUNT VALUE 10
UNITS 10
UNIT VALUE 11
NET INVESTMENT FACTOR 11
RESERVED RIGHTS 11
CHANGE IN INVESTMENT POLICY 11
VALUATION PERIODS AND VALUATION DAYS 12
THE FIXED ACCOUNT 12
FIXED ACCOUNT 12
FIXED ACCOUNT VALUE 12
TRANSFERS 12
TRANSFER PRIVILEGE 12
TRANSFER PROCESSING FEE 13
POLICY VALUES 13
POLICY VALUE 13
CASH SURRENDER VALUE 13
PARTIAL WITHDRAWALS 13
SURRENDER CHARGE 14
POLICY ADMINISTRATION CHARGE 14
ANNUITY DATE 14
TERMINATION 15
BASIS OF VALUES 15
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS & TRANSFERS -
POSTPONEMENT 15
GENERAL PROVISIONS 15
CONTRACT 15
INCONTESTABILITY 16
OWNER 16
</TABLE>
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TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
BENEFICIARY 16
WRITTEN NOTICE 16
MISSTATEMENT OF AGE OR SEX 17
PERIODIC REPORTS 17
ASSIGNMENT 17
OUR CONSENT 17
POLICY DATE 17
EFFECTIVE DATE 17
CURRENCY 17
PLACE OF PAYMENT 18
MODIFICATION 18
NON-PARTICIPATION 18
PAYMENT OPTIONS 18
ELECTION OF PAYMENT OPTIONS 18
PAYMENT DATES 19
AGE AND SURVIVAL OF PAYEE 19
DEATH OF PAYEE 19
BETTERMENT OF INCOME 19
TABLE OF PAYMENTS ON BASIS OF $1,000 NET PROCEEDS 21
</TABLE>
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POLICY DETAILS
<TABLE>
<S> <C>
POLICY NUMBER E1XXXXX
ANNUITANT JOHN DOE
AGE 35
POLICY DATE APRIL 1, 1997
EFFECTIVE DATE APRIL 1, 1997
ANNUITY DATE APRIL 1, 2027
MATURITY DATE APRIL 1, 2062
OWNER JOHN DOE
INITIAL PREMIUM $5,000.00
ANNUALIZED MORTALITY AND
EXPENSE CHARGE 1.25%
ANNUALIZED RATE OF DAILY
ADMINISTRATIVE FEE 0.15%
ANNUAL ADMINISTRATION CHARGE $30.00*
</TABLE>
* If the policy value on the policy anniversary is $35,000 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" or "Joint-Annuitant" means the natural person (or persons) whose
life (or lives) is used to determine the duration of any payments made under a
payment option involving life contingencies.
"Annuity Date" means the date you have elected for the commencement of annuity
payment or the date that a lump sum payment is to be made. The amount of the
annuity payments will be determined by the policy value 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 100th birthday or any earlier date required by law.
"Proceeds" means an amount payable to you. This amount may be the policy value,
cash surrender value, or the death benefit, depending on events surrounding the
payment as described below.
"Cash Surrender Value" means the policy value, less 1) any applicable surrender
charge; and 2) the annual administration charge.
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.
For any annuity benefit with payments of five years or more, such annuity
benefits at the time the policy value is applied under a payment option will not
be less than those that would be provided by the application of an amount to
purchase any single premium immediate annuity policy offered by us at the time
to the same class of annuitants. Such amount shall be the greater of the cash
surrender value or 95% of what the cash surrender value would be if there were
no surrender charge.
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<PAGE> 32
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.
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. 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; or
3. the highest anniversary value immediately preceding the date
of death. The highest anniversary value is equal to the
greatest anniversary value attained from the following: As of
the date of receipt of due proof of death, the Company will
calculate an anniversary value for each policy anniversary
prior to the deceased's attained age 81. The anniversary value
is equal to the policy value on a policy anniversary,
increased by the dollar amount of any premium payment made
since that anniversary and reduced by the dollar amount of any
partial surrenders since that anniversary.
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 there is more than one owner, this provision will apply upon the death of the
first owner. If you die prior to the annuity 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 or joint-annuitant. If a
joint-annuitant has been designated, and you die prior to the annuity date, then
a distribution will also be required by Federal tax law. In the event of your
death prior to the annuity date, the following rules shall apply:
1. If we receive due proof of your death before the annuity date
and you are not the last surviving annuitant, the proceeds we
will pay to the beneficiary is the policy value as of the date
of your death.
2. If we receive due proof of your death before the annuity date
and you are the last surviving annuitant, the proceeds we will
pay to the beneficiary is the death benefit described in the
"Proceeds on Death of Last Surviving Annuitant Before Annuity
Date" provision.
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<PAGE> 33
SPOUSE AS DESIGNATED BENEFICIARY
If you die prior to the annuity date and your spouse is the designated
beneficiary, the policy may be continued with your spouse as the owner of the
policy. In such event, no distribution would be required by federal tax law.
OWNER'S DEATH AFTER ANNUITY DATE
If you die on or after the annuity 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 primary annuitant will
be treated as the death of the owner.
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. 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 that the applicable
jurisdiction levies on us relating to the policy for the year the premium is
paid. Currently, no premium tax is levied in New York.
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 the Fixed Account. Any additional net
premiums will be allocated in the same manner
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<PAGE> 34
unless at the time of payment we have received your written notice to the
contrary. The total allocation must equal 100%.
THE VARIABLE ACCOUNT
VARIABLE ACCOUNT
We established the Canada Life Insurance Company of New York Variable Annuity
Account 1 (called "the Variable Account") as a separate investment account under
New York law. The Variable Account is 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
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.
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
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<PAGE> 35
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. The unit value for each subsequent valuation period
is determined by multiplying the unit value at the end of the immediately
preceding valuation period by the net investment factor for the valuation period
for which the value is being determined.
The unit value for a valuation period applies to each day in that period. The
unit value may increase or decrease from one valuation period to the next.
NET INVESTMENT FACTOR
The net investment factor is an index that measures the investment performance
of a sub-account from one valuation period to the next. Each sub-account has a
net investment factor which may be greater than or less than 1.
The net investment factor for each sub-account for a valuation period equals 1
plus the rate of return earned by the relevant portfolio of the Fund adjusted
for the effect of taxes charged or credited to the sub-account, the mortality
and expense risk charge and the daily administration fee. The annualized rate of
the daily administration fee is shown on the Policy Details.
The rate of return of the relevant portfolio is equal to the fraction obtained
by dividing (a) by (b) where:
(a) is the next investment income and net gains, realized and
unrealized, credited during the current valuation period; and
(b) is the value of the net assets of the relevant series at the end
of the preceding valuation period, adjusted for the net capital
transactions and dividends declared during the current valuation
period.
RESERVED RIGHTS
When permitted by law, and subject to prior approval, if required, of the New
York Superintendent of Insurance, we reserve the right to:
1. create new variable accounts;
2. combine variable accounts, including the Canada Life Insurance
Company of New York Variable Annuity Account 1;
3. remove, combine or add sub-accounts and make the new sub-accounts
available to policyowners at our discretion;
4. add new portfolios of the Funds or of other registered investment
companies;
5. deregister the Variable Account under the Investment Company Act
of 1940 if registration is no longer required;
6. make any changes required by the Investment Company Act of 1940;
7. operate the Variable Account as a managed investment company
under the Investment Company Act of 1940 or any other form
permitted by law; and
8. substitute shares of another portfolio of the Fund or shares of
another registered open-end
investment company or any other reserved rights as detailed in
the prospectus.
If a change is made, we will send you a revised prospectus and any notice
required by law.
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<PAGE> 36
CHANGE IN INVESTMENT POLICY
The investment policy for a sub-account in the Variable Account may not be
changed unless the change is approved, if required, by the New York Insurance
Department.
VALUATION PERIODS AND VALUATION DAYS
A valuation period for each sub-account is the period that starts at the close
of business on one valuation day and ends at the close of business on the next
succeeding valuation day. The close of business is when the New York Stock
Exchange closes, usually at 4:00 p.m. Eastern Time.
A valuation day is each day on which valuation of the assets is required by
applicable law, which currently is each day the New York Stock Exchange is open
for trading.
THE FIXED ACCOUNT
FIXED ACCOUNT
The Fixed Account provides values and benefits based only upon the net premium
payments and policy values allocated to the Fixed Account, the Guaranteed
Interest Rate credited on such amounts, and any charges 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.
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%. Any higher current interest rate that we are
crediting to the Guarantee Amount as of your policy anniversary will remain in
effect until your next policy anniversary.
The Guarantee Amount is equal to:
1. an amount equal to that part of any net premium allocated to or
policy value transferred to the Fixed Account;
2. any policy value transferred to the Fixed Account; plus
3. interest at the Guaranteed Interest Rate on 1 and 2 above; minus
4. any cash surrender value withdrawn from the Fixed Account; minus
5. any amount transferred from the Fixed Account; minus
6. any applicable premium tax charge; minus
7. any policy administration charge; minus
8. any applicable surrender charges.
FIXED ACCOUNT VALUE
This policy's Fixed Account value before the annuity date or maturity date is
the Guarantee Amount.
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:
1. the minimum transfer amount is $250; and
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<PAGE> 37
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.
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 Fixed Account affected by the transfer. The processing fee will be charged
proportionately to the receiving sub-account(s) and/or the Fixed Account.
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.
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 the Fixed Account below $500 will be treated
as a request for a full withdrawal of the amount in that
sub-account or the Fixed Account; 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 the
Fixed Account. If you do not provide this information to us, we will withdraw
proportionately from the sub-accounts and 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 Fixed Account is inadequate to comply with your
withdrawal request, we will first withdraw from the specified sub-accounts and
the Fixed Account. The remaining balance will be withdrawn proportionately from
the other sub-accounts and the Fixed Account in which you are invested.
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<PAGE> 38
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 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; plus None
2. Up to 100% of the interest on the Fixed Account at
the time the request for the withdrawal or surrender
is made; 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:
-------------------------------------
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)
and the Fixed Account being surrendered or partially withdrawn in relation to
the premium (s) withdrawn. If the premium remaining in a sub-account or the
Fixed Account 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 Fixed Account 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 $35,000 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 the Fixed
Account in which you are invested. If the charge is obtained from a
sub-account(s), we will cancel the appropriate number of units from the
applicable sub-account based on the unit value at the end of the valuation
period when the charge is assessed. If the charge is obtained from the Fixed
Account, we will reduce this policy's Fixed Account by the amount of the charge.
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<PAGE> 39
ANNUITY DATE
You may change the annuity date, subject to these limitations
1. we must receive your written notice at our Home Office at
least 30 days before the current annuity date;
2. the requested annuity date must be a date that is at least 30
days after we receive your written request; and
3. the requested annuity date cannot be any later than the
maturity date.
TERMINATION
We may pay you the cash surrender value and end this policy if before the
annuity date or maturity date all of these events simultaneously exists:
1. you have not paid any premiums for at least two years; and
2. the policy value is less than $2,000; and
3. the total premiums paid, less any partial withdrawals, is less
than $2,000.
We will mail you a notice of our intention to terminate this policy at least six
months in advance. This policy will automatically terminate on the date
specified in the notice, unless we receive an additional premium before the
termination date specified in the notice. The additional premium must be at
least the minimum amount specified in the Additional Premiums provision.
BASIS OF VALUES
Any paid up annuity cash surrender or death benefits that may be available are
at least equal to the minimum required by law in the state in which this policy
is delivered. A detailed statement of the method used to compute the minimum
values has been filed, where required, with the insurance officials of the
jurisdiction in which this policy is delivered.
PAYMENT OF BENEFITS, PARTIAL WITHDRAWALS, CASH SURRENDERS & TRANSFERS -
POSTPONEMENT
We will usually pay any proceeds, partial withdrawals, or cash surrenders within
seven calendar day 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.
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<PAGE> 40
GENERAL PROVISIONS
CONTRACT
We have issued this policy in consideration of your application and your payment
of the initial premium. The entire contract is made up of this policy and the
attached copy of the application. The statements made in the application are
deemed representations and not warranties. We cannot use any statement in
defense to a claim or to void this policy unless it is contained in the
application and a copy of the application is attached to the policy at issue.
Only our President, Secretary or Actuary may modify this policy or waive any of
our rights or requirements.
Any change in this policy must be in writing. The change must bear the signature
or a reproduction of the signature of one or more of the above officers.
INCONTESTABILITY
We will not contest this policy after it has been in force during any
annuitant's lifetime for two years from the date of issue of this policy.
OWNER
During any annuitant's lifetime and before the earlier of the annuity date or
maturity date, you have all the rights and privileges granted by this policy. If
you appoint an irrevocable beneficiary, then your rights will be subject to
those of that beneficiary.
During any annuitant's lifetime and before the annuity date, you may name a new
owner, joint owner or annuitant by giving us written notice.
If you die before the annuity date and before the last surviving annuitant,
ownership will pass to your surviving designated beneficiary, if any; otherwise
to your estate.
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.
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<PAGE> 41
MISSTATEMENT OF AGE OR SEX
If the age or sex of any annuitant has been misstated, we will pay the amount
which the proceeds would have purchased at the correct age and sex.
If we make an overpayment because of an error in age or sex, 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 or sex, any unpaid
payments will be recalculated at the correct age and sex and future payments
will be adjusted. The underpayment with interest at 3% compounded annually will
be paid in a single sum.
PERIODIC REPORTS
We will mail you a report showing the following items:
1. the number of units credited to this policy and the dollar value of
those units;
2. the policy value;
3. any premiums paid, withdrawals and charges made since the last
report; and
4. any information required by law.
The information in the report will be as of a date not more than two months
before the date of the mailing. We will mail the report to you:
1. at least annually or more often as required by law; and
2. to your last address known to us.
ASSIGNMENT
You may assign a nonqualified policy or an interest in it at any time before the
earlier of the annuity date or maturity date during any annuitant's lifetime. An
assignment must be in written notice acceptable to us. It will not be binding on
us until we receive and file it at our Home Office. We are not responsible for
the validity of any assignment. Your rights and the rights of any beneficiary
will be affected by an assignment.
An assignment of a nonqualified policy may result in tax consequences for you.
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.
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<PAGE> 42
PLACE OF PAYMENT
All amounts payable by us will be payable at our Home Office.
MODIFICATION
Subject to prior approval, if required, of the New York Superintendent of
Insurance and upon notice to you, we reserve the right to modify the policy, but
only if such modification:
1. is necessary to make the policy or the Variable Account comply
with any law or regulation issued by a governmental agency to
which we are subject; or
2. is necessary to assure continued qualification of the policy
under the Internal Revenue Code or other federal or state laws
relating to retirement annuities or variable annuity policies;
or
3. is necessary to reflect a change in the operation of the
Variable Accounts; or
4. provides additional variable account and/or fixed accumulation
options.
In event of such modification, we may make appropriate endorsement to the
policy.
NON-PARTICIPATION
This policy is not eligible for dividends and will not participate in
our divisible surplus.
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. If an election is not in effect
at the last surviving annuitant's death, 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
$2,000; or
2. any periodic payment under the election would be less than
$20.
PAYMENT OPTION 1: LIFE INCOME
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.
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<PAGE> 43
PAYMENT OPTION 2: MUTUAL AGREEMENT
We will pay the proceeds according to other terms, if those terms are mutually
agreed upon.
PAYMENT DATES
The payment dates of the payment options will be calculated from the date on
which the proceeds become payable.
AGE AND SURVIVAL OF PAYEE
We have the right to require proof of age and sex 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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<PAGE> 44
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Page 20
<PAGE> 45
TABLE OF PAYMENTS ON BASIS OF $1,000 NET PROCEEDS
OPTION 1 - LIFE INCOME
<TABLE>
<CAPTION>
AGE MALE FEMALE AGE MALE FEMALE MONTHLY
MONTHLY MONTHLY MONTHLY
<S> <C> <C> <C> <C> <C>
41 3.35 3.15 66 5.54 4.86
42 3.39 3.18 67 5.72 5.00
43 3.43 3.21 68 5.92 5.15
44 3.48 3.25 69 6.12 5.31
45 3.53 3.29 70 6.34 5.49
46 3.58 3.33 71 3.58 5.68
47 3.64 3.37 72 6.83 5.88
48 3.69 3.42 73 7.10 6.10
49 3.75 3.47 74 7.39 6.35
50 3.82 3.52 75 7.70 6.61
51 3.88 3.57 76 8.03 6.89
52 3.95 3.62 77 8.39 7.20
53 4.03 3.68 78 8.78 7.53
54 4.10 3.74 79 9.19 7.89
55 4.18 3.81 80 9.63 8.28
56 4.27 3.87 81 10.11 8.71
57 4.36 3.95 82 10.62 9.18
58 4.46 4.03 83 11.17 9.68
59 4.57 4.11 84 11.75 10.24
60 4.68 4.20 85 12.38 10.84
61 4.80 4.29 86 13.05 11.49
62 4.93 4.39 87 13.77 12.21
63 5.07 4.49 88 14.54 12.98
64 5.21 4.61 89 15.38 13.82
65 5.37 4.73 90 16.28 14.71
</TABLE>
The Table is based on the following assumptions: 1983(a) Projection G, Year Of
Purchase = 1995, Interest = 3%, Load = 3%. 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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Page 22
<PAGE> 47
CANADA LIFE INSURANCE COMPANY OF 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.
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 23
<PAGE> 1
EXHIBIT 4(b)
RIDERS AND ENDORSEMENTS
<PAGE> 2
CANADA LIFE INSURANCE COMPANY OF NEW YORK
DEATH BENEFIT AND FEE CHANGE ENDORSEMENT
This endorsement is part of the policy to which it is attached. The endorsement
changes the policy as provided below.
The provision titled Proceeds On Death Of Annuitant Before Annuity Date or
Maturity Date (The Death Benefit) is deleted in its entirety and replaced by the
following:
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. 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; or
3. the highest anniversary value immediately preceding the date of
death. The highest anniversary value is equal to the greatest
anniversary value attained from the following: As of the date of
receipt of due proof of death, the Company will calculate an
anniversary value for each policy anniversary prior to the
deceased's attained age 81. The anniversary value is equal to the
policy value on a policy anniversary, increased by the dollar
amount of any premium payment made since that anniversary and
reduced by the dollar amount of any partial surrenders since that
anniversary.
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 Policy Details page is changed as follows:
- "*" is added after the words "ANNUAL ADMINISTRATION CHARGE $30)
- The sentence: "* If the policy value on the policy anniversary is
$35,000 or more, we will waive the policy administration charge
for the prior policy year" is added.
- The Annualized Rate of Daily Administrative Fee is changed from
0.35% to 0.15%.
/s/ David A. Hopkins /s/ D.A. Lorey
Secretary President
<PAGE> 3
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE:
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) of the Internal Revenue Code
of 1986, as amended (the "Code"), 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. The premium payment(s) shall be in cash and, except in the case of
rollover contributions described in Sections 402(c), 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. You shall have the sole responsibility for determining
whether any premium payment qualifies as a rollover or simplified
employee pension contributions, whether it is deductible for income tax
purposes, and whether other applicable income tax requirements are met.
5. The Policy does not require fixed premium payments. 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 (as applicable or
under another IRA) 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, if this
payment option is available under the terms of your Policy; or
(e) over a period certain not exceeding the joint and last survivor
expectancy of you and your designated beneficiary, if this payment
option is available under the terms of your Policy.
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 and the regulations thereunder, and the minimum distribution
incidental benefit requirement of Proposed Income Tax Regulation
Section 1.401(a)(9)-2. Payment must either be nonincreasing or may
increase only as provided in Proposed Income Tax Regulation Section
1.401(a)(9)-1, Q&A F-3.
Page 1
<PAGE> 4
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. 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 6 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 7 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.
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.
You or your beneficiary, as applicable, shall have the sole
responsibility for requesting a distribution that complies with this
Rider and applicable law.
10. 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 2
<PAGE> 5
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE:
500 MAMARONECK AVENUE, HARRISON, NEW YORK 10528
PHONE (914) 835-8400
ROTH INDIVIDUAL RETIREMENT ANNUITY RIDER
This Rider is part of the Policy. The Policy is intended to qualify as a Roth
individual retirement annuity ("Roth IRA") under Section 408A of the Internal
Revenue Code of 1986, as amended (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. The premium payment(s) shall be in cash and, except in the case of
rollover contributions described in Sections 408(d)(3), 408A(c)(3)(B),
408A(c)(6), and 408A(e) of the Code, or transfers from another Roth IRA
or individual retirement account or annuity, shall not exceed $2,000
for any taxable year. You shall have the sole responsibility for
determining whether any premium payment qualifies as a rollover or
meets other applicable income tax requirements.
5. The Policy does not require fixed premium payments. 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 (as applicable or
under another IRA) or the purchase of additional benefits.
6. The entire interest in the Policy 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 Sections 408(b)(3) and 408A(c)(5), 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.
Your beneficiary shall have the sole responsibility for requesting a
distribution that complies with this Rider and applicable law.
Page 1
<PAGE> 6
7. For purposes of the foregoing provision, life expectancy shall be
determined by use of the expected return multiples in Table V of
Treasury Regulation Section 1.72-9 in accordance with Code Section
408(b)(3) and the regulations thereunder. Life expectancy will be
initially determined on the basis of your beneficiary's attained age in
the year distributions are required to commence. Unless your spouse
elects otherwise prior to the date distributions are required to
commence, your spouse's life expectancy will be recalculated annually
based on your spouse's attained age in the year for which the required
distribution is being determined. The life expectancy of a nonspouse
beneficiary will not be recalculated.
You may satisfy the minimum distribution requirements under Sections
408(b)(3) and 408A(c)(5) of the Code by receiving a distribution from
one Roth IRA that is equal to the amount required to satisfy the
minimum distribution requirement for two or more Roth IRAs. For this
purpose, if you own two or more Roth IRAs, you may use the alternative
method described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements.
8. 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 2
<PAGE> 7
CANADA LIFE INSURANCE COMPANY OF NEW YORK
HOME OFFICE:
500 MAMARONECK AVENUE, HARRISON, NEW YORK 10528
PHONE (914) 835-8400
SIMPLE INDIVIDUAL RETIREMENT ANNUITY RIDER
This Rider is part of the Policy. The Policy is intended to qualify as a SIMPLE
individual retirement annuity ("SIMPLE IRA") under Section 408(p) of the
Internal Revenue Code of 1986, as amended (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. This SIMPLE IRA will accept only cash contributions made on your behalf
pursuant to the terms of a SIMPLE IRA Plan described in Code Section
408(p). A rollover contribution or a transfer of assets from another of
your SIMPLE IRAs will also be accepted.
You shall have the sole responsibility for determining whether any
premium payment, rollover, or transfer complies with applicable law.
If contributions made on your behalf pursuant to a SIMPLE IRA Plan
maintained by your employer are received directly by us from the
employer, we will provide the employer with the summary description
required by Code Section 408(1)(2).
5. The Policy does not require fixed premium payments. 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 (as applicable or
under another IRA) 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, if
this payment option is available under the terms of your
Policy; or
(e) over a period certain not exceeding the joint and last
survivor expectancy of you and your designated beneficiary, if
this payment option is available under the terms of your
Policy.
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 and the regulations thereunder, and the minimum distribution
incidental benefit requirement of Proposed Income Tax Regulation
Section 1.401 (a)(9)-2. Payment must either be nonincreasing or may
increase only as provided in Proposed Income Tax Regulation Section
1.401(a)(9)-1, Q&A F-3.
Page 1
<PAGE> 8
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. 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 6 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 7 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.
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.
Prior to the expiration of the 2-year period beginning on the date you
first participated in any SIMPLE IRA Plan maintained by your employer,
any rollover or transfer by you of funds from this SIMPLE IRA must be
made to another of your SIMPLE IRAs. Any distribution of funds to you
during this 2-year period may be subject to a 25-percent additional tax
if you do not roll over the amount distributed into a SIMPLE IRA. After
the expiration of this 2-year period, you may roll over or transfer
funds to any of your IRAs that are qualified under Code Section 408(a)
or (b).
You or your beneficiary, as applicable, shall have the sole
responsibility for requesting a distribution that complies with this
Rider and applicable law.
10. 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 2
<PAGE> 1
EXHIBIT 5
FORM OF APPLICATION
<PAGE> 2
<TABLE>
<CAPTION>
CANADA LIFE
INSURANCE COMPANY OF NEW YORK APPLICATION FOR
500 MAMARONECK AVENUE FLEXIBLE PREMIUM VARIABLE DEFERRED ANNUITY
HARRISON, NEW YORK 10528
(800) 905-1959
<S> <C>
- --------------------------------------------------------------------------------------------------------------------------
1. OWNERS (APPLICANTS) 4. 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 [ ] Other Date of Birth [ ] [ ] [ ] Sex [ ]M [ ]F Date of Birth [ ] [ ] [ ]
Month Day Year Month Day Year
Daytime Phone Number ( )
-------------------------------- [ ][ ][ ][ ][ ][ ][ ][ ][ ]
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ] Social Security Number
Social Security Number Tax ID Number ==================================================
JOINT-ANNUITANT (Optional)
Client Brokerage Acct. # (If applicable)
--------------------------- Name*
=================================================================== -------------------------------------------
JOINT OWNER (Optional) First Middle Last
1. Name* Sex [ ] M [ ] F Date of Birth [ ] [ ] [ ]
-------------------------------------------------------
First Middle Last [ ][ ][ ][ ][ ][ ][ ][ ][ ] Month Day Year
Social Security Number
-------------------------------------------------------------
5. MY INVESTMENT
-------------------------------------------------------------
Sex [ ]M [ ]F [ ]Other Date of Birth [ ] [ ] [ ] Allocated payment with application of $_____ as
Month Day Year indicated below (MUST TOTAL 100%)
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ] ____% Cash Management (21) ___% Income (22)
Social Security Number Tax ID Number ____% Bond (23) ___% Common Stock (24)
____% Capital (25) ___% International (26)
- ------------------------------------------------------------------- ____% Communic. & Inform (27) ___% Global Growth Oppor. (28)
2. BENEFICIARIES ____% Global Smaller Cos. (29) ___% Frontier (41)
- ------------------------------------------------------------------- ____% High Yeild Bond (42) ___% Global Technology (43)
Enclose signed letter if more information is required. ____% Small-Cap Value (44) ___% Large-Cap Value (45)
1. Name* ____% Fixed Account (201)
-----------------------------------------------------------
First Middle Last
[ ] Check here if you are using Seligman Time Horizon
Matrix(SM). If so, PLEASE LEAVE INVESTMENT
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ] ALLOCATION BLANK IN THIS SECTION AND ATTACH TIME
Social Security Number Tax ID Number HORIZON MATRIX(SM) ELECTION FORM.
-------------------------------------------------------------
6. Pre-Authorized Check (PAC)
Relationship Percentage % -------------------------------------------------------------
----------------------- ---- I authorize the Company to collect $____ (MINIMUM $100/$50 -
IRA) starting on ______________ by initiating electronic
2. Name* debt entries to my account.
-----------------------------------------------------------
First Middle Last Select One: [ ] Checking attach voided check)
[ ] Savings (attach deposit slip)
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ] If start date is not indicated, this option will commence
Social Security Number Tax ID Number 30 days from issue date. This option is not available on
the 29th, 30th, or 31st day of each month.
Relationship Percentage % ------------------------------------------------------------
----------------------- ---- 7. Replacement
------------------------------------------------------------
Will this Annuity replace or change any other insurance or
================================================================== annuity?
CONTINGENT BENEFICIARY
[ ] NO [ ]YES - Company
Name* ------------------------------------
--------------------------------------------------------- Policy No.
First Middle Last ---------------------------------
(Please attach replacement forms.
[ ][ ][ ][ ][ ][ ][ ][ ][ ] OR [ ][ ][ ][ ][ ][ ][ ][ ][ ]
Social Security Number Tax ID Number ------------------------------------------------------------
8. FOR AGENTS ONLY
Relationship Percentage % ------------------------------------------------------------
----------------------- ---- Questions? Contact either your broker/dealer or Canada Life
- ------------------------------------------------------------------ at (800) 905-1959.
3. TYPE OF ACCOUNT (MUST BE COMPLETED)
- ------------------------------------------------------------------ [ ]Option A (Trail) [ ]Option B (No Trail)
IRA: [ ] Traditional [ ] Roth [ ] Simple [ ] SEP [ ]Option C (Trail) [ ]Option D (Trail)
IRA Transfer/Rollover? [ ] Yes [ ] No
IRA Tax Year is_______________
[ ] 401(k) [ ] 457 [ ] Non-Qualified
[ ] 403(b) [ ] Keogh (HR-10) [ ] Other ________
* Unless subsequently changed in accordance with terms of Policy
issued.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
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 TO 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.
=========================================================================================
- ---------------------
TELEPHONE TRANSFER AUTHORIZATION
- ---------------------
I/We authorize the Company to act on transfer instructions given by telephone
from any person who can furnish identification. Neither the Company nor any
person authorized by the Company will be responsible for any claim, loss,
liability or expense in connection with a telephone transfer if the Company or
such other person acted on telephone transfer instructions in good faith in
reliance on this authorization. I/We accept and will comply with the procedures
established by the Company from time to time.
=========================================================================================
- ---------------------
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-Annually [ ] Annually
Transfer above amount to (please use numeric codes listed in Section 5):
_____________ ____________ _____________ _____________
_____________ ____________ _____________ _____________
_____________ ____________ _____________ _____________
_____________ ____________ _____________ _____________
- -----------------------------------------------------------------------------------------
10. REMARKS
- -----------------------------------------------------------------------------------------
=========================================================================================
- --------------------
SYSTEMATIC WITHDRAWAL PRIVILEGE (SWP)*
- --------------------
I/We hereby authorize the Company to initiate withdrawals from my Policy, via
Electronic Funds Transfer, as indicated below.
SELECT ONE: [ ] CHECKING (ATTACH VOIDED CHECK) [ ] SAVINGS (ATTACH DEPOSIT SLIP)
Withdraw: [ ] Maximum amount allowed without incurring a Surrender
Charge, or $_____________, to start on / /
Month Day Year
Stop Date:_________________ or Number of Withdrawals:________.
Withdraw From (please use numeric codes listed in Section 5):
_____________ ____________ _____________ _____________
_____________ ____________ _____________ _____________
_____________ ____________ _____________ _____________
_____________ ____________ _____________ _____________
Frequency of Withdrawal: [ ] Monthly [ ] Quarterly [ ] Semi-Annually [ ] Annually
Please [ ] Withhold [ ] Do Not Withhold Federal Income Taxes. (If left blank,
10% of federal taxes will be automatically withheld).
==========================================================================================
- ---------------------
PORTFOLIO REBALANCING *
- ---------------------
I/We hereby authorize the Company to provide portfolio rebalancing services as
indicated below:
Frequency of Rebalancing: [ ] Quarterly [ ] Semi-Annually [ ] Annually
- ------------------------------------------------------------------------------------------------------------------------------------
11. SIGNATURES
- ------------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF APPLICANT: To the best of the knowledge and belief of the person(s) signing below, all statements in this Application
are true and correctly worded. Each person signing below adopts all statements made in this Application and agrees to be bound by
them. IT IS AGREED THAT THE POLICY WILL NOT TAKE EFFECT UNTIL THE LATER OF: 1) THE POLICY IS ISSUED; OR 2) WE RECEIVE AT OUR
ADMINISTRATIVE OFFICE THE FIRST PREMIUM REQUIRED UNDER THE POLICY. No agent or registered representative can modify this agreement
or waive any of the Company's rights or requirements. I/WE ACKNOWLEDGE RECEIPT OF THE EFFECTIVE PROSPECTUS(ES) FOR THE POLICY. 3)
I/WE CERTIFY THAT THE NUMBER SHOWN ON THIS FORM IS MY/OUR SOCIAL SECURITY # OR TAXPAYER ID #. 4) THE POLICY I/WE HAVE APPLIED FOR
IS SUITABLE FOR MY/OUR INSURANCE INVESTMENT OBJECTIVES, FINANCIAL SITUATION, AND NEEDS.
I/WE UNDERSTAND THAT ALL ACCUMULATION BENEFITS AND VALUES PROVIDED BY THE VARIABLE ACCOUNT MAY INCREASE OR DECREASE DAILY
DEPENDING ON INVESTMENT PERFORMANCE, AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNTS.
[ ] I/WE REQUEST THE STATEMENT OF ADDITIONAL INFORMATION.
- ------------------------------------------------------------------------------------------------------------------------------------
Signed in (State) Date Signed Signature of Owner/Applicant Signature of Joint Owner
- ------------------------------------------------------------------------------------------------------------------------------------
Signature of Annuitant (if different from Owner) Signature of Joint-Annuitant (if different from Owner)
- ------------------------------------------------------------------------------------------------------------------------------------
Signature of Irrevocable Beneficiary (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(if designated)
- ------------------------------------------------------------------------------------------------------------------------------------
Agent Number State License ID Number Agent Phone Number Agent Fax Number
* If start date is not indicated, this option will commence 30 days from issue date. This option is not available on the 29th,
30th or 31st day of each month.
</TABLE>
<PAGE> 1
EXHIBIT 6 (d)
AMENDMENT TO THE BY-LAWS OF CANADA LIFE INSURANCE COMPANY OF NEW YORK
PASSED BY THE BOARD ON
SEPTEMBER 4, 1997
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF
BY-LAWS
OF
CANADA LIFE INSURANCE COMPANY
OF NEW YORK
UNDER SECTION 1206 OF ARTICLE 12 OF
THE INSURANCE LAW OF THE STATE OF NEW YORK
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
BY-LAWS
OF
CANADA LIFE INSURANCE COMPANY
OF NEW YORK
UNDER SECTION 1206 OF ARTICLE 12 OF
THE INSURANCE LAW OF THE STATE OF NEW YORK
THE UNDERSIGNED, being the President and Secretary of Canada Life
Insurance Company of New York, a New York corporation (the "Corporation"), do
hereby certify and set forth:
FIRST: The name of the Corporation is Canada Life Insurance Company of
New York.
SECOND: The By-Laws of the Corporation were filed by the Department of
Insurance of the State of New York on June 7, 1971.
THIRD: The By-Laws of the Corporation were later amended, said
amendment being approved by the New York State Insurance Department on December
7, 1994.
<PAGE> 4
FOURTH: The By-Laws of the Corporation, as amended in 1994, are hereby
further amended, pursuant to Section 1206 of Article 12 of the Insurance Law of
the State of New York, in the following respect:
Section 2 of Article II of the Corporation's By-Laws which presently
provides, inter alia, that the number of directors constituting the
whole Board shall not be less than thirteen nor more than twenty-one;
provided, however, that if the Corporation has admitted assets of less
than $500,000,000, the Board may decrease the number of directors to
not less than nine directors, of which at least four must be
Non-Affiliated Directors; provided, further, however, that in the event
that the Corporation has admitted assets of less than $500,000,000 and
fewer than thirteen, but at least nine, directors, the number of
directors of the Corporation shall be increased to not fewer than
thirteen within one year following the end of the calendar year in
which the Corporation exceeded $500,000,000 in admitted assets, is
hereby amended by deleting Article II, Section 2 in its entirety and
substituting therefor a new Article II, Section 2 in the following
form:
SECTION 2. Number of Directors. The number of directors constituting
the whole Board shall not be less than thirteen nor more than
twenty-one; provided, however, that if the Corporation has admitted
assets of less than $1,500,000,000, the Board may decrease the number
of directors to not less than nine directors, of which at least four
must be Non-Affiliated Directors; provided, further, however, that in
the event that the Corporation has admitted assets of less than
$1,500,000,000 and fewer than thirteen, but at least nine, directors,
the number of directors of the Corporation shall be increased to not
fewer than thirteen within one year following the end of the calendar
year in which the Corporation exceeded $1,500,000,000 in admitted
assets. Within such limits, the number of directors may be fixed from
time to time by vote of a majority of the whole Board at any regular or
special meeting, except that the first Board, as appointed in the
Charter of the Corporation, shall consist of thirteen directors. The
term of any incumbent director shall not be reduced by any decrease in
the number of directors."
FIFTH: The amendment to the By-Laws set forth in this Certificate of
Amendment has been duly adopted in accordance with the applicable provisions of
Section 803 of the Business Corporation Law of the State of New York by vote of
the Board of Directors followed by the affirmative vote of the holder of all of
the outstanding shares of stock of the Corporation at a meeting of shareholders
duly called and held on the 4th day of September, 1997.
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed and signed this
certificate this 15 day of December, 1997, and affirm, under the penalties of
perjury, that the statements made herein are true and correct.
/s/ D. Allen Loney
---------------------------------
D. Allen Loney, President
/s/ David A. Hopkins
---------------------------------
David A. Hopkins, Secretary
<PAGE> 6
CANADA LIFE INSURANCE COMPANY OF NEW YORK
SECRETARY'S CERTIFICATE
I, David A. Hopkins, Secretary of Canada Life Insurance Company of New
York, a New York corporation (the "Corporation"), hereby certify that:
1. Attached hereto as Exhibit A is a true and correct copy of
resolutions duly adopted by the Board of Directors of the Corporation at a
meeting duly called and held September 4, 1997, at which meeting a quorum of
directors was present and acting throughout, and such resolutions have not been
modified or rescinded and remain in full force and effect on the date hereof,
and no other resolutions have been adopted by the Board of Directors of the
Corporation relating to the subject matter thereof.
2. Attached hereto as Exhibit B is a true and correct copy of
resolutions duly adopted by the sole shareholder of the Corporation at a meeting
duly called and held September 4, 1997, and such resolutions have not been
modified or rescinded and remain in full force and effect on the date hereof,
and no other resolutions have been adopted by the sole shareholder of the
Corporation relating to the subject matter thereof.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
December 15, 1997.
/s/ David A. Hopkins
----------------------------
David A. Hopkins, Secretary
<PAGE> 7
EXHIBIT A
RESOLVED THAT, Section 2 of Article II of the Corporation's By-Laws be
amended to read as follows:
"SECTION 2. Number of Directors. The number of directors constituting the whole
Board shall not be less than thirteen nor more than twenty-one; provided,
however, that if the Corporation has admitted assets of less than
$1,500,000,000, the Board may decrease the number of directors to not less than
nine directors, of which at least four must be Non-Affiliated Directors;
provided, further, however, that in the event that the Corporation has admitted
assets of less than $1,500,000,000 and fewer than thirteen, but at least nine,
directors, the number of directors of the Corporation shall be increased to not
fewer than thirteen within one year following the end of the calendar year in
which the Corporation exceeded $1,500,000,000 in admitted assets. Within such
limits, the number of directors may be fixed from time to time by vote of a
majority of the whole Board at any regular or special meeting, except that the
first Board, as appointed in the Charter of the Corporation, shall consist of
thirteen directors. The term of any incumbent director shall not be reduced by
any decrease in the number of directors."
<PAGE> 8
EXHIBIT B
RESOLVED THAT, Section 2 of Article II of the Corporation's By-Laws be
amended to read as follows:
"SECTION 2. Number of Directors. The number of directors constituting the whole
Board shall not be less than thirteen nor more than twenty-one; provided,
however, that if the Corporation has admitted assets of less than
$1,500,000,000, the Board may decrease the number of directors to not less than
nine directors, of which at least four must be Non-Affiliated Directors;
provided, further, however, that in the event that the Corporation has admitted
assets of less than $1,500,000,000 and fewer than thirteen, but at least nine,
directors, the number of directors of the Corporation shall be increased to not
fewer than thirteen within one year following the end of the calendar year in
which the Corporation exceeded $1,500,000,000 in admitted assets. Within such
limits, the number of directors may be fixed from time to time by vote of a
majority of the whole Board at any regular or special meeting, except that the
first Board, as appointed in the Charter of the Corporation, shall consist of
thirteen directors. The term of any incumbent director shall not be reduced by
any decrease in the number of directors."
<PAGE> 1
EXHIBIT 10(a)
CONSENT OF COUNSEL
<PAGE> 2
[CANADA LIFE LETTERHEAD]
April 28, 1998
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. 8 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/ Charles MacPhaul
- ----------------------
Charles MacPhaul
Counsel, U.S. Division
<PAGE> 1
EXHIBIT 10(b)
CONSENT OF INDEPENDENT COUNSEL
<PAGE> 2
[SUTHERLAND, ASBILL & BRENNAN LLP LETTERHEAD]
April 24, 1998
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. 8 under the Securities Act of 1933 and Amendment
No. 8 under the Investment Company Act of 1940 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
By: /s/ Stephen E. Roth
---------------------------
Stephen E. Roth
<PAGE> 1
EXHIBIT 10(c)
CONSENT OF INDEPENDENT AUDITORS
<PAGE> 2
EXHIBIT 10(c)
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 13, 1998
and February 18, 1998 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 Registration Statement [Form N-4, No. 33-64240]
and related Prospectus of Canada Life of New York Variable Annuity Account 2
[May 1, 1998].
Chartered Accountants
Toronto, Canada
April 24, 1998
<PAGE> 1
EXHIBIT 13
SAMPLE PERFORMANCE DATA CALCULATION
<PAGE> 2
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
CASH MANAGEMENT SELIGMAN PORTFOLIO SUB-ACCOUNT
7-DAY CURRENT YIELD
AS AT DECEMBER 31, 1997
7-Day Current Yield = ((NCS - ES) / UV / 7) x 365)
Where NCS = the net change in the value of the Portfolio (exclusive
of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation, and exclusive of
income other than investment income) for the 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 & Expenses Risk Charges deducted
for the 7-day period
Admin = per unit administration charges deducted for the
7-day period = (30 / AAV / 365) x AUV x 7
Where AAV = Average Accumulated Value of Contracts on the last day of
the 7-day period = $40,000
AUV = the sum of the unit values on the first and last day of
the 7-day period divided by 2
= [ 1.3942 + 1.3953 ] / 2 = 1.39475
UV = the unit value on the first day of the 7 day period.
= 1.3942
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
DATE NCS M&E ADMIN
<S> <C> <C> <C>
Dec. 25 0.000000000 0.000043716
Dec. 26 0.000274000 0.000043716
Dec. 27 0.000429000 0.000131148
Dec. 30 0.000147000 0.000043716
Dec. 31 0.000151000 0.000043716
- ------------------------------------------------------------------------------------------------------------
0.001001 0.000306011 0.000020054 (a) = 0.000675
UV = 1.3942
7 day current yield = ((( .001001 - .000306011 - .000020054 ) / 1.3942)) / 7 x 365
7 DAY CURRENT YIELD = 2.524248017 OR 2.52%
</TABLE>
<PAGE> 3
CANADA LIFE INSURANCE COMPANY OF NEW YORK VARIABLE ANNUITY ACCOUNT 2
CASH MANAGEMENT SELIGMAN PORTFOLIO SUB-ACCOUNT
7-DAY EFFECTIVE YIELD
AS AT DECEMBER 31, 1997
365/7
EFFECTIVE YIELD = [(1 + NCS - ES) / UV) - 1]
Where NCS = NCS as calculated for the current yield
ES = ES as calculated for the current yield
UV = UV as calculated for the current yield
365/7
7-day effective yield: [(((.000675) / 1.3942) + 1) - 1] = 2.56%
---------
<PAGE> 4
CANADA LIFE OF NEW YORK 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)
Total 1 / n
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
= 3480/365 = Cash Management, Income, Bond, Common Stock, Capital Sub-Accounts
= 1703/365 = International Sub-Account
= 1184/365 = Communications and Information, Frontier, Global Smaller Companies Sub-Accounts
= 975/365 = High-Yield Sub-Account
= 609/365 = Global Growth Opportunities and Global Technology Sub-Accounts
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 1997 inception
= 4.5% for 1994, 1995 inception
= 3.6% for 1992, 1993 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
</TABLE>
<PAGE> 5
CASH MANAGEMENT SUB-ACCOUNT
<TABLE>
<S> <C>
ADMIN = (( 30 / 40,000 ) / 365 ) x 3480 x (1,000 + (1,000 x ( 1.3953 -1.0000 )/ 1.0000 / 2))
= 0.0071507 x 1197.65
= 8.56402
ERV = (1,000 x (( 1.3953 - 1.0000) / 1.0000) )+ 1,000 - 8.5640178 - (0.00 x 1,000)
= 1386.74
TOTAL (1 / ( 1.3953 / 365))
RETURN = ( 1386.736/ 1,000 ) - 1
= 3.49%
FRONTIER SUB-ACCOUNT
ADMIN = (( 30 / 40,000 ) / 365 )x 1184 x (1,000 + (1,000 x ( 19.317 -10.0000 ) / 10.0000 / 2))
= 0.0024329 x 1465.855
= 3.56624
ERV = (1,000 x (( 19.3171 - 10.0000) / 10.0000) )+ 1,000 - 3.5662445 - (0.045 x 1,000)
= 1,883.14
TOTAL (1 / ( 1184 / 365))
RETURN = ( 1883.1438/ 1,000 ) - 1
= 21.55%
GLOBAL SMALLER COMPANIES SUB-ACCOUNT
ADMIN = (( 30 / 40,000 ) / 365 ) x 1184 x (1,000 + (1,000 x( 14.167 -10.0000 ) / 10.0000 / 2))
= 0.0024329 x 1020.837
= 2.48357
ERV = (1,000 x (( 14.1673 - 10.0000) / 10.0000) )+ 1,000 - 2.4835693 - ( 0.045 x 1,000)
= 1,369.25
TOTAL (1 / 14.1673 / 365))
RETURN = ( 1369.2464/1,000 ) - 1
= 10.17%
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
HIGH YIELD SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 975 x (1,000 + (1,000 x (13.592 -10.0000 ) / 10.0000 / 2))
= 0.0020034 x 1017.962
= 2.03941
ERV = (1,000 x ((13.5924 - 10.0000/ 10.0000)+ 1,000 - 2.0394102 - (0.054 x 1,000)
= 1,303.20
TOTAL ( 1/( 13.5924 / 365))
RETURN = ( 1303.2006 / 1,000 ) -1
= 10.42%
GLOBAL GROWTH OPPORTUNITIES SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 609 x (1,000 + (1,000 x ( 10.882 -10.0000 ) / 10.0000 / 2))
= 0.0012514 x 1004.411
= 1.25689
ERV = (1,000 x ((10.8821 - 10.0000/ 10.0000)+ 1,000 -1.256889 - ( 0.054 x 1,000)
= 1,032.95
TOTAL (1/ ( 10.8821 / 365))
RETURN = ( 1032.9531 / 1,000 ) -1
= 1.96%
GLOBAL TECHNOLOGIES SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 609 x (1,000 + (1,000 x( 12.113 -10.0000 ) / 10.0000 / 2))
= 0.0012514 x 1010.563
= 1.26459
ERV = (1,000 x (( 12.1126 - 10.0000/ 10.0000)+ 1,000 -1.2645881 - ( 0.05 x 1,000)
= 1,156.00
TOTAL (1/ ( 12.1126 / 365))
RETURN = ( 1155.9954 / 1,000 ) -1
= 9.08%
</TABLE>
<PAGE> 7
<TABLE>
<S> <C>
INCOME SUB-ACCOUNT
ADMIN = (( 30 / 40,000) / 365 ) x 3480 x (1,000 + (1,000 x( 21.45 -10.0000 ) / 10.0000 / 2))
= 0.0071507 x 1057.249
= 7.56005
ERV = (1,000 x ((21.4498 - 10.0000/ 10.0000)+ 1,000- 7.5600545 - ( 0.00 x 1,000)
= 2,137.42
TOTAL (1/ ( 21.4498 / 365))
RETURN = ( 2137.4199 / 1,000 ) -1
= 8.29%
BOND SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 3480 x (1,000 + (1,000 x( 16.334 -10.0000 ) / 10.0000 / 2))
= 0.0071507 x 1031.669
= 7.37714
ERV = (1,000 x ((16.3337 - 10.0000/ 10.0000)+ 1,000- 7.3771364 - ( 0.00 x 1,000)
= 1,625.99
TOTAL (1/ ( 16.3337 / 365))
RETURN = ( 1625.9929 / 1,000 ) -1
= 5.23%
COMMON STOCK SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 3480 x (1,000 + (1,000 x( 32.751 -10.0000 ) / 10.0000 / 2))
= 0.0071507 x 1113.756
= 7.96412
ERV = (1,000 x (( 32.7512 - 10.0000/ 10.0000)+ 1,000- 7.9641182 - ( 0.00 x 1,000)
= 3,267.16
TOTAL (1/ ( 32.7512 / 365))
RETURN = ( 3267.1559 / 1,000 ) -1
= 13.22%
</TABLE>
<PAGE> 8
<TABLE>
<S> <C>
CAPITAL SUB-ACCOUNT
ADMIN = (( 30 / 40,000/ 365 ) x 3480 x (1,000 + (1,000 x( 30.807 -10.0000 ) / 10.0000 / 2))
= 0.007151 x 1104.035
= 7.89461
ERV = (1,000 x(( 30.807 - 10.0000)/ 10.0000)+ 1,000- 7.8946064 - ( 0.00 x 1,000)
= 3,072.81
TOTAL (1/ ( 30.807 / 365))
RETURN = ( 3072.8054 / 1,000 ) -1
= 12.50%
INTERNATIONAL SUB-ACCOUNT
ADMIN = (( 30 / 40,000/ 365 ) x 1703 x (1,000 + (1,000 x( 13.874 -10.0000 ) / 10.0000 / 2))
= 0.003499 x 1019.368
= 3.56709
ERV = (1,000 x (( 13.8736 - 10.0000/ 10.0000)+ 1,000- 3.5670898 - ( 0.04 x 1,000)
= 1,383.79
TOTAL (1/ ( 13.8736 / 365))
RETURN = ( 1383.7929 / 1,000 ) -1
= 7.21%
COMMUNICATION & INFORMATION SUB-ACCOUNT
ADMIN = (( 30 / 40,000/ 365 ) x 1184 x (1,000 + (1,000 x( 18.256 -10.0000 ) / 10.0000 / 2))
= 0.0024329 x 1041.28
= 2.53330
ERV = (1,000 x ((18.2559 - 10.0000/ 10.0000)+ 1,000 -2.5333046 - ( 0.05 x 1,000)
= 1,778.06
TOTAL (1/ ( 18.2559 / 365))
RETURN = ( 1778.0567 / 1,000 ) -1
= 19.41%
</TABLE>
<PAGE> 9
CANADA LIFE OF NEW YORK 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)
Total 1/n
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
= 3480/365 = Cash Management, Income, Bond, Common Stock, Capital Sub-Accounts
= 1703/365 = International Sub-Account
= 1184/365 = Communications and Information, Frontier, Global Smaller Companies Sub-Accounts
= 975/365 = High-Yield Sub-Account
= 609/365 = Global Growth Opportunities and Global Technology Sub-Accounts
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) / BUV) / 2 ))
where AAV = Average Accumulated Value of Contracts on the last day of the period
= $40,000
</TABLE>
<PAGE> 10
<TABLE>
CASH MANAGEMENT SUB-ACCOUNT
<S> <C> <C>
ADMIN = (( 30 / 40,000 / 365 ) 3480 x (1,000+ (1,000 x( 1.3953 -1.0000 ) / 1.0000 / 2))
= 0.0071507 x 1197.65
= 8.56402
ERV = (1,000 x (( 1.3953 - 1.0000/ 1.0000))+ 1,000- 8.5640178
= 1386.74
TOTAL (1/ ( 1.3953 / 365))
RETURN ( 1386.736 / 1,000 ) -1
= 3.49%
FRONTIER SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) 1184 x (1,000+ (1,000 x( 19.317 -10.0000 ) / 10.0000 / 2))
= 0.0024329 x 1046.59
= 2.54621
ERV = (1,000 x (( 19.3171 - 10.000/ 10.0000)+ 1,000- 2.5462135
= 1,929.16
TOTAL (1/ ( 19.3171 / 365))
RETURN = ( 1929.1638 / 1,000 ) -1
= 22.45%
GLOBAL SMALLER COMPANIES SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 1184 x (1,000+ (1,000 x( 14.167 -10.000 ) / 10.0000 / 2))
= 0.0024329 x 1020.84
= 2.48357
ERV = (1,000 x(( 14.1673 - 10.000/ 10.0000)+ 1,000- 2.4835693
= 1,414.25
TOTAL (1/ ( 14.1673 / 365))
RETURN = ( 1414.2464 / 1,000 ) -1
= 11.28%
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C>
HIGH YIELD SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 975 x (1,000+ (1,000x( 13.592-10.000 ) / 10.0000 / 2))
= 0.0020034 x 1017.96
= 2.03941
ERV = (1,000 x ((13.5924 - 10.000 / 10.0000)+ 1,000- 2.0394102
= 1,357.20
TOTAL (1 / ( 13.5924 / 365))
RETURN = ( 1357.2006 / 1,000 ) -1
= 12.11%
GLOBAL GROWTH OPPORTUNITIES SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 609 x (1,000+ (1,000x( 10.882-10.000 ) / 10.0000 / 2))
= 0.0012514 x 1004.41
= 1.25689
ERV = (1,000 x(( 10.8821 - 10.000/ 10.0000)+ 1,000- 1.256889
= 1,086.95
TOTAL (1/ ( 10.8821 / 365))
RETURN = ( 1086.9531 / 1,000 ) -1
= 5.12%
GLOBAL TECHNOLOGIES SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) 609 x (1,000+ (1,000x( 12.113-10.000 ) / 10.0000 / 2))
= 0.0012514 x 1010.56
= 1.26459
ERV = (1,000 x(( 12.1126 - 10.000/ 10.0000)+ 1,000- 1.2645881
= 1,210.00
TOTAL (1/ ( 12.1126 / 365))
RETURN = ( 1209.9954 / 1,000 ) -1
= 12.10%
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
INCOME SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 3480 x (1,000+ (1,000x( 21.45-10.000 ) / 10.0000 / 2))
= 0.0071507 x 1057.25
= 7.56005
ERV = (1,000 x((21.4498 - 10.000/ 10.0000)+ 1,000 - 7.5600545
= 2,137.42
TOTAL (1/ ( 21.4498 / 365))
RETURN = ( 2137.4199/ 1,000 ) -1
= 8.29%
BOND SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 )x 3480 x (1,000+ (1,000x( 16.334-10.000) / 10.0000 / 2))
= 0.0071507 x 1031.67
= 7.37714
ERV = (1,000 x(( 16.3337 - 10.000/ 10.0000)+ 1,000- 7.3771364
= 1,625.99
TOTAL (1/ ( 16.3337 / 365))
RETURN = ( 1625.9929 / 1,000 ) -1
= 5.23%
COMMON STOCK SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365 ) x 3480 x (1,000+ (1,000x ( 32.751-10.000 ) / 10.0000 / 2))
= 0.0071507 x 1113.76
= 7.96412
ERV = (1,000 x ((32.7512 - 10.000/ 10.0000)+ 1,000- 7.9641182
= 3,267.16
TOTAL (1/ ( 32.7512 / 365))
RETURN = ( 3267.1559 / 1,000 ) -1
= 13.22%
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C>
CAPITAL SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365)x 3480 x (1,000+ (1,000x ( 30.807-10.000 ) / 10.0000 / 2))
= 0.0071507 x 1104.04
= 7.89461
ERV = (1,000 x (( 30.807 - 10.000/ 10.0000)+ 1,000- 7.8946064
= 3,072.81
TOTAL (1/ ( 30.807 / 365))
RETURN = ( 3072.8054 / 1,000 ) -1
= 12.50%
INTERNATIONAL SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365)x 1703 x (1,000+ (1,000x( 13.874-10.000 ) / 10.0000 / 2))
= 0.0034993 x 1019.37
= 3.56709
ERV = (1,000 x(( 13.8736 - 10.000/ 10.0000)+ 1,000- 3.5670898
= 1,383.79
TOTAL (1/ (13.8736 / 365))
RETURN = ( 1383.7929 / 1,000 ) -1
= 7.21%
COMMUNICATION & INFORMATION SUB-ACCOUNT
ADMIN = (( 30 / 40,000 / 365)x 1184 x (1,000+ (1,000x( 18.256-10.000 ) / 10.0000 / 2))
= 0.0024329 x 1041.28
= 2.53330
ERV = (1,000 x (( 18.2559 - 10.000/ 10.0000)+ 1,000- 2.5333046
= 1,823.06
TOTAL (1/ ( 18.2559 / 365))
RETURN = ( 1823.0567 / 1,000 ) -1
= 20.34%
</TABLE>
