As filed with the Securities and Exchange Commission on April 19, 1996.
File No. 33-73738
File No. 811-6260
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |_|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 5 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_|
Amendment No. 6 |X|
CENTURY VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
CENTURY LIFE OF AMERICA
(Name of Depositor)
2000 Heritage Way
Waverly, Iowa 50677
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number: (319) 352-4090
Barbara L. Secor, Esquire
2000 Heritage Way
Waverly, Iowa 50677
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b) of Rule 485
|X| on May 1, 1996 pursuant to paragraph (b) of Rule 485
|_| 60 days after filing pursuant to paragraph (a)(i) of Rule 485
|_| on pursuant to paragraph (a)(i) of Rule 485
|_| 75 days after filing pursuant to paragraph (a)(ii)
|_| on pursuant to paragraph (a)(ii) of Rule 485
Pursuant to Rule 24f-2, Registrant registered an indefinite amount of securities
under the Securities Act of 1933. The Rule 24f-2 Notice for Registrant's most
recent fiscal year was filed on February 9 , 1996.
The index to attached exhibits is found following the signature pages after page
[ ].
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Cross Reference Sheet
Pursuant to Rules 481(a) and 495(a)
Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4
PART A
Item of Form N-4 Prospectus Caption
<S> <C>
1. Cover Page Cover Page
2. Definitions Definitions
3. Synopsis Expense Tables; Summary
4. Condensed Financial Information Condensed Financial Information; Yields and Total Returns
5. General
(a) Depositor Century Life of America
(b) Registrant Century Variable Annuity Account
(c) Portfolio Company Ultra Series Fund; T. Rowe Price International Series, Inc.; MFS(R)
Variable Insurance TrustSM; Availability of Funds
(d) Fund Prospectus Ultra Series Fund; T. Rowe Price International Series, Inc.; MFS(R)
Variable Insurance TrustSM; Availability of Funds
(e) Voting Rights Voting Rights
(f) Administrators N/A
6. Deductions and Expenses
(a) General Charges and Deductions; Summary
(b) Sales Load Charges and Deductions; Summary
(c) Special Purchase Plan Purchase Payments; Transfer Privileges
(d) Commissions Distribution of the Contracts
(e) Expenses - Registrant Charges and Deductions; Summary
(f) Fund Expenses Charges and Deductions
(g) Organizational Expenses N/A
7. Contracts
(a) Persons with Rights Summary; Addition, Deletion or Substitution of Investments; Description
of the Contract; Payment Options; Voting Rights; Death Benefit Before
the Annuity Date; Death Benefit After the Annuity Date; Modification;
Election of Annuity Payment Options
(b)(i)Allocation of Purchase Payments Summary; Purchase Payments; Free-Look Period; Allocation of Purchase
Payments
(ii)Transfers Summary; Transfer Privileges
(iii)Exchanges Transfers, Assignments or Exchange of a Contract
(c) Changes Additions, Deletions or Substitutions of Investments; Description of the
Contract; Modification
(d) Inquiries Cover page; Inquiries
8. Annuity Period Summary; Annuity Payment Options
9. Death Benefit Death Benefit Before the Annuity Date; Death Benefit After the Annuity
Date
10. Purchases and Contract Value
(a) Purchases Summary; Issuance of a Contract; Purchase Payments; Free Look Period;
Allocation of Purchase Payments; Variable Contract Value; Transfer
Privileges
(b) Valuation Definitions; Variable Contract Value
(c) Daily Calculation Definitions; Variable Contract Value
(d) Underwriter Issuance of a Contract; Distribution of the Contracts
11. Redemptions
(a) By Owners Summary; Transfer Privilege; Surrenders and Partial Withdrawals; Partial
Withdrawals; Annuity Payments on the Annuity Date; Payments; Annuity
Payment Options; Federal Tax Matters
By Annuitant Summary; Transfer Privilege; Surrenders and Partial Withdrawals;
Proceeds on the Annuity Date; Payments; Annuity Payment Options; Federal
Tax Matters
(b) Texas ORP N/A
(c) Check Delay Payments
(d) Lapse Contract Loans
(e) Free Look Summary; Free Look Period
12. Taxes Summary; Federal Tax Matters
13. Legal Proceedings Legal Proceedings
14. Table of Contents for the
Statement of Additional Information Statement of Additional Information Table of Contents
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<CAPTION>
PART B
Item of Form N-4 Part B Caption
<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History N/A
18. Services
(a) Fees and Expenses of Registrant Charges and Deductions (prospectus)
(b) Management Contracts Termination of Participation Agreements
(c) Custodian N/A
Independent Public Accountant Experts
(d) Assets of Registrant Century Variable Annuity Account (prospectus)
(e) Affiliated Persons Century Life of America (prospectus)
(f) Principal Underwriter Distribution of the Contracts (prospectus)
19. Purchase of Securities Being Offered Distribution of the Contracts (prospectus)
Offering Sales Load N/A
20. Underwriters Distribution of the Contracts (prospectus)
21. Calculation of Performance Data Calculation of Yields and Total Returns; Yields and Total Returns
(prospectus)
22. Annuity Payments Variable Annuity Payments; Annuity Payment Options (prospectus)
23. Financial Statements Financial Statements
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<PAGE>
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<CAPTION>
PART C -- OTHER INFORMATION
Item of Form N-4 Part C Caption
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24. Financial Statements and Exhibits Financial Statements and Exhibits
(a) Financial Statements (a) Financial Statements
(b) Exhibits (b) Exhibits
25. Directors and Officers of the Depositor Directors and Officers of Century Life of America
26. Persons Controlled By or Under Common
Control with the Depositor or Registrant Persons Controlled By or Under Common Control with the Depositor or
Registrant
27. Number of Contractowners Number of Owners
28. Indemnification Indemnification
29. Principal Underwriters Principal Underwriter
30. Location of Accounts and Records Location of Books and Records
31. Management Services Management Services
32. Undertakings Undertakings and Representations
Signature Page Signatures
</TABLE>
<PAGE>
PART A
PROSPECTUS
<PAGE>
TABLE OF CONTENTS
EXPENSE TABLES
DEFINITIONS
SUMMARY
THE CONTRACT
CHARGES AND DEDUCTIONS
ANNUITY PROVISIONS
FEDERAL TAX STATUS
CONDENSED FINANCIAL INFORMATION
CENTURY LIFE OF AMERICA, THE CENTURY VARIABLE ANNUITY ACCOUNT, AND THE
UNDERLYING FUNDS
CENTURY LIFE OF AMERICA
CENTURY VARIABLE ANNUITY ACCOUNT
THE UNDERLYING FUNDS
ULTRA SERIES FUND
Capital Appreciation Stock Fund
Growth and Income Stock Fund
Balanced Fund
Bond Fund
Money Market Fund
T. ROWE PRICE INTERNATIONAL SERIES, INC
International Stock Portfolio
MFS(R) VARIABLE INSURANCE TRUSTSM
MFS(R) World Governments SeriesSM
MFS(R) Emerging Growth SeriesSM
AVAILABILITY OF THE FUNDS
RESOLVING MATERIAL CONFLICTS
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
DESCRIPTION OF THE CONTRACT
ISSUANCE OF A CONTRACT
PURCHASE PAYMENTS
FREE-LOOK PERIOD
ALLOCATION OF PURCHASE PAYMENTS
VARIABLE CONTRACT VALUE
TRANSFER PRIVILEGES
SURRENDERS AND PARTIAL WITHDRAWALS
CONTRACT LOANS
DEATH BENEFIT BEFORE THE ANNUITY DATE
DEATH BENEFIT AFTER THE ANNUITY DATE
ANNUITY PAYMENTS ON THE ANNUITY DATE
PAYMENTS
MODIFICATION
REPORTS TO OWNERS
INQUIRIES
THE GUARANTEED INTEREST OPTION
CATEGORY 1
Guaranteed Interest Option Value
Guarantee Periods
Net Purchase Payment Preservation Program
Interest Adjustment
CATEGORY 2
Guaranteed Interest Option Value
Guarantee Periods
Net Purchase Payment Preservation Program
CATEGORY 3
CATEGORY 4
CHARGES AND DEDUCTIONS
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
ANNUAL CONTRACT FEE
ASSET-BASED ADMINISTRATION CHARGE
TRANSFER PROCESSING FEE
MORTALITY AND EXPENSE RISK CHARGE
FUND EXPENSES
PREMIUM TAXES
OTHER TAXES
ANNUITY PAYMENT OPTIONS
ELECTION OF ANNUITY PAYMENT OPTIONS
FIXED ANNUITY PAYMENTS
VARIABLE ANNUITY PAYMENTS
DESCRIPTION OF ANNUITY PAYMENT OPTIONS
YIELDS AND TOTAL RETURNS
FEDERAL TAX MATTERS
INTRODUCTION
TAX STATUS OF THE CONTRACT
TAXATION OF ANNUITIES
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
WITHHOLDING
MULTIPLE CONTRACTS
TAXATION OF QUALIFIED PLANS
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
OTHER TAX CONSEQUENCES
DISTRIBUTION OF THE CONTRACTS
LEGAL PROCEEDINGS
VOTING RIGHTS
COMPANY HOLIDAYS
FINANCIAL STATEMENTS
<PAGE>
CENTURY LIFE OF AMERICA PROSPECTUS
2000 Heritage Way, Waverly, Iowa 50677
(319) 352-4090 (800) 798-5500 May 1, 1996
This Prospectus describes the individual flexible premium deferred
variable annuity contract, (the "Contract") being offered by Century Life of
America (the "Company"). The Contract may be sold to or in connection with
retirement plans, including those that qualify for special federal tax treatment
under the Code.
Purchase payments and Contract Values are allocated, as designated by
the Owner, to one or more of the Subaccounts of the Century Variable Annuity
Account (the "Variable Account"), or to the Guaranteed Interest Option, or to
both. The assets of each Subaccount will be invested solely in a corresponding
portfolio of Ultra Series Fund, T. Rowe Price International Series, Inc., or
MFS(R) Variable Insurance TrustSM ("MFS Variable Insurance Trust"). The
accompanying prospectuS for the Ultra Series Fund describes its portfolios or
Funds -- the Capital Appreciation Stock Fund, the Growth and Income Stock Fund,
the Balanced Fund, the Bond Fund and the Money Market Fund. The accompanying
prospectus for T. Rowe Price International Series, Inc. describes its
International Stock Portfolio and the accompanying prospectus for MFS Variable
Insurance Trust describes its MFS(R) World Governments SeriesSM ("MFS World
Governments Series") and MFS(R) Emerging GroWth Series SM ("MFS Emerging Growth
Series"). The Contract Value of the Contracts prior to the Annuity Date, except
for amounts in the Guaranteed Interest Option, will vary according to the
investment performance of the portfolios or Funds in which the selected
Subaccounts are invested. The Owner bears the entire investment risk on amounts
allocated to the Variable Account.
This Prospectus sets forth basic information about the Contract and the
Variable Account that a prospective investor should know before investing.
Additional information about the Contract and the Variable Account is contained
in the Statement of Additional Information which has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
table of contents for the Statement of Additional information is on page 40 of
this Prospectus. You may obtain a copy of the Statement of Additional
Information (dated May 1, 1996, as supplemented from time to time) free of
charge by writing to or calling the Company at the address or telephone 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 ULTRA SERIES
FUND, T. ROWE PRICE INTERNATIONAL SERIES, INC., AND MFS VARIABLE INSURANCE
TRUST.
UNLIKE CREDIT UNION AND BANK ACCOUNTS, CONTRACT VALUE INVESTED IN THE VARIABLE
ACCOUNT IS NOT INSURED. INVESTMENT OF CONTRACT VALUE IN THE VARIABLE ACCOUNT
INVOLVES CERTAIN RISKS INCLUDING LOSS OF PURCHASE PAYMENTS (PRINCIPAL). VARIABLE
CONTRACT VALUE IS NOT DEPOSITED IN OR GUARANTEED BY ANY CREDIT UNION OR BANK AND
IS NOT GUARANTEED BY ANY GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
EXPENSE TABLES
The following expense information assumes that the entire Contract
Value is Variable Contract Value.
Owner Transaction Expenses
Sales Charge Imposed on Purchase Payments None
Maximum Surrender Charge (contingent
deferred sales charge) as a percentage
of purchase payments 7%
Transfer Processing Fee None*
Annual Contract Fee $30**
Variable Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge 1.25%
Other Variable Account Expenses 0.15%
Total Variable Account Expenses 1.40%
Annual Fund Expenses
(as percentage of average net assets)
Capital Appreciation
Stock Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses After Reimbursement 0.15%
Total Annual Fund Expenses 0.65%
(after reimbursements)
* The Company reserves the right to charge a $10 transfer fee on each transfer
after the first 12 transfers in any Contract Year. (See "Charges and
Deductions.")
**TheCompany does not deduct the annual Contract fee if the Contract Value is
$25,000 or more. (See "Annual Contract Fee.")
<PAGE>
Growth and Income Stock Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses After Reimbursement 0.15%
Total Annual Fund Expenses 0.65%
(after reimbursements)
Balanced Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses After Reimbursement 0.15%
Total Annual Fund Expenses 0.65%
(after reimbursements)
Bond Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses After Reimbursement 0.15%
Total Annual Fund Expenses 0.65%
(after reimbursements)
Money Market Fund
Management Fees (investment advisory fees) 0.50%
Other Expenses After Reimbursement 0.15%
Total Annual Fund Expenses 0.65%
(after reimbursements)
International Stock Portfolio
Management Fees (investment advisory fees) 1.05%
Other Expenses .00%
Total Annual Fund Expenses 1.05%
(after reimbursements)
MFS World Governments Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after reimbursements) 0.25%
Total Annual Fund Expenses 1.00%
(after reimbursements)
MFS Emerging Growth Series
Management Fees (investment advisory fees) 0.75%
Other Expenses (after reimbursements) 0.25%
Total Annual Fund Expenses 1.00%
(after reimbursements)
Premium taxes may be applicable, depending on the laws of various
jurisdictions.
The above tables are intended to assist the Owner in understanding the
costs and expenses that he or she will bear directly or indirectly. The tables
reflect the expenses anticipated for the Variable Account and for each of the
underlying Funds available as investment options for the 1995 fiscal year. For a
more complete description of the various costs and expenses see "Charges and
Deductions" and the prospectuses for the Ultra Series Fund, the T. Rowe Price
International Series, Inc. and the MFS Variable Insurance Trust which accompany
this Prospectus.
The annual expenses listed for all of the Funds of the Ultra Series
Fund are net of certain reimbursements by the Company. Pursuant to an expense
reimbursement agreement, the Company has agreed to absorb all ordinary business
expenses for each Fund that exceed .65% of the Fund's average daily net assets
for the period May 1, 1996 to May 1, 1997. The expense reimbursement agreement
is renewable on an annual basis. There is no guarantee that the agreement will
be renewed. If it is not renewed, the percent of the Funds' average daily net
assets paid as expenses may increase. Absent the expense reimbursements, the
Funds' total expenses for the 1995 fiscal year would have been: Capital
Appreciation Stock .75%, Growth and Income Stock .69%, Balanced .68%, Bond .68%
and Money Market .73%.
The annual expenses listed for the MFS World Governments Series are net
of certain reimbursements by its investment adviser. The investment adviser has
agreed to bear, subject to reimbursement, until December 31, 2004, expenses of
the World Governments Series such that the Series' aggregate operating expenses
do not exceed 1.00%, on an annualized basis, of its average daily net assets.
See "Information Concerning Shares of The Series - Expenses" in the prospectus
of the MFS World Governments Series. Absent this expense arrangement, the "Other
Expenses" and the "Total Annual Fund Expenses" shown above would be 1.24% and
1.99%, respectively.
The annual expenses for the MFS Emerging Growth Series are net of
certain reimbursements by its investment adviser. The investment adviser has
agreed to bear, subject to reimbursement, expenses of the Emerging Growth Series
such that the Series' aggregate operating expenses shall not exceed on an
annualized basis, 1.00% of the average daily net assets of the Series from
November 2, 1994 through December 31, 1996, 1.25% of the average daily net
assets of the Series from January 1, 1997 through December 31, 1998, and 1.50%
of the average daily net assets of the Series from January 1, 1999 through
December 31, 2004. See "Information Concerning Shares of The Series - Expenses"
in the prospectus of the MFS Emerging Growth Series. Absent this expense
arrangement, the "Other Expenses" and the "Total Annual Fund Expenses" shown
above would be 2.16% and 2.91%, respectively.
<PAGE>
Examples
An Owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:
1. If the Contract is surrendered (or annuitized under annuity option 1) at
the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
Capital Appreciation $87 $118 $153 $269
Growth and Income 87 118 153 269
Balanced 87 118 153 269
Bond 87 118 153 269
Money Market 87 118 153 269
International Stock 91 130 172 308
MFS World Governments 90 129 170 303
MFS Emerging Growth 90 129 170 303
2. If the Contract is not surrendered (or annuitized under annuity options 2 -
4) at the end of the applicable time period:
Subaccount 1 Year 3 Years 5 Years 10 Years
- ---------- ------ ------- ------- --------
Capital Appreciation $24 $73 $126 $269
Growth and Income 24 73 126 269
Balanced 24 73 126 269
Bond 24 73 126 269
Money Market 24 73 126 269
International Stock 28 85 145 308
MFS World Governments 27 84 143 303
MFS Emerging Growth 27 84 143 303
The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples also assume that the annual contract fee
is $30 and that the average Contract Value is $10,000, which translates the
contract fee into an assumed .30% charge for the purposes of the examples based
on a $1,000 investment.
The examples should not be considered a representation of past or
future expenses. The assumed 5% annual rate of return is hypothetical and should
not be considered a representation of past or future annual returns, which may
be greater or less than this assumed rate.
<PAGE>
DEFINITIONS
Accumulation Unit A unit of measure used to calculate Variable Contract Value.
Annuitant The person or persons whose life (or lives)
determines the annuity payment benefits payable under
the Contract and whose death determines the death
benefit. The maximum number of joint Annuitants is
two and provisions referring to the death of an
Annuitant mean the death of the last surviving
Annuitant.
Annuity Date The date when the adjusted Contract Value will be
applied under an annuity payment option, if the
Annuitant is still living.
Annuity Unit A unit of measure used to calculate variable annuity
payments.
Beneficiary The person to whom the proceeds payable on the death
of an Annuitant will be paid.
Code The Internal Revenue Code of 1986, as amended.
Company Century Life of America.
Contract The same date in each Contract Year as the Contract
Anniversary Date.
Contract Date The date set forth on the specifications page of the
Contract which is used to determine Contract Years
and Contract Anniversaries.
Contract Year A twelve-month period beginning on the Contract Date
or on a Contract Anniversary.
Contract Value The total amount invested under the Contract.
It is the sum of the Variable Contract Value, the
Guaranteed Interest Option Value and the balance of
the Loan Account.
Due Proof of Death Proof of death satisfactory to the
Company. Such proof may consist of the following if
acceptable to the Company:
(a) a certified copy of the death record;
(b) a certified copy of a court decree reciting
a finding of death;
(c) any other proof satisfactory to the Company.
Fund An investment portfolio (sometimes called a series)
of Ultra Series Fund, T. Rowe Price International
Series, Inc. or MFS Variable Insurance Trust or any
other open-end management investment company or unit
investment trust in which a Subaccount invests.
General Account The assets of the Company other than those allocated
to the Variable Account or any other separate account
of the Company.
Guarantee Amount Any portion of Guaranteed Interest Option
value allocated to a particular Guarantee Period with
a particular expiration date (including interest
thereon) less any withdrawals therefrom.
Guarantee Period A specific number of years for which the Company
agrees to credit a particular effective annual
interest rate.
Guaranteed Interest An allocation option under the Contract Funded by the
Option Company's General Account. It is not part of nor
dependent upon the investment performance of the
Variable Account.
Guaranteed Interest The value of the Contract in the Guaranteed Interest
Option Value Option .
Home Office The Company's principal office at 2000 Heritage Way,
Waverly, Iowa 50677.
Loan Account For any Contract, a portion of the Company's
General Account to which Contract Value is
transferred to provide collateral for any loan taken
under the Contract.
Loan Amount At any time other than a Contract Anniversary,
the Contract Value in the Loan Account plus any
interest charges accrued on such Contract Value up to
that time.
Net Purchase A purchase payment less any premium taxes deducted
Payment from purchase payments.
Non-Qualified A Contract that is not a "Qualified Contract."
Contract
Owner The person(s) who owns the Contract and who is
entitled to exercise all rights and privileges
provided in the Contract.
Payee The Annuitant(s) during the annuity period.
Qualified Contract A Contract that is issued in connection with
retirement plans that qualify for special federal
income tax treatment under Sections 401, 403(b), 408,
or 457 of the Code.
SEC The U.S. Securities and Exchange Commission.
Subaccount A subdivision of the Variable Account, the assets of
which are invested in a corresponding underlying
Fund.
Surrender Value The Contract Value plus the value of any paid
up annuity additions plus or minus any applicable
interest adjustment, less any applicable surrender
charges, premium taxes not previously deducted, and
the annual Contract fee and loan amount.
Valuation Day For each Subaccount, each day on which the New
York Stock Exchange is open for business except for
the holidays listed in the Prospectus under
"Holidays" and any day that a Subaccount's
corresponding Fund does not value its shares.
Valuation Period The period that starts at 3:00 p.m. central time on
one Valuation Day and ends at 3:00 p.m. on the next
succeeding Valuation Day.
Variable Account Century Variable Annuity Account.
Variable Contract The value of the Contract in the Variable Account.
Value
Written Notice A Written Notice or request in a form satisfactory to
the Company which is signed by the Owner and received
at the Home Office.
<PAGE>
SUMMARY
The Contract
Issuance of a Contract. Contracts may be issued in connection with
retirement plans that may or may not qualify for special federal tax treatment
under the Code. (See "Issuance of a Contract.") Neither the Owner nor the
Annuitant may be older than 85 on the Contract Date.
Free-Look Period. The Owner has the right to return the Contract within
10 days after he or she receives it. The returned Contract will become void. The
Company will return to the Owner an amount equal to the Contract Value on the
date the Contract is received at the Home Office (or by the sales representative
who sold it) plus any premium taxes deducted. Where required, the Company will
instead return the purchase payment(s). (See "Free-Look Period.")
Purchase Payments. The minimum amount required to purchase a Contract
depends upon several factors. In general, $5,000 is the minimum purchase amount
the Company must receive within the first 12 months of the Contract. However,
certain Qualified Contracts, Section 1035 Contracts, and Contracts sold to
employees have lower minimum purchase amounts, as explained in the "Purchase
Payments" section. Unless the minimum purchase amount is paid in full at the
time of application, an automatic purchase payment plan must be established and
regular payments scheduled to pay the minimum purchase amount before the first
anniversary of the Contract. The minimum size of a purchase payment is $100,
unless the payment is made through an automatic purchase payment plan in which
case the minimum size is $25. (See "Purchase Payments.")
Allocation of Purchase Payments. Purchase payments under a Contract
will be allocated, as designated by the Owner, to one or more of the Subaccounts
of the Variable Account or to the Guaranteed Interest Option or to both. An
allocation to a Subaccount must be in whole percentages and be at least 5% of
the purchase payment. An allocation to the Guaranteed Interest Option must be at
least $1,000. In states where the Company must refund purchase payments in the
event the Owner exercises the free-look right, any portion of the initial Net
Purchase Payment to be allocated to a Subaccount will be allocated to the Money
Market Subaccount for a 20-day period following the Contract Date. At the end of
that period, the amount in the Money Market Subaccount will be allocated to the
Subaccounts as selected by the Owner. The assets of each Subaccount will be
invested solely in a corresponding underlying Fund. The Contract Value, except
for amounts in the Guaranteed Interest Option, will vary according to the
investment performance of the Fund(s) in which the selected Subaccount(s) is
invested. Interest will be credited to amounts in the Guaranteed Interest Option
at a guaranteed minimum rate of 3% per year, or a higher current interest rate
declared by the Company. (See "Allocation of Purchase Payments.")
Transfers. On or before the Annuity Date, the Owner may transfer all or
part of the amount in a Subaccount or the Guaranteed Interest Option to another
Subaccount or the Guaranteed Interest Option subject to certain restrictions.
Transfers to the Guaranteed Interest Option must be at least $1,000.
Transfers out of the Guaranteed Interest Option are only permitted during the
30-day period prior to the expiration of a Guarantee Period. No fee is charged
for transfers but the Company reserves the right to charge $10 for the 13th and
each subsequent transfer during a Contract Year.
(See "Transfer Privilege.")
Partial Withdrawal. The Owner may, by Written Notice, withdraw part of
the Surrender Value subject to certain limitations. (See "Partial Withdrawals.")
Surrender. Upon Written Notice on or before the Annuity Date, the Owner
may surrender the Contract and receive its Surrender Value. (See "Surrender.")
Charges and Deductions
The following charges and deductions are assessed under the Contract:
Surrender Charge (Contingent Deferred Sales Charge). No charge for
sales expenses is deducted from purchase payments at the time purchase payments
are paid. However, a surrender charge is deducted upon surrender or partial
withdrawal of purchase payments within 7 years of their being paid and, in
certain circumstances, upon payment of a death benefit or the election of
certain annuity payment options.
For purchase payments withdrawn or surrendered within one year of
having been paid, the charge is 7% of the amount of the payment withdrawn or
surrendered. For each purchase payment, the surrender charge decreases by 1% for
each full year that has elapsed since the payment was made. No surrender charge
is assessed upon the withdrawal or surrender of Contract Value in excess of
aggregate purchase payments or on purchase payments made more than 7 years prior
to the withdrawal or surrender. (See "Charges for Surrender or Partial
Withdrawals.")
Subject to certain restrictions, for the first partial withdrawal (or
surrender) in each Contract Year, an amount equal to 10% of aggregate purchase
payments subject to a surrender charge (as of the time of withdrawal or
surrender) may be surrendered without a surrender charge. (See "Amounts Not
Subject to Surrender Charge.") The surrender charge also may be waived in
certain circumstances as provided in the Contracts. (See "Waiver of Surrender
Charge.")
Annual Contract Fee. The Company deducts an annual Contract fee of $30.
(This fee is waived if the Contract Value exceeds $25,000.) Prior to the Annuity
Date, the Company deducts this fee from the Contract Value on each Contract
Anniversary (or upon surrender of the Contract). After the Annuity Date, the
Company deducts this fee from variable annuity payments. A pro-rated portion of
the fee is deducted upon annuitization of a Contract except on a Contract
Anniversary. (See "Annual Contract Fee.")
Mortality and Expense Risk Charge. The Company deducts a daily
mortality and expense risk charge to compensate it for assuming certain
mortality and expense risks. The charge is deducted from the assets of the
Variable Account at a rate of 0.003425% per day which is an annual rate of 1.25%
(approximately 0.85% for mortality risk and 0.40% for expense risk).
(See "Mortality and Expense Risk Charge.")
Asset-Based Administration Charge. The Company deducts a daily
administration charge to compensate it for certain expenses it incurs in
administration of the Contract. The charge is deducted from the assets of the
Variable Account at an annual rate of 0.15%. (See "Asset-Based Administration
Charge.")
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted either: (a) from purchase payments as they are
received, (b) from Contract Value upon surrender or partial withdrawal, (c) upon
application of adjusted Contract Value to an annuity payment option, or (d) upon
payment of a death benefit. The Company, however, reserves the right to deduct
premium taxes at the time it pays such taxes. (See "Premium Taxes.")
Annuity Provisions
The Owner selects the Annuity Date. For Non-Qualified Contracts, the
Annuity Date may not be after the later of the Contract Anniversary following
the Annuitant's 85th birthday or 10 years after the Contract Date. For Qualified
Contracts, the Annuity Date must be no later than the Annuitant's age 70 1/2 or
any other date meeting the requirements of the Code. The Owner may change the
Annuity Date as described in the "Annuity Payments on the Annuity Date" section.
On the Annuity Date, the Contract Value (adjusted as described below)
will be applied to an annuity payment option, unless the Owner chooses to
receive the Surrender Value in a lump sum. Adjusted Contract Value is Contract
Value less applicable premium tax not yet deducted, less a pro-rated portion of
the annual Contract fee, plus or minus any applicable interest adjustment, and
(for annuity option 1) less any applicable surrender charge. (See "Annuity
Payment Options.")
Federal Tax Status
Generally, a distribution (including a surrender, partial withdrawal or
death benefit payment) may result in taxable income. In certain circumstances, a
10% penalty tax may apply. For a further discussion of the federal income status
of variable annuity contracts, see "Federal Tax Status."
CONDENSED FINANCIAL INFORMATION
The following information is a part of the financial statements of the
Variable Account. The financial statements have been examined by KPMG Peat
Marwick LLP and are included in the Statement of Additional Information. The
table below gives per unit information about the financial history of each
Subaccount for the fiscal year ended December 31, 1994 and 1995.
<TABLE>
<CAPTION>
Capital Appreciation Growth and Income Stock
Stock Subaccount Subaccount Balanced Subaccount Bond Subaccount
1995 1994 1995 1994 1995 1994 1995 1994
Net asset value:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $10.00 $10.00 $9.82 $10.00 $9.89 $10.00 $9.89 $10.00
End of period 12.90 10.00 12.76 9.82 11.92 9.89 11.36 9.89
Percentage
increase in unit 29.00% 0.00% 29.94% (1.80)% 20.53% (1.10)% 14.86% (1.10)%
value during period
Number of units 2,024,589 324,922 2,807,876 593,599 2,698,049 664,679 556,749 127,666
outstanding at end
of period
Money Market Subaccount International Stock Subaccount World Governments Subaccount
: 1995 1994 1995 1994 1995 1994
==== ==== ==== ==== ==== ====
Net asset value
Beginning of period $10.16 $10.00 $9.99 $10.00 $10.01 $10.00
End of period 10.55 10.16 10.96 9.99 11.29 10.01
Percentage
increase in unit 3.84% 1.60% 9.71% (0.10)% 12.79% 0.10%
value during period
Number of units 637,911 257,622 1,090,681 326,923 505,990 186,155
outstanding at end
of period
</TABLE>
<PAGE>
CENTURY LIFE OF AMERICA,
THE CENTURY VARIABLE ANNUITY ACCOUNT, AND
THE UNDERLYING FUNDS
Century Life of America, the Company, is the insurer. Century Variable
Annuity Account, the Variable Account, is a separate account of the Company.
Three registered investment companies of the series type serve as underlying
investment options for the Variable Account.
Century Life of America
Century Life of America is a mutual life insurance company organized
under the laws of Iowa in 1879 and incorporated on June 21, 1882. The Home
Office of the Company is located at 2000 Heritage Way, Waverly, Iowa 50677. The
Company organized as a fraternal benefit society with the name "Mutual Aid
Society of the Evangelical Lutheran Synod of Iowa and Other States," changed its
name to "Lutheran Mutual Aid Society" in 1911, and reorganized as a mutual life
insurance company called "Lutheran Mutual Life Insurance Company" on January 1,
1938. On December 28, 1984, the Company changed its name again to "Century Life
of America." In February 1996, the Board of Directors of the Company recommended
that the Company name be changed to CUNA Mutual Life Insurance Company. The
recommended name change will be voted on by policyholders May 10, 1996. If
approved, the new name will become effective no later than July 1, 1997.
On July 1, 1990, the Company entered into a permanent affiliation with
CUNA Mutual Insurance Society ("CUNA Mutual"), 5910 Mineral Point Road, Madison
WI 53705. The terms of an Agreement of Permanent Affiliation provide for
extensive financial sharing between the Company and CUNA Mutual of individual
life insurance business through reinsurance arrangements, the joint development
of business plans and distribution systems for individual insurance and other
financial service products within the credit union system, and the sharing of
certain resources and facilities. At the current time, all of the directors of
the Company are also directors of CUNA Mutual and many of the senior executive
officers of the Company hold similar positions with CUNA Mutual. The
affiliation, however, is not a merger or consolidation. Both companies remain
separate corporate entities and their respective Owners retain their voting
rights.
As of December 31, 1995, the Company had more than $2.6 billion in
assets and more than $12 billion of life insurance in force. Effective April 15,
1996 , A.M. Best rated the Company A (Excellent). Effective November 13, 1995,
Duff & Phelps rated the Company AA. These are the most recent ratings available
as of the date of this Prospectus. Periodically, the rating agencies issue new
ratings. To obtain updated ratings, contact the Company at the address and
telephone number shown on the first page of this Prospectus.
The objective of Best's rating system is to evaluate the factors
affecting overall performance of an insurance company and then provide an
opinion of a company's financial strength and ability to meet its contractual
obligations relative to other companies in the industry. The evaluation includes
both quantitative and qualitative analysis of a company's financial and
operating performance.
Duff & Phelps Credit Rating Co. rates insurance companies on their
claims paying abilities. It bases these ratings on its assessment of the
economic fundamentals of the company's principal lines of business, the
company's competitive position, the company's management capability, the
relationship of the company to its affiliates and the company's asset and
liability management practices.
The Company owns Century Life Insurance Company and a one-half
interest in Century Investment Management Co. (the investment adviser to the
Ultra Series Fund). CUNA Mutual owns CUNA Mutual Investment Corporation, 5910
Mineral Point Road, Madison, Wisconsin, 53705. CUNA Mutual Investment
Corporation owns CUNA Brokerage Services, Inc. (the principal underwriter for
the Variable Account) and owns a one-half interest in Century Investment
Management Co. (the Investment Adviser to the Ultra Series Fund).
Century Variable Annuity Account
The Variable Account was established by the Company as a separate
account on December 14, 1993. The Variable Account will receive and invest Net
Purchase Payments made under the Contracts. In addition, the Variable Account
may receive and invest purchase payments for other variable annuity contracts
issued in the future by the Company.
Although the assets in the Variable Account are the property of the
Company, the assets in the Variable Account attributable to the Contracts are
not chargeable with liabilities arising out of any other business which the
Company may conduct. The assets of the Variable Account are available to cover
the general liabilities of the Company only to the extent that the Variable
Account's assets exceed its liabilities arising under the Contracts and any
other contracts supported by the Variable Account. The Company has the right to
transfer to the General Account any assets of the Variable Account which are in
excess of reserves and other Contract liabilities. All obligations arising under
the Contracts are general corporate obligations of the Company.
The Variable Account is divided into Subaccounts. In the future, the
number of Subaccounts may change. Each Subaccount invests exclusively in shares
of a single corresponding Fund. The income, gains and losses, realized or
unrealized, from the assets allocated to each Subaccount are credited to or
charged against that Subaccount without regard to income, gains or losses from
any other Subaccount.
The Variable Account has been registered with 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.
Registration with the SEC does not involve supervision of the management or
investment practices or policies of the Variable Account or of the Company by
the SEC. The Variable Account is also subject to the laws of the State of Iowa
which regulate the operations of insurance companies domiciled in Iowa.
The Underlying Funds
The Variable Account invests in shares of the Ultra Series Fund, the T.
Rowe Price International Series, Inc., and MFS Variable Insurance Trust . Each
is a management investment company of the series type with one or more
investment portfolios or Funds. Each is registered with the SEC as an open-end,
management investment company. Such registration does not involve supervision of
the management or investment practices or policies of the companies or their
Funds by the SEC.
The Ultra Series Fund currently has five Funds available as investment
options under the Contracts, the T. Rowe Price International Series, Inc. has
one Fund available as an investment option under the Contracts, and the MFS
Variable Insurance Trust has two Funds available as investment options under the
Contracts. Ultra Series Fund and MFS Variable Insurance Trust also have other
Funds that are not available under the Contracts. All three investment companies
may, in the future, create additional Funds that may or may not be available as
investment options under the Contracts. Each Fund has its own investment
objective and the income, gains and losses for each Fund are determined
separately for that Fund.
The investment objectives and policies of each Fund are summarized
below. There is no assurance that any Fund will achieve its stated objectives.
More detailed information, including a description of risks and expenses, may be
found in the prospectuses for the Ultra Series Fund, the T. Rowe Price
International Series, Inc. and the MFS Variable Insurance Trust which must
accompany or precede this Prospectus and which should be read carefully and
retained for future reference.
Ultra Series Fund
Ultra Series Fund currently has five Funds available as investment
options under the Contracts.
Capital Appreciation Stock Fund. This Fund seeks a high level of
long-term growth of capital. It pursues this objective by investing in
common stocks, including those of smaller companies and of companies
undergoing significant change.
Growth and Income Stock Fund. This Fund seeks long-term growth of
capital with income as a secondary consideration. It pursues this
objective by investing in common stocks of companies with financial and
market strengths and long-term records of performance.
Balanced Fund. This Fund seeks a high total return through the
combination of income and capital growth. It pursues this objective by
investing in the types of common stocks owned by the Capital
Appreciation Stock Fund and the Growth and Income Stock Fund, the type
of bonds owned by the Bond Fund, and the type of money market
instruments owned by the Money Market Fund.
Bond Fund. This Fund seeks a high level of current income, consistent
with the prudent limitation of investment risk, through investment in a
diversified portfolio of fixed-income securities with maturities of up
to 30 years.
It principally invests in securities of intermediate term maturities.
Money Market Fund. This Fund seeks the highest current income available
from money market instruments consistent with preservation of capital
and liquidity. An investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. Government. There can be no
assurance that the Money Market Fund will be able to maintain a stable
net asset value of $1.00 per share.
Century Investment Management Co. ("CIMCO") serves as investment
adviser to the Ultra Series Fund and manages its assets in accordance
with general policies and guidelines established by the Trustees of the
Ultra Series Fund. One half of CIMCO's outstanding common stock is
owned by the Company and one half indirectly by CUNA Mutual.
T. Rowe Price International Series, Inc.
T. Rowe Price International Series, Inc. currently has one investment
portfolio or Fund available as an investment option under the Contracts.
International Stock Portfolio. This Fund seeks long-term growth of
capital through investments primarily in common stocks of established, non-U.S.
companies.
Rowe Price-Fleming International, Inc. ("RPFI") serves as the
investment adviser to the International Stock Portfolio and manages its assets
in accordance with general policies and guidelines established by the board of
directors of the T. Rowe Price International Series, Inc. RPFI was founded in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
MFS Variable Insurance Trust
The MFS Variable Insurance Trust currently has two investment series or
Funds available as investment options under the Contracts.
MFS World Governments Series. This Fund seeks not only preservation,
but also growth of capital, together with moderate current income.
MFS Emerging Growth Series. This Fund seeks long-term growth of capital
through investments primarily in equity securities of emerging growth companies.
Massachusetts Financial Services Company ("MFS") serves as the
investment adviser to the MFS World Governments Series and MFS Emerging Growth
Series and manages its assets in accordance with general policies and guidelines
established by the board of trustees of the MFS Variable Insurance Trust. MFS is
a subsidiary of Sun Life Assurance Company of Canada (U.S.) which, in turn, is a
wholly owned subsidiary of Sun Life Assurance Company of Canada.
Availability of the Funds
The Variable Account purchases shares of the International Stock
Portfolio, the MFS World Governments Series and the MFS Emerging Growth Series
in accordance with two participation agreements. One is between the Company and
the T. Rowe Price International Series, Inc. One is between the Company and MFS
Variable Insurance Trust. The termination provisions of these agreements vary. A
summary of the termination provisions of these agreements may be found in the
Statement of Additional Information.
If a participation agreement terminates, the Variable Account may not
be able to purchase additional shares of the Fund(s) covered by that agreement.
Likewise, in certain circumstances, it is possible that shares of a Fund may not
be available to the Variable Account even if the participation agreement
relating to that Fund has not been terminated. In either event, Owners will no
longer be able to allocate purchase payments or transfer Contract Value to the
Subaccount investing in that Fund.
Resolving Material Conflicts
Ultra Series Fund. Currently, the Ultra Series Fund sells shares only
to the Variable Account and to separate accounts of the Company supporting
individual variable life insurance contracts and variable annuity contracts sold
solely in connection with qualified retirement plans. The Ultra Series Fund may
in the future sell shares to other separate accounts of the Company (and its
life insurance company affiliates), supporting variable products and to variable
life insurance and annuity separate accounts of insurance companies not
affiliated with the Company. Currently, the Company does not foresee any
disadvantages to Owners arising from the sale of shares to support its variable
life insurance contracts or qualified plan variable annuity contracts or that
would arise if the Ultra Series Fund were to offer its shares to support
products other than the Contracts or such variable life insurance contracts or
qualified plan variable annuity contracts. However, the management of the Ultra
Series Fund will monitor events in order to identify any material irreconcilable
conflicts that might possibly arise (1) as a result of the Ultra Series Fund
offering its shares to support both the Contracts and such variable life
insurance contracts and qualified plan variable annuity contracts, or (2) as a
result of the Ultra Series Fund offering its shares to support products other
than the Contracts or such variable life insurance contracts and qualified plan
variable annuity contracts. In the event of such a conflict, the Company would
determine what action, if any, should be taken in response to the conflict. In
addition, if the Company believes that Ultra Series Fund's response to any such
conflict insufficiently protects Owners, it will take appropriate action on its
own, including withdrawing the Variable Account's investment in the Ultra Series
Fund. (The Ultra Series Fund Prospectus also addresses the material conflicts
issue.)
The T. Rowe Price International Series, Inc. and the MFS Variable
Insurance Trust. The T. Rowe Price International Series, Inc. currently sells
shares of the International Stock Portfolio to the Variable Account and to
separate accounts of life insurance companies not affiliated with the Company to
support other variable annuity contracts. The MFS Variable Insurance Trust
currently sells shares of its MFS World Governments Series and its MFS Emerging
Growth Series to the separate accounts of the Company for variable annuity
Contracts and for variable universal life insurance Contracts, and to separate
accounts of life insurance companies not affiliated with the Company to support
other variable annuity contracts (and to MFS as a seed money investment). Shares
of the International Stock Portfolio, the MFS World Governments Series, and the
MFS Emerging Growth Series may in the future be sold to other separate accounts
of the Company and shares of the MFS World Governments Series, and the MFS
Emerging Growth Series may in the future be sold to separate accounts of other
affiliated or unaffiliated life insurance companies to support other variable
annuity or variable life insurance contracts. Shares of the MFS World
Governments Series, and the MFS Emerging Growth Series also may in the future be
sold to qualified retirement plans.
Currently, the Company does not foresee any disadvantages to Owners
arising from the sale of such shares to support variable life insurance
contracts or variable annuity contracts of other companies or to qualified
retirement plans. However, the management of the T. Rowe Price International
Series, Inc. and the MFS Variable Insurance Trust will each monitor events
related to their Funds in order to identify any material irreconcilable
conflicts that might possibly arise as a result of the a Fund's offering its
shares to (1) support both variable life insurance Contracts and variable
annuity Contracts, or (2) support the variable life insurance contracts and/or
variable annuity contracts issued by various unaffiliated insurance companies.
In addition, the management of the MFS Variable Insurance Trust will monitor the
Trust in order to identify any material irreconcilable conflicts that might
possibly arise as a result of the sale of its shares to qualified retirement
plans. In the event of such a conflict, the management of the appropriate Fund
would determine what action, if any, should be taken in response to the
conflict. In addition, if the Company believes that the response of the T. Rowe
Price International Series, Inc. or the MFS Variable Insurance Trust to any such
conflict insufficiently protects Owners, it will take appropriate action on its
own, including withdrawing the Variable Account's investment in the
International Stock Portfolio, the MFS World Governments Series, or the MFS
Emerging Growth Series as appropriate. (The prospectuses for the T. Rowe Price
International Series, Inc. and the MFS Variable Insurance Trust also address the
material conflict issue.)
Addition, Deletion or Substitution of Investments
The Company reserves the right, subject to applicable law, to make
additions to, deletions from, or substitutions for the shares of a Fund that are
held in the Variable Account or that the Variable Account may purchase. If the
shares of a Fund are no longer available for investment or if, in the Company's
judgment, further investment in any Fund should become inappropriate, the
Company may redeem the shares, if any, of that Fund and substitute shares of
another Fund. The Company will not substitute any shares attributable to a
Contract's interest in a Subaccount without notice and prior approval of the SEC
and state insurance authorities, to the extent required by the 1940 Act or other
applicable law.
The Company also reserves the right to establish additional Subaccounts
of the Variable Account, each of which would invest in shares of a new
corresponding Fund having a specified investment objective. The Company may, in
its sole discretion, establish new Subaccounts or eliminate or combine one or
more Subaccounts if marketing needs, tax considerations or investment conditions
warrant. Any new Subaccounts may be made available to existing Owners on a basis
to be determined by the Company. Subject to obtaining any approvals or consents
required by applicable law, the assets of one or more Subaccounts may be
transferred to any other Subaccount if, in the sole discretion of the Company,
marketing, tax, or investment conditions warrant.
In the event of any such substitution or change, the Company (by
appropriate endorsement, if necessary) may change the Contract to reflect the
substitution or change.
If the Company considers it to be in the best interest of Owners and
Annuitants, and subject to any approvals that may be required under applicable
law, the Variable Account may be operated as a management investment company
under the 1940 Act, it may be deregistered under that Act if registration is no
longer required, it may be combined with other Company separate accounts, or its
assets may be transferred to another separate account of the Company. In
addition, the Company may, when permitted by law, restrict or eliminate any
voting rights of Owners or other persons who have such rights under the
Contracts.
DESCRIPTION OF THE CONTRACT
Issuance of a Contractt
In order to purchase a Contract, application must be made to the
Company through a licensed representative of the Company, who is also a
registered representative of CUNA Brokerage Services, Inc. ("CUNA Brokerage") or
a broker-dealer having a selling agreement with CUNA Brokerage or a
broker-dealer having a selling agreement with such broker-dealer. Contracts may
be sold to or in connection with retirement plans that do not qualify for
special tax treatment as well as retirement plans that qualify for special tax
treatment under the Code. Neither the Owner nor the Annuitant may be older than
age 85 on the Contract Date.
Purchase Payments
The minimum amount required to purchase a Contract depends upon several
factors. The minimum purchase amount the Company must receive during the first
12 months of the Contract is:
o $5,000 for a Contract other than those specified below.
o $2,000 for Contracts that qualify for special federal income
tax treatment under Sections 401, 408, or 457 of the Code.
This category includes qualified pension plans, individual
retirement accounts, and certain deferred compensation plans.
o $300 for Contracts that qualify for special federal income tax
treatment under Section 403(b) of the Code. This category
includes tax-sheltered annuities.
o The value of a Contract exchanged pursuant to Section 1035 of
the Code, if the Company had approved the transaction prior to
the exchange.
o $600 for a Contract sold to employees of the Company and its
subsidiaries, to employees of CUNA Mutual and its
subsidiaries, and to registered representatives and other
persons associated with CUNA Brokerage Services, Inc. This
category includes both individual retirement accounts and
non-individual retirement accounts.
Unless the minimum purchase amount specified above already has been
paid in full at the time of application, an automatic purchase payment plan must
be established to schedule regular payments during the first 12 months of the
Contract. Under the Company's automatic purchase payment plan, the Owner can
select a monthly payment schedule pursuant to which purchase payments will be
automatically deducted from a credit union or bank account or other source.
The regular payment schedule established under the automatic purchase
plan must total at least the amount shown above as a minimum purchase amount.
For example, if $5,000 is the required minimum purchase amount, a $2,000 payment
at the time of application and an automatic payment plan amount of $272.73 a
month for the next 11 months would be sufficient. Similarly, if $2,000 is the
required minimum purchase amount, an initial purchase payment of $166.74 and an
automatic payment plan amount of $166.66 for each of the next 11 months would be
sufficient. (Tax law does not permit the Company to accept more than $2,000.00
for an individual retirement account, except in the case of a rollover or
transfer.)
The minimum size for an initial purchase payment and subsequent
purchase payment is $100, unless the payment is made through an automatic
purchase payment plan in which case the minimum size is $25. Purchase payments
may be made at any time during the Annuitant's lifetime and before the Annuity
Date.
The Company reserves the right not to accept (1) purchase payments
received after the Contract Anniversary following the Annuitant's 85th birthday,
(2) purchase payments of less than $100, and (3) purchase payments in excess of
$1 million. Also, the Company reserves the right to change the size of minimum
payments and, with respect to Contracts not yet issued, the size of the minimum
purchase amounts.
The Company reserves the right to terminate a Contract and pay the
Contract Value to the Owner if: (1) no purchase payments have been received
during the prior 24 months, and (2) aggregate purchase payments up to the time
of termination total less than $2,000, and (3) Contract Value is less than
$2,000. Since the charges imposed on such a Contract will be significant, only
those with the financial capability to keep an annuity in place for a
substantial period should purchase an annuity.
Free-Look Period
The Contract provides for an initial "free-look" period. The Owner has
the right to return the Contract within 10 days of receiving it. In some
jurisdictions, this period may be longer than 10 days. When the Company receives
the returned Contract at the Home Office or when the sales representative who
sold the Contract receives it before the end of this period, the Company will
cancel the Contract and refund to the Owner an amount equal to the Contract
Value as of the date the returned Contract is received plus any premium taxes
deducted. This amount may be more or less than the aggregate amount of purchase
payments made up to that time. In certain jurisdictions, the Company is required
instead to return aggregate purchase payments to Owners who exercise their
free-look right.
Allocation of Purchase Payments
At the time of application, the Owner selects how the initial Net
Purchase Payment is to be allocated among the Subaccounts and the Guaranteed
Interest Option . An allocation to a Subaccount must be for at least 5% of a
purchase payment and be in whole percentages. An allocation to the Guaranteed
Interest Option must be for at least $1,000.
If the application for a Contract is properly completed and is
accompanied by all the information necessary to process it, including payment of
the initial purchase payment, the initial Net Purchase Payment will be
allocated, as designated by the Owner, to one or more of the Subaccounts or to
the Guaranteed Interest Option within two Valuation Days of receipt of such
purchase payment by the Company at its Home Office. If the application is not
properly completed, the Company reserves the right to retain the purchase
payment for up to five Valuation Days while it attempts to complete the
application. If the application is not complete at the end of the 5-day period,
the Company will inform the applicant of the reason for the delay and the
initial purchase payment will be returned immediately, unless the applicant
specifically consents to the Company retaining the purchase payment until the
application is complete. Once the application is complete, the initial Net
Purchase Payment will be allocated as designated by the Owner within two
Valuation Days.
Notwithstanding the foregoing, in jurisdictions where the Company must
refund aggregate purchase payments in the event the Owner exercises the
free-look right, any portion of the initial Net Purchase Payment to be allocated
to a Subaccount will be allocated to the Money Market Subaccount for a 20-day
period following the Contract Date. At the end of that period, the amount in the
Money Market Subaccount will be allocated to the Subaccounts as designated by
the Owner based on the proportion that the allocation percentage for each such
Subaccount bears to the sum of the allocation percentages.
Any subsequent Net Purchase Payments will be allocated as of the end of
the Valuation Period in which the subsequent Net Purchase Payment is received by
the Company and will be allocated in accordance with the allocation schedule in
effect at the time the purchase payment is received. However, Owners may direct
individual payments to a specific Subaccount or to the Guaranteed Interest
Option (or any combination thereof) without changing the existing allocation
schedule. The allocation schedule may be changed by the Owner at any time by
Written Notice. Changing the purchase payment allocation schedule will not
change the allocation of existing Contract Value among the Subaccounts or the
Guaranteed Interest Option .
The Contract Values allocated to a Subaccount will vary with that
Subaccount's investment experience, and the Owner bears the entire investment
risk. Owners should periodically review their purchase payment allocation
schedule in light of market conditions and their overall financial objectives.
Variable Contract Value
The Variable Contract Value will reflect the investment experience of
the selected Subaccounts, any Net Purchase Payments paid, any surrenders or
partial withdrawals, any transfers, and any charges assessed in connection with
the Contract. There is no guaranteed minimum Variable Contract Value, and,
because a Contract's Variable Contract Value on any future date depends upon a
number of variables, it cannot be predetermined.
Calculation of Variable Contract Value. The Variable Contract Value is
determined at the end of each Valuation Period. The value will be the aggregate
of the values attributable to the Contract in each of the Subaccounts,
determined for each Subaccount by multiplying that Subaccount's unit value for
the relevant Valuation Period by the number of Accumulation Units of that
Subaccount allocated to the Contract.
Determination of Number of Accumulation Units. Any amounts allocated or
transferred to the Subaccounts will be converted into Subaccount Accumulation
Units. The number of Accumulation Units to be credited to a Contract is
determined by dividing the dollar amount being allocated or transferred to a
Subaccount by the Accumulation Unit value for that Subaccount at the end of the
Valuation Period during which the amount was allocated or transferred. The
number of Accumulation Units in any Subaccount will be increased at the end of
the Valuation Period by any Net Purchase Payments allocated to the Subaccount
during the current Valuation Period and by any amounts transferred to the
Subaccount from another Subaccount or from the Guaranteed Interest Option during
the current Valuation Period.
Any amounts transferred, surrendered or deducted from a Subaccount will
be processed by canceling or liquidating Accumulation Units. The number of
Accumulation Units to be canceled is determined by dividing the dollar amount
being removed from a Subaccount by the Accumulation Unit value for that
Subaccount at the end of the Valuation Period during which the amount was
removed. The number of Accumulation Units in any Subaccount will be decreased at
the end of the Valuation Period by: (a) any amounts transferred (including any
applicable transfer fee) from that Subaccount to another Subaccount or to the
Guaranteed Interest Option, (b) any amounts withdrawn or surrendered during that
Valuation Period, (c) any surrender charge, annual Contract fee or premium tax
assessed upon a partial withdrawal or surrender, and (d) the annual Contract
fee, if assessed during that Valuation Period.
Determination of Accumulation Unit Value. The Accumulation Unit value
for each Subaccount's first Valuation Period was set at $10. The Accumulation
Unit value for a Subaccount is calculated for each subsequent Valuation Period
by subtracting (2) from (1) and dividing the result by (3), where:
(1) Is the result of:
(a) the net assets of the Subaccount (i.e., the aggregate
value of underlying Fund shares or units held by the
Subaccount) as of the end of the Valuation Period;
(b) plus or minus the net charge or credit with respect
to any taxes paid or any amount set aside as a
provision for taxes during the Valuation Period that
the Company determines to be attributable to the
operations of the Subaccount.
(2) The cumulative unpaid daily charge for mortality and expense
risks and for administration multiplied by the number of days
in the Valuation Period.
(3) The number of Accumulation Units outstanding as of the end of
the Valuation Period.
Transfer Privileges
General. Before the Annuity Date and subject to the restrictions
described below, the Owner may transfer all or part of the amount in a
Subaccount or the Guaranteed Interest Option to another Subaccount or the
Guaranteed Interest Option .
Transfers to the Guaranteed Interest Option must be at least $1,000.
Transfers out of the Guaranteed Interest Option are only permitted during the
30-day period prior to the expiration of a Guarantee Period. Transfers will be
made as of the Valuation Day on which Written Notice requesting such transfer is
received by the Company if received before 3:00 p.m. Central Time. Transfers
will be made as of the Valuation Day next following the day on which Written
Notice requesting such transfer is received if received after 3:00 p.m. Central
Time. Subject to the foregoing restrictions, there currently is no limit on the
number of transfers that can be made among or between Subaccounts or to or from
the Guaranteed Interest Option .
Transfers may be made based upon instructions given by written request
or by telephone. The Company will only honor telephone transfer requests if it
has a currently valid telephone transfer authorization form on file signed by
the Owner(s). A telephone transfer authorization form received by the Company at
the Home Office is valid until it is rescinded or revoked in writing by the
Owner(s) or until a subsequently dated form signed by the Owner(s) is received
at the Home Office. If a currently valid telephone transfer authorization form
is on file, the Company may act upon the instructions of any one Owner. The
Company is not responsible for inability to receive an Owner's instructions
because of busy telephone lines or malfunctioning telephone equipment.
The Company will send a written confirmation of all transfers made
pursuant to telephone instructions. The Company may also require a form of
personal identification prior to acting on instructions received by telephone
and tape record instructions received by telephone. If the Company follows these
procedures, it will not be liable for any losses to Owners due to unauthorized
or fraudulent instructions.
The Company reserves the right to modify, restrict, suspend or
eliminate the transfer privileges (including the telephone transfer facility) at
any time, for any class of Contracts, for any reason. In particular, the Company
reserves the right to not honor transfers requested by a third party holding a
power of attorney from an Owner where that third party requests simultaneous
transfers on behalf of the Owners of two or more Contracts.
Transfer Fee. No charge is made for transfers, however, the Company
reserves the right to charge $10 for the 13th and each subsequent transfer
during a Contract Year. (See "Charges and Deductions.")
Dollar-Cost Averaging. If elected at the time of the application or at
any time thereafter by written request, an Owner may systematically or
automatically transfer (on a monthly, quarterly, semi-annual or annual basis)
specified dollar amounts from the Money Market Subaccount to other Subaccounts.
This is known as the dollar-cost averaging method of investment. The fixed
dollar amount will purchase more Accumulation Units of a Subaccount when their
value is lower and fewer units when their value is higher. Over time, the cost
per unit averages out to be less than if all purchases had been made at the
highest value and greater than if all purchases had been made at the lowest
value. The dollar-cost averaging method of investment reduces the risk of making
purchases only when the price of Accumulation Units is high. It does not assure
a profit or protect against a loss in declining markets.
Owners may elect dollar-cost averaging only if their Variable Contract
Value in the Money Market Subaccount is at least $5,000 at the time of the
election. The minimum transfer amount for dollar-cost averaging is the
equivalent of $100 per month. The amount transferred to a Subaccount must be at
least 5% of the amount transferred and must be stated in whole percentages. An
amount transferred to the Guaranteed Interest Option must be at least $1,000.
Once elected, dollar-cost averaging remains in effect until the
earliest of these events: (1) the Variable Contract Value in the Money Market
Subaccount is depleted to zero; (2) the Owner cancels the election (by Written
Notice or by telephone if the Company has the Owner's telephone authorization
form on file; or (3) for three successive months, the Variable Contract Value in
the Money Market Subaccount has been insufficient to implement the dollar-cost
averaging instructions the Owner has given to the Company. The Company will
notify the Owner when dollar-cost averaging is no longer in effect. There is no
additional charge for using dollar-cost averaging. The Company reserves the
right to discontinue offering the dollar-cost averaging facility at any time and
for any reason.
Other Types of Automatic Transfers. If elected at the time of the
application or at any time thereafter by written request, an Owner may
systematically or automatically transfer (on a monthly, quarterly, semi-annual
or annual basis) Variable Contract Value from one Subaccount to another. Such
automatic transfers may be requested on the following basis: (1) as a specified
dollar amount, (2) as a specified number of Accumulation Units, (3) as a
specified percent of Variable Contract Value in a particular Subaccount, or (4)
in an amount equal to the excess of a specified amount of Variable Contract
Value in a particular Subaccount.
Owners may elect automatic transfers only if their Variable Contract
Value in the Subaccount from which the transfers are to be made is at least
$5,000 at the time of the election. The minimum automatic transfer amount is the
equivalent of $100 per month. The amount transferred to a Subaccount must be at
least 5% of the amount transferred and must be stated in whole percentages. An
amount transferred to the Guaranteed Interest Option must be at least $1,000.
Once elected, automatic transfers remain in effect until the earliest of these
events: (1) the Variable Contract Value in the Subaccount from which transfers
are being made is depleted to zero; (2) the Owner cancels the election (by
Written Notice or by telephone if the Company has the Owner's telephone
authorization form on file); or (3) for three successive months, the Variable
Contract Value in the Subaccount from which transfers are being made has been
insufficient to implement the automatic transfer instructions the Owner has
given to the Company. The Company will notify the Owner when automatic transfer
instructions are no longer in effect. There is no additional charge for using
automatic transfers. The Company reserves the right to discontinue offering the
automatic transfer facility at any time and for any reason.
Automatic Personal Portfolio Rebalancing Service. If elected at the
time of the application or requested at any time thereafter by Written Notice,
an Owner may instruct the Company to automatically transfer (on a monthly,
quarterly, semi-annual or annual basis) Variable Contract Value between and
among specified Subaccounts in order to achieve a particular percentage
allocation of Variable Contract Value among such Subaccounts. Such percentage
allocations must be in whole percentages and be at least 5% per allocation.
Owners may start and stop automatic Variable Contract Value rebalancing at any
time and may specify any percentage allocation of Contract Value between or
among as many Subaccounts as are available at the time the rebalancing is
elected. (If an Owner elects automatic Variable Contract Value rebalancing
without specifying such percentage allocation(s), the Company will allocate
Variable Contract Value in accordance with the Owner's currently effective
purchase payment allocation schedule.) There is no additional charge for using
Variable Contract Value rebalancing.
Surrenders and Partial Withdrawals
Surrender. At any time before the Annuity Date, the Owner may surrender
the Contract for its Surrender Value. The Surrender Value will be determined as
of the Valuation Day on the date Written Notice requesting surrender and the
Contract are received at the Company's Home Office. The Surrender Value will be
paid in a lump sum unless the Owner requests payment under an annuity payment
option. A surrender may have adverse federal income tax consequences, including
a penalty tax. (See "Taxation of Annuities.")
Partial Withdrawals. At any time before the Annuity Date, an Owner may
make withdrawals of the Surrender Value in any Contract Year. There is no
minimum amount which may be withdrawn but the maximum amount is that which would
leave the remaining Surrender Value equal to $2,000. A partial withdrawal
request that would reduce the Surrender Value to less than $2,000 is treated as
a request for a full surrender of the Contract. The Company will withdraw the
amount requested from the Contract Value as of the Valuation Day Written Notice
requesting the partial withdrawal is received. Any applicable interest
adjustment will be deducted from the remaining Contract Value. (See "Interest
Adjustment.") Any applicable surrender charge also will be deducted from the
remaining Contract Value. (See "Surrender Charge.")
The Owner may specify the amount of the partial withdrawal to be made
from Subaccounts or Guarantee Amounts. If the Owner does not so specify, or if
the amount in the designated Subaccounts or Guarantee Amount is inadequate to
comply with the request, the partial withdrawal will be made from each
Subaccount and each Guarantee Amount based on the proportion that the value in
such Subaccount or Guarantee Amount bears to the total Contract Value
immediately prior to the partial withdrawal.
A partial withdrawal may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
Surrender and Partial Withdrawal Restrictions. The Owner's right to
make surrenders and partial withdrawals is subject to any restrictions imposed
by applicable law or employee benefit plan.
Restrictions on Distributions from Certain Types of Contracts. There
are certain restrictions on surrenders of and partial withdrawals from Contracts
used as funding vehicles for Code Section 403(b) retirement programs. Section
403(b)(11) of the Code restricts the distribution under Section 403(b) annuity
contracts of: (i) elective contributions made in years beginning after December
31, 1988; (ii) earnings on those contributions; and (iii) earnings in such years
on amounts held as of the last year beginning before January 1, 1989.
Distributions of those amounts may only occur upon the death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions may not be
distributed in the case of hardship.
Other restrictions with respect to the election, commencement, or
distribution of benefits may apply under Qualified Contracts or under the terms
of the plans in respect of which Qualified Contracts are issued.
Systematic Withdrawals. If elected at the time of the application or
requested at any time thereafter by Written Notice, an Owner may elect to
receive periodic partial withdrawals under the Company's systematic withdrawal
plan. Under the systematic withdrawal plan, the Company will make partial
withdrawals (on a monthly, quarterly, semi-annual or annual basis) from
designated Subaccounts as specified by the Owner. Such withdrawals must be at
least $100 each and may only be made from Variable Contract Value. For any
Contract, partial withdrawals under the systematic withdrawal plan may only be
made from Subaccounts having $5,000 or more of Variable Contract Value at the
time of election. Owners must be at least age 59 1/2 to participate in the
systematic withdrawal plan unless they elect to receive substantially equal
periodic payments. The systematic withdrawal plan is not available to Owners
using the dollar-cost averaging facility, the automatic transfer facility, or
the automatic purchase payment plan.
The withdrawals may be requested on the following basis: (1) as a
specified dollar amount, (2) as a specified whole number of Accumulation Units,
(3) as a specified whole percent of Variable Contract Value in a particular
Subaccount, (4) in an amount equal to the excess of a specified amount of
Variable Contract Value in a particular Subaccount, and (5) in an amount equal
to an Owner's required minimum distribution under the Code.
Participation in the systematic withdrawal plan will terminate on the
earliest of the following events: (1) the Variable Contract Value in a
Subaccount from which partial withdrawals are being made becomes zero, (2) a
termination date specified by the Owner is reached, (3) the Owner requests that
his or her participation in the plan cease, or (4) a surrender charge would be
applicable to amounts being withdrawn (i.e., partial withdrawals under the
systematic withdrawal plan may not include amounts subject to the surrender
charge). With regard to (4), an Owner may, by Written Notice, request that
systematic withdrawals continue even though a surrender charge is deducted in
connection with such withdrawals. Also with regard to (4), if necessary to meet
the required minimum distribution under the Code or if necessary to make
substantially equal payments as required under the Code, the Company will
continue systematic withdrawals even though a surrender charge is deducted.
There are federal income tax consequences to partial withdrawals
through the systematic withdrawal plan and Owners should, therefore, consult
with their tax adviser before electing to participate in the plan. The Company
reserves the right to discontinue offering the systematic withdrawal plan at any
time.
Contract Loans
Owners of Contracts issued in connection with retirement programs
meeting the requirements of Section 403(b) of the Code (other than those
programs subject to Title 1 of the Employee Retirement Income Security Act of
1974) may borrow from the Company using their Contracts as collateral. Loans
such as these are subject to the provisions of any applicable retirement program
and to the Code. Owners should, therefore, consult their tax and retirement plan
advisers prior to taking a Contract loan.
At any time, Owners may borrow the lesser of (1) the maximum loan
amount permitted under the Code, or (2) 90% of the Surrender Value of their
Contract. Loans in excess of the maximum amount permitted under the Code may be
treated as a taxable distribution rather than a loan. The Company will only make
Contract loans after approving a written application by the Owner. The written
consent of all assignees and irrevocable beneficiaries must be obtained before a
loan will be given.
When a loan is made, the Company transfers an amount equal to the
amount borrowed from Variable Contract Value or Guaranteed Interest Option value
to the Loan Account. The Loan Account is part of the Company's General Account
and Contract Value in the Loan Account does not participate in the investment
experience of any Subaccount or Guarantee Account. The Owner must indicate in
the loan application from which Subaccounts or Guarantee Amounts, and in what
amounts, Contract Value is to be transferred to the Loan Account. In the absence
of any such instructions from the Owner, the transfer(s) are made pro-rata from
all Subaccounts having Variable Contract Value and from all Guarantee Amounts.
Loans may be repaid by the Owner at any time before the Annuity Date. Upon the
repayment of any portion of a loan, an amount equal to the repayment will be
transferred from the Loan Account to the Subaccount(s) or Guarantee Accounts
designated by the Owner or according to the Owner's current purchase payment
allocation instructions.
The Company charges interest on Contract loans at an effective annual
rate of 6.5%. The Company pays interest on the Contract Value in the Loan
Account at rates it determines from time to time but never less than an
effective annual rate of 3.0%. Consequently, the net cost of a loan is the
difference between 6.5% and the rate being paid from time to time on the
Contract Value in the Loan Account. Interest on Contract loans accrues on a
daily basis from the date of the loan and is due and payable at the end of each
Contract Year. If the Owner does not pay the interest due at that time, an
amount equal to such interest less interest earned on the Contract Value in the
Loan Account is transferred from his or her Variable Contract Value or
Guaranteed Interest Option Value (as described above for the loan itself) to the
Loan Account. This transfer will therefore increase the loan amount.
If at any time, the loan amount of a Contract exceeds the Surrender
Value, the Contract will be in default. In this event, the Company will send a
Written Notice of default to the Owner stating the amount of loan repayment
needed to reinstate the Contract and the Owner will have 60 days, from the day
the notice is mailed, to pay the stated amount. If the Company does not receive
the required loan repayment within 60 days, it will terminate the Contract
without value. Principal and interest must be repaid in substantially level
payments made no less frequently than quarterly over a five-year period (or, if
the loan is used to acquire the Owner's principal residence, a 10, 15 or 20-year
period but not beyond the year the Owner attains age 70 1/2). The Owner is
allowed a 60-day grace period from the end of quarter installment due date. If
the amount due by the end of the quarter is not received within the grace
period, a deemed distribution of the entire amount of the outstanding principal,
interest due, and any applicable charges under this Contract, including any
withdrawal charge, will be made. This deemed distribution may be subject to
income and penalty tax under the Code and may adversely affect the treatment of
the Contract under Code Section 403(b).
Any loan amount outstanding upon the death of the Owner or Annuitant is
deducted from any death benefit paid. In addition, a Contract loan, whether or
not repaid, will have a permanent effect on the Contract Value because the
investment experience of the Variable Account and the interest rates applicable
to Guarantee Accounts do not apply to the portion of Contract Value transferred
to the Loan Account. The longer the loan remains outstanding, the greater this
effect is likely to be.
Death Benefit Before the Annuity Date
Death of an Owner. If any Owner dies prior to the Annuity Date, any
surviving Owner becomes the sole Owner. If there is no surviving Owner, the
Annuitant becomes the new Owner unless the deceased Owner was also the
Annuitant. If the sole deceased Owner was also the Annuitant, then the
provisions relating to the death of an Annuitant (described below) will govern
unless the deceased Owner was one of two joint Annuitants. (In the latter event,
the surviving Annuitant becomes the Owner.)
The following options are available to sole surviving Owners or new
Owners:
(1) If the Owner is the spouse of the deceased Owner, he or she
may continue the Contract as the new Owner.
(2) If the Owner is not the spouse of the deceased Owner:
(a) he or she may elect, within 60 days of the date the
Company receives Due Proof of Death, to receive the
Surrender Value in a single sum within 5 years of the
deceased Owner's death; or
(b) he or she may elect, within 60 days of the date the
Company receives Due Proof of Death, to receive the
Surrender Value paid out under one of the annuity
payment options;
If he or she does not elect one of the above options, the
Company will pay the Surrender Value five years from the date
of the deceased Owner's death.
Under any of these options, sole surviving Owners or new Owners may exercise all
Ownership rights and privileges from the date of the deceased Owner's death
until the date that the Surrender Value is paid.
Death of the Annuitant. If the Annuitant dies before the Annuity Date,
the Company will pay the death benefit described below to the Beneficiary named
by the Owner in a lump sum. (Owners and beneficiaries also may name successor
beneficiaries.) If there is no surviving Beneficiary, the Company will pay the
death benefit to the Owner or the Owner's estate. In lieu of a lump sum payment,
the Beneficiary may elect, within 60 days of the date the Company receives due
proof of the Annuitant's death, to apply the death benefit to an annuity payment
option, provided that the Annuity Date selected by the Beneficiary is at least
two years after the Contract Date.
If the Annuitant who is also an Owner dies, the provisions described
immediately above apply except that the Beneficiary may only apply the death
benefit payment to an annuity payment option if:
(1) payments under the option begin within 1 year of the
Annuitant's death; and
(2) payments under the option are payable over the Beneficiary's
life or over a period not greater than the Beneficiary's life
expectancy.
Death Benefit.
Old Death Benefit. If the Annuitant is age 75 or younger on the date of
death, the death benefit is an amount equal to the greater of:
(1) aggregate Net Purchase Payments made under the Contract less
partial withdrawals as of the date the Company receives Due
Proof of Death of the deceased;
(2) Contract Value as of the date the Company receives due proof
of the deceased's death; or
(3) the death benefit floor amount as of the date of the
deceased's death plus any Net Purchase Payments and minus any
partial withdrawals made since the most recent death benefit
floor computation anniversary prior to death;
less any applicable premium taxes not previously deducted and any outstanding
loan amount on the date the death benefit is paid. After the Annuitant's 76th
birthday, the death benefit is always equal to the Contract Value as of the date
the Company receives due proof of the Annuitant's death less any outstanding
loan amount and any applicable premium taxes not previously deducted.
New Death Benefit. The Death Benefit was revised effective May 1, 1996
and the revised benefit will be implemented and retroactively applied to all
Contracts upon approval by the state insurance regulatory body in which the
Contract is issued. Prior to approval by the state insurance regulator, the Old
Death Benefit in effect prior to May 1, 1996 will be applied. To determine the
benefit in your state you may contact the Company at the address and telephone
number shown on the first page of this Prospectus. Under the New Death Benefit,
the Annuitant is age 75 or younger on the Contract Date, the death benefit is an
amount equal to the greater of:
(1) aggregate Net Purchase Payments made under the Contract
less partial withdrawals as of the date the Company receives
Due Proof of Death of the deceased;
(2) Contract Value as of the date the Company receives Due
Proof of Death of the deceased's death; or
(3) the death benefit floor amount as of the date of the
deceased's death plus any Net Purchase Payments made and less
any partial withdrawals made since the most recent death
benefit floor computation anniversary prior to death.;
less any applicable premium taxes not previously deducted and any outstanding
loan amount on the date the death benefit is paid. After the Annuitant's 76th
birthday, the death benefit is always equal to the Contract Value as of the date
the Company receives due proof of the Annuitant's death less any outstanding
loan amount and any applicable premium taxes not previously deducted.
The death benefit floor amount is the Contract Value on the most recent
death benefit floor computation anniversary. In states other than Texas, death
benefit floor computation anniversaries are the 7th Contract Anniversary and
each subsequent 7th Contract Anniversary (for example, the 14th Contract
Anniversary, the 21st Contract Anniversary, etc.) (In Texas, the death benefit
floor computation anniversaries are the 6th Contract Anniversary and each
subsequent 6th Contract Anniversary.)
Death Benefit After the Annuity Date
If an Owner dies after the Annuity Date, any surviving Owner becomes
the sole Owner. If there is no surviving Owner, the Payee receiving annuity
payments becomes the new Owner. Such Owners will have the rights of Owners
during the annuity period, including the right to name successor Payees if the
deceased Owner had not previously done so. The death of an Annuitant after the
Annuity Date will have the effect stated in the annuity payment option pursuant
to which annuity payments are being made.
Annuity Payments on the Annuity Date
The Owner selects the Annuity Date. For Non-Qualified Contracts, the
Annuity Date may not be after the later of the Contract Anniversary following
the Annuitant's 85th birthday or 10 years after the Contract Date. For Qualified
Contracts, the Annuity Date must be no later than the Annuitant's age 70 1/2 or
any other date meeting the requirements of the Code.
The Owner may change the Annuity Date subject to the following
limitations: (1) the Owner's Written Notice must be received at the 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 receipt of the Written Notice, and
(3) the requested Annuity Date must be at least two years after the Contract
Date.
Prior to the Annuity Date, partial withdrawals may be made. (See
"Surrenders and Partial Withdrawals.")
On the Annuity Date, the adjusted Contract Value will be applied under
the life income annuity payment option with ten years guaranteed, unless the
Owner elects to have the proceeds paid under another payment option or to
receive the Surrender Value in a lump sum. (See "Annuity Payment Options.") In
certain states, the Surrender Value will be applied to the annuity payment
option rather than the adjusted Contract Value. Unless the Owner instructs the
Company otherwise, amounts in the Guaranteed Interest Option will be used to
provide a fixed-annuity payment option and amounts in the Variable Account will
be used to provide a variable annuity payment option.
The adjusted Contract Value is the Contract Value:
(1) plus or minus any applicable interest adjustment;
(2) minus any applicable surrender charge if annuity payment
option 1 is selected;
(3) minus the pro-rated portion of the annual Contract fee (unless
the Annuity Date falls on the Contract Anniversary);
(4) minus any applicable loan amount; and
(5) minus any applicable premium taxes not yet deducted.
Payments
Any surrender, partial withdrawal, Contract loan or death benefit
usually will be paid within seven days of receipt of a written request, any
information or documentation reasonably necessary to process the request, and
(in the case of a death benefit) receipt and filing of Due Proof of Death.
However, payments may be postponed 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 Owners; 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 a recent check or draft has been submitted, the Company has the
right to delay payment until it has assured itself that the check or draft has
been honored.
The Company has the right to defer payment of any surrender or partial
withdrawal or transfer from the Guaranteed Interest Option for up to six months
from the date of receipt of Written Notice for such a surrender or transfer. If
payment is not made within 30 days after receipt of documentation necessary to
complete the transaction, or such shorter period required by a particular
jurisdiction, interest will be added to the amount paid from the date of receipt
of documentation at 3% or such higher rate required for a particular
jurisdiction.
Modification
Upon notice to the Owner, the Company may modify the Contract if:
(1) necessary to permit the Contract or the Variable Account to
comply with any applicable law or regulation issued by a
government agency; or
(2) necessary to assure continued qualification of the Contract
under the Code or other federal or state laws relating to
retirement annuities or variable annuity contracts; or
(3) necessary to reflect a change in the operation of the Variable
Account; or
(4) the modification provides for the addition or substitution of
investment options.
In the event of most such modifications, the Company will make
appropriate endorsement to the Contract.
Reports to Owners
At least annually, the Company will mail to each Owner, at such Owner's
last known address of record, a report setting forth the Contract Value
(including the Contract Value in each Subaccount and each Guarantee Amount) of
the Contract, purchase payments paid and charges deducted since the last report,
partial withdrawals made since the last report and any further information
required by any applicable law or regulation.
Inquiries
Inquiries regarding a Contract may be made by writing to the Company at
its Home Office.
THE GUARANTEED INTEREST OPTION
THE GUARANTEED INTEREST OPTION VARIES ACCORDING TO THE STATE IN WHICH
THE CONTRACT IS ISSUED. SOLELY FOR THE SAKE OF CONVENIENT REFERENCE, STATES HAVE
BEEN DIVIDED INTO FOUR CATEGORIES. IN CATEGORY ONE, THE COMPANY OFFERS GUARANTEE
PERIODS VARYING IN DURATION FROM ONE YEAR TO 10 YEARS AND THE COMPANY MAY IMPOSE
AN INTEREST ADJUSTMENT ON GUARANTEE AMOUNTS WITHDRAWN PRIOR TO THE EXPIRATION OF
A GUARANTEE PERIOD. IN CATEGORY TWO, THE COMPANY OFFERS A GUARANTEE PERIOD OF
ONE YEAR AND NO INTEREST ADJUSTMENT IS IMPOSED IF GUARANTEE AMOUNTS ARE
WITHDRAWN PRIOR TO THE EXPIRATION OF THAT YEAR. IN CATEGORY THREE, THE COMPANY
DOES NOT INTEND TO OFFER A GUARANTEED INTEREST OPTION . IN CATEGORY FOUR, THE
COMPANY HAS NOT YET DETERMINED THE TYPE OF GUARANTEED INTEREST OPTION THE
COMPANY WILL OFFER. TO DETERMINE THE GUARANTEED INTEREST OPTION AVAILABLE IN
YOUR STATE, FIND THE NAME OF YOUR STATE IN THE LISTS OF STATES BELOW. THEN READ
ABOUT THE GUARANTEED INTEREST OPTION AVAILABLE IN THAT STATE.
Category 1
THE COMPANY, IN CATEGORY ONE STATES, OFFERS GUARANTEE PERIODS VARYING
IN DURATION FROM ONE YEAR TO 10 YEARS AND THE COMPANY MAY IMPOSE AN INTEREST
ADJUSTMENT ON GUARANTEE AMOUNTS WITHDRAWN PRIOR TO THE EXPIRATION OF A GUARANTEE
PERIOD. CATEGORY ONE STATES ARE: ALABAMA, ALASKA, ARIZONA, ARKANSAS, CALIFORNIA,
COLORADO, CONNECTICUT, DELAWARE, DISTRICT OF COLUMBIA, FLORIDA, GEORGIA, HAWAII,
IDAHO, ILLINOIS, INDIANA, IOWA, KANSAS, KENTUCKY, LOUISIANA, MAINE,
MASSACHUSETTS, MICHIGAN, MINNESOTA, MISSISSIPPI, MISSOURI, MONTANA, NEBRASKA,
NEVADA, NEW MEXICO, NORTH CAROLINA, NORTH DAKOTA, OHIO, OKLAHOMA, RHODE ISLAND,
SOUTH CAROLINA, SOUTH DAKOTA, TENNESSEE, VERMONT, VIRGINIA, WEST VIRGINIA, AND
WYOMING.
An Owner may allocate some or all of the Net Purchase Payments and
transfer some or all of the Contract Value to the Guaranteed Interest Option,
which is part of the Company's General Account and pays interest at declared
rates guaranteed for selected periods of time of from one to ten years. The
principal, after deductions, is also guaranteed. The Company's General Account
supports its insurance and annuity obligations. Since the Guaranteed Interest
Option is part of the General Account, the Company assumes the risk of
investment gain or loss on this amount. All assets in the General Account are
subject to the Company's general liabilities from business operations. The
Guaranteed Interest Option may not be available in all states.
The Guaranteed Interest Option has not been, and is not required to be,
registered with the SEC under the Securities Act of 1933, and neither the
Guaranteed Interest Option nor the Company's General Account has been registered
as an investment company under the 1940 Act. Therefore, neither the Company's
General Account, the Guaranteed Interest Option, nor any interests therein are
generally subject to regulation under the 1933 Act or the 1940 Act. The
disclosures relating to the Guaranteed Interest Option which are included in
this Prospectus are for the Owner's information and have not been reviewed by
the SEC. However, such disclosures may be subject to certain generally
applicable provisions of federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
Guaranteed Interest Option Value
The portion of the Contract Value allocated to the Guaranteed Interest
Option is the Guaranteed Interest Option value which is credited with interest,
as described below. The Guaranteed Interest Option value reflects interest
credited to Contract Value in Guarantee Periods, Net Purchase Payments allocated
to or Contract Value transferred to Guarantee Periods, transfers of Contract
Value out of Guarantee Periods, surrenders and partial withdrawals from
Guarantee Periods (including related interest adjustments) and charges assessed
in connection with the Contract. The Guaranteed Interest Option value is the sum
of Guarantee Amounts under the Contract. The Guaranteed Interest Option value is
guaranteed to accumulate at a minimum effective annual interest rate of 3%.
Guarantee Periods
From time to time the Company will offer to credit Guaranteed Interest
Option value with interest at specific guaranteed rates for specific periods of
time. These periods of time are known as Guarantee Periods. The Company 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 Company will publish
an effective annual interest rate applicable to each Guarantee Period being
offered at that time. Net Purchase Payments allocated or Contract Value
transferred to a Guarantee Period are guaranteed to earn that rate of interest
for each year of the period (provided that such payments and Contract Value are
not withdrawn from the Guarantee Period or surrendered). 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 rate of 3%.
Guarantee Periods begin as of the date Net Purchase Payments or
transfers of Contract Value are made to them and end when the number of years in
the period has elapsed. The last day of the period is the expiration date for
the period. Owners may not select Guarantee Periods with expiration dates later
than the Contract's current Annuity Date. During the 30-day period prior to the
expiration of a Guarantee Period, the Owner may transfer the Guarantee Amount
related to that Guarantee Period to any new Guarantee Period or Subaccount
available at that time. If, at the expiration of a Guarantee Period, less than
one year remains until the Annuity Date, the Company will credit interest to the
Guarantee Amount at the guaranteed rate then applicable to a one year Guarantee
Period. The Company will notify Owners of the available Guarantee Periods and
Subaccounts 30 days prior to the expiration of a Guarantee Period.
If an Owner does not respond to the notice with instructions as to how
to reinvest the Guarantee Amount, then on the expiration date the Company will
invest the Guarantee Amount in another Guarantee Period of the same duration as
the expiring period. If no Guarantee Period of equal duration is available at
that time, the Company will reinvest the Guarantee Amount in the next shortest
Guarantee Period available. If either of such default Guarantee Periods would
extend beyond the Annuity Date of the Contract, the Company will reinvest the
Guarantee Amount in the Guarantee Period of the longest duration that expires
before the Annuity Date.
The Company intends to credit Guarantee Amounts with interest at
current rates in excess of the minimum guaranteed rate but is not obligated to
do so. These current interest rates are influenced by, but do not necessarily
correspond to, prevailing general market interest rates. Any interest credited
on Guarantee Amounts in excess of the minimum guaranteed effective rate of 3%
per year will be determined in the sole discretion of the Company. The Owner
therefore assumes the risk that interest credited may not exceed the minimum
guaranteed rate.
Net Purchase Payment Preservation Program
An Owner may elect to allocate the initial Net Purchase Payment under a
Contract between the Guaranteed Interest Option and the Variable Account in such
a manner that the portion of the initial Net Purchase Payment, when allocated to
the appropriate Guarantee Period, will earn a guaranteed return (if left in that
Guarantee Period until the expiration of the period) such that, at the end of
the Guarantee Period, the Guarantee Amount equals the initial Net Purchase
Payment. This would permit the Owner to allocate the remaining portion of the
initial Net Purchase Payment to one or more Subaccounts and still be certain of
having a Contract Value at the end of the Guarantee Period at least equal to the
initial Net Purchase Payment. Upon request, the Company will inform an Owner of
the portion of any Net Purchase Payment that must be allocated to a particular
Guarantee Period to achieve this result.
Interest Adjustment
The Company will impose an interest adjustment on Guarantee Amounts
withdrawn or surrendered or applied to an annuity payment option from a
Guarantee Period prior to the expiration of the period except when such a
withdrawal, surrender or annuitization occurs during the 30-day period prior to
the expiration of the period. The interest adjustment is calculated by
multiplying the amount surrendered, withdrawn or annuitized by the following
factor:
0.70 x (I - J) x n/12
Where:
I = the guaranteed interest rate then being offered for a new
Guarantee Period equal in duration to the period from which
the Guarantee Amount is being withdrawn, surrendered or
annuitized. If a Guarantee Period of such duration is not
being offered, "I" equals the linear interpolation of the
guaranteed rates for periods then available. If the Guarantee
Periods needed to perform the interpolation are not being
offered, "I" equals the interest rate being paid on the
Treasury Constant Maturity Series published by the Federal
Reserve Board for Treasury securities with remaining
maturities equal to the duration of the appropriate Guarantee
Period plus the interest adjustment reference factor shown on
the Contract data page. If no published rates are available
for maturities equal to the duration of the appropriate
Guarantee Period, linear interpolation of other published
rates will be used.
J = the guaranteed interest rate then being credited to the
Guarantee Amount being withdrawn, surrendered or annuitized.
n = the number of complete months remaining until the expiration
of the Guarantee Period.
The interest adjustment will reflect the relationship between I, J and n. At a
time when I exceeds J, the interest adjustment will reduce the portion of any
Guarantee Amount available for withdrawal, surrender or annuitization. At a time
when J exceeds I, the interest adjustment will increase the portion of any
Guarantee Amount available for withdrawal, surrender or annuitization. Moreover,
the interest adjustment will only operate to increase or reduce credited
interest in an amount equal to the excess of 3% per year on a Guarantee Amount
at the beginning of any Guarantee Period.
The interest adjustment is calculated separately for each Guarantee
Amount and is applied before any surrender charge. Owners must instruct the
Company as to which Guarantee Periods should be withdrawn or surrendered. Within
any Guarantee Period, Guarantee Amounts are withdrawn or surrendered on a
first-in-first-out basis. The adjustment does not apply to the calculation of a
death benefit or to amounts deducted from Guaranteed Interest Option value by
the Company as fees or charges. In addition, the sum of the surrender charge and
interest adjustment for a Guarantee Amount withdrawn or surrendered will not
exceed 10% of the Guarantee Amount withdrawn or surrendered.
Any applicable interest adjustment(s) will be deducted from or added to
the remaining Guarantee Amount(s), if any, or from all remaining Guarantee
Amounts on a pro-rata basis. If, at the time a partial withdrawal is requested
from a Guarantee Amount, the Guaranteed Interest Option value would be
insufficient to permit the deduction of the interest adjustment from any
remaining Guarantee Amounts, then the Company will not permit the partial
withdrawal.
The imposition of an interest adjustment may have significant federal
income tax consequences. (See "Taxation of Annuities.")
Category 2
THE COMPANY, IN CATEGORY TWO STATES, OFFERS A GUARANTEE PERIOD OF ONE
YEAR AND NO INTEREST ADJUSTMENT IS IMPOSED IF GUARANTEE AMOUNTS ARE WITHDRAWN
PRIOR TO THE EXPIRATION OF THAT YEAR. CATEGORY TWO STATES ARE: PENNSYLVANIA,
TEXAS, UTAH AND WISCONSIN.
An Owner may allocate some or all of the Net Purchase Payments and
transfer some or all of the Contract Value to the Guaranteed Interest Option
which is part of the Company's General Account and pays interest at declared
rates guaranteed for one year periods. The principal, after deductions, is also
guaranteed. The Company's General Account supports its insurance and annuity
obligations. Since the Guaranteed Interest Option is part of the General
Account, the Company assumes the risk of investment gain or loss on this amount.
All assets in the General Account are subject to the Company's general
liabilities from business operations. The Guaranteed Interest Option may not be
available in all states.
The Guaranteed Interest Option has not been, and is not required to be,
registered with the SEC under the Securities Act of 1933, and neither the
Guaranteed Interest Option nor the Company's General Account has been registered
as an investment company under the 1940 Act. Therefore, neither the Company's
General Account, the Guaranteed Interest Option, nor any interests therein are
generally subject to regulation under the 1933 Act or the 1940 Act. The
disclosures relating to the Guaranteed Interest Option which are included in
this Prospectus are for the Owner's information and have not been reviewed by
the SEC. However, such disclosures may be subject to certain generally
applicable provisions of federal securities laws relating to the accuracy and
completeness of statements made in prospectuses.
Guaranteed Interest Option Value
The Guaranteed Interest Option value is the portion of the Contract
Value allocated to the Guaranteed Interest Option. The Guaranteed Interest
Option value reflects Net Purchase Payments allocated to and Contract Value
transferred to Guarantee Accounts, interest credited to Contract Value in
Guarantee Accounts, transfers of Contract Value out of Guarantee Accounts,
surrenders and partial withdrawals from Guarantee Accounts and charges assessed
in connection with the Contract. Guarantee Amounts are withdrawn or surrendered
on a first-in-first-out basis. The Guaranteed Interest Option value is the sum
of Guarantee Amounts under the Contract. The Guaranteed Interest Option value is
guaranteed to accumulate at a minimum effective annual interest rate of 3%.
Guarantee Periods
From time to time the Company will offer to credit Guaranteed Interest
Option value with interest at a specific rate guaranteed for the following one
year period. The one year period is known as a Guarantee Period. The Company
will publish the effective annual interest rate applicable to each Guarantee
Period. Net Purchase Payments allocated and Contract Value transferred to a
Guarantee Account are guaranteed to earn that rate of interest during the period
(provided that such payments and Contract Value are not withdrawn from the
Guarantee Account or surrendered). The interest rate will always be equal to or
greater than an effective annual rate of 3%.
A Guarantee Period begins as of the date Net Purchase Payments or
transfers of Contract Value are made to the Guarantee Account and ends when 365
days have passed. The last day of the 365 day period is the expiration date for
the Guarantee Period. During the 30-day period prior to the expiration date, the
Owner may transfer the Guarantee Amount related to that Guarantee Period to a
new one year Guarantee Period or to any Subaccount available at that time.
Thirty days prior to the expiration of a Guarantee Period, the Company will
notify Owners of the interest rates applicable to the upcoming Period. If an
Owner does not respond to the notice with instructions as to how to reinvest the
Guarantee Amount, then on the expiration date the Company will invest the
Guarantee Amount in another one year Guarantee Period at the guaranteed rate
then offered. If less than one year remains until the Annuity Date, the Company
will credit interest to the Guarantee Amount at the guaranteed rate then
applicable to a one year Guarantee Period.
The Company intends to credit Guarantee Amounts with interest at
current rates in excess of the minimum guaranteed rate but is not obligated to
do so. Current interest rates are influenced by, but do not necessarily
correspond to, prevailing general market interest rates. Any interest credited
on Guarantee Amounts in excess of the minimum guaranteed effective rate of 3%
per year will be determined in the sole discretion of the Company. The Owner
therefore assumes the risk that interest credited may not exceed the minimum
guaranteed rate.
The Company will not impose an interest adjustment on Guarantee Amounts
withdrawn or surrendered or applied to an annuity payment option from a one year
Guarantee Period.
Net Purchase Payment Preservation Program
An Owner may elect to allocate the initial Net Purchase Payment under a
Contract between the Guaranteed Interest Option and the Variable Account in such
a manner that the portion of the initial Net Purchase Payment allocated to the
Guarantee Period will earn a guaranteed return (if left in the Guarantee Period
until the expiration date) such that, at the end of the Guarantee Period, the
Guarantee Amount will equal the initial Net Purchase Payment. This permits the
Owner to allocate the remaining portion of the initial Net Purchase Payment to
one or more Subaccounts and still be certain of having a Contract Value at the
end of the Guarantee Period at least equal to the initial Net Purchase Payment.
Upon request, the Company will inform an Owner of the portion of any initial Net
Purchase Payment that must be allocated to a one year Guarantee Period to
achieve this result.
Category 3
THE COMPANY DOES NOT INTEND TO OFFER A GUARANTEED INTEREST OPTION IN
CATEGORY THREE STATES. CATEGORY THREE STATES ARE: MARYLAND, OREGON AND
WASHINGTON.
Category 4
THE COMPANY HAS NOT YET DETERMINED THE TYPE OF GUARANTEED INTEREST
OPTION THE COMPANY WILL OFFER IN CATEGORY FOUR STATES. CATEGORY FOUR STATES, AS
OF MAY 1, 1996, ARE: NEW HAMPSHIRE AND NEW JERSEY. THE COMPANY, UPON REQUEST,
WILL PROVIDE CURRENT INFORMATION ABOUT THE GUARANTEED INTEREST OPTION AVAILABLE
IN THESE STATES.
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
General. No charge for sales expenses is deducted from purchase
payments at the time purchase payments are paid. However, within certain time
limits described below, a surrender charge (contingent deferred sales charge) is
deducted from the Contract Value if a partial withdrawal or surrender is made
before the Annuity Date. Also, a surrender charge is deducted from amounts
applied to annuity payment option 1. (See "Annuity Payments on the Annuity
Date.")
In the event surrender charges are not sufficient to cover sales
expenses, the loss will be borne by the Company; conversely, if the amount of
such charges proves more than enough to cover such expenses, the excess will be
retained by the Company. The Company does not currently believe that the
surrender charges imposed will cover the expected costs of distributing the
Contracts. Any shortfall will be made up from the Company's general assets which
may include amounts derived from the mortality and expense risk charge.
Charge for Partial Withdrawal or Surrender. A charge is imposed on the
partial withdrawal or surrender of purchase payments within seven years of their
having been received by the Company. The surrender charge is the percentage of
each such purchase payment specified in the table below and is separately
calculated and applied to each purchase payment at any time when that purchase
payment is withdrawn or surrendered. No surrender charge applies to Contract
Value in excess of aggregate purchase payments. The surrender charge is
calculated using the assumption that all Contract Value in excess of aggregate
purchase payments is surrendered before any purchase payments and that purchase
payments are surrendered on a first-in-first-out basis.
Number of Full Years Between
Date of Purchase Payment and Charge as Percentage
Date of Surrender of Purchase Payment
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 + 0%
Any applicable surrender charge is deducted pro-rata from the remaining
Variable Contract Value in the Subaccounts from which the withdrawal is made or
the remaining Guaranteed Interest Option value from the Guarantee Amounts from
which the withdrawal is made. If such remaining Variable Contract Value or
Guaranteed Interest Option value is insufficient for this purpose, the surrender
charge is deducted pro-rata from all Subaccounts and Guarantee Amounts under the
Contract.
Amounts Not Subject to Surrender Charge. In each Contract Year, up to
10% of an amount equal to the aggregate purchase payments still subject to a
surrender charge (computed at the time of the withdrawal or surrender) may be
withdrawn or surrendered during that year without a surrender charge. Any
amounts surrendered or withdrawn in excess of this 10% will be assessed a
surrender charge. This right is not cumulative from Contract Year to Contract
Year.
Waiver of Surrender Charge. In most states, the Contract provides that,
upon Written Notice from the Owner before the Annuity Date, the surrender charge
will be waived on any partial withdrawal or surrender if the Annuitant is
confined to a nursing home or hospital (as described in the Contract) or becomes
terminally ill (as described in the Contract). This waiver is not available in
some states, and, therefore, is not described in Contracts issued in those
states. As of January 1, 1995, those states include Kansas, Pennsylvania, and
Texas.
Annual Contract Fee
On each Contract Anniversary prior to the Annuity Date, the Company
deducts from the Variable Contract Value an annual Contract fee of $30 to
reimburse it for administrative expenses relating to the Contract. The fee is
deducted from each Subaccount and from the Guaranteed Interest Option based on
the proportion that the value of the Subaccount and the Guaranteed Interest
Option bear to the total Contract Value. (In Texas and South Carolina, the fee
is deducted from each Subaccount based on the proportion that the value of the
Subaccount bears to the total Variable Contract Value.) The Company does not
expect to make a profit on this fee. The annual Contract fee also is deducted
upon surrender of a Contract on a date other than a Contract Anniversary. A
pro-rated portion of the fee is deducted upon annuitization. After the Annuity
Date, the annual Contract fee is deducted from variable annuity payments. The
Company does not deduct the annual Contract fee on Contracts with a Contract
Value of $25,000 or more on the Contract Anniversary. The Contract fee will not
be charged after the Annuity Date when a Contract with a Contract Value of
$25,000 or more has been annuitized.
Asset-Based Administration Charge
The Company deducts a daily administration charge to compensate it for
certain expenses it incurs in administration of the Contract. The charge is
deducted from the assets of the Variable Account at an annual rate of 0.15%. The
Company does not expect to make a profit from this charge.
Transfer Processing Fee
Currently no fee is charged for transfers. However, the Company
reserves the right to charge $10 for the 13th and each subsequent transfer
during a Contract Year. For the purpose of assessing such a transfer fee, each
written request would be considered to be one transfer, regardless of the number
of Subaccounts or Guarantee Amounts affected by the transfer. The transfer fee
would be deducted from the Subaccount or Guarantee Amount from which the
transfer is made. If a transfer is made from more than one Subaccount or
Guarantee Amount at the same time, the transfer fee would be deducted pro-rata
from the remaining Variable Contract Value in such Subaccount(s) or from the
remaining Guarantee Amount.
Mortality and Expense Risk Charge
To compensate the Company for assuming mortality and expense risks, the
Company deducts a daily mortality and expense risk charge from the assets of the
Variable Account. The charge is at a daily rate of 0.003425%. On an annual
basis, this equates to 1.25% (approximately 0.85% for mortality risk and 0.40%
for expense risk).
The mortality risk the Company assumes is that Annuitants may live for
a longer period of time than estimated when the guarantees in the Contract were
established. Because of these guarantees, each Payee is assured that longevity
will not have an adverse effect on the annuity payments received. The mortality
risk that the Company assumes also includes a guarantee to pay a death benefit
if the Annuitant dies before the Annuity Date. The expense risk that the Company
assumes is the risk that the administrative fees and transfer fees (if imposed)
may be insufficient to cover actual future expenses.
If the mortality and expense risk charge is insufficient to cover the
actual cost of the mortality and expense risks undertaken by the Company, the
Company will bear the shortfall. Conversely, if the charge proves more than
sufficient, the excess will be profit to the Company and will be available for
any proper corporate purpose including, among other things, payment of sales
expenses.
Fund Expenses
Because the Variable Account purchases shares or units of the various
Funds, the net assets of the Variable Account will reflect the investment
advisory fees and other operating expenses incurred by such Funds. See the
accompanying current prospectuses for Ultra Series Fund, T. Rowe Price
International Series, Inc. and MFS Variable Insurance Trust.
Premium Taxes
Various states and other governmental entities levy a premium tax on
annuity contracts issued by insurance companies. Premium tax rates are subject
to change from time to time by legislative and other governmental action. In
addition, other government units within a state may levy such taxes. The timing
of tax levies varies from one taxing authority to another. If premium taxes are
applicable to a Contract, the jurisdiction may require payment (a) from purchase
payments as they are received, (b) from Contract Value upon withdrawal or
surrender, (c) from adjusted Contract Value upon application to an annuity
payment option, or (d) upon payment of a death benefit. The Company will forward
payment to the taxing jurisdiction when required by law. Although the Company
reserves the right to deduct premium taxes at the time such taxes are paid to
the taxing authority, currently the Company does not deduct premium tax from the
Owner's Contract Value until the Contract is annuitized. (In Pennsylvania,
premium tax is also deducted when the Contract is terminated by surrender or
death.)
The Company, upon request, will provide current premium tax rates. To
obtain this information, contact the Company at the address and telephone number
shown on the first page of this prospectus. As of January 1, 1996, the Contracts
offered by this Prospectus were subject to tax in the states shown below:
============================ ============= =============
Non-Qualified
State Qualified
============================ ============= =============
California 2.35% 0.50%
District of Columbia 2.25% 2.25%
Kansas 2.00% 0.00%
Kentucky 2.00% 2.00%
Maine 2.00% 0.00%
Nevada 3.50% 0.00%
South Dakota 1.25% 0.00%
West Virginia 1.00% 1.00%
Wyoming 1.00% 0.00%
============================ ============= =============
Other Taxes
Currently, no charge is made against the Variable Account for any
federal, state or local taxes (other than premium taxes) that the Company incurs
or that may be attributable to the Variable Account or the Contracts. The
Company may, however, make such a charge in the future from Surrender Value,
death benefits or annuity payments, as appropriate. Such taxes may include taxes
(levied by any government entity) which the Company determines to have resulted
from: (1) the establishment or maintenance of the Variable Account, (2) receipt
by the Company of purchase payments, (3) issuance of the Contracts, or (4) the
payment of annuity payments.
ANNUITY PAYMENT OPTIONS
Election of Annuity Payment Options
On the Annuity Date, the adjusted Contract Value will be applied under
an annuity payment option, unless the Owner elects to receive the Surrender
Value in a single sum. (See "Annuity Payments on the Annuity Date.") If an
election of an annuity payment option is not on file at the Company's Home
Office on the Annuity Date, the proceeds will be paid as a life income annuity
with payments for ten years guaranteed. An annuity payment option may be
elected, revoked, or changed by the Owner at any time before the Annuity Date
while the Annuitant is living. The election of an option and any revocation or
change must be made by Written Notice signed by the Owner and/or Beneficiary, as
appropriate. The Owner may elect to apply any portion of the adjusted Contract
Value to provide either variable annuity payments or fixed annuity payments or a
combination of both.
Prior to the Annuity Date, the Owner can apply the entire Surrender
Value under an annuity payment option, or a Beneficiary can apply the death
benefit under an annuity payment option. The annuity payment options available
are described below.
The Company reserves the right to refuse the election of an annuity
payment option other than paying the adjusted Contract Value in a lump sum if
the total amount applied to an annuity payment option would be less than $2,500,
or each annuity payment would be less than $25.00.
Fixed Annuity Payments
Fixed annuity payments are periodic payments from the Company to the
designated Payee, the amount of which is fixed and guaranteed by the Company.
The amount of each payment depends only on the form and duration of the annuity
payment option chosen, the age of the Annuitant, the sex of the Annuitant (if
applicable), the amount applied to purchase the annuity payments and the
applicable annuity purchase rates in the Contract. The annuity purchase rates in
the Contract are based on a minimum guaranteed interest rate of 3.5%. The
Company may, in its sole discretion, make annuity payments in an amount based on
a higher interest rate.
Variable Annuity Payments
The dollar amount of the first variable annuity payment is determined
in the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a particular annuity payment option, the dollar
amount of the first variable annuity payment and the first fixed annuity payment
(assuming such fixed payment is based on the minimum guaranteed 3.5% interest
rate) would be the same. Variable annuity payments after the first payment are
similar to fixed annuity payments except that the amount of each payment varies
to reflect the net investment performance of the Subaccount(s) selected by the
Owner or Payee.
The net investment performance of a Subaccount is translated into a
variation in the amount of variable annuity payments through the use of Annuity
Units. The amount of the first variable annuity payment associated with each
Subaccount is applied to purchase Annuity Units at the Annuity Unit value for
the Subaccount on the Annuity Date. The number of Annuity Units of each
Subaccount attributable to a Contract then remains fixed unless an exchange of
Annuity Units is made as described below. Each Subaccount has a separate Annuity
Unit value that changes with each Valuation Period in substantially the same
manner as do Accumulation Units of the Subaccount.
The dollar value of each variable annuity payment after the first is
equal to the sum of the amounts determined by multiplying the number of Annuity
Units under a Contract of a particular Subaccount by the Annuity Unit value for
the Subaccount for the Valuation Period which ends immediately preceding the
date of each such payment. If the net investment return of the Subaccount for a
payment period is equal to the pro-rated portion of the 3.5% annual assumed
investment rate, the variable annuity payment attributable to that Subaccount
for that period will equal the payment for the prior period. To the extent that
such net investment return exceeds an annualized rate of 3.5% for a payment
period, the payment for that period will be greater than the payment for the
prior period and to the extent that such return for a period falls short of an
annualized rate of 3.5%, the payment for that period will be less than the
payment for the prior period.
After the Annuity Date, a Payee may change the selected Subaccount(s)
by Written Notice up to four times per Contract Year. Such a change will be made
by exchanging Annuity Units of one Subaccount for another on an equivalent
dollar value basis. See the Statement of Additional Information for examples of
Annuity Unit value calculations and variable annuity payment calculations.
Description of Annuity Payment Options
Option 1 - Interest Income. (Fixed Annuity Payments Only) The proceeds
are left with the Company to earn interest at a compound annual rate to be
determined by the Company but not less than 3.5%. Interest will be paid every
month or every 12 months as the Owner or Payee selects. Under this option, the
Payee may withdraw part or all of the proceeds at any time.
This option may not be available in all states.
Option 2 - Income For a Fixed Term. (Fixed Annuity Payments Only) The
proceeds are paid out in equal monthly installments for a fixed number of years
between 5 and 30. In the event of the Payee's death, a successor Payee may
receive the payments or may elect to receive the present value of the remaining
payments (computed as described in the Contract) in a lump sum. If there is no
successor Payee or if the successor Payee dies, the present value of the
remaining payments will be paid to the estate of the last surviving Payee.
Option 3A - Life Income With Specified Number of Years Guaranteed. The
proceeds are paid in monthly installments during the Payee's lifetime with the
guarantee that payments will be made for a period of ten years or twenty years.
In the event of the Payee's death before the expiration of the specified number
of years, a successor Payee may receive the remaining payments or may elect to
receive the present value of the remaining payments (computed as described in
the Contract) in a lump sum. If there is no successor Payee or if the successor
Payee dies, the present value of the remaining payments will be paid to the
estate of the last surviving Payee.
Option 3B - Life Income With Special Specified Number of Years
Guaranteed. (Fixed Annuity Payments Only) The same as Option 3A except that the
specified number of years selected is at least that which is necessary for the
total of all guaranteed payments to equal the amount of proceed applied under
this option.
Option 3C - Life Income. The same as Option 3A except that payments are
not guaranteed for a specific number of years but only for the lifetime of the
Payee. Under this option, a Payee could receive only one payment if the
Annuitant dies after the first payment, two payments if the Annuitant dies after
the second payment, etc.
Option 4 - Joint and Survivor Life Income - 10 Year Guaranteed Period
Certain. The proceeds are paid out in monthly installments for as long as either
of two joint Payees (Annuitants) remain alive. If after the second Payee dies,
payments have been made for fewer than 10 years, payments will be made to any
successor Payee who was not a joint Annuitant or such successor Payee may elect
to receive the present value of the remaining payments (computed as described in
the Contract) in a lump sum. If there is no such successor Payee or if the
successor Payee dies, the present value of the remaining payments will be paid
to the estate of the last surviving Payee.
The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the Payee's age (and if
applicable, sex). Age will be determined from the last birthday at the due date
of the first payment.
Alternate Payment Option. In lieu of one of the above options, the
adjusted Contract Value or death benefit, as applicable, may be applied to any
other payment option made available by the Company or requested and agreed to by
the Company.
YIELDS AND TOTAL RETURNS
From time to time, the Company may advertise or include in sales
literature yields, effective yields and total returns for the Subaccounts. These
figures are based on historical earnings and do not indicate or project future
performance. The Company also may, from time to time, advertise or include in
sales literature Subaccount performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance appears in the Statement of Additional
Information.
Effective yields and total returns for the Subaccounts are based on the
investment performance of the corresponding Fund. The performance of a Fund in
part reflects its expenses. See the prospectuses for the Funds.
The yield of the Money Market Subaccount refers to the annualized
income generated by an investment in the Subaccount over a specified seven-day
period. The yield is calculated by assuming that the income generated for that
seven-day period is generated each seven-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
Subaccount 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 Subaccount (except the Money Market Subaccount) refers
to the annualized income generated by an investment in the Subaccount 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 month over a 12-month period and is shown as a percentage of the
investment.
The total return of a Subaccount refers to return quotations assuming
an investment under a Contract has been held in the Subaccount for various
periods of time. For periods prior to the date the Variable Account commenced
operations, performance information will be calculated based on the performance
of the various Funds and the assumption that the Subaccounts were in existence
for the same periods as those indicated for the Funds, with the level of
Contract charges that were in effect at the inception of the Subaccounts for the
Contracts. When a Subaccount or Fund has been in operation for one, five, and
ten years, respectively, the total returns 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 Contract 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 annual percentage change in
the value of an investment in the Subaccount 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 Subaccount (including any surrender charge
that would apply if an Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
In addition to the standard version described above, total return
performance information computed on two different non-standard bases may be used
in advertisements or sales literature. Average annual total return information
may be presented, computed on the same basis as described above, except
deductions will not include the surrender charge. In addition, the Company may
from time to time disclose cumulative total returns for Contracts funded by
Subaccounts.
From time to time, yields, standard average annual total returns, and
non-standard total returns for the Funds may be disclosed, including such
disclosures for periods prior to the date the Variable Account commenced
operations.
Non-standard performance data will only be disclosed if the standard
performance data for the required periods is also disclosed. For additional
information regarding the calculation of other performance data, please refer to
the Statement of Additional Information.
In advertising and sales literature, the performance of each Subaccount
may be compared with the performance of other variable annuity issuers in
general or to the performance of particular types of variable annuities
investing in mutual funds, or investment portfolios of mutual funds with
investment objectives similar to the Subaccount. Lipper Analytical Services,
Inc. ("Lipper"), Variable Annuity Research Data Service ("VARDS") and
Morningstar, Inc. ("Morningstar") are independent services which monitor and
rank the performance of variable annuity issuers in each of the major categories
of investment objectives on an industry-wide basis.
Lipper's and Morningstar's rankings include variable life insurance
issuers as well as variable annuity issuers. VARDS's rankings compare only
variable annuity issuers. The performance analyses prepared by Lipper, VARDS and
Morningstar 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 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.
Advertising and sales literature may also compare the performance of
each Subaccount to the Standard & Poor's Index of 500 Common Stocks, a widely
used measure of stock performance. This unmanaged index assumes the reinvestment
of dividends but does not reflect any "deduction" for transaction costs or
expenses of operating and managing an investment portfolio. The Lehman Bond
Indexes represent unmanaged groups of securities of various issuers and terms to
maturity which are representative of bond market performance. The Consumer Price
Index is a statistical measure of changes in the prices of goods and services
over time published by the U.S. Bureau of Labor Statistics. Lipper Performance
Summary Averages represent the average annual total return of all the funds
(within a specified investment category) that are covered by the Lipper
Analytical Services Variable Insurance Products Performance Analysis Service.
Other independent ranking services and indices may also be used for performance
comparisons.
The Company may also report other information including the effect of
tax-deferred compounding on a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Subaccount investments are reinvested on a
tax-deferred basis which can lead to substantial long-term accumulation of
assets, provided that the Subaccount investment experience is positive.
FEDERAL TAX MATTERS
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 Contract issued by the Company. Any
person concerned about these tax implications should consult a competent tax
adviser before initiating any transaction. This discussion is based upon the
Company's understanding of the present federal income tax laws, as they are
currently interpreted by the Internal Revenue Service ("IRS"). 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 IRS. Moreover, no attempt has
been made to consider any applicable state or other tax laws.
The Contract may be purchased on a non-qualified basis or purchased and
used in connection with plans qualifying for favorable tax treatment. The
Qualified Contract is designed for use by individuals whose purchase payments
are comprised solely 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), 403(b), 408, or 457 of the Code. The ultimate
effect of federal income taxes on the amounts held under a Contract, or annuity
payments, and on the economic benefit to the Owner, the Annuitant, or the
Beneficiary depends on the type of retirement plan, on the tax and employment
status of the individual concerned, and on the Company's tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a tax-qualified plan and receiving distributions
from a Qualified Contract in order to continue receiving favorable tax
treatment. Therefore, purchasers of Qualified Contracts should seek competent
legal and tax advice regarding the suitability of a Contract for their
situation, the applicable requirements, and the tax treatment of the rights and
benefits of a Contract. The following discussion assumes that Qualified
Contracts are purchased with proceeds from and/or contributions under retirement
plans that qualify for the intended special federal income tax treatment.
Tax Status of the Contract
Diversification Requirements. Section 817(h) of the Code provides that
separate account investment underlying a contract must be "adequately
diversified" in accordance with Treasury regulations in order for the contract
to qualify as an annuity contract under Section 72 of the Code. The Variable
Account, through each underlying 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 Subaccounts may be
invested. Although the Company does not have direct control over the Funds in
which the Variable Account invests, we believe that each Fund in which the
Variable Account owns shares will meet the diversification requirements, and
therefore, the Contract will be treated as an annuity contract under the Code.
In certain circumstances, owners of variable annuity contracts may be
considered the owners, for federal income tax purposes, of the assets of the
separate account used to support their contracts. In those circumstances, income
and gains from the separate account assets would be includible in the variable
annuity contract owner's gross income. The IRS has stated in published rulings
that a variable contractowner will be considered the owner of separate account
assets if the contractowner possesses incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. The Treasury
Department has also 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 (i.e., the
contractowner), rather than the insurance company, to be treated as the owner of
the assets in the account." This announcement also states that guidance would be
issued by way of regulations or rulings on the "extent to which policyholders
may direct their investments to particular subaccounts without being treated as
owners of the underlying assets."
The ownership rights under the Contracts are similar to, but different
in certain respects from, those described by the IRS in rulings in which it was
determined that contractowners were not owners of separate account assets. For
example, the Owner of a Contract has the choice of one or more Subaccounts in
which to allocate Net Purchase Payments and Contract Values, and may be able to
transfer among Subaccounts more frequently than in such rulings. These
differences could result in an Owner being treated as the Owner of the assets of
the Variable Account. In addition, the Company does not know what standards will
be set forth, if any, in the regulations or rulings which the Treasury
Department has stated it expects to issue. The Company therefore reserves the
right to modify the Contract as necessary to attempt to prevent the
contractowner from being considered the Owner of the assets of the Variable
Account.
Required Distributions. In order to be treated as an annuity contract
for federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
annuity date but prior to the time the entire interest in the contract 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 contract 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 annuitant" and which is distributed over the life of such annuitant
or over a period not extending beyond the life expectancy of that annuitant,
provided that such distributions begin within one year of that owner's death.
The owner's "designated annuitant" is the person designated by such owner as an
annuitant and to whom ownership of the contract passes by reason of death and
must be a natural person. However, if the owner's "designated annuitant" is the
surviving spouse of the owner, the contract may be continued with the surviving
spouse as the new owner.
The Non-Qualified Contracts 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. The Company
intends 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 Contracts.
The following discussion assumes that the Contracts 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. The Company believes that an Owner who is a natural person is not taxed
on increases in the value of a Contract until distribution occurs by withdrawing
all or part of the Contract Value (e.g., partial withdrawals and surrenders) or
as annuity payments under the payment option elected. For this purpose, the
assignment, pledge, or agreement to assign or pledge any portion of the Contract
Value (and in the case of a Qualified Contract, 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 payment
option) is taxable as ordinary income.
Any annuity contract Owner who is not a natural person generally must
include in income any increase in the excess of the Contract Value over the
"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 competent tax adviser.
The following discussion generally applies to Contracts owned by
natural persons.
Partial Withdrawals. In the case of a partial withdrawal from a
Qualified Contract, 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 purchase payments paid by or on behalf of the individual under a
Contract which were not excluded from the individual's gross income. For
Contracts 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 Contracts.
In the case of a partial withdrawal (including systematic withdrawals)
from a Non-Qualified Contract, under Section 72(e), any amounts received are
generally first treated as taxable income to the extent that the Contract Value
immediately before the partial withdrawal exceeds the "investment in the
contract" at that time. Any additional amount withdrawn is not taxable. With
respect to a Non-Qualified Contract, partial withdrawals are generally treated
as taxable income to the extent that the Contract Value immediately before the
withdrawal exceeds the "investment in the contract" at that time. The Contract
Value immediately before a partial withdrawal may have to be increased by any
positive interest adjustment which results from such a withdrawal. There is,
however, no definitive guidance on the proper tax treatment of interest
adjustments, and the Owner should contact a competent tax adviser with respect
to the potential tax consequences of an interest adjustment. Surrenders are
treated as taxable income to the extent that the amount received exceeds the
investment in the contract.
In the case of a full surrender under a qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the contract."
Section 1035 of the Code generally provides that no gain or loss shall
be recognized on the exchange of one annuity contract for another. Special rules
and procedures apply to Section 1035 transactions. Prospective Owners wishing to
take advantage of Section 1035 should consult their tax adviser.
Annuity Payments. Tax consequences may vary depending on the payment
option elected under an annuity contract. Generally, under Code Section 72(b),
(prior to recovery of the investment in the Contract) taxable income does not
include that part of any amount received as an annuity under an annuity contract
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 annuity
payments, the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each 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. However, the entire distribution
will be taxable once the recipient has recovered the dollar amount of his or her
"investment in the contract." For fixed annuity payments, in general, there is
no tax on the portion 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 annuity
payment is taxable until the recovery of the investment in the contract, and
thereafter the full amount of each annuity payment is taxable. If death occurs
before full recovery of the investment in the contract, the unrecovered amount
may be deducted on the Annuitant's final tax return.
Taxation of Death Benefit Proceeds. Amounts may be distributed from a
Contract because of the death of the Owner or Annuitant. Generally, such amounts
are includible in the income of the recipient as follows: (i) if distributed in
a lump sum, they are taxed in the same manner as a full surrender of the
contract or (ii) if distributed under a payment option, they are taxed in the
same way as annuity payments.
Penalty Tax on Certain Withdrawals. In the case of a distribution
pursuant to a Non-Qualified Contract, 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 on distributions:
(1) made on or after the taxpayer reaches age 59 1/2;
(2) made on or after the death of the holder (or if the holder is
not an individual, the death of the primary Annuitant);
(3) attributable to the taxpayer's 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 the designated Beneficiary;
(5) made under certain annuities issued in connection with
structured settlement agreements; and
(6) made under an annuity contract that is purchased with a single
purchase payment when the Annuity 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 payment period.
Other tax penalties may apply to certain distributions under a
Qualified Contract.
Possible Changes in Taxation. In past years, legislation has been
proposed that would have adversely modified the federal taxation of certain
annuities. For example, one such proposal would have changed the tax treatment
of non-qualified annuities that did not have "substantial life contingencies" by
taxing income as it is credited to the annuity. Congress may consider more
proposed legislation regarding taxation of annuities. There is always the
possibility that the tax treatment of annuities could change by legislation or
other means (such as IRS regulations, revenue rulings, judicial decisions,
etc.). Moreover, it is also possible that any change could be retroactive (that
is, effective prior to the date of the change).
Transfers, Assignments or Exchanges of a Contract
A transfer of ownership of a Contract, the designation of an Annuitant,
Payee or other Beneficiary who is not also the Owner, the selection of certain
Annuity Dates or the exchange of a Contract may result in certain tax
consequences to the Owner that are not discussed herein. An Owner contemplating
any such actions should contact a competent tax adviser with respect to the
potential tax effects.
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 may elect not to have tax withheld from distributions. Effective
January 1, 1993, distributions from certain qualified plans are generally
subject to mandatory withholding. Certain states also require withholding of
state income tax whenever federal income tax is withheld.
Multiple Contracts
All non-qualified deferred annuity Contracts entered into after October
21, 1988 that are issued by the Company (or its affiliates) to the same Owner
during any calendar year are treated as one annuity Contract for purposes of
determining the amount includible in gross income under Section 72(e). The
effects of this rule are not yet clear; however, it could affect the point where
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
contractowner should consult a competent tax adviser before purchasing more than
one annuity Contract.
Taxation of Qualified Plans
The Contracts are designed for use with several types of qualified
plans. The tax rules applicable to participants in these qualified plans vary
according to the type of plan and the terms and conditions of the plan itself.
Special favorable tax treatment may be available for certain types of
contributions and distributions. Adverse tax consequences may result from
contributions in excess of specified limits; distributions prior to age 59 1/2
(subject to certain exceptions); distributions that do not conform to specified
commencement and minimum distribution rules; aggregate distributions in excess
of a specified annual amount; and in other specified circumstances. Therefore,
no attempt is made to provide more than general information about the use of the
Contracts with the various types of qualified retirement plans. Contractowners,
the Annuitants, and Beneficiaries are cautioned that the rights of any person to
any benefits under these qualified retirement plans may be subject to the terms
and conditions of the plans themselves, regardless of the terms and conditions
of the Contract, but the Company shall not be bound by the terms and conditions
of such plans to the extent such terms contradict the Contract, unless the
Company consents. Some retirement plans are subject to distribution and other
requirements that are not incorporated into the Company's Contract
administration procedures. Brief descriptions follow of the various types of
qualified retirement plans in connection with a Contract. The Company will amend
the Contract as necessary to conform it to the requirements of such plan.
Corporate Pension and Profit Sharing Plans and H.R. 10 Plans. Section
401(a) of the Code permits corporate employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish these plans for themselves and their employees. These retirement plans
may permit the purchase of the Contracts to accumulate retirement savings under
the plans. Adverse tax or other legal consequences to the plan, to the
participant or to both may result if this Contract is assigned or transferred to
any individual as a means to provide benefit payments, unless the plan complies
with all legal requirements applicable to such benefits prior to transfer of the
Contract. Employers intending to use the Contract with such plans should seek
competent advice.
Individual Retirement Annuities. 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 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 Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service. Employers may establish Simplified
Employee Pension (SEP) Plans to provide IRA contributions on behalf of their
employees. The Internal Revenue Service has not reviewed the Contract 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
Contract comports with IRA qualifications requirements.
Tax Sheltered Annuities. Section 403(b) of the Code allows employees of
certain Section 501(c)(3) organizations and public schools to exclude from their
gross income the purchase payments paid, within certain limits, on a Contract
that will provide an annuity for the employee's retirement. These purchase
payments may be subject to FICA (social security) tax. Owners of certain Section
403(b) annuities may receive Contract loans. Contract loans that satisfy certain
requirements with respect to loan amount and repayment are not treated as
taxable distributions. If these requirements are not satisfied, or if the
Contract terminates while a loan is outstanding, the loan balance will be
treated as a taxable distribution and may be subject to penalty tax, and the
treatment of the Contract under Section 403(b) may be adversely affected. Owners
should seek competent advice before requesting a Contract loan.
Certain Deferred Compensation Plans. Code Section 457 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. These plans are subject to various restrictions on
contributions and distributions. The plans may permit participants to specify
the form of investment for their deferred compensation account. In general, all
investments are owned by the sponsoring employer and are subject to the claims
of the general creditors of the employer. Depending on the terms of the
particular plan, the employer may be entitled to draw on deferred amounts for
purposes unrelated to its Section 457 plan obligations. In general, all amounts
distributed under a Section 457 plan are taxable and are subject to federal
income tax withholding as wages.
Possible Charge for the Company's Taxes
At the present time, the Company makes no charge to the Subaccounts for
any Federal, state, or local taxes that the Company incurs which may be
attributable to such Subaccounts or the Contracts. The Company, however,
reserves 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 it
determines to be properly attributable to the Subaccounts or to the Contracts.
Other Tax Consequences
As noted above, the foregoing comments about the Federal tax
consequences under these Contracts 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 the
Company's 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 Contract depend on the individual
circumstances of each Owner or recipient of the distribution. A competent tax
adviser should be consulted for further information.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be offered to the public on a continuous basis. The
Company does not anticipate discontinuing the offering of the Contracts, but
reserves the right to discontinue the offering. Applications for Contracts are
solicited by agents who are licensed by applicable state insurance authorities
to sell the Company's variable annuity Contracts and who are also registered
representatives of CUNA Brokerage Services, Inc. ("CUNA Brokerage") or
broker-dealers having selling agreements with CUNA Brokerage or broker-dealers
having selling agreements with such broker-dealers. CUNA Brokerage is an
indirect wholly-owned subsidiary of CUNA Mutual and is registered with the SEC
under the Securities Exchange Act of 1934 as a broker-dealer and is a member of
the National Association of Securities Dealers, Inc.
CUNA Brokerage acts as the principal underwriter, as defined in the
1940 Act, of the Contracts for the Variable Account pursuant to an underwriting
agreement between the Company and CUNA Brokerage. CUNA Brokerage is not
obligated to sell any specific number of Contracts. CUNA Brokerage maintains an
Office of Supervisory Jurisdiction at the same address as the Company. CUNA
Brokerage's principal business address is the same as that of CUNA Mutual.
The Company may pay sales commissions to broker-dealers up to an amount
equal to 6% of the purchase payments paid under a Contract. These broker-dealers
are expected to compensate sales representatives in varying amounts from these
commissions. The Company also may pay other distribution expenses such as
agents' insurance and pension benefits, agency expense allowances, and overhead
attributable to distribution. In addition, the Company may from time to time pay
or allow additional promotional incentives in the form of cash or other
compensation. These distribution expenses do not result in any additional
charges under the Contracts that are not described under "Charges and
Deductions."
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party
or the assets of the Variable Account are subject. The Company is not involved
in any litigation that is of material importance in relation to its total assets
or that relates to the Variable Account.
VOTING RIGHTS
In accordance with its view of current applicable law, the Company will
vote Fund shares held in the Variable Account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Subaccounts. If, however, the 1940
Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or the Company otherwise determines that
it is allowed to vote the shares in its own right, it may elect to do so.
The number of votes that an Owner or Annuitant has the right to
instruct will be calculated separately for each Subaccount of the Variable
Account, and may include fractional votes. Prior to the Annuity Date, an Owner
holds a voting interest in each Subaccount to which the Contract Value is
allocated. After the Annuity Date, the Annuitant has a voting interest in each
Subaccount from which variable annuity payments are made.
For each Owner, the number of votes attributable to a Subaccount will
be determined by dividing the Contract Value attributable to that Owner's
Contract in that Subaccount by the net asset value per share of the Fund in
which that Subaccount invests. For each Annuitant, the number of votes
attributable to a Subaccount will be determined by dividing the liability for
future variable annuity payments to be paid from that Subaccount by the net
asset value per share of the Fund in which that Subaccount invests. This
liability for future payments is calculated on the basis of the mortality
assumptions, the 3.5% assumed investment rate used in determining the number of
Annuity Units of that Subaccount credited to the Annuitant's Contract and the
Annuity Unit value of that Subaccount on the date that the number of votes is
determined. As variable annuity payments are made to the Annuitant, the
liability for future payments decreases as does the number of votes.
The number of votes available to an Owner or Annuitant will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the relevant meeting of the Fund's
shareholders. Voting instructions will be solicited by written communication
prior to such meeting in accordance with procedures established for the Fund.
Each Owner or Annuitant having a voting interest in a Subaccount will receive
proxy materials and reports relating to any meeting of shareholders of the Fund
in which that Subaccount invests.
Fund shares for which no timely instructions are received and shares
held by the Company in a Subaccount for which no Owner or Annuitant has a
beneficial interest will be voted in proportion to the voting instructions which
are received with respect to all Contracts participating in that Subaccount.
Voting instructions to abstain on any item to be voted upon will be applied to
reduce the total number of votes eligible to be cast on a matter.
COMPANY HOLIDAYS
The Company is closed on the following holidays: (1) for Thanksgiving,
the day immediately following; (2) for Christmas, the final scheduled work day
preceding; and (3) for New Year's Day and Independence Day, the day itself if
those days fall Monday through Friday, the day immediately preceding if those
days fall on a Saturday, and the day immediately following if those days fall on
a Sunday.
FINANCIAL STATEMENTS
The audited financial statements of the Variable Account as of December
31, 1995, including a statement of assets and liabilities, a statement of
operations for the year then ended, a statement of changes in net assets for the
year ended 12/31/95 and the 7 month period ended 12/31/94, and accompanying
notes, are included in the Statement of Additional Information.
The audited balance sheets for the Company as of December 31, 1995 and
1994 and the related statutory basis statements of operations, changes in net
worth, and cash flows for the years ended December 31, 1995, 1994, and 1993 as
well as the Independent Auditors' Report are contained in the Statement of
Additional Information.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS
THE CONTRACT
INCONTESTABILITY
MISSTATEMENT OF AGE OR SEX
PARTICIPATION
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET SUBACCOUNT YIELDS
OTHER SUBACCOUNT YIELDS
AVERAGE ANNUAL TOTAL RETURNS
OTHER TOTAL RETURNS
EFFECT OF THE ANNUAL CONTRACT FEE ON PERFORMANCE DATA
VARIABLE ANNUITY PAYMENTS
ASSUMED INVESTMENT RATE
AMOUNT OF VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
TERMINATION OF PARTICIPATION AGREEMENTS
T. ROWE PRICE INTERNATIONAL SERIES, INC
MFS VARIABLE INSURANCE TRUST
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
CENTURY VARIABLE ANNUITY ACCOUNT
CENTURY LIFE OF AMERICA
You may obtain a copy of the Statement of Additional Information free of charge
by writing to or calling the Company at the address or telephone number shown at
the beginning of this Prospectus.
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Century Life of America
2000 Heritage Way
Waverly, Iowa 50677
(800)-798-5500
CENTURY VARIABLE ANNUITY ACCOUNT
Individual Flexible Premium Deferred Variable Annuity Contract
This Statement of Additional Information contains information in
addition to the information described in the Prospectus for the individual
flexible premium deferred variable annuity contract (the "Contract") offered by
Century Life of America (the "Company"). This Statement of Additional
Information is not a Prospectus, and it should be read only in conjunction with
the Prospectuses for the Contract and Ultra Series Fund, T. Rowe Price
International Series, Inc. and MFS(R) Variable Insurance TrustSM ("MFS Variable
Insurance Trust"). The Prospectus for the Contract is dated the same as this
Statement of Additional Information. You may obtain a copy of the Prospectuses
by writing or calling us at our address or phone number shown above.
May 1, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS
THE CONTRACT
INCONTESTABILITY
MISSTATEMENT OF AGE OR SEX
PARTICIPATION
CALCULATION OF YIELDS AND TOTAL RETURNS
MONEY MARKET SUBACCOUNT YIELDS
OTHER SUBACCOUNT YIELDS
AVERAGE ANNUAL TOTAL RETURNS
OTHER TOTAL RETURNS
EFFECT OF THE ANNUAL CONTRACT FEE ON PERFORMANCE DATA
VARIABLE ANNUITY PAYMENTS
ASSUMED INVESTMENT RATE
AMOUNT OF VARIABLE ANNUITY PAYMENTS
ANNUITY UNIT VALUE
TERMINATION OF PARTICIPATION AGREEMENTS
T. ROWE PRICE INTERNATIONAL SERIES, INC
MFS VARIABLE INSURANCE TRUST
LEGAL MATTERS
EXPERTS
OTHER INFORMATION
FINANCIAL STATEMENTS
CENTURY VARIABLE ANNUITY ACCOUNT
CENTURY LIFE OF AMERICA
<PAGE>
ADDITIONAL CONTRACT PROVISIONS
The Contract
The application, endorsements and all other attached papers are part of
the Contract. The statements made in the application are deemed representations
and not warranties. The Company will not use any statement in defense of a claim
or to void the Contract unless it is contained in the application.
Incontestability
The Company will not contest the Contract.
Misstatement of Age or Sex
If the age or sex (if applicable) of the Annuitant has been misstated,
the amount which will be paid is that which the proceeds would have purchased at
the correct age and sex (if applicable).
Participation
The Contract may participate in the Company's divisible surpluses but
no dividends are expected to be paid. Any dividends paid after the Annuity Date
would be paid with each annuity payment.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Company may disclose yields, total returns, and
other performance data pertaining to the Contracts for a Subaccount. Such
performance data will be computed, or accompanied by performance data computed,
in accordance with the standards defined by the SEC.
Money Market Subaccount Yields
From time to time, advertisements and sales literature may quote the
current annualized yield of the Money Market Subaccount for a seven-day period
in a manner which does not take into consideration any realized or unrealized
gains or losses on shares of the Ultra Series Fund's Money Market Fund or on
that Fund's portfolio securities.
This current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and unrealized
appreciation and depreciation) at the end of the seven-day period in the value
of a hypothetical account under a Contract having a balance of 1 unit of the
Money Market Subaccount at the beginning of the period, dividing such net change
in account value by the value of the hypothetical 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 Fund attributable to the hypothetical account; and 2) charges and deductions
imposed under the Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical
account for: 1) the annual Contract fee; 2) the mortality and expense risk
charge; and (3) the asset-based administration charge. For purposes of
calculating current yields for a Contract, an average per unit Contract fee is
used based on the $30 annual Contract fee deducted at the end of each Contract
Year. Current Yield is calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Money Market Fund
(exclusive of realized gains or losses on the sale of
securities and unrealized appreciation and
depreciation) for the seven-day period attributable
to a hypothetical account having a balance of 1
Subaccount unit.
ES = per unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the unit value for the first day of the seven-day
period.
365/7
Effective yield = (1 + ((NCS-ES)/UV)) - 1
Where:
NCS = the net change in the value of the Money Market Fund
(exclusive of realized gains or losses on the sale of
securities and unrealized appreciation and
depreciation) for the seven-day period attributable
to a hypothetical account having a balance of 1
Subaccount unit.
ES = per unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the unit value for the first day of the seven-day
period.
Because of the charges and deductions imposed under the Contract, the
yield for the Money Market Subaccount is lower than the yield for the Money
Market Fund.
The current and effective yields on amounts held in the Money Market
Subaccount normally fluctuate on a daily basis. Therefore, the disclosed yield
for any given past period is not an indication or representation of future
yields or rates of return. The Money Market Subaccount's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Fund, the types and quality of portfolio
securities held by the Money Market Fund and the Money Market Fund's operating
expenses. Yields on amounts held in the Money Market Subaccount may also be
presented for periods other than a seven-day period.
Yield calculations do not take into account the surrender charge under
the Contract equal to 1% to 7% of certain purchase payments during the seven
years subsequent to each payment being made. A surrender charge will not be
imposed upon surrender or partial withdrawal in any Contract Year on an amount
equal to 10% of the aggregate purchase payments subject to the surrender charge
as of the time of the first withdrawal or surrender in that Contract Year.
Other Subaccount Yields
From time to time, sales literature or advertisements may quote the
current annualized yield of one or more of the Subaccounts (except the Money
Market Subaccount) for a Contract for 30-day or one-month periods. The
annualized yield of a Subaccount refers to income generated by the Subaccount
during a 30-day or one-month period and 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
Fund attributable to the Subaccount units less Subaccount expenses for the
period; by 2) the maximum offering price per unit on the last day of the period
times the daily average number of units outstanding for the period; by 3)
compounding that yield for a six-month period; and by 4) multiplying that result
by 2. Expenses attributable to the Subaccount include the annual contract fee,
the asset-based administration charge and the mortality and expense risk charge.
The yield calculation assumes a contract fee of $30 per year per Contract
deducted at the end of each Contract Year. For purposes of calculating the
30-day or one-month yield, an average contract fee based on the average Contract
Value in the Variable Account is used to determine the amount of the charge
attributable to the Subaccount for the 30-day or one-month period. The 30-day or
one-month yield is calculated according to the following formula:
Yield = 2 X (((NI - ES)/(U X UV) + 1)6 - 1)
Where:
NI = net income of the portfolio for the 30-day or one-month
period attributable to the Subaccount's units.
ES = expenses of the Subaccount 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 Contracts, the
yield for the Subaccount is lower than the yield for the corresponding Fund.
The yield on the amounts held in the Subaccounts normally fluctuates
over time. Therefore, the disclosed yield for any given past period is not an
indication or representation of future yields or rates of return. A Subaccount's
actual yield is affected by the types and quality of portfolio securities held
by the corresponding Fund and that Fund's operating expenses.
Yield calculations do not take into account the surrender charge under
the Contract equal to 1% to 7% of certain purchase payments during the seven
years subsequent to each payment being made. A surrender charge will not be
imposed upon surrender or partial withdrawal in any Contract Year on an amount
equal to 10% of the aggregate purchase payments subject to the surrender charge
as of the time of the first withdrawal or surrender in that Contract Year.
Average Annual Total Returns
From time to time, sales literature or advertisements may also quote
average annual total returns for one or more of the Subaccounts for various
periods of time.
When a Subaccount or Fund 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.
Standard average annual total returns represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a Contract 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 calendar quarter-end
practicable, considering the type of the communication and the media through
which it is communicated.
Standard average annual total returns are calculated using Subaccount
unit values which the Company calculates on each Valuation Day based on the
performance of the Subaccount's underlying Fund, the deductions for the
mortality and expense risk charge, the deductions for the asset-based
administration charge and the annual Contract fee. The calculation assumes that
the Contract fee is $30 per year per Contract deducted at the end of each
Contract year. For purposes of calculating average annual total return, an
average per-dollar per-day Contract fee attributable to the hypothetical account
for the period is used. The calculation also assumes surrender of the Contract
at the end of the period for the return quotation. Total returns will therefore
reflect a deduction of the surrender charge for any period less than eight
years. The total return is calculated according to the following formula:
TR = ((ERV/P)1/N) - 1
Where:
TR = the average annual total return net of Subaccount recurring
charges.
ERV = the ending redeemable value (net of any applicable surrender
charge) 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.
Such average annual total return information for the Subaccounts is as
follows:
Period Since Inception
Subaccount 6/30/94 to 12/31/95 12/31/94 to 12/31/95
Capital Appreciation 14.17% 22.55%
Growth and Income 13.36% 23.48%
Balanced 8.37% 14.08%
Bond 4.97% 8.43%
Money Market -.06% -2.59%
International Stock 2.50% 3.28%
World Governments 4.54% 6.35%
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Variable Account
commenced operations. Such performance information is calculated only for those
Funds with a commencement date in January 1994 or earlier. The Growth & Income,
Balanced, Bond, and Money Market Funds commenced operations in January 1985. The
Capital Appreciation Fund commenced operations in January 1994. The
International Stock Portfolio of the T. Rowe Price International Series, Inc.
commenced operations in March of 1994. The MFS(R) World Governments SeriesSM
("MFS WorlD Governments Series") and MFS(R) Emerging Growth SeriesSM ("MFS
Emerging Growth Series") of the MFS Variable Insurance TrusT commenced
operations in June of 1994 and July of 1995 respectively.
Performance information for the Subaccounts for periods prior to the
inception of the Variable Account is calculated according to the formula shown
on the previous page, based on the performance of the Funds and the assumption
that the corresponding Subaccounts were in existence for the same periods as
those indicated for the Funds, with the level of Contract charges that were in
effect at the inception of the Subaccounts.
Such average annual total return information for the Subaccounts is as
follows:
For the For the For the For the period
1-year 5-year 10-Year from date
period period period of inception
ended ended ended of fund to
Subaccount 12/31/95 12/31/95 12/31/95 12/31/95
Capital Appreciation 22.55% N/A N/A 13.30%
Growth and Income 23.48% 13.43% 11.18% 12.12%
Balanced 14.08% 9.14% 8.95% 9.87%
Bond 8.43% 6.37% 6.73% 7.64%
Money Market -2.59% 1.94% 4.05% 4.20%
Other Total Returns
From time to time, sales literature or advertisements may also quote
average annual 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 charges on amounts surrendered or withdrawn.
Such average annual total return information for the Subaccounts is as
follows:
Period Since Inception
Subaccount 6/30/94 to 12/31/95 12/31/94 to 12/31/95
Capital Appreciation 17.30% 28.84%
Growth and Income 16.50% 29.78%
Balanced 11.60% 20.38%
Bond 8.26% 14.73%
Money Market 3.31% 3.71%
International Stock 5.83% 9.58%
World Governments 7.83% 12.65%
The chart below corresponds to the chart on the previous page showing
returns for periods prior to the date the Variable Account commenced operations,
except that the chart below does not reflect the surrender charge. Such average
annual total return information for the Subaccounts is as follows:
For the For the For the For the period
1-year 5-year 10-Year from date
period period period of inception
ended ended ended of fund to
Subaccount 12/31/95 12/31/95 12/31/95 12/31/95
Capital Appreciation 28.84% N/A N/A 15.67%
Growth and Income 29.78% 13.75% 11.18% 12.12%
Balanced 20.38% 9.52% 8.95% 9.87%
Bond 14.73% 6.79% 6.73% 7.64%
Money Market 3.71% 2.43% 4.05% 4.20%
The Company may disclose cumulative total returns in conjunction with
the standard formats described above. The cumulative total returns will be
calculated using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Subaccount recurring
charges for the period.
ERV = The ending redeemable value of the hypothetical investment
at the end of the period.
P = A hypothetical single payment of $1,000.
Effect of the Annual Contract Fee on Performance Data
The Contract provides for a $30 annual Contract fee to be deducted
annually at the end of each Contract Year, from the Subaccounts based on the
proportion of the Variable Contract Value invested in each such Subaccount. For
purposes of reflecting the Contract fee in yield and total return quotations,
the annual charge is converted into a per-dollar per-day charge based on the
average Variable Contract Value in the Variable Account of all Contracts 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.
VARIABLE ANNUITY PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable annuity payments which
follows this section is based on an assumed investment rate of 3.5% per year.
The assumed investment rate is used merely in order to determine the first
monthly payment per thousand dollars of applied value. This rate does not bear
any relationship to the actual net investment experience of the Variable Account
or of any Subaccount.
Amount of Variable Annuity Payments
The amount of the first variable annuity payment to a Payee will depend
on the amount (i.e., the adjusted Contract Value, the Surrender Value, the death
benefit) applied to effect the variable annuity payment as of the Annuity Date,
the annuity payment option selected, and the age and sex (if, applicable) of the
Annuitant. The Contracts contain tables indicating the dollar amount of the
first annuity payment under each annuity payment option for each $1,000 applied
at various ages. These tables are based upon the 1983 Table A (promulgated by
the Society of Actuaries) and an assumed investment rate of 3.5% per year.
The portion of the first monthly variable annuity payment derived from
a Subaccount is divided by the Annuity Unit value for that Subaccount
(calculated as of the date of the first monthly payment). The number of such
units will remain fixed during the annuity period, assuming the Payee makes no
exchanges of Annuity Units for Annuity Units of another Subaccount.
In any subsequent month, for any Contract, the dollar amount of the
variable annuity payment derived from each Subaccount is determined by
multiplying the number of Annuity Units of that Subaccount attributable to that
Contract by the value of such Annuity Unit at the end of the Valuation Period
immediately preceding the date of such payment.
The Annuity Unit value will increase or decrease from one payment to
the next in proportion to the net investment return of the Subaccount or
Subaccounts supporting the variable annuity payments, less an adjustment to
neutralize the 3.5% assumed investment rate referred to above. Therefore, the
dollar amount of annuity payments after the first will vary with the amount by
which the net investment return of the appropriate Subaccounts is greater or
less than 3.5% per year. For example, for a Contract using only one Subaccount
to generate variable annuity payments, if that Subaccount has a cumulative net
investment return of 5% over a one year period, the first annuity payment in the
next year will be approximately 1 1/2% greater than the payment on the same date
in the preceding year. If such net investment return is 1% over a one year
period, the first annuity payment in the next year will be approximately 2 1/2
percentage points less than the payment on the same date in the preceding year.
(See also "Variable Annuity Payments" in the Prospectus.)
Annuity Unit Value
The value of an Annuity Unit is calculated at the same time that the
value of an Accumulation Unit is calculated and is based on the same values for
Fund shares and other assets and liabilities. (See "Variable Contract Value" in
the Prospectus.) The Annuity Unit value for each Subaccount's first Valuation
Period was set at $100. The Annuity Unit value for a Subaccount is calculated
for each subsequent Valuation Period by dividing (1) by (2), then multiplying
this quotient by (3) and then multiplying the result by (4), where:
(1) is the Accumulation Unit value for the current Valuation
Period;
(2) is the Accumulation Unit value for the immediately preceding
Valuation Period;
(3) is the Annuity Unit value for the immediately preceding
Valuation Period; and
(4) is a special factor designed to compensate for the assumed
investment rate of 3.5% built into the table used to compute
the first variable annuity payment.
The following illustrations show, by use of hypothetical examples, the
method of determining the Annuity Unit value and the amount of several variable
annuity payments based on one Subaccount.
<TABLE>
<CAPTION>
Illustration of Calculation of Annuity Unit Value
<S> <C>
1. Accumulation Unit value for current Valuation Period 12.56
2. Accumulation Unit value for immediately preceding Valuation Period 12.55
3. Annuity Unit value for immediately preceding Valuation Period 103.41
4. Factor to compensate for the assumed investment rate of 3.5% 0.99990575
5. Annuity Unit value of current Valuation Period ((1) / (2)) x (3) x (4) 103.48
Illustration of Variable Annuity Payments
1. Number of Accumulation Units at Annuity Date 1,000.00
2. Accumulation Unit value $18.00
3. Adjusted Contract Value (1)x(2) $18,000.00
4. First monthly annuity payment per $1,000 of adjusted Contract Value $5.63
5. First monthly annuity payment (3)x(4) / 1,000 $101.34
6. Annuity Unit value $98.00
7. Number of Annuity Units (5)/(6) 1.034
8. Assume Annuity Unit value for second month equal to $99.70
9. Second monthly annuity payment (7)x(8) $103.09
10. Assume Annuity Unit value for third month equal to $95.30
11. Third monthly annuity payment (7)x(10) $98.54
</TABLE>
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their
shares to the Variable Account contain varying provisions regarding termination.
The following summarizes those provisions:
T. Rowe Price International Series, Inc.
The agreement between the Company and T. Rowe Price International
Series, Inc. (and its principal underwriter) provides for termination as it
applies to any Fund covered by the agreement: (1) by any party upon six months
prior written notice to the other parties or in the event that (subject to
certain conditions) formal proceedings are initiated against any other party by
the SEC or another regulator or in the event that any other party suffers a
material adverse change in its business, operations, financial condition or
prospects or suffers material adverse publicity, (2) by the Company upon Written
Notice to the other parties if shares of the Fund are not reasonably available
to meet the requirements of the Contracts or are not registered, issued or sold
in conformity with applicable laws or such laws preclude the use of such shares
as investment media for the Contracts, (3) by the Company upon Written Notice to
the other parties in the event that the Fund fails to meet certain Code
requirements described in the agreement, (4) by T. Rowe Price International
Series, Inc. or its principal underwriter upon 45 days written notice to the
Company, and (5) by T. Rowe Price International Series, Inc. or its principal
underwriter upon written notice to the Company in the event that the Contracts
fail to meet certain Code requirements described in the agreement.
MFS Variable Insurance Trust
The agreement between the Company and MFS Variable Insurance Trust (and
its investment adviser) provides for termination as it applies to any Fund
covered by the agreement: (1) by any party upon six months prior written notice
to the other parties, or in the event that (subject to certain conditions)
formal proceedings are initiated against any other party by the SEC or another
regulator, or (subject to certain conditions) in the event that the Company
should substitute shares of another Fund for the Fund, (2) by any party upon
written notice to the other parties in the event that any other party suffers a
material adverse change in its business, operations, financial condition or
prospects or suffers material adverse publicity, or in the event that another
party materially breaches any provision of the agreement, (3) by the Company
upon prompt written notice to the other parties if shares of the Fund are not
reasonably available to meet the requirements of the Contracts or are not
appropriate funding vehicles for the Contracts, and (4) upon assignment of the
agreement by any party unless the other parties agree in writing to the
assignment.
LEGAL MATTERS
All matters relating to Iowa law pertaining to the Contracts, including
the validity of the Contracts and the Company's authority to issue the
Contracts, have been passed upon by Barbara L. Secor, Esquire, Assistant Vice
President and Associate General Counsel of the Company.
EXPERTS
The financial statements of the Variable Account as of December 31,
1995, including a statement of assets and liabilities, a statement of
operations, a statement of changes in net assets, and accompanying notes, which
are included in this Statement of Additional Information and in the registration
statement, have been audited by KPMG Peat Marwick LLP, independent auditors, as
set forth in their report herein, and are included herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The balance sheets of the Company as of December 31, 1995 and 1994 and
the related statements of operations, changes in capital and surplus, and cash
flows for the years ended December 31, 1995, 1994 and 1993, which are included
in this Statement of Additional Information and in the registration statement,
have been audited by KPMG Peat Marwick LLP, independent auditors, as set forth
in their report herein, and are included herein in reliance upon such report
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 Contracts discussed in
this Statement of Additional Information. Not all 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 Contracts 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 audited financial statements of the Variable Account as of December
31, 1995, including a statement of assets and liabilities, a statement of
operations, a statement of changes in net assets, and accompanying notes, are
included in this Statement of Additional Information.
The Company's balance sheets as of December 31, 1995 and 1994, and the
related statutory basis statements of operations, changes in capital and
surplus, and cash flows for the years ended December 31, 1995, 1994, and 1993,
as well as the Independent Auditor's Reports, which are included in this
Statement of Additional Information, should be considered only as bearing on the
Company's ability to meet its obligations under the Contracts. They should not
be considered as bearing on the investment performance of the assets held in the
Variable Account.
<PAGE>
<TABLE>
<CAPTION>
CENTURY VARIABLE ANNUITY ACCOUNT
Statement of Assets and Liabilities
December 31, 1995
Capital
Appreciation Growth and Money International World
Assets: Stock Income Stock Balanced Bond Market Stock Governments
Investments in Ultra Series Fund: Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
(note 2)
<S> <C> <C> <C> <C> <C> <C> <C>
Capital Appreciation Stock Fund,
2,086,907 shares at net asset
value of $12.51 per share
(cost $24,415,887) $26,110,628 $ -- $ -- $ -- $ -- $ -- $ --
Growth and Income Stock Fund,
1,968,681 shares at net asset
value of $18.20 per share
(cost $34,205,133) -- 35,835,999 -- -- -- -- --
Balanced Fund, 2,199,371 shares
at net asset value of $14.63
per share (cost $31,252,862) -- -- 32,175,887 -- -- -- --
Bond Fund, 595,013 shares at
net asset value of $10.63
per share (cost $6,145,356) -- -- -- 6,324,290 -- -- --
Money Market Fund, 6,730,748
shares at net asset value of
$1.00 per share
(cost $6,730,748) -- -- -- -- 6,730,748 -- --
Investments in T. Rowe Price
International Fund, Inc.:
International Stock Portfolio,
1,061,910 shares at net asset
value of $11.26 per share
(cost $11,182,572) -- -- -- -- -- 11,957,105 --
Investments in MFS(R) Variable
Insurance TrustSM:
World Governments Series,
561,893 shares at net asset
value of $10.17 per share
(cost $5,862,605) -- -- -- -- -- -- 5,714,455
---------- ---------- ---------- --------- --------- ---------- ---------
Total assets 26,110,628 35,835,999 32,175,887 6,324,290 6,730,748 11,957,105 5,714,455
---------- ---------- ---------- --------- --------- ---------- ---------
Liabilities:
Accrued adverse mortality and
expense charges 2,664 3,649 3,268 642 701 1,223 583
Other accrued expenses 320 438 392 77 84 147 70
---------- ---------- ---------- --------- --------- ---------- ---------
Total liabilities 2,984 4,087 3,660 719 785 1,370 653
---------- ---------- ---------- --------- --------- ---------- ---------
Net assets $26,107,644 $35,831,912 $32,172,227 $6,323,571 $6,729,963 $11,955,735 $5,713,802
========== ========== ========== ========= ========= ========== =========
Units outstanding (note 5) 2,024,589 2,807,876 2,698,049 556,749 637,911 1,090,681 505,990
========== ========== ========== ========= ========= ========== =========
Net asset value per unit $12.90 $12.76 $11.92 $11.36 $10.55 $10.96 $11.29
========== ========== ========== ========= ========= ========== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTURY VARIABLE ANNUITY ACCOUNT
Statement of Operations
December 31, 1995
Capital
Appreciation Growth and Money International World
Stock Income Stock Balanced Bond Market Stock Governments
Investment income (loss): Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend income $912,104 $2,685,202 $1,945,490 $238,857 $263,872 $19,336 $536,112
Adverse mortality and expense
charges (note 3) (145,906) (213,588) (203,400) (38,995) (63,592) (89,431) (44,506)
Administrative charges (17,509) (25,631) (24,408) (4,679) (7,631) (10,732) (5,341)
-------- -------- -------- ------- ------- ------- -------
Net investment income (loss) 748,689 2,445,983 1,717,682 195,183 192,649 (80,827) 486,265
-------- -------- -------- ------- ------- ------- -------
Realized and unrealized gain
(loss) on investments:
Realized gain (loss) on
security transactions:
Proceeds from sale of securities 23,890 94,892 105,902 96,061 9,541,079 78,789 206,445
Cost of securities sold (22,412) (87,944) (101,600) (92,912) (9,541,079) (75,665) (194,407)
-------- -------- -------- ------- -------- ------- --------
Net realized gain (loss) on
security transactions 1,478 6,948 4,302 3,149 0 3,124 12,038
Net change in unrealized
appreciation or depreciation
on investments 1,856,614 1,848,620 1,148,835 216,889 0 873,668 (114,274)
--------- --------- -------- ------- -------- ------- --------
Net gain (loss) on investments 1,858,092 1,855,568 1,153,137 220,038 0 876,792 (102,236)
--------- --------- -------- ------- -------- ------- --------
Net increase (decrease) in net
assets resulting from operations $2,606,781 $4,301,551 $2,870,819 $415,221 $192,649 $795,965 $384,029
========= ========= ========= ======= ======== ======== ========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTURY VARIABLE ANNUITY ACCOUNT
Statement of Changes in Net Assets
For Seven Months Ended December 31, 1994 and the Year Ended December 31, 1995
CAPITAL APPRECIATION STOCK SUBACCOUNT GROWTH AND INCOME STOCK SUBACCOUNT
Operations: 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net investment income (loss) $748,689 $145,302 $2,445,983 $148,380
Net realized gain (loss) on
security transactions 1,478 (290) 6,948 (424)
Net change in unrealized appreciation
or depreciation on investments 1,856,614 (161,872) 1,848,620 (217,754)
-------- -------- -------- --------
Change in net assets from
operations 2,606,781 (16,860) 4,301,551 (69,798)
--------- --------- --------- --------
Capital unit transactions (note 5):
Proceeds from sales of units 26,775,941 3,693,101 34,898,103 6,494,288
Cost of units repurchased (6,523,112) (428,207) (9,194,950) (597,282)
--------- --------- --------- --------
Change in net assets from capital
unit transactions 20,252,829 3,264,894 25,703,153 5,897,006
--------- --------- --------- --------
Increase (decrease) in net assets 22,859,610 3,248,084 30,004,704 5,827,208
Net assets:
Beginning of period 3,248,034 0 5,827,208 0
--------- --------- --------- --------
End of period $26,107,644 $3,248,034 $35,831,912 $5,827,208
========= ========= ========= =========
BALANCED SUBACCOUNT BOND SUBACCOUNT
Operations: 1995 1994 1995 1994
---- ---- ---- ----
Net investment income (loss) $1,717,682 $187,116 $195,183 $28,852
Net realized gain (loss) on
security transactions 4,302 (387) 3,149 (189)
Net change in unrealized appreciation
or depreciation on investments 1,148,835 (225,809) 216,889 (37,955)
--------- -------- --------- --------
Change in net assets from
operations 2,870,819 (39,080) 415,221 (9,292)
--------- -------- --------- --------
Capital unit transactions (note 5):
Proceeds from sale of units 32,100,084 7,250,087 7,330,321 1,434,559
Cost of units repurchased (9,369,392) (640,293) (2,685,189) (162,049)
--------- -------- --------- --------
Change in net assets from capital
unit transactions 22,730,692 6,609,794 4,645,132 1,272,510
--------- -------- --------- --------
Increase (decrease) in net assets 25,601,511 6,570,716 5,060,353 1,263,218
Net assets:
Beginning of period 6,570,716 0 1,263,218 0
---------- --------- --------- ---------
End of period $32,172,227 $6,570,716 $6,323,571 $1,263,218
========== ========= ========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CENTURY VARIABLE ANNUITY ACCOUNT
Statement of Changes in Net Assets
For Seven Months Ended December 31, 1994 and the Year Ended December 31, 1995
MONEY MARKET SUBACCOUNT INTERNATIONAL STOCK SUBACCOUNT
Operations: 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net investment income (loss) $192,649 $28,183 ($80,827) ($11,114)
Net realized gain (loss) on
security transactions 0 0 3,124 652
Net change in unrealized appreciation
or depreciation on investments 0 0 873,668 (99,135)
-------- -------- --------- --------
Change in net assets from
operations 192,649 28,183 795,965 (109,597)
-------- -------- --------- --------
Capital unit transactions (note 5):
Proceeds from sales of units 26,622,937 10,832,302 13,898,714 3,864,444
Cost of units repurchased (22,701,986) (8,244,122) (6,004,541) (489,250)
--------- --------- --------- --------
Change in net assets from capital
unit transactions 3,920,951 2,588,180 7,894,173 3,375,194
--------- --------- --------- --------
Increase (decrease) in net assets 4,113,600 2,616,363 8,690,138 3,265,597
Net assets:
Beginning of period 2,616,363 0 3,265,597 0
--------- --------- ---------- --------
End of period $6,729,963 $2,616,363 $11,955,735 $3,265,597
========= ========= ========== =========
WORLD GOVERNMENTS SUBACCOUNT
Operations: 1995 1994
---- ----
<S> <C> <C>
Net investment income (loss) $486,265 $41,152
Net realized gain (loss) on
security transactions 12,038 (5)
Net change in unrealized appreciation
or depreciation on investments (114,274) (33,876)
--------- --------
Change in net assets from
operations 384,029 7,271
--------- --------
Capital unit transactions (note 5):
Proceeds from sale of units 7,213,831 2,215,210
Cost of units repurchased (3,747,086) (359,453)
--------- --------
Change in net assets from capital
unit transactions 3,466,745 1,855,757
--------- --------
Increase (decrease) in net assets 3,850,774 1,863,028
Net assets:
Beginning of period 1,863,028 --
--------- --------
End of period $5,713,802 $1,863,028
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
CENTURY VARIABLE ANNUITY ACCOUNT
Notes to Financial Statements
(1) Organization
The Century Variable Annuity Account (the Variable Account) is a unit
investment trust registered under the Investment Company Act of 1940 with
the Securities and Exchange Commission. The Variable Account was
established as a separate investment account within Century Life of America
(the Company) to receive and invest net premiums paid under variable
annuity contracts (Contracts).
Although the assets in the Variable Account are the property of the
Company, the assets in the Variable Account attributable to the Contracts
are not chargeable with liabilities arising out of any other business which
the Company may conduct. The assets of the Variable Account are available
to cover the general liabilities of the Company only to the extent that the
Variable Account's assets exceed its liabilities arising under the
Contracts. The Company has the right to transfer to the general account any
assets of the Variable Account which are in excess of reserves and other
contract liabilities. All obligations arising under the Contracts are
general corporate obligations of the Company.
(2) Significant Accounting Policies
Investments
The Variable Account currently is divided into seven subaccounts but may,
in the future, include additional subaccounts. Each subaccount invests
exclusively in shares of a single underlying fund. (The term fund is used
to mean an investment portfolio sometimes called a fund, i.e., Ultra Series
Fund, T. Rowe Price International Series, Inc., MFS Variable Insurance
Trust, or any other open-end management investment company or unit
investment trust in which a subaccount invests.) The income, gains and
losses, realized or unrealized, from the assets allocated to each
subaccount are credited to or charged against that subaccount without
regard to income, gains or losses from any other subaccount.
The Variable Account invests in shares of Ultra Series Fund, T. Rowe Price
International Series, Inc., and MFS Variable Insurance Trust. Each is a
management investment company of the series type with one or more funds.
Each is registered with the SEC as an open-end, management investment
company. Such registration does not involve supervision of the management
or investment practices or policies of the companies or their funds by the
SEC.
Ultra Series Fund currently has five Funds available as investment options
under the Contracts while T. Rowe Price International Series, Inc. and MFS
Variable Insurance Trust have one fund available as an investment option
under the Contracts. Ultra Series Fund and MFS Variable Insurance Trust
also have other funds that are not available under the Contracts. All three
companies may, in the future, create additional funds that may or may not
be available as investment options under the Contracts. Each fund has its
own investment objectives and the income, gains and losses for each fund
are determined separately for that fund.
Century Investment Management Co. (CIMCO) serves as the Investment Adviser
to the Ultra Series Fund and manages its assets in accordance with general
policies and guidelines established by the board of trustees of the Ultra
Series Fund. The Company owns one half of CIMCO's outstanding stock and one
half is owned indirectly by CUNA Mutual Insurance Society.
Rowe Price-Fleming International, Inc. (RPFI) serves as the Investment
Adviser to the International Stock Portfolio and manages its assets in
accordance with general policies and guidelines established by the board of
directors of T. Rowe Price International Series, Inc. RPFI was founded in
1979 as a joint venture between T. Rowe Price Associates, Inc. and Robert
Fleming Holdings Limited.
Massachusetts Financial Services Company (MFS) serves as the Investment
Adviser to the MFS World Governments Series and manages its assets in
accordance with general policies and guidelines established by the board of
trustees of MFS Variable Insurance Trust. MFS is a subsidiary of Sun Life
Assurance Company of Canada (U.S.) which, in turn, is a subsidiary of Sun
Life Assurance Company of Canada.
The assets of each Fund are held separate from the assets of the other
funds, and each fund is offered at a price equal to its respective net
asset value per share, without sales charge. Dividends and capital gain
distributions from each fund are reinvested in that Fund. Investments in
shares of the funds are stated at market value which is the net asset value
per share as determined by the funds. Realized gains and losses from
security transactions are reported on an average cost basis.
Dividend income is recorded on the ex-dividend date.
Federal Income Taxes
Currently, no charge is made against the Variable Account for any federal,
state or local taxes (other than premium taxes) that the Company incurs or
that may be attributable to the Variable Account or the Contracts. The
Company may, however, make such a charge in the future from Surrender
Value, death benefits or annuity payments, as appropriate. Such taxes may
include taxes (levied by any government entity) which the Company
determines to have resulted from: (1) the establishment or maintenance of
the Variable Account, (2) receipt by the Company of purchase payments, (3)
issuance of the Contracts, or (4) the payment of annuity payments.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increase and decrease in
net assets from operations during the period. Actual results could differ
from those estimates.
(3) Fees and Charges
Organization Costs
Century Life of America absorbed all organization expenses of the Variable
Account.
Contract Charges
Surrender Charge (Contingent Deferred Sales Charge). No charge for sales
expenses is deducted from purchase payments at the time purchase payments
are paid. However, a surrender charge is deducted upon surrender or partial
withdrawal of purchase payments within 7 years of their being paid and, in
certain circumstances, upon payment of a death benefit or the election of
certain annuity payment options.
For purchase payments withdrawn or surrendered within one year of having
been paid, the charge is 7% of the amount of the payment withdrawn or
surrendered. For each purchase payment, the surrender charge decreases by
1% for each full year that has elapsed since the payment was made. No
surrender charge is assessed upon the withdrawal or surrender of the
Contract Value in excess of aggregate purchase payments or on purchase
payments made more than 7 years prior to the withdrawal or surrender.
Subject to certain restrictions. for the first partial withdrawal (or
surrender) in each contract year, an amount equal to 10% of aggregate
purchase payments subject to a surrender charge (as of the time of
withdrawal or surrender) may be surrendered without a surrender charge. The
surrender charge also may be waived in certain circumstances as provided in
the Contracts.
Annual Contract Fee. On each contract anniversary (or upon surrender of the
Contract) prior to the annuity date, the Company deducts an annual contract
fee of $30 from the variable contract value. After the annuity date, the
Company deducts this fee from variable annuity payments. A pro-rated
portion of the fee is deducted upon annuitization of a contract except on a
Contract anniversary.
Transfer Fee. No charge is made for transfers, however, the Company
reserves the right to charge $10 for the 13th and each subsequent transfer
during a Contract year.
Premium Taxes. If state or other premium taxes are applicable to a
Contract, they will be deducted either: (a) from purchase payments as they
are received, (b) from contract value upon surrender or partial withdrawal,
(c) upon application of adjusted contract value to an annuity payment
option, or (d) upon payment of a death benefit. The Company, however,
reserves the right to deduct premium taxes at the time it pays such taxes.
Variable Account Charges
Mortality and Expense Risk Charge. The Company deducts a daily mortality
and expense risk charge to compensate it for assuming certain mortality and
expense risks. The charge is deducted from the assets of the Variable
Account at an annual rate of 1.25% (approximately 0.85% for mortality risk
and 0.40% for expense risks).
Asset-Based Administration Charge. The Company deducts a daily
administration charge to compensate it for certain expenses it incurs in
administration of the Contract. The charge is deducted from the assets of
the Variable Account at an annual rate of 0.15%.
(4) Investment Transactions
The cost of shares purchased, including reinvestment of dividend
distributions, during the year ended December 31, 1995, was as follows:
Capital Appreciation Stock Fund............................ $21,029,252
Growth and Income Stock Fund............................... 28,249,882
Balanced Fund.............................................. 24,558,931
Bond Fund.................................................. 4,937,973
Money Market Fund.......................................... 13,764,819
International Stock Portfolio.............................. 7,899,001
World Governments Series................................... 4,159,434
--------------
$104,599,292
(5) Unit Activity from Contract Transactions
Transactions in units of each Subaccount of the Variable Account for the
years ended December 31, 1994 and 1995, were as follows:
<TABLE>
<CAPTION>
Capital
Appreciation Growth and Money International World
Stock Income Stock Balanced Bond Market Stock Governments
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
<S> <C> <C> <C> <C> <C> <C> <C>
Units outstanding at June 1, 1994 0 0 0 0 0 0 0
Units sold 367,724 654,214 729,365 144,031 1,074,936 374,996 222,086
Units repurchased (42,802) (60,615) (64,686) (16,365) (817,314) (48,043) (35,931)
-------- -------- -------- ------- -------- -------- -------
Units outstanding at December 31, 1994 324,922 593,599 664,679 127,666 257,622 326,923 186,155
-------- -------- -------- ------- -------- -------- -------
Units sold 2,250,573 2,997,868 2,868,364 676,502 2,565,795 1,336,544 663,603
Units repurchased (550,906) (783,591) (834,995) (247,419) (2,185,506) (572,787) (343,768)
-------- -------- -------- ------- -------- -------- -------
Units outstanding at December 31, 1995 2,024,589 2,807,876 2,698,049 556,749 637,911 1,090,681 505,990
======== ======== ======== ======= ======== ======== =======
</TABLE>
(6) Annuitization
As of December 31, 1995, there were no annuitized contracts.
<PAGE>
(7) Condensed Financial Information
The table below gives per unit information about the financial history of
each Subaccount for each period.
<TABLE>
<CAPTION>
Capital Appreciation Growth and Income Balanced Bond
Stock Subaccount Stock Subaccount Subaccount Subaccount
Net asset value: 1995* 1994** 1995* 1994** 1995* 1994** 1995* 1994**
----- ------ ----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $10.00 $10.00 $9.82 $10.00 $9.89 $10.00 $9.89 $10.00
End of period 12.90 10.00 12.76 9.82 11.92 9.89 11.36 9.89
Percentage increase in unit
value during period 29.0% (0.0)% 29.9% (1.8)% 20.5% (1.1)% 14.9% (1.1)%
Number of units
outstanding at end
of period 2,024,589 324,922 2,807,876 593,599 2,698,049 664,679 556,749 127,666
Money Market International World Governments
Subaccount Stock Subaccount Subaccount
Net asset value: 1995* 1994** 1995* 1994** 1995* 1994**
----- ------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $10.16 $10.00 $9.99 $10.00 $10.01 $10.00
End of period 10.55 10.16 10.96 9.99 11.29 10.01
Percentage increase in
unit value during period 3.8% 1.6% 9.7% (0.1)% 12.8% 0.1%
Number of units
outstanding at end of
period 637,911 257,622 1,090,681 326,923 505,990 186,155
For the Money Market Subaccount, the "seven-day average yield" for the
seven days ended December 31, 1995, was 3.56% and the "effective yield" for
that period was 3.68%.
<FN>
* 1995 data is for the year ended December 31, 1995.
**1994 data is for the seven months ended December 31, 1994.
</FN>
</TABLE>
<PAGE>
CENTURY VARIABLE ANNUITY ACCOUNT
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Century Life of America and Contract
Owners of Century Variable Annuity Account:
We have audited the statements of assets and liabilities of the Capital
Appreciation Stock Subaccount, Growth and Income Stock Subaccount, Balanced
Subaccount, Bond Subaccount, Money Market Subaccount, International Stock
Subaccount and the World Governments Subaccount of the Century Variable Annuity
Account as of December 31, 1995, the related statements of operations for the
year then ended, changes in net assets and the condensed financial information
for the year ended December 31, 1995 and the seven-month period ended December
31, 1994. These financial statements and condensed financial information are the
responsibility of the Account's management. Our responsibility is to express an
opinion on these financial statements and condensed financial information 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 statement and condensed
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Investments owned at December 31, 1995 were verified
by audit of the statement of assets and liabilities of the underlying funds of
Ultra Series Fund and confirmation with MFS Variable Insurance Trust and T.Rowe
Price. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and condensed financial information
referred to above present fairly, in all material respects, the financial
position of the Capital Appreciation Stock Subaccount, Growth and Income Stock
Subaccount, Balanced Subaccount, Bond Subaccount, Money Market Subaccount,
International Stock Subaccount, and the World Governments Subaccount of the
Century Variable Annuity Account as of December 31, 1995, the results of their
operations for the year then ended changes in their net assets and the condensed
financial information for the year ended December 31, 1995 and the seven-month
period ended December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
February 16, 1996
<PAGE>
CENTURY LIFE OF AMERICA
Financial Statements and Supplementary Information
December 31, 1995
(With Independent Auditors' Report Thereon)
<PAGE>
CENTURY LIFE OF AMERICA
Balance Sheets
December 31, 1995 and 1994
(In Thousands)
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Investments:
Bonds $1,636,574 1,618,418
Stocks:
Preferred 357 954
Common 43,685 37,702
Mortgage loans on real estate 428,594 403,386
Real estate 66,374 61,684
Policy loans 100,880 100,481
Other invested assets 21,721 7,970
Cash and short-term investments 15,300 3,461
--------- ---------
Total investments 2,313,485 2,234,056
Premiums receivable 10,483 9,409
Accrued investment income 33,106 32,876
Electronic data processing equipment 2,391 2,467
Due from affiliates and related parties 2,239 4,169
Federal income tax recoverable 0 1,583
Other assets 5,822 4,231
Separate accounts 296,874 147,894
--------- ---------
$2,664,400 2,436,685
========= =========
Liabilities and Surplus
Liabilities:
Policy reserves:
Life insurance and annuity contracts $1,847,156 1,784,214
Accident and health insurance 10,620 9,989
Supplementary contracts without life contingencies 60,324 54,849
Policyholders' dividend accumulations 150,989 150,529
Policy and contract claims 6,223 5,194
Other policyholders' funds:
Dividends payable to policyholders 22,470 22,158
Premiums and other deposit funds 5,533 13,135
Interest maintenance reserve 1,301 223
Liabilities for employees' and agents' retirement plans 40,807 37,492
Amounts held for others 22,591 21,811
Due to affiliates and related parties 743 4,897
Commissions, expenses, taxes, licenses, and fees accrued 11,600 12,989
Federal income tax payable 3,945 0
Separate accounts 287,915 141,555
Other liabilities 2,416 3,535
Asset valuation reserve 32,202 28,816
Loss contingency reserve for real estate 1,296 1,661
--------- ---------
Total liabilities 2,508,131 2,293,047
Surplus:
Assigned for contingencies 1,841 1,561
Assigned for permanent guaranty fund 400 400
Unassigned 154,028 141,677
--------- ---------
Total surplus 156,269 143,638
Commitments and contingencies
--------- ---------
$2,664,400 2,436,685
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CENTURY LIFE OF AMERICA
Statements of Operations
Years Ended December 31, 1995, 1994, and 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Income:
Premiums and other considerations:
Life and annuity $262,326 244,160 238,342
Accident and health 10,504 8,968 7,738
Supplementary contracts and dividend accumulations 48,633 50,173 44,031
Annuity and other fund deposits 22,734 21,098 13,126
Net investment income 173,355 167,545 162,122
Reinsurance commissions 18,523 21,614 21,907
Other income 7,026 7,263 6,766
------- ------- -------
Total income 543,101 520,821 494,032
------- ------- -------
Benefits and expenses:
Death benefits 31,807 28,044 24,780
Annuity benefits 39,948 33,455 31,739
Surrender benefits 101,456 103,107 74,676
Payments on supplementary contracts without life
contingencies and dividend accumulations 50,478 46,549 38,749
Other benefits to policyholders and beneficiaries 11,013 9,888 10,537
Increase in policy reserves - life and annuity contracts
and accident and health insurance 63,573 104,895 119,100
Increase in liabilities for supplementary contracts without life
contingencies and policyholders' dividend accumulations 5,935 9,936 27,816
Decrease in group annuity reserves (7,276) (6,509) (17,305)
Increase in benefit funds 4,103 4,112 3,742
Commissions 25,232 21,289 21,645
General insurance expenses, including cost of
collection in excess of loading on due and deferred
premiums and other expenses 59,633 63,556 66,996
Insurance taxes, licenses, and fees 5,585 7,366 7,050
Net transfers to separate accounts 101,369 45,469 20,288
------- ------- -------
Total benefits and expenses 492,856 471,157 429,813
------- ------- -------
Income before dividends to policyholders, federal income
taxes, and net realized capital gains (losses) 50,245 49,664 64,219
Dividends to policyholders 22,004 19,954 24,812
------- ------- -------
Income before federal income taxes and net
realized capital gains (losses) 28,241 29,710 39,407
Federal income taxes 13,321 8,660 8,588
------- ------- -------
Income before net realized capital gains (losses) 14,920 21,050 30,819
Net realized capital gains (losses), less federal income taxes
and transfers to the interest maintenance reserve (567) (993) 4,388
------- ------- -------
Net income $14,353 20,057 35,207
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CENTURY LIFE OF AMERICA
Statements of Unassigned Surplus
Years Ended December 31, 1995, 1994, and 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $141,677 128,467 97,548
-------- ------- -------
Increase (decrease) in unassigned surplus:
Net income 14,353 20,057 35,207
Net unrealized losses (558) (8,650) (858)
Change in asset valuation reserve (3,386) (1,365) (2,763)
Changes in federal income tax expense for prior years 987 (1,606) (1,871)
Change in nonadmitted assets 496 726 354
Change in surplus of separate accounts (2,500) 1,954 (7,407)
Change in separate account seed money 2,593 (2,071) 5,547
Annuity dividend release to surplus 0 0 3,810
Change in loss contingency reserve for real estate 365 (168) (1,015)
Change in voluntary mortgage loan reserve 0 3,000 0
Prior period adjustment for affiliation expenses 215 1,504 0
Other miscellaneous changes (214) (171) (85)
-------- ------- -------
Net increase in unassigned surplus 12,351 13,210 30,919
-------- ------- -------
Balance at end of year $154,028 141,677 128,467
======== ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CENTURY LIFE OF AMERICA
Statements of Cash Flow
Years Ended December 31, 1995, 1994, and 1993
(In Thousands)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations:
Life, annuity, and accident and health $294,530 273,115 258,020
Supplementary contracts and dividend accumulations 48,633 50,173 44,031
Investment income received 176,990 168,812 160,492
Reinsurance commissions 17,735 20,333 21,955
Other income 9,369 8,978 12,227
------- ------- -------
Total provided from operations 547,257 521,411 496,725
------- ------- -------
Life and accident and health claims paid 36,192 30,183 28,495
Surrender benefits paid 101,456 103,108 74,676
Other benefits to policyholders paid 96,571 86,055 77,014
Commissions, other expenses, and taxes paid,
excluding federal income taxes 92,808 89,306 90,417
Dividends to policyholders paid 21,634 22,654 23,544
Federal income taxes paid 7,145 1,318 30,134
Net decrease in policy loans 398 1,308 115
Net transfers to separate accounts 106,508 46,934 20,289
Interest paid on defined benefit plans 4,078 6,183 7,041
------- ------- -------
Total used in operations 466,790 387,049 351,725
------- ------- -------
Net provided by operations 80,467 134,362 145,000
Proceeds from investments sold, matured, or repaid:
Bonds 217,833 338,250 228,968
Stocks 22,194 16,162 39,250
Mortgage loans 38,861 34,613 36,280
Other invested assets 1,594 924 499
Net gain (loss) on cash and short-term investments 0 12 0
Real estate sold 2,315 2,476 6,929
Other cash provided 6,716 8,050 12,530
------- ------- -------
Total cash provided 369,980 534,849 469,456
------- ------- -------
Cost of investments acquired:
Bonds 236,607 488,593 440,572
Stocks 22,063 18,364 17,942
Mortgage loans 67,942 47,401 11,842
Real estate 6,933 7,731 3,790
Other invested assets 13,227 368 2
Other cash used - other applications, net 11,369 8,108 3,970
------- ------- -------
Total cash applied 358,141 570,565 478,118
------- ------- -------
Net change in cash and short-term investments 11,839 (35,716) (8,662)
Cash and short-term investments at beginning of year 3,461 39,177 47,839
------- ------- -------
Cash and short-term investments at end of year $15,300 3,461 39,177
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
December 31, 1995, 1994, and 1993
(1) Summary of Significant Accounting Policies
Company Operations
Century Life of America (the Company) is a mutual life insurance company
organized under the laws of the state of Iowa. The Company offers a full
range of ordinary life and health insurance products through face-to-face
and direct response distribution systems. The Company's operations are
conducted in 49 states and the District of Columbia. The Company is subject
to regulation by the Insurance Departments of states in which it is
licensed, and undergoes periodic examinations by those departments.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Iowa Department of
Commerce, Insurance Division, which practices are currently considered
generally accepted accounting principles for mutual life insurance companies
and include the following significant accounting policies:
The costs related to acquiring business are charged to income in the
year incurred and, thus, are not amortized over the periods benefited,
whereas the premium income is recorded into earnings on a pro rata basis
over the premium-paying periods covered by the policies;
Adjustments reflecting the revaluation of investments at statement date
and equity in earnings of subsidiary companies are carried to the
statements of unassigned surplus as "net unrealized gains or losses,"
without providing for income taxes, or income tax reductions, with
respect to net unrealized gains or losses;
Majority-owned subsidiaries are not consolidated and are carried at
their underlying book value using the equity method of accounting;
Policy reserves are based on statutory mortality and interest
requirements without consideration for withdrawals, which may differ
from reserves based on reasonably conservative estimates of mortality,
interest, and withdrawals;
Deferred federal income taxes are not provided for unrealized gains and
the temporary differences between the statutory and tax basis of assets
and liabilities;
"Nonadmitted assets" (principally, the airplane, prepaid insurance and
expenses, furniture, equipment, and certain receivables) are excluded
from the balance sheets through a direct charge to surplus;
The asset valuation reserve is recorded as a liability by a direct
charge to surplus;
The interest maintenance reserve defers recognition of interest-related
gains and losses from the disposal of investment securities and
amortizes them into income over the remaining life of those securities;
The loss contingency reserve for real estate is recorded as a liability
by a direct charge to surplus;
Changes in federal income tax expense of prior years are charged or
credited to surplus;
Pension expense reflects the amount funded during the year, and
disclosures related to the pension plan are in accordance with ERISA
requirements;
Effective in 1995, write-downs of the carrying value of outstanding
mortgage loans to the market value of the real estate acquired through
foreclosure are charged to income as realized losses;
Assets and liabilities are recorded net of ceded reinsurance balances;
and
Deposits, surrenders, and benefits on universal life and annuity
contracts are recorded in the statement of operations.
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(1) Summary of Significant Accounting Policies, Continued
Basis of Presentation, Continued
In January 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 120, "Accounting and Reporting
by Mutual Life Insurance Enterprises and by Insurance Enterprises for
Certain Long-Duration Participating Contracts." This pronouncement removes
the exemption of mutual life insurance enterprises from SFAS Statements Nos.
60, 97, and 113. Also in January 1995, the American Institute of Certified
Public Accountants issued a Statement of Position (SOP), "Accounting for
Certain Insurance Activities of Mutual Life Insurance Enterprises," which
provides accounting guidance for long-duration participating life insurance
contracts. Both of the pronouncements are effective for periods beginning
after December 15, 1995. These pronouncements require mutual life insurance
companies to apply all authoritative accounting pronouncements in preparing
their financial statements if they are to be reported in conformity with
generally accepted accounting principles (GAAP). Therefore, the financial
statements of the Company prepared on the basis of statutory accounting
practices will no longer be described as prepared in conformity with GAAP
after the effective date of these pronouncements. The effects of applying
the provisions of these pronouncements will cause total surplus and net
earnings to differ from amounts as reported under the existing accounting
practices. Statutory surplus as prepared in conformity with GAAP at December
31, 1994 was $179,420,000 versus statutory surplus of $141,677,000. Net
earnings as prepared in conformity with GAAP at December 31, 1994 and 1993
was $8,038,000 and $24,398,000, respectively versus statutory net earnings
of $14,353,000 and $20,057,000, respectively. These differences as of and
for the year ended 1995 have not yet been determined by the Company.
Valuation of Investments
Investments are valued as prescribed by the National Association of
Insurance Commissioners (NAIC). Bonds and short-term investments are
generally carried at amortized cost, preferred stocks at cost, common stocks
of unaffiliated companies at market value, and mortgage loans at the amount
of outstanding principal adjusted for premiums and discounts. Bonds that the
NAIC has determined are impaired in value are carried at estimated fair
value. Real estate acquired in satisfaction of debt is valued at the lower
of the carrying value of the outstanding mortgage loans or fair value of the
acquired real estate at time of foreclosure. The adjusted basis is
subsequently depreciated. Investments in limited partnerships included in
other invested assets and investments in unconsolidated subsidiaries are
carried at the Company's share of the underlying net equity of the
investment. Home office real estate is carried at depreciated cost.
Realized gains and losses on the sale of investments are determined on a
specific identification basis. The net unrealized gains and losses
attributable to the adjustment from book value to carrying value for all
investments, except for the equity in earnings of limited partnerships, are
reflected in surplus. Net unrealized gains for bonds and stocks [composed of
unrealized gains of $18,404,841 ($16,403,424 in 1994), reduced by unrealized
losses of $8,538,442 ($5,611,151 in 1994)] amounted to $9,866,399 at
December 31, 1995 ($10,792,273 at December 31, 1994). Effective in 1995, the
Company changed its method in which it records losses resulting from the
write-down of the carrying value of outstanding mortgage loans to fair value
of the acquired real estate at time of foreclosure as realized losses.
Realized losses from the write-down of the carrying amount of foreclosed
mortgage loans were $722,905 in 1995. Prior to 1995, the Company recorded
these losses as unrealized losses and as a direct charge to surplus.
Unrealized losses related to such write-downs were $3,751,137 and $1,381,207
in 1994 and 1993, respectively. Earnings from its investments in limited
partnerships amounted to $164,747 during 1995 ($1,051,075 and $631,145 in
1994 and 1993) and was credited to income.
Policy Reserves
During 1988, the Company began using the mortality table 1980 Commissioners'
Standard Ordinary (C.S.O.) Mortality Table. Prior to the adoption of the
1980 C.S.O. table, reserves were recorded using the 1958 C.S.O. table. The
1958 C.S.O. table is used with interest rate assumptions ranging from 2.5
percent to 5 percent. The 1980 C.S.O. table is used with interest rate
assumptions ranging from 3.5 percent to 5.5 percent. With respect to older
policies, the mortality table and interest assumptions vary from the
American Experience table with 3 to 4 percent interest to the 1941 C.S.O.
table with 2.5 percent interest. Approximately 22 percent of the reserves
are calculated on a net level reserve basis and 78 percent on a modified
reserve basis. The effect of the use of a modified reserve basis is to
partially offset the effect of immediately expensing acquisition costs by
providing a policy reserve increase in the first policy year which is less
than the reserve increase in renewal years. Fixed deferred annuity reserves
are calculated using continuous CARVM with 3.5 to 7.0 percent interest
assumptions.
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(1) Summary of Significant Accounting Policies, Continued
Provision for Participating Policy Dividends
The provision for participating policy dividends is based on the board of
directors' determination and declaration of an equitable current dividend
plus a provision for such dividend expected to be paid in the following year
rather than being provided for ratably over the premium-paying period in
accordance with dividend scales contemplated at the time the policies were
issued. Participating business comprised 100 percent of ordinary life
insurance in force and premiums received during 1995.
Asset Valuation Reserve (AVR) and Interest Maintenance Reserve (IMR)
An AVR is maintained as prescribed by the NAIC for the purpose of
stabilizing the surplus of the Company against fluctuations in the market
value of assets.
An IMR is maintained as prescribed by the NAIC for the purpose of
stabilizing the surplus of the Company against gains and losses on sales of
fixed income investments that are primarily attributable to changing
interest rates. The interest-related gains and losses are deferred and
amortized into income over the remaining life of the securities.
Electronic Data Processing Equipment
Electronic data processing equipment is carried at cost, less accumulated
depreciation of $4,751,205 and $4,073,583 at December 31, 1995 and 1994,
respectively. The equipment is being depreciated on the straight-line method
over a five-year period.
Pension Costs
Pension costs relating to the Company's pension plans are computed on the
basis of accepted actuarial methods. The annual contributions are computed
according to the aggregate funding method which produces an annual normal
cost at each valuation date. Such annual normal cost provides for spreading
the excess of the present value of future benefits over the value of the
assets of the plan as a level percentage of payroll over the remaining
period of service of active employees on the valuation date based upon the
actuarial assumptions adopted. Gains and losses which arise on each
valuation date as the result of differences between the actual experience
and that expected by the actuarial assumptions are spread over the remaining
period of service of active employees. The Company's policy is to fund
pension costs accrued.
Risks and Uncertainties
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheets and revenues and expenses
for the period. Actual results could differ significantly from those
estimates. The following elements of the financial statements are most
affected by the use of estimates and assumptions:
Investment valuations
Insurance reserves
The Company is subject to the risk that interest rates will change and cause
a decrease in the value of its investments. To the extent that fluctuations
in interest rates cause the duration of assets and liabilities to differ,
the Company may have to sell assets prior to their maturity and realize
losses. Interest rate exposure for the investment portfolio is managed
through asset/liability management techniques which attempt to match the
duration of the assets with the estimated duration of the liabilities. The
Company has derivative financial instruments at December 31, 1995 which are
discussed in note 2.
The Company is subject to the risk that issuers of securities owned by the
Company will default, or other parties, including reinsurers which owe the
Company money, will not pay. The Company minimizes this risk by adhering to
a conservative investment strategy, by maintaining strong reinsurance and
credit and collection policies, and by providing allowances or reserves for
any amounts deemed uncollectible.
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(1) Summary of Significant Accounting Policies, Continued
Risks and Uncertainties, Continued
The Company is subject to the risk that the legal or regulatory environment
in which the Company operates will change and create additional costs and
expenses not anticipated by the Company in pricing its products. In other
words, regulatory initiatives designed to reduce insurer profits or new
legal theories may create costs for the insurer beyond those recorded in the
financial statements. The Company mitigates this risk by operating in a
geographically diverse area, thus reducing its exposure to any single
jurisdiction, closely monitoring the regulatory environment to anticipate
changes and by using underwriting practices which identify and minimize the
potential adverse impact of this risk.
Disclosures About Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value
information about existing on and off-balance sheet financial instruments.
In cases where quoted market prices are not available, fair values are based
on estimates using present value or other valuation techniques. These
techniques are significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. Although fair value
estimates are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in the immediate settlement of the instruments. Certain
financial instruments and all nonfinancial instruments are excluded from
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company. In addition,
the tax ramifications of the related unrealized gains and losses can have a
significant effect on fair value estimates and have not been considered in
the estimates.
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash, short-term investments, accrued investment income, and policy
loans: The carrying amounts reported for these instruments approximate
their fair values because of their short-term nature.
Bonds and stocks: Fair values for bonds are based on quoted market prices
where available. For bonds 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. The fair values for
unaffiliated preferred and common stocks are based on quoted market
prices.
Derivative financial instruments: The carrying value and fair value for
these instruments is discussed in note 2.
Mortgage loans: The fair values for mortgage loans are estimated using
discounted cash flow analyses, using interest rates currently being
offered for similar loans to borrowers with similar credit ratings. Loans
with similar characteristics are aggregated for purposes of the
calculations. Fair values for mortgages in default are valued at the
estimated fair value of the underlying collateral.
Separate account assets and liabilities: The fair value of assets held in
separate accounts is based on quoted market prices. The fair value of
liabilities related to separate accounts is the amount payable on demand.
Investment contracts: The fair values of the Company's liabilities under
investment type insurance contracts are estimated using the cash
surrender value of the contracts.
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
<TABLE>
(1) Summary of Significant Accounting Policies, Continued
Disclosures About Fair Value of Financial Instruments, Continued
The carrying amounts and fair values as of December 31 were as follows (000s omitted):
<CAPTION>
Carrying amount Fair value
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Investments:
Bonds $1,636,574 1,618,418 1,728,572 1,553,971
Preferred stocks 357 954 366 979
Common stocks of nonaffiliates 25,678 19,410 25,678 19,410
Mortgage loans on real estate 428,594 403,386 462,167 395,000
Policy loans 100,880 100,481 100,880 100,481
Short-term investments 18,256 6,623 18,256 6,623
Cash (2,956) (3,162) (2,956) (3,162)
Assets held in separate accounts 296,874 147,894 296,874 147,894
Liabilities related to separate accounts 287,915 141,555 287,915 141,555
</TABLE>
Derivative Financial Instruments
The Company has only limited involvement with derivative financial
instruments, and does not use them for trading purposes. The Company enters
into derivatives, primarily interest rate swaps, to reduce interest rate
exposures for long-term assets and to exchange fixed for floating interest
rates.
Net interest receivable or payable on those contracts that hedge risks
associated with interest rate fluctuations are recognized in the period
incurred as an adjustment to investment income. Realized capital gains and
losses on equity swaps are recognized in the period incurred as an
adjustment to net realized capital gains (losses). Unrealized capital gains
and losses on equity swaps are charged or credited to surplus.
Reclassifications
Certain amounts previously reported in prior years' financial statements
have been reclassified to conform to current year presentation.
(2) Investments
Bonds
The carrying value and estimated fair value of investments in bonds at
December 31, 1995 and 1994 are as follows (000s omitted):
<TABLE>
<CAPTION>
Gross Gross
Carrying unrealized unrealized Estimated
Type of security value gains losses fair value
---------------- ----- ----- ------ ----------
1995
----
<S> <C> <C> <C> <C>
United States treasury $ 79,778 2,599 (106) 82,271
and government
States and political
subdivisions 64 0 0 64
Foreign government 20,614 1,675 0 22,289
Corporate securities 1,143,456 77,281 (4,541) 1,216,196
Mortgage-backed
securities 332,394 11,937 (210) 344,121
Other debt securities 60,268 3,404 (41) 63,631
--------- ------- ------- ---------
$1,636,574 96,896 (4,898) 1,728,572
========= ======= ======= =========
</TABLE>
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(2) Investments, Continued
<TABLE>
<CAPTION>
Gross Gross
Carrying unrealized unrealized Estimated
Type of security value gains losses fair value
1994
<S> <C> <C> <C> <C>
United States treasury
and government $ 101,622 74 (4,640) 97,056
States and political
subdivisions 155 0 (35) 120
Foreign government 22,822 68 (678) 22,212
Corporate securities 1,131,172 10,916 (47,904) 1,094,184
Mortgage-backed
securities 343,344 780 (22,731) 321,393
Foreign Corporate
Securities 19,303 180 (477) 19,006
--------- ------- -------- ---------
$1,618,418 12,018 (76,465) 1,553,971
========= ======= ======== =========
</TABLE>
A provision of $7,234,079 and $4,112,524 at December 31, 1995 and 1994,
respectively, has been provided for bonds that have been determined by the
NAIC to have an impairment in value. No further provision, except for the
asset valuation reserve, is made for possible losses resulting when
statement value exceeds estimated fair value, as the Company has the ability
and intent to hold these investments until maturity and does not expect to
realize any significant losses.
The carrying value and estimated fair value of investments in bonds at
December 31, 1995, by contractual maturity, are shown below (000s omitted).
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
Carrying Estimated
value fair value
Due in 1 year or less $ 38,190 38,325
Due after 1 year through 5 years 411,117 427,004
Due after 5 years through 10 years 657,425 703,716
Due after 10 years 165,871 182,648
--------- ---------
1,272,603 1,351,693
Mortgage-backed securities 332,394 344,121
Other structured securities 31,577 32,758
--------- ---------
$1,636,574 1,728,572
========= =========
The average duration until maturity for the above bonds, excluding
mortgage-backed securities, is 3.9 years.
Proceeds from sales, calls, redemptions, and maturities of investments in
bonds were $217,833,188, $338,250,247, and $228,967,811 during 1995, 1994,
and 1993 respectively. Gross gains of $3,455,815, $2,698,682, and $6,900,246
and gross losses of $2,559,251, $11,985,605, and $2,979,670 were realized on
those sales in 1995, 1994, and 1993, respectively. Net realized capital
gains (losses), less applicable income taxes, of $1,412,534, ($4,448,743),
and $4,220,420 were transferred to the IMR in 1995, 1994, and 1993,
respectively.
Equity Securities
The gross unrealized gains and losses on non-affiliated equity securities
at December 31, 1995 and 1994 are as follows (000s omitted):
Gross Gross Estimated
unrealized unrealized market
Cost gains losses value
1995 $23,502 3,692 1,150 26,044
1994 $20,311 1,209 1,131 20,389
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(2) Investments, Continued
Mortgage Loans on Real Estate
The Company's mortgage portfolio consists mainly of commercial mortgage
loans made to customers throughout the United States. The Company limits its
concentrations of credit risk by diversifying its mortgage loan portfolio so
that loans made in any one state are not greater than 20 percent (16 percent
in Illinois) of the aggregate mortgage loan portfolio balance and loans of
no more than 2 percent of the aggregate mortgage loan portfolio balance are
made to any one borrower. All outstanding commercial mortgage loans are
secured by completed, income-producing properties. At December 31, 1995, the
commercial mortgage portfolio had an average remaining life of approximately
4.8 years.
Assets Designated
The carrying values of assets designated for regulatory authorities are as
follows (000s omitted):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Bonds and short term investments $1,636,599 1,618,498
Mortgage loans 428,594 403,386
Policy loans 100,880 100,481
---------- ----------
$2,166,073 2,122,365
========== ==========
Net Investment Income
Components of net investment income are as follows (000s omitted):
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Bonds $127,056 121,725 114,429
Preferred stocks 73 105 158
Common stocks 2,393 5,844 2,165
Short-term investments 1,447 1,214 918
Derivative financial instruments 742 0 0
Mortgage loans 37,835 36,992 40,406
Real estate 10,422 10,070 9,469
Policy loans 6,392 6,276 6,139
Other invested assets 192 (541) (163)
Other 85 (1,038) 135
------- ------- -------
Gross investment income 186,637 180,647 173,656
Less investment expenses 13,282 13,102 11,534
------- ------- -------
Net investment income $173,355 167,545 162,122
======== ======= =======
Realized Gains and Losses
Net realized capital gains and losses are summarized as follows (000s omitted):
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Debt securities $ 896 (9,287) 3,921
Equity securities 3,322 1,420 7,202
Mortgage loans 76 (530) 252
Real estate 180 (223) 1,868
Short-term investments and other 0 248 0
Derivative financial instruments (3,174) 0 0
------ ------ ------
Net realized investment gains $1,300 (8,372) 13,243
====== ====== ======
</TABLE>
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(2) Investments, Continued
Derivative Financial Instruments
As of December 31, 1995, the Company had an interest rate swap agreement
with a major financial institution, having a notional amount of $100
million. Under the agreement, the Company receives interest payments at a
floating rate based on an interest rate index, which was 5.75 percent as of
December 31, 1995, and pays interest on the same notional amount at a fixed
rate, which was 6.96 percent as of December 31, 1995. Amounts exchanged as a
part of the interest rate differential are accounted for as adjustments to
interest income. This interest rate swap agreement is scheduled to terminate
in the year 2000. As of December 31, 1995, the carrying value of the
interest rate swap agreement was $0 and the fair value was ($4,607,000).
This negative fair value represents the estimated amount the Company would
have to pay at December 31, 1995 to cancel the contract or transfer it to
another party.
The Company has entered into a total return swap with CUMIS Insurance
Society, a wholly owned subsidiary of CUNA Mutual Investment Corporation,
for the period from January 1, 1995 through December 31, 1996. Under this
arrangement, the Company agrees to swap the total return (investment income,
realized and unrealized gains/losses) on a $19.4 million portfolio of the
Company's common stock in exchange for the return on a portfolio of the same
size of CUMIS Insurance Society's bonds. This swap was entered into in order
to minimize the Company's exposure to market risk in its common stock
portfolio. In 1995, the financial statement impact of the swap was to reduce
the Company's total return on investments by $1,641,136. The Company
recorded the following income (loss) in 1995 from this transaction;
investment income $1,171,120, realized losses ($3,173,747) , unrealized
gains $361,491. Of the net amount due to CUMIS, $1,490,493 was paid in
December 1995 and the balance $150,643, was recorded as a payable at
year-end. Given the nature of the agreement, the contracts carrying value
and fair market value are $0.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate swap agreements. The Company
anticipates, however, that counterparties will be able to fully satisfy
their obligations under the contracts. The Company does not obtain
collateral to support financial instruments, but monitors the credit
standing of the counterparties.
(3) Real Estate
A summary of real estate held is as follows (000s omitted):
1995 1994
---- ----
Cost:
Investment real estate $83,886 75,125
Home office 12,318 12,267
-------- --------
96,204 87,392
Less accumulated depreciation 29,830 25,708
-------- --------
$66,374 61,684
======== ========
Investment real estate and the home office buildings are being depreciated
on a straight-line basis over the useful lives of these assets.
(4) Affiliation and Transactions with Affiliates and Related Parties
On July 1, 1990, the Company entered into an agreement of permanent
affiliation with CUNA Mutual Insurance Society (CMIS), following approval by
the Iowa Commissioner of Insurance after notice and hearing and after
written ballot approval by the Company's policyholders. The agreement is not
a merger or consolidation in that both companies remain separate corporate
entities, and both continue to be separately owned and ultimately controlled
by their respective policyholder groups, who retain their voting rights
without change. The agreement terms include a provision for a majority of
the Company's board of directors to be nominated for election by CMIS; a
provision for extensive financial reinsurance of each company's individual
life and health business; joint development of business plans and
distribution systems for the sale of individual insurance and financial
service products within the credit union market; and a provision for the
sharing of certain resources and facilities. Expenses relating to shared
resources and facilities are allocated between the companies and their
subsidiaries under a cost-sharing agreement. Expenses are allocated based on
specific identification or, if undeterminable, generally on the basis of
usage or benefit derived. These transactions give rise to intercompany
account balances which are settled periodically. Subsequent to each year
end, the expense allocation process is subject to review by each company.
Based on these reviews, allocated expenses to each company may be adjusted,
if determined necessary. These expenses were adjusted by $(214,524) (net of
taxes of $115,513), and by $1,504,074 (net of taxes of $809,886) during 1995
and 1994, respectively, and recorded as a direct charge or credit to
unassigned surplus.
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(4) Affiliation and Transactions with Affiliates and Related Parties, Continued
Common stock investments include the Company's wholly owned subsidiaries:
Century Life Insurance Company (CL); Red Fox Motor Hotel Corporation; and
Century Financial Services Corp. Century Investors of America, Inc. (CI),
another wholly owned subsidiary, was liquidated on December 31,1993. The
Company also shares equally with CUNA Mutual Investment Corporation
ownership of Century Investment Management Company. The carrying value of
these subsidiary investments on the Company's books amounted to $18,007,296
and $18,292,566 at December 31, 1995 and 1994, respectively. Included in net
investment income (see note 2) was dividend income of $2,000,000 from CL for
the year ended December 31, 1995 ($5,500,000 for 1994 and $0 for 1993). No
dividend income was received from CI for the year ended December 31, 1995
($0 for 1994 and $1,437,966 for 1993).
Expenses are allocated by the Company to its subsidiaries. These expenses,
such as salaries, rents, depreciation, and other operating expenses,
represent the subsidiaries' share of expenses and are allocated based on
specific identification or, if undeterminable, generally on the basis of
usage or benefit derived. These transactions give rise to intercompany
account balances which are settled monthly.
In 1995, the Company funded the purchase of 50 percent of CUNA Mortgage
Corporation by CUNA Mutual Investment Corporation (CMIC) by providing cash
of $13.2M to CMIC. In return, the Company received a note with a stated
maturity date of January 15, 2011. The effective yield on the date of the
agreement was 10.62 percent. The yield will vary over the life of the note
as both the yield and the payment stream will be determined based on the
paydown activity of an underlying notional pool of Federal National Mortgage
Association mortgages. The structure of this arrangement will provide a
hedge against the Company's bond holdings, as the return will vary inversely
with the return on the bond portfolio. The carrying value of the note is
$12.9 million at December 31, 1995 and is included in other invested assets
on the 1995 balance sheet.
(5) Separate Accounts
The Company has three separate account components. The first component is
used for the investment of premiums on flexible premium variable universal
life insurance policies and has eight subaccounts which each invest
exclusively in shares of a single corresponding fund. The funds consist of
the following: Capital Appreciation Stock, Growth and Income Stock, Balanced
(combination of common stock and bond), Bond, Money Market, Treasury 2000,
International Stock, and World Governments. The second component is used for
the investment of group annuity premium deposits and has seven subaccounts
which invest in all but the Treasury 2000 fund. The third component is used
for the investment of premiums received on variable annuity contracts and
has seven subaccounts which invest in all but the Treasury 2000 fund.
Investments of the money market fund and money market instruments in the
other funds are stated on an amortized cost basis, which approximates market
value. Investments other than money market instruments are stated at market
value.
(6) Annuity Reserves and Deposit Liabilities
The withdrawal characteristics of the Company's annuity contracts and
deposit funds as of December 31, 1995 and 1994 are as follows (amounts are
net of reinsurance) (000s omitted):
1995 1994
---- ----
Subject to discretionary withdrawal:
With market value adjustments $200,380 141,800
At book value, less surrender charge 471,320 483,177
At market value 118,247 23,192
At book value, no charge or adjustment 592,213 587,371
--------- ---------
1,382,160 1,235,540
Not subject to discretionary withdrawal 26,177 22,460
--------- ---------
$1,408,337 1,258,000
========= =========
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(7) Reinsurance
As a result of the permanent affiliation (see note 4), the Company and
affiliated parent, CMIS, and affiliated subsidiary, MEMBERS Life Insurance
Company (ML), began sharing, through reinsurance, a majority of the
individual life, annuity, and health insurance business issued by each
company after July 1, 1990. The Company ceded 35 percent of the career
agency business written July 1, 1990, until December 31, 1993, to ML. With
career agency business issued January 1, 1994, the Company began ceding 50
percent to ML. The majority of business written by PLAN AMERICA
representatives has been ceded at 50 percent to ML.
The Company assumes a portion of the business originated by a CMIS joint
venture. In addition, the Company follows the policy of reinsuring that
portion of risk in excess of $500,000 on the life of any individual with
unaffiliated companies. Reinsurance under this policy is effective prior to
sharing under the affiliation agreement.
The following amounts represent the deductions for reinsurance ceded to
affiliated and unaffiliated companies. The Company is liable for these
amounts in the event such companies are unable to pay their portion of the
claims. (000s omitted)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations $ 75,362 105,283 113,842
========= ========= =========
Policy reserves and claim liabilities $ 529,827 459,902 357,684
========= ========= =========
Insurance in force $1,375,434 1,302,561 1,140,727
========= ========= =========
Included in these balances above are the following amounts relating to activity with ML (000s omitted):
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations $ 73,249 103,588 112,423
========= ========= =========
Policy reserves and claim liabilities $ 527,150 457,619 355,696
========= ========= =========
Insurance in force $1,066,331 986,998 846,377
========= ========= =========
Assumed reinsurance activity from CMIS and ML was as follows (000s omitted):
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Premiums and other considerations $ 25,264 20,393 15,334
========= ========= =========
Policy reserves and claim liabilities $ 17,460 12,527 8,244
========= ========= =========
Insurance in force $1,411,590 1,002,639 581,175
========= ========= =========
</TABLE>
The above intercompany transactions give rise to intercompany account
balances which are settled monthly.
(8) Federal Income Taxes
The Company files a consolidated life/nonlife federal income tax return with
its subsidiaries. The Company's policy is to collect from or refund to its
subsidiaries the amount of taxes applicable to its operations had it filed a
separate return. Net federal income taxes payable or recoverable reflect
balances payable to or due from subsidiaries and the Internal Revenue
Service (IRS) as follows (000s omitted):
1995 1994
---- ----
Due from subsidiaries $1,461 252
Due (to) from IRS (5,406) 1,331
------ ------
($3,945) 1,583
====== ======
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(8) Federal Income Taxes, Continued
The actual federal income tax expense differs from "expected" tax expense
computed by applying the statutory federal income tax rate of 35 percent to
the income before federal income taxes and net realized capital gains for
the following reasons (000s omitted):
<TABLE>
<CAPTION>
1995 1994 1993
Amount Percent Amount Percent Amount Percent
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $ 9,884 35.0% 10,398 35.0% 13,792 35.0%
Nontaxable investment income (3,650) (12.9) (3,860) (12.6) (3,496) (8.9)
Mutual life insurance company
differential earnings adjustment 3,259 11.5 666 2.2 (1,848) (4.7)
Nondeductible deferred acquisition costs 860 3.1 1,485 4.9 1,789 4.5
Taxable nonadmitted investment income 23 0.1 15 0.0 (193) (0.5)
Accrual to cash basis adjustment of
dividends to policyholders 126 0.5 (945) (3.0) (1,088) (2.8)
Write-downs of mortgage loans (393) (1.4) (1,294) (4.2) (466) (1.2)
Difference between book and tax
depreciation 174 0.6 58 0.2 (16) 0.0
Change in book and tax reserves 802 2.8 1,055 3.4 (391) (1.0)
Seed money withdrawal 98 0.3 48 0.2 (126) (0.3)
Miscellaneous book/tax capital gain
adjustment 2,138 7.6 989 3.2 1,092 2.8
Amortization of IMR (117) (0.4) (207) (0.7) (173) (0.4)
Tax associated interest 81 0.3 (4) (0.0) (229) (0.6)
Other, net 36 0.1 256 0.8 (59) (0.2)
------- ----- ------ ----- ------ -----
$13,321 47.2% 8,660 29.3% 8,588 21.7%
======= ===== ====== ===== ====== =====
</TABLE>
The Company's consolidated federal income tax returns have been examined by
the IRS through 1991. An agreement has been reached with the IRS for issues
outstanding through 1991. Adjustments of $0, $0, and $3,594,839 were charged
to surplus in 1995, 1994, and 1993, respectively, relative to this
agreement. Other miscellaneous tax adjustments relating to prior years that
were (charged) credited to surplus amounted to $756,853, ($1,592,264), and
($1,215,812) during 1995, 1994, and 1993, respectively.
In prior taxable years, the Company has claimed the benefit of the negative
differential earnings rate (DER). The permissibility of the negative DER is
currently the subject of litigation between the IRS and other taxpayers in
the industry. The Company has established a reserve for its potential
exposure with respect to this issue.
Income taxes on net realized capital gains (losses) amounted to $455,130,
($2,930,359), and $4,635,386, for 1995,1994, and 1993, respectively. Of
these amounts $760,595, ($2,395,477), and $2,272,535, were transferred to
the IMR in 1995, 1994, and 1993, respectively.
(9) Retirement Plans
The Company has two noncontributory defined benefit plans which cover
substantially all employees and agents who meet eligibility requirements.
The defined benefit plan contracts provide that the Company will function
as the insurer. The total pension expense for 1995, 1994, and 1993 was
$1,992,599, $2,717,207, and $2,090,665, respectively.
The actuarial present value of accumulated plan benefits and plan net
assets available for benefits for the Company's benefit plans as of January
1, 1995 and 1994 are as follows:
Actuarial present value of accumulated plan benefits (000s omitted):
1995 1994
Vested $28,628 26,308
Nonvested 1,271 1,148
------- -------
$29,899 27,456
======= =======
Net assets available for benefits $40,081 36,395
======= =======
<PAGE>
CENTURY LIFE OF AMERICA
Notes to Financial Statements
(9) Retirement Plans, Continued
The assumed rate of return used in determining the actuarial present value
of accumulated plan benefits on the two plans was 7 percent, and the salary
increase assumption was 5 percent for 1995, 1994, and 1993.
The Company provides certain medical and life insurance benefits for
retirees and their beneficiaries and covered dependents. The Company's
medical benefit plan provides subsidized coverage after retirement for
eligible full-time employees and agents, their spouses and dependents, up
to age 65. Starting at age 65, retirees pay the full cost of their
coverage. Additionally, the Company provides group term life insurance for
its retirees, the face amount of which is based on the individual's salary
at retirement. The cost of postretirement benefits other than pensions is
recognized by the Company during the employee's active working careers. The
Company adopted this policy as of January 1, 1992 and is amortizing the
related initial impact over twenty years. Postretirement benefit costs
amounted to $825,705 in 1995 ($769,590 in 1994 and $494,000 in 1993) and
include the expected cost of such benefits for newly eligible or vested
employees, interest cost, gains and losses arising from differences between
actuarial assumptions and actual experience, and amortization of the
transition obligation. The unfunded postretirement benefit obligation was
$4,560,541 and $4,570,081 at December 31, 1995 and 1994, respectively. The
accrued postretirement benefit liability at December 31, 1995 and 1994 was
$1,754,484 and $1,399,476, respectively. The discount rate used in
determining the postretirement benefit obligation at December 31, 1995 and
1994 was 8 percent and the initial health care cost trend rate was 10
percent trending down to an ultimate rate of 5.5 percent. 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, 1995, by $185,392 and
the estimated eligibility cost and interest cost components of net periodic
postretirement benefit cost for 1995 by $49,447.
The Company has two defined contribution plans (401[k] and thrift) which
cover all regular full-time employees and agents who meet certain
eligibility requirements. Under the plans, the Company contributes an
amount equal to 50 percent of the employees' contributions, up to a maximum
of 3 percent of the employees' salaries. The Company contributions were
approximately $960,000, $998,000, and $947,000 for the years ended December
31, 1995, 1994, and 1993, respectively.
(10) Commitments and Contingencies
The Company participates in a securities lending program. All securities
loaned are fully collateralized with cash, U.S. Government securities or
irrevocable bank letters of credit. At December 31, 1995, the par value of
securities loaned by the Company totaled $15.1 million.
The Company has assigned surplus of $1.8 million in 1995 and $1.6 million
in 1994 for contingency reserves. Contingency reserves are designated by
the Company as special surplus funds and are required by regulatory
authorities.
The Company had outstanding loan commitments of approximately $13.5 million
at December 31, 1995.
The Company is a defendant in various legal actions arising out of the
conduct of its business. In the opinion of management and in-house legal
counsel, the ultimate liability, if any, resulting from all such pending
actions will not materially affect the financial position or results of
operations of the Company.
The Company has been sued by a party to an agreement with the Company which
terminated as of December 31, 1995. The lawsuit alleges various complaints
and seeks various remedies and damages. The suit, which was filed in March
of 1996, is in the very early stages and the ultimate outcome can not
presently be determined. However, the Company believes that it will prevail
based on merits of the case.
<PAGE>
CENTURY LIFE OF AMERICA
Schedule I - Summary of Investments -
Other than Investments in Related Parties
December 31, 1995
<TABLE>
<CAPTION>
Amount at which
shown in the
Cost Value balance sheet
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States government and government
agencies and authorities $ 79,777,508 82,270,233 79,777,508
States, municipalities and political subdivisions 63,763 63,890 63,763
Foreign governments 20,613,737 22,288,305 20,613,737
Public utilities 1,143,456,542 1,216,196,572 1,143,456,542
All other corporate bonds 60,268,414 63,631,846 60,268,414
Mortgage-backed securities 332,394,219 344,121,034 332,394,219
------------ ------------ ------------
Total fixed maturities 1,636,574,183 1,728,571,880 1,636,574,183
============ ============ ============
Equity securities:
Common stocks:
Public utilities 724,792 850,951 850,951
Banks, trust, and insurance companies 391,412 583,687 583,687
Industrial, miscellaneous, and all other 22,028,547 24,243,416 24,243,416
Nonredeemable preferred stocks 357,238 365,570 357,238
------------ ------------ ------------
Total equity securities 23,501,989 26,043,624 26,035,292
------------ ============ ------------
Mortgage loans on real estate 428,594,228 428,594,228
Real estate 14,528,625 14,528,625
Real estate acquired in satisfaction of debt 51,845,005 51,845,005
Policy loans 100,879,548 100,879,548
Other long-term investments 21,721,092 21,721,092
Short-term investments 18,255,834 18,255,834
------------ ------------
Total investments $2,295,900,504 2,298,433,807
============ ============
</TABLE>
<PAGE>
CENTURY LIFE OF AMERICA
Schedule III - Supplementary Insurance Information
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Future
policy Other
benefits, policy
Deferred losses, claims
policy claims and
acquisition and loss Unearned benefits Premium
Segment costs expenses premiums payable revenue
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Life insurance $ 0 1,923,141,658 0 6,165,455 344,197,150
========= ============ ======== ========= ===========
Year ended December 31, 1994:
Life insurance $ 0 1,861,749,841 0 5,193,850 324,398,752
========= ============ ======== ========= ===========
Year ended December 31, 1993:
Life insurance $ 0 1,753,883,242 0 3,525,543 303,237,600
========= ============ ======== ========= ===========
Benefits Amortization
claims of deferred
Net losses and policy Other
investment settlement acquisition operating Premium
income expenses costs expenses written
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Life insurance $173,355,504 296,934,768 0 195,921,043 0
=========== =========== ======== ========== ========
Year ended December 31, 1994:
Life insurance $167,544,704 329,365,217 0 141,791,542 0
=========== =========== ======== ========== ========
Year ended December 31, 1993:
Life insurance $162,122,449 310,092,231 0 119,721,441 0
=========== =========== ======== ========== ========
</TABLE>
<PAGE>
CENTURY LIFE OF AMERICA
Schedule IV - Reinsurance
Years Ended December 31, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Assumed Percentage
Ceded to other from other of amount
Gross amount companies companies Net amount assumed to net
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Life insurance in force $10,930,404,549 1,375,434,224 1,411,589,675 10,966,560,000 12.9%
============== ============ ============ ============= ======
Premiums
Life insurance $321,231,937 74,971,145 16,065,694 262,326,486
Accident and health insurance 1,696,238 391,181 9,198,546 10,503,603
-------------- ------------ ------------ -------------
Total premiums $ 322,928,175 75,362,326 25,264,240 272,830,089 9.3%
============== ============ ============ ============= ======
Year ended December 31, 1994:
Life insurance in force $10,720,495,714 1,302,560,973 1,002,639,259 10,420,574,000 9.6%
============== ============ ============ ============= ======
Premiums
Life insurance $ 336,480,036 105,061,586 12,741,704 244,160,154
Accident and health insurance 1,538,764 221,904 7,651,114 8,967,974
-------------- ------------ ------------ -------------
Total premiums $ 338,018,800 105,283,490 20,392,818 253,128,128 8.1%
============== ============ ============ ============= ======
Year ended December 31, 1993:
Life insurance in force $10,531,927,926 1,140,726,840 581,174,914 9,972,376,000 5.8%
============== ============ ============ ============= ======
Premiums
Life insurance $ 342,975,070 113,606,722 8,974,057 238,342,405
Accident and health insurance 1,614,007 235,674 6,359,496 7,737,829
-------------- ------------ ------------ -------------
Total premiums $ 344,589,077 113,842,396 15,333,553 246,080,234 6.2%
============== ============ ============ ============= ======
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Century Life of America:
We have audited the accompanying balance sheets of Century Life of America as of
December 31, 1995 and 1994 and the related statements of operations, unassigned
surplus and cash flow for each of the years in the three year period ended
December 31, 1995.
In connection with our audits of the financial statements, we also have audited
the financial statement schedules I, III, and IV. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in note 1, these financial statements were prepared in conformity
with accounting practices prescribed or permitted by the Iowa Department of
Commerce, Insurance Division. Such practices are currently regarded as generally
accepted accounting principles for mutual life insurance companies.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Century Life of America as of
December 31, 1995 and 1994 and the results of its operations and its cash flow
for each of the years in the three year period ended December 31, 1995 in
conformity with generally accepted accounting principles. Also in our opinion,
the related financial statement schedules, when considered in relation to the
basic financial statements, taken as a whole, present fairly, in all material
respects, the information set forth therein.
As discussed in note 1 to the financial statements, the Company changed its
method of accounting for mortgage loan foreclosure losses in 1995.
Des Moines, Iowa
March 26, 1996
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
(1) Certified resolution of the board of directors of Century Life
of America (the "Company") establishing Century Variable
Annuity Account (the "Account").
(2) Not applicable.
(3) (a) Distribution Agreement Between Century Life of America and
CUNA Brokerage Services, Inc. for Variable Annuity Contracts
dated December 28, 1994.
(b) Servicing Agreement Related to the Distribution Agreement
between Century Life of America and CUNA Brokerage Services,
Inc. for Variable Annuity Contracts, dated December 28, 1994.
(4) (a) Contract Form
(b) Amendment to Contract
(c) TSA Endorsement
(d) State Variations
(5) (a) Contract Application
(b) IRA Endorsement
(c) State Variations
(6) (a) Certificate of Existence of the Company
(b) Articles of Incorporation of the Company
Amendment to Articles of Incorporation
(c) Bylaws of the Company
(7) Not Applicable.
(8) (a) Participation agreement between T. Rowe Price
International Series, Inc. and the Company dated April 22,
1994. Amendment to Participation Agreement dated November
1994.
(b) Participation agreement between MFS Variable Insurance
Trust and the Company dated April 29, 1994. Amendment to
Participation Agreement dated November 1994. Amendment to
Participation Agreement effective May 1, 1996.
(9) Opinion and Consent of Barbara L. Secor, Esquire.
(10) Consent of KPMG Peat Marwick LLP.
(11) Not Applicable.
(12) Not Applicable.
(13) Schedules of Performance Data Computations.
(14) Financial Data Schedule electronic submission (Exhibit 27)
Also, pursuant to Rule 483(b) copies of powers of attorney are filed as an
exhibit.
<TABLE>
<CAPTION>
Item 25. Directors and Officers of the Company
Name Occupation
<S> <C> <C>
Directors
James C. Barbre 1994-Present ACT Technologies, Inc.
Secretary-Treasurer
1985-1993 Self-employed consultant in carpet
manufacturing and distribution in Dalton,
Georgia
Wilfred F. Broxterman 1989-Present Hughes Aircraft Employees Federal
Credit Union
President and Chief Executive Officer
Ralph B. Canterbury 1965-Present USAir Federal Credit Union
President
James A. Halls 1990-Present Retired
1957-1989 Faegre & Benson - Attorney-at-Law
Jerald R. Hinrichs 1990-Present Hinrichs & Associates
Insurance Marketing Consultants
Owner/President
1988-1990 MONY Financial Services
Regional Vice President
1980-1990 New York Life Insurance Company
Senior Vice President
Michael B. Kitchen 1995-Present Century Life of America*
President and Chief Executive Officer
1992-1995 The CUMIS Group Limited
President and Chief Executive Officer
1991-1992 Canadian Imperial Bank of Commerce
Consultant
1980-1991 AETNA Canada
Senior Vice President
Robert T. Lynch 1970-Present Detroit Teachers Credit Union
Treasurer/General Manager
Omer K. Reed 1959-Present Self-employed dentist
Gerald J. Ring 1968-Present Park Towne Corporation
President
Donald F. Roby 1990-Present Retired
1986-1989 Farm and Home Savings
President and Chief Executive Officer
Rosemarie M. Shultz 1976-Present Public Employees Credit Union
President and Chief Executive Officer
Neil A. Springer 1994-Present Springer Souder & Associates, L.L.C.
Managing Director
1992-1994 Slayton International, Inc.
Senior Vice President
1991-1992 Alexander Proudfoot
President, Central Region
1984-1990 Navistar International Transportation Corp.
President and Chief Operating Officer
Executive Officers
Michael S. Daubs 1973-Present Century Life of America*
Chief Investment Officer
Century Investment Management Co.
President
Harry N. Frenchak 1991-Present Century Life of America*
Chief Officer, Corporate Services
John A. Gibson 1988-Present Century Life of America*
Chief Marketing Officer
Richard J. Keintz 1979-Present Century Life of America*
Chief Officer, Finance and
Information Services
Michael B. Kitchen 1995-Present Century Life of America*
President and Chief Executive Officer
1992-1995 The CUMIS Group Limited
President and Chief Executive Officer
1991-1992 Canadian Imperial Bank of Commerce
Consultant
1980-1991 AETNA Canada
Senior Vice President
Kevin T. Lentz 1983-Present Century Life of America
Chief Operating Officer
Daniel E. Meylink, Sr. 1983-Present Century Life of America*
Chief Officer, Member Services
Thomas O. Olson 1988-Present Century Life of America*
Chief Officer, International Markets
Kevin G. Shea 1976-Present Century Life of America*
Chief Officer, Lending Services
John M. Waggoner 1977-Present Century Life of America*
Chief Legal Officer
<FN>
* Century Life of America entered into a permanent affiliation with the
CUNA Mutual Insurance Society on July 1, 1990. Those persons marked
with an "*" hold identical titles with CUNA Mutual Insurance Society.
The most recent position has been given for those persons who have held
more than one position with Century Life of America or CUNA Mutual
Insurance Society during the last five year period. Each person has
business addresses at both 2000 Heritage Way, Waverly, Iowa 50677, and
5910 Mineral Point Road, Madison, Wisconsin 53705.
</FN>
</TABLE>
Item 26. Persons Controlled by or Under Common Control With the Depositor or
Registrant.
The registrant is a segregated asset account of the Company and is
therefore owned and controlled by the Company. The Company is a mutual life
insurance company and therefore is controlled by its contractowners.
Nonetheless, various companies and other entities are controlled by the Company
and may be considered to be under common control with the registrant or the
Company. Such other companies and entities, together with the identity of their
controlling persons (where applicable), are set forth on the following
organization charts.
In addition, as described in the prospectus under the caption "Century
Life of America," by virtue of an Agreement of Permanent Affiliation with CUNA
Mutual Insurance Society ("CUNA Mutual"), the Company and the registrant could
be considered to be affiliated persons of CUNA Mutual. Likewise, CUNA Mutual and
its affiliates, together with the identity of their controlling persons (where
applicable), are set forth on the following organization charts.
See organization charts on following page.
<PAGE>
Century Life of America
ORGANIZATIONAL CHART AS OF MAY 1995
Century Life of America
An Iowa mutual life insurance company
Fiscal Year End: December 31
Century Life of America is the controlling company for the following
subsidiaries:
1. Century Life Insurance Company
An Iowa Stock Life Company.
100% ownership by Century Life of America
Business: Life insurance
Classes of Stock: Common only
Authorized Shares: 750,000 of $2.67 par
Issued Shares: 750,000
Capital Structure:
Stated capital: $2,002,500
Add. paid-in: $0
Ret. earn.: $15,007,908
Total Equity: $17,010,408
Sole Shareholder: Century Life of America
Fiscal Year End: December 31
2. Red Fox Motor Hotel Corporation
An Iowa Business Act Corporation.
100% ownership by Century Life of America
Business: Operation of Red Fox Inn, a motel
Classes of Stock: Common only
Authorized Shares: 1,000 non par
Issued Shares: 242.7821
Capital Structure:
Stated capital: $242,782
Add. paid-in: $0
Ret. earn: ($40,774)
Total Equity: $202,008
Sole Shareholder: Century Life of America
Fiscal Year End: December 31
3. Century Financial Services Corp.
An Iowa Business Act Corporation
100% ownership by Century Life of America
Business: Financial Planning
Classes of Stock: Common only
Authorized Shares: 10,000 non par
Issued Shares: 1,000
Capital Structure:
Stated capital: $250,000
Add. paid-in: $700,000
Ret. earn.: ($363,652)
Total Equity: $586,348
Sole Shareholder: Century Life of America
Fiscal Year End: December 31
4. Century Investment Management Co.
An Iowa Business Act Corporation
50% ownership by Century Life of America
50% ownership by CUNA Mutual Investment Corporation
Business: Registered Investment Advisor
Classes of Stock: Non-assessable
Authorized Shares: 500,000 non par
Issued Shares: 100
Capital Structure:
Stated capital: $10,000
Add. paid-in: $520,000
Ret. earn.: $457,604
Total Equity: $987,604
Equal Shareholders: Century Life of America & CUNA Mutual
Investment Corporation
Fiscal Year End: December 31
Century Investment Management Co. is the investment adviser
of:
a. The Ultra Series Fund
A Massachusetts Business Trust
Domiciled in Iowa
Business: Open-end diversified management investment
company offered through insurance contracts
Shareholders: Three separate accounts of Century Life
of America hold legal title for the benefit of
policyowners.
Principal Underwriter: CUNA Brokerage Services, Inc.
Fiscal Year End: December 31
5. Plan America Program, Inc.
A Maine Business Act Corporation
100% ownership by Century Life of America
Business: Quasi-public corporation, operating an insurance
business
Classes of Stock: Voting common only
Authorized Shares: 5,000 of $1.00 par
Issued Shares: 100
Capital Structure:
Stated capital: $500
Sole Shareholder: Century Life of America
Fiscal Year End: December 31
CUNA Mutual Group
ORGANIZATIONAL CHART
AS OF DECEMBER 31, 1995
CUNA Mutual Insurance Society
Business: Life Health & Disability Insurance
May 20, 1935*
State of domicile: Wisconsin
CUNA Mutual Insurance Society, either directly or indirectly is the
controlling company of the following wholly-owned subsidiaries:
1. CUNA Mutual Investment Corporation
Business: Holding Company
September 15, 1972*
State of domicile: Wisconsin
CUNA Mutual Investment Corporation is the owner of the
following subsidiaries:
a. CUMIS Insurance Society, Inc.
Business: Property/Casualty
May 23, 1960*
State of domicile: Wisconsin
CUMIS Insurance Society, Inc. is the 100% owner of
the following subsidiary:
(1) Credit Union Mutual Insurance Society New
Zealand Ltd.
Business: Fidelity Bond Coverages
November 1, 1990*
State of domicile: Wisconsin
b. League General Insurance Company
Business: Property/Casualty
January 1, 1983*
State of domicile: Michigan
c. CUNA Brokerage Services, Inc.
Business: Brokerage
July 19, 1985*
State of domicile: Wisconsin
d. CUNA Mutual Financial Services Corporation
Business: Individual Marketing
November 21, 1983*
State of domicile: Wisconsin
e. CUNA Mutual General Agency of Texas, Inc.
Business: Managing General Agent
August 14, 1991*
State of domicile: Texas
f. Members Life Insurance Company
Business: Credit Disability/Life/Health
February 27, 1976*
State of domicile: Wisconsin
Formerly CUMIS Life & CUDIS
g. International Commons, Inc.
Business: Special Events
January 13, 1981*
State of domicile: Wisconsin
h. CUNA Mortgage Corporation
Business: Mortgage Servicing
November 20, 1978*
State of domicile: Wisconsin
i. Investors Equity Insurance Company, Inc.
Business: Private Mortgage Insurance
April 14, 1994*
State of Domicile: California
j. CUNA Mutual Insurance Agency, Inc.
Business: Leasing/Brokerage
March 1, 1974*
State of domicile: Wisconsin
Formerly CMCI Corporation
CUNA Mutual Insurance Agency, Inc. is the 100% owner
of the following subsidiaries:
(1) CM Field Services, Inc.
Business: Serves Agency Field Staff
January 26, 1994*
State of domicile: Wisconsin
(2) CUNA Mutual Insurance Agency of Alabama, Inc.
Business: Property & Casualty Agency
May 27, 1993*
State of domicile: Alabama
(3) CUNA Mutual Insurance Agency of New Mexico,Inc.
Business: Brokerage of Corporate & Personal
Lines
June 10, 1993*
State of domicile: New Mexico
(4) CUNA Mutual Insurance Agency of Hawaii, Inc.
Business: Property & Casualty Agency
June 10, 1993*
State of domicile: Hawaii
(5) CUNA Mutual Casualty Insurance Agency of
Mississippi, Inc.
Business: Property & Casualty Agency
June 24, 1993*
State of domicile: Mississippi
(6) CUNA Mutual Insurance Agency of Kentucky, Inc.
Business: Brokerage of Corporate & Personal
Lines
October 5, 1994*
State of domicile: Kentucky
(7) CUNA Mutual Insurance Agency of Massachusetts,
Inc.
Business: Brokerage of Corporate & Personal
Lines
January 27, 1995*
State of domicile: Massachusetts
2. C.U.I.B.S. Pty. Ltd.
Business: Brokerage
February 18, 1981*
Country of domicile: Australia
*Dates shown are dates of acquisition, control or organization.
CUNA Mutual Insurance Society, either directly or through a wholly-owned
subsidiary, has a partial ownership interest in the following:
1. C U Financial and Insurance Services, Inc./California
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by California League Services Corporation
May 16, 1980
2. C. U. Family Insurance Services, Inc./Colorado
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Colleague Services Corporation
September 1, 1981
3. C. U. Insurance Services, Inc./Oregon
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Oregon Credit Union League
December 27, 1989
4. CUFIS of Illinois, Inc.
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Illinois Credit Union League Service Corporation
April 10, 1990
5. CUFIS of New York, Inc.
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by CUC Services, Inc.
March 28, 1991
6. The CUMIS Group Limited
63.1% ownership by CUNA Mutual Insurance Society (as of 12-31-95)
7. Century Investment Management Co. (CIMCO)
50% ownership by CUNA Mutual Investment Corporation
50% ownership by Century Life of America
January 1, 1992
8. Tracking Partners, Inc.
51% ownership by CUMIS Insurance Society, Inc.
49% ownership by Collateral Tracking Service
May 1, 1992
9. Cooperative Savings and Credit Unions Insurance Society "Benefit" SA
(Poland)
63% ownership by CUNA Mutual Insurance Society
19.47% ownership by CUMIS Insurance Society, Inc.
17.53% ownership by Foundation for Polish Credit Unions
September 1, 1992
10. GWARANT, Ltd.
50% ownership by CUNA Mutual Insurance Society
50% ownership by Foundation for Polish Credit Unions
February 18, 1994
11. CUNA Mutual Insurance Agency of Ohio, Inc.
1% of value owned by Michael Corcoran (CUNA Mutual Employee) subject to a
voting trust agreement, Michael B. Kitchen as Voting Trustee.
99% of value owned by CUNA Mutual Insurance Agency, Inc. Due to Ohio
regulations, CUNA Mutual Insurance Agency, Inc. holds no voting stock in
this corporation.
June 14, 1993
12. SECURITY Management Company, Ltd. (Hungary)
90% ownership by CUNA Mutual Insurance Society
10% ownership by: Federation of Savings Cooperatives
Savings Cooperative of Szoreg
Savings Cooperative of Szekkutas
(collectively called Hungarian Associates)
September 5, 1992
13. CMG Mortgage Insurance Company
55% ownership by CUNA Mutual Investment Corporation 45% ownership by PMI
Mortgage Insurance Co.
April 14, 1994
Limited Liability Companies
1. CUNA Mutual Funds Management Company, L.L.C. (formerly CMC Management,
L.L.C)
50% interest by CUNA Mutual Investment Corporation
50% interest by CUNA Service Group, Inc.
September 30, 1993
a. CMC - T. Rowe Price Management Co., L.L.C.
50% interest by CUNA Mutual Funds Management Company, L.L.C.
50% interest by T. Rowe Price Management, Inc.
October 8, 1993
2. CUNA Mortgage Assistance, L.L.C.
50% interest by CUNA Mortgage Corporation
50% interest by CUNA Service Group, Inc.
November 7, 1995
Stock Corporation - CUNA Mutual Group owns less than 50%
1. Cooperators Life Assurance Society Limited (Jamaica)
CUNA Mutual Insurance Society owns 122,500 shares
Jamaica Co-op Credit Union League owns 127,500 shares
(NOTE: Awaiting authority to write business)
May 10, 1990
2. CUNA Caribbean Insurance Society Limited (Trinidad and Tobago, W.I.)
47.96% ownership by CUNA Mutual Insurance Society
July 4, 1985
3. CU Interchange Group, Inc.
Owned by CUNA Mutual Investment Corporation, CUNA Service Group and
various state league organizations December 15, 1993 - CUNA Mutual
Investment Corporation purchased 100 shares stock
4. CUNA Service Group, Inc.
April 22, 1974 - CUNA Mutual Insurance Society purchased 200.71 shares
Partnerships
1. PLAN AMERICA(R) Financial Services, a Wisconsin partnership
CUNA Mutual Insurance Society - 50% Partner
Century Life of America - 50% Partner
December 17, 1987
2. LeaSo Partners, a California partnership
CUNA Mutual Insurance Society - 50% Partner
California Credit Union League - 50% Partner
December 29, 1981
3. CM CUSO Limited Partnership, a Washington Partnership
CUMIS Insurance Society, Inc. - General Partner
Credit Unions in Washington - Limited Partners
June 14, 1993
Affiliated (Nonstock)
1. NARCUP, Inc.
August 8, 1978
2. CUNA Mutual Group Foundation, Inc.
July 5, 1967
3. Century Companies of America
July 1, 1990
4. Aseguradora Solidaria de Colombia (formerly Seguros UCONAL Limitada)
17.2% membership by CUNA Mutual Insurance Society
July 2, 1985
<PAGE>
Item 27. Number of Contractowners
As of February 28, 1996, 2,210 persons owned non-qualified contracts
and 3,573 persons owned qualified contracts offered by Registrant.
Item 28. Indemnification.
Section 10 of the Bylaws of the Company and Article VIII, Section 4 of
the Company's charter together provide for indemnification of officers
and directors of the Company against claims and liabilities that such
officers and/or directors become subject to by reason of having served
as an officer or director of the Company or any subsidiary or affiliate
of the Company. Such indemnification covers liability for all actions
alleged to have been taken, omitted, or neglected by such officers or
directors in the line of duty as an officer or director, except
liability arising out of an officer's or a director's willful
misconduct.
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 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 of the Registrant 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 question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) CUNA Brokerage is the registrant's principal underwriter. CUNA
Brokerage is also the principal underwriter for certain
variable life insurance contracts issued by Century Variable
Account and principal underwriter for the Ultra Series Fund,
an underlying Fund for the Company's variable products.
(b) Officers and Directors of CUNA Brokerage.
Name and Principal Positions and Offices
Business Address With the Underwriter
Joseph Tripalin* Director, President and Managing Principal
William W. Sayles* Director and Vice President
Steven A. Goldberg* Director and Secretary
Michael G. Joneson** Director and Treasurer
Gary L. Cutler* Director
John M. Waggoner* Chief Legal Officer
Campbell D. McHugh* Compliance Officer
Brian Lasko** Supervisory Principal
Mary Houston** Operations Principal
*The principal business address of these persons is: 5910 Mineral Point Road,
Madison, Wisconsin 53705.
**The principal business address of these persons is: 2000 Heritage Way,
Waverly, Iowa 50677
(c) CUNA Brokerage Services is the only principal underwriter. The
Distribution Agreement between the Company and CUNA Brokerage
Services and the Related Servicing Agreement between the
Company and CUNA Brokerage Services specify the services
provided by each party. Those contracts have been filed as
exhibits under Item 24(b)(3). The Company pays a dealer
concession of approximately six percent, as more fully
described in Schedule A of the Servicing Agreement. The total
dealer's concession for the year ended December 31, 1995, was
$5,709,829. The contracts provide that the Company performs
certain functions on behalf of the distributor. For example,
the Company sends confirmation statements to Owners and the
Company maintains payroll records for the registered
representatives. Some of the dealer concession is used to
reimburse the Company for the services it performs on behalf
of the distributor.
Item 30. Location Books and Records
All of the accounts, books, records or other documents required to be
kept by Section 31(a) of the Investment Company Act of 1940 and rules
thereunder, are maintained by the Company at 2000 Heritage Way, Waverly, Iowa
50677 or at Century Investment Management Co. or CUNA Mutual Group, both at 5910
Mineral Point Road, Madison, Wisconsin 53705.
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
registration statement.
Item 32. Undertakings and Representations
(a) The registrant undertakes that it will file a post-effective
amendment to this registration statement as frequently as is
necessary to ensure that the audited financial statements in
the registration statement are never more than 16 months old
for as long as purchase payments under the Contracts offered
herein are being accepted.
(b) The 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 postcard or
similar written communication affixed to or included in the
Prospectus that the applicant can remove and send to the
Company for a statement of additional information.
(c) The registrant undertakes to deliver any statement of
additional information and any financial statements required
to be made available under this Form N-4 promptly upon written
or oral request to the Company at the address or phone number
listed in the Prospectus.
(d) The Company represents that in connection with its offering of
the Contracts as funding vehicles for retirement plans meeting
the requirements of Section 403(b) of the Internal Revenue
Code of 1986, it is relying on a no-action letter dated
November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and
27(d) of the Investment Company Act of 1940, and that
paragraphs numbered (1) through (4) of that letter will be
complied with.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485 for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Madison, State
of Wisconsin, on the 12th day of April, 1996.
Century Variable Annuity Account (Registrant)
By: /s/ Michael B. Kitchen
Michael B. Kitchen
President and Chief Executive Officer
Century Life of America (Depositor)
By: /s/ Michael B. Kitchen
Michael B. Kitchen
President and Chief Executive Officer
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURES AND TITLE DATE
James C. Barbre *
James C. Barbre, Director
Wilfred F. Broxterman *
Wilfred F. Broxterman, Director
Ralph B. Canterbury *
Ralph B. Canterbury, Director
James A. Halls *
James A. Halls, Director
Jerald R. Hinrichs *
Jerald R. Hinrichs, Director
/s/ Michael B. Kitchen April 12, 1996
Michael B. Kitchen, Director
Robert T. Lynch *
Robert T. Lynch, Director
Omer K. Reed *
Omer K. Reed, Director
Gerald J. Ring *
Gerald J. Ring, Director
Donald F. Roby *
Donald F. Roby, Director
Rosemarie M. Shultz *
Rosemarie M. Shultz, Director
Neil A. Springer *
Neil A. Springer, Director
/s/ Linda L. Lilledahl April 12, 1996
Linda L. Lilledahl, Attorney-In-Fact
*Pursuant to Powers of Attorney filed herewith
<PAGE>
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURES AND TITLE DATE
/s/ Michael G. Joneson April 12, 1996
Michael G. Joneson
Chief Accounting Officer
/s/ Richard J. Keintz April 12, 1996
Richard J. Keintz
Chief Financial Officer
/s/ Michael B. Kitchen April 12, 1996
Michael B. Kitchen
President
<PAGE>
EXHIBIT INDEX
1. Certified resolution of the board of directors of Century Life of
America (the "Company") establishing Century Variable Annuity Account
(the "Account").
3(a) Distribution Agreement Between Century Life of America and CUNA
Brokerage Services, Inc. for Variable Annuity Contracts dated December
28, 1994.
(b) Servicing Agreement Related to the Distribution Agreement between
Century Life of America and CUNA Brokerage Services, Inc. for Variable
Annuity Contracts dated December 28, 1994.
4 (a) Variable Annuity Contract
(b) Amendment to Variable Annuity Contract
(c) TSA Endorsement
(d) State Variations
5 (a) Variable Annuity Application
(b) IRA Endorsement
(c) State Variations
6 (a) Certificate of Existence of the Company
(b) Articles of Incorporation of the Company
Amendments to Articles of Incorporation
(c) Bylaws of the Company
8 (a) Participation agreement between T. Rowe Price International Series,
Inc. and the Company dated April 22, 1994. Amendment to Participation
Agreement dated November 1994.
(b) Participation agreement between MFS Variable Insurance Trust and the
Company dated April 29, 1994. Amendment to Participation Agreement
dated November 1994. Amendment to Participation Agreement effective May
1, 1996.
9. Opinion and Consent of Barbara L. Secor, Esquire.
13. Schedules of Performance Data Computation.
14. Financial Data Schedule electronic submission (Exhibit 27)
Powers of Attorney
<PAGE>
EXHIBIT 1
CERTIFICATION
I, the undersigned Assistant Secretary of Century Life of America, do hereby
CERTIFY that the Century Life of America Board of Directors, at a meeting duly
held on December 14, 1993, a quorum being present, did adopt the following
resolutions:
RESOLVED, That the following resolution establishing Century Variable
Annuity Account is hereby adopted; and be it further
RESOLVED, That the following resolution remain in full force and effect
until otherwise revoked by the Board of Directors of this corporation:
1. The Board of Directors of Century Life of America ("Company"),
hereby establishes a separate account, pursuant to Iowa Code
Section 508A.1 (1985), designated "Century Variable Annuity
Account" (the "Annuity Account"), for the following use and
purposes, and subject to the conditions set forth in this
Resolution.
2. The Annuity Account is established for the purpose of
providing for the issuance by the Company of certain variable
annuity contracts (the "Contracts"), and shall constitute a
funding medium to support reserves under the Contracts.
3. The portion of the assets of the Annuity Account equal to the
reserves and other Contract liabilities with respect to such
Account shall not be chargeable with liabilities arising out
of any other business the Company may conduct.
4. The income, gains and losses, realized or unrealized, from
assets allocated to the Annuity Account shall, in accordance
with the Contracts, be credited to or charged against such
Account without regard to other income, gains or losses of the
Company.
5. The Annuity Account shall be divided into investment
subaccounts; each investment subaccount in the Annuity Account
shall invest in the shares of a mutual fund portfolio
designated on the schedule page of the Contract and net
premiums under the Contracts shall be allocated to the
eligible portfolios in accordance with instructions received
from owners of the Contracts.
6. The Board of Directors expressly reserves the right to add or
remove any investment subaccount of the Annuity Account or
substitute a designated series or mutual fund for another as
it may deem necessary or appropriate.
7. The President, the Chief Financial Officer or a designee of
either, be, and they hereby are, authorized to invest such
amount or amounts of the Company's cash in the Annuity Account
or in any investment subaccount thereof as may be deemed
necessary or appropriate to facilitate the commencement of the
Account's operations and/or meet any minimum capital
requirements under the Investment Company Act of 1940 (the
"1940 Act").
<PAGE>
8. The President, the Chief Financial Officer or a designee of
either, be, and they hereby are, authorized to transfer cash
from time to time between the Company's general account and
the Annuity Account as deemed necessary or appropriate and
consistent with the terms of the Contracts. Persons who have
been authorized previously to transfer cash on behalf of
Century Life of America are hereby expressly authorized to
transfer cash for purposes of this paragraph.
9. The Board of Directors of the Company reserves the right to
change the designation of the Annuity Account to such other
designation as it may deem necessary or appropriate.
10. The President, or his designee (with such assistance from the
Company's independent certified public accountants, legal
counsel and independent consultants or others as he may
require), be, and he hereby is, authorized and directed to
take all action necessary to: (a) register the Annuity Account
as a unit investment trust under the 1940 Act; (b) register
the Contracts in such amounts, which may be an indefinite
amount, as he may from time to time deem appropriate under the
Securities Act of 1933 (the "1933 Act"); and (c) take all
other actions which are necessary in connection with the
offering of the Contracts for sale and the operation of the
Annuity Account in order to comply with the 1940 Act, the
Securities Exchange Act of 1934, the 1933 Act, and other
applicable federal and state laws, including the filing of any
amendments to registration statements, any undertakings, and
any applications for exemptions from the 1940 Act or other
applicable laws as shall be deemed necessary or appropriate.
11. The President, or his designee, be, and he hereby is,
authorized and empowered to prepare, execute and cause to be
filed with the securities and Exchange Commission (the "SEC")
on behalf of the Annuity Account, and by the Company as
sponsor and depositor, a Notification of Registration on Form
N-8A, a registration statement registering the Account as an
investment company under the 1940 Act and the Contracts under
the 1933 Act, and any and all amendments to the foregoing on
behalf of the Annuity Account and the Company and on behalf of
and as attorneys-in-fact for the principal executive officer
and/or the principal financial officer and/or the principal
accounting officer and/or any other officer of the Company.
12. The Company's General Counsel is duly appointed as agent for
service under any registration statement, and is duly
authorized to receive communications and notices from the SEC
with respect thereto.
13. The President, or his designee, be, and he hereby is,
authorized on behalf of the Annuity Account and on behalf of
the Company to take any and all action that each of them may
deem necessary or advisable in order to offer and sell the
Contracts, including any registrations, filings and
qualification both of the Company, its officers, agents and
employees, and of the Contracts, under the insurance and
securities laws of any of the states of the United States of
America or other jurisdictions, and in connection therewith to
prepare, execute, deliver and file all such applications,
reports, covenants, resolutions, applications for exemptions,
consents to service of process and other papers and
instruments as may be required under such laws, and to take
any and all further action which he or legal counsel of the
Company may deem necessary or desirable (including entering
into whatever agreements and contracts may be necessary) in
order to maintain such registrations or qualifications for as
<PAGE>
long as he or legal counsel deem it to be in the best
interests of the Annuity Account and the Company.
14. The President, or his designee, be, and he hereby is,
authorized in the names and on behalf of the Annuity Account
and the Company to execute and file irrevocable written
consents on the part of the Annuity Account and of the Company
to be used in such states wherein such consents to service of
process may be requisite under the insurance or securities
laws therein in connection with the registration or
qualification of the Contracts and to appoint the appropriate
state official, or such other person as may be allowed by
insurance or securities laws, agent of the Annuity Account and
of the Company for the purpose of receiving and accepting
process.
15. The President, or his designee, be, and he hereby is,
authorized to establish procedures under which the Company
will provide voting rights for owners of the Contract with
respect to securities owned by the Annuity Account.
16. The President, or his designee, be, and he hereby is,
authorized to execute an agreement or agreements as deemed
necessary and appropriate (i) with CUNA Brokerage Services,
Inc. ("CBS") or other qualified entity under which CBS or such
other entity will be appointed principal underwriter and
distributor for the Contracts, (ii) with one or more qualified
banks or other qualified entities to provide administrative
and/or custody services in connection with the establishment
and maintenance of the Annuity Account and the design,
issuance, and administration of the Contracts, and (iii) with
the designated mutual funds and/or the principal underwriter
and distributor of those funds for the purchase and redemption
of fund shares.
17. The President, or his designee, be, and he hereby is,
authorized to execute and deliver these agreements and other
documents and do such acts and things as may be necessary or
desirable to carry out the foregoing resolutions and the
intent and purposes thereof.
WITNESS, my hand and the seal of the Corporation on this 22nd day of December,
1993.
/s/ Donna C. Blankenheim
Donna C. Blankenheim, Assistant Secretary
CENTURY LIFE OF AMERICA
[Corporate Seal]
<PAGE>
EXHIBIT 3
DISTRIBUTION AGREEMENT
BETWEEN
CENTURY LIFE OF AMERICA AND
CUNA BROKERAGE SERVICES, INC.
FOR VARIABLE ANNUITY CONTRACTS
This Agreement is made effective the 28th day of December 1994 by and between
Century Life of America (Century Life), a mutual life insurance company
domiciled in the State of Iowa with its principal office located in Waverly,
Iowa, and CUNA Brokerage Services, Inc. (CUNA Brokerage), a registered
broker/dealer domiciled in the State of Wisconsin with its principal office
located in Madison, Wisconsin.
WHEREAS, Certain variable annuity contracts of Century Life require distribution
under the auspices of a registered broker/dealer; and
WHEREAS, CUNA Brokerage is a registered broker/dealer and desires to distribute
Century Life's variable annuity contracts;
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
ARTICLE 1
APPOINTMENT
1.1 Century Life appoints CUNA Brokerage to be the principal underwriter
and distributor for all of Century Life's variable annuity contracts
which require distribution under the auspices of a registered
broker/dealer.
ARTICLE 2
DUTIES OF CUNA BROKERAGE
2.1 REGISTRATION UNDER THE 1934 ACT
CUNA Brokerage is registered as a broker/dealer under the provisions of
the 1934 Act (1934 Act) and has secured and will maintain
authorizations, licenses, qualifications, and permits necessary to
perform its obligations under this agreement in those states requested
by Century Life.
2.2 MEMBERSHIP IN THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
CUNA Brokerage currently holds and shall maintain a membership in the
National Association of Securities Dealers, Inc. (NASD).
2.3 RESPONSIBILITY FOR SECURITIES ACTIVITIES
CUNA Brokerage shall assume full responsibility for the securities
activities of all persons engaged directly or indirectly in the Century
Life operations for Century Life variable annuity products, including
but not limited to training, supervision, and control as contemplated
under appropriate provisions of the 1934 Act and regulations thereunder
and by the rules of the NASD. All persons directly or indirectly
<PAGE>
involved in such variable annuity securities activities shall be
registered representatives or registered principals of CUNA Brokerage
as appropriate to their activities.
Also, each registered representative selling the product and at least
one registered principal shall be properly licensed as an insurance
agent of Century Life.
2.4 APPOINTMENT OF REGISTERED PERSONS AND MAINTENANCE OF PERSONNEL RECORDS
CUNA Brokerage shall have the authority and responsibility for the
appointment and registration of those persons who will be registered
representatives and registered principals. CUNA Brokerage shall direct
the maintenance of all personnel records of such persons.
2.5 MAINTENANCE OF NET CAPITAL
CUNA Brokerage shall maintain required net capital at levels which will
comply with maximum aggregate indebtedness provisions under the
provisions of the 1934 Act, any regulation thereunder, and any NASD
rules.
2.6 REQUIRED REPORTS
CUNA Brokerage shall have the responsibility for preparation and
submission of any reports or other materials required by any regulatory
authority having proper jurisdiction.
2.7 LIMITATIONS ON AUTHORITY
CUNA Brokerage is not authorized to give any information or to make any
representations concerning the variable annuity contracts other than
the statements contained in the current registration statement filed
with the Securities and Exchange Commission or such sales literature as
may be authorized by Century Life.
ARTICLE 3
DUTIES OF CENTURY LIFE
3.1 MAINTENANCE OF ACCOUNTING RECORDS
Century Life shall maintain and hold, on behalf of and as agent for
CUNA Brokerage, those records pertaining to variable annuity contracts
required to be maintained and preserved by the 1934 Act, any
regulations thereunder, and any applicable NASD rules. All such books
and records are, and shall at all times remain, the property of CUNA
Brokerage and shall at all times be subject to inspection by duly
authorized officers, auditors, and representatives of CUNA Brokerage
and by the Securities and Exchange Commission, the NASD, and other
regulatory authorities having proper jurisdiction.
<PAGE>
3.2 CONFIRMATION OF TRANSACTIONS
On behalf of CUNA Brokerage and acting as agent for CUNA Brokerage,
Century Life shall confirm all transactions required to be confirmed in
the form and manner required by the 1934 Act, any regulations
thereunder, and any NASD rules.
3.3 FURNISHING MATERIALS
Century Life shall furnish to CUNA Brokerage copies of prospectuses,
financial statements and other documents which CUNA Brokerage
reasonably requests for use in connection with the solicitation, sale
and distribution of Century Life's variable annuity contracts.
ARTICLE 4
COMPENSATION
4.1 As compensation for services to be performed pursuant to this
agreement, Century Life shall pay a dealer concession to and on behalf
of CUNA Brokerage. The amount of the dealer concession and the manner
in which it will be paid is specified in Schedule A to a related
contract titled "Servicing Agreement Related to the Distribution
Agreement between Century Life of America and CUNA Brokerage Services,
Inc. for Variable Annuity Contracts."
ARTICLE 5
TERMINATION
5.1 This Agreement may be terminated at any time by either party upon
written notice to the other stating the date when such termination
shall be effective, provided that this Agreement may not be terminated
or modified by either party if the effect would be to put CUNA
Brokerage out of compliance with the "net-capital" requirements of the
1934 Act. Default of any kind shall not have the effect of terminating
this Agreement.
IN WITNESS WHEREOF, the undersigned, as duly authorized officers, have
caused this instrument to be executed, in duplicate, on behalf of their
respective companies.
CENTURY LIFE OF AMERICA
BY: /s/ Kevin T. Lentz
Kevin T. Lentz
Chief Operating Officer
CUNA BROKERAGE SERVICES, INC.
BY: /s/ Robert W. Bush
Robert W. Bush
President
<PAGE>
SERVICING AGREEMENT RELATED TO THE DISTRIBUTION AGREEMENT
BETWEEN
CENTURY LIFE OF AMERICA AND CUNA BROKERAGE SERVICES, INC.
FOR VARIABLE ANNUITY CONTRACTS
This Agreement is made effective the 28th day of December 1994 by and between
Century Life of America (Century Life), a mutual life insurance company
domiciled in the State of Iowa with its principal office located in Waverly,
Iowa, and CUNA Brokerage Services, Inc. (CUNA Brokerage), a registered
broker/dealer domiciled in the State of Wisconsin with its principal office
located in Madison, Wisconsin.
WHEREAS, Certain variable annuity contracts of Century Life require distribution
under the auspices of a registered broker/dealer; and
WHEREAS, CUNA Brokerage is a registered broker/dealer and desires to distribute
Century Life's variable annuity contracts; and
WHEREAS, Century Life appointed CUNA Brokerage to be the principal underwriter
and distributor for all of Century Life's variable annuity contracts which
require distribution under the auspices of a registered broker/dealer, under the
terms of a Distribution Agreement between Century Life of America and CUNA
Brokerage Services, Inc. dated December 28, 1994.
WHEREAS, That agreement provided that compensation for the services would be
specified in this agreement;
NOW, THEREFORE, for good and valuable consideration, the parties agree as
follows:
1. Payments to and on behalf of CUNA Brokerage shall be properly reflected
on the books and records maintained on behalf of CUNA Brokerage by
Century Life, so as to be in compliance with applicable law and
regulation.
2. Century Life shall maintain payroll records (for the benefit of CUNA
Brokerage) which are consistent with its own payroll records kept in
the ordinary course of business. Century Life shall remit directly to
the proper taxing authorities all applicable payroll taxes and other
applicable sums to be deducted from compensation payable to registered
representatives of CUNA Brokerage. Century Life shall pay such
compensation and taxes out of the dealer concession described in
Schedule A.
3. Schedule A is incorporated by reference into this Agreement for all
purposes as though set out in its entirety herein. When and if the
Schedule is amended, the amendments will be incorporated by reference
into this Agreement for all purposes, provided, however, that in the
event of a conflict between the provisions contained in the Schedule
and the provisions of this Agreement, the provisions of this Agreement
shall control.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed, in
duplicate, by their respective officers duly authorized to do so.
CENTURY LIFE OF AMERICA
BY: /s/ Kevin T. Lentz
Kevin T. Lentz
Chief Operating Officer
CUNA BROKERAGE SERVICES, INC.
BY: /s/ Robert W. Bush
Robert W. Bush
President
<PAGE>
SCHEDULE A
1. Century Life shall pay to and on behalf of CUNA Brokerage, from the
gross premium Century Life receives from MEMBERS(R) Variable Annuity,
as a dealer concession: six percent (6%) if the purchaser of an annuity
is between the ages of zero (0) and seventy (70) years, five percent
(5%) if the purchaser is between the ages of seventy-one (71) and
eighty (80) years, and three and five-tenths percent (3.5%) if the
purchaser is age eighty-one (81) or older.
2. Century Life shall pay to CUNA Brokerage three percent (3%) of that
dealer concession.
3. Century Life, on behalf of CUNA Brokerage, shall pay to registered
representatives of CUNA Brokerage the compensation specified in these
contracts:
(1) PLAN AMERICA(R) General Agents Agreement (for PLAN AMERICA I
representatives)
(2) PLAN AMERICA(R) Representative's Contract with Century Life of
America (for PLAN AMERICA II representatives)
(3) Century Life of America Career Representative's Full Time
Contract (for Century Career Representatives)
(4) Century Life Insurance Company Broker's Contract (for Century
Brokers)
4. Century Life will use any remaining dealer concession on behalf of CUNA
Brokerage by:
o maintaining payroll records as described in paragraph 1 of
this Servicing Agreement; o performing the services described
in Article 3 of the Distribution Agreement between Century
Life and CUNA Brokerage for Variable Annuity Contracts; and o
providing overhead support related to the distribution systems
specified in Section 3 of this schedule.
This Schedule A is approved, effective this 28th day of December, 1994.
CENTURY LIFE OF AMERICA
BY: /s/ Kevin T. Lentz
Kevin T. Lentz
Chief Operating Officer
CUNA BROKERAGE SERVICES, INC.
BY: /s/ Robert W. Bush
Robert W. Bush
President
<PAGE>
EXHIBIT 4
FLEXIBLE PREMIUM DEFERRED
VARIABLE AND FIXED ANNUITY
Flexible Purchase Payments as described herein.
Annuity Payments starting on the Annuity Date.
Death benefit payable at death prior to the Annuity Date.
Participating.
CONTRACT NUMBER: 000040004521
READ YOUR CONTRACT CAREFULLY. This is a legal contract between the Owner and
Century Life of America, and hereafter will be referred to as the Contract.
This Contract is issued to the Owner in consideration of the application and the
initial purchase payment. Century Life of America will pay the benefits of this
Contract, subject to its terms and conditions, which will never be less than the
amount required by state law.
RIGHT TO EXAMINE THIS CONTRACT. If for any reason You decide not to keep this
Contract, You may return it to Us within ten (10) days after You receive it. You
may return it to either Our Home Office or to the agent who sold it to You. We
will consider it void from the beginning and will pay a refund within 7 days of
receipt of the Contract in the Home Office. We will refund any Net Purchase
Payments allocated to the Guaranteed Interest Option; plus any Net Purchase
Payments allocated to the Variable Account adjusted to reflect investment gain
or loss from the date of allocation to the date of cancellation; plus any
applicable premium taxes which have been deducted prior to allocation. If
required by state law, We will, instead of the foregoing, refund any purchase
payments received by Us.
ANNUITY PAYMENTS AND OTHER VALUES PROVIDED BY THIS CONTRACT WHEN BASED ON THE
INVESTMENT EXPERIENCE OF A SUBACCOUNT ARE VARIABLE AND NOT GUARANTEED AS TO
FIXED DOLLAR AMOUNT. THE VARIABLE PROVISIONS ARE DESCRIBED IN SECTION 5.
THIS CONTRACT CONTAINS AN INTEREST ADJUSTMENT PROVISION. THE AMOUNT PAYABLE UPON
SURRENDER OR PARTIAL WITHDRAWAL OF THE GUARANTEED INTEREST OPTION VALUE MAY BE
ADJUSTED UPWARD OR DOWNWARD BASED ON AN INTEREST ADJUSTMENT FORMULA. SEE SECTION
7.5.
Signed for Century Life of America, Waverly, Iowa, on the Contract Date.
Michael B. Kitchen Barbara L. Secor
President Secretary
Countersigned by:
Duly Licensed Resident Agent
<PAGE>
GUIDE TO CONTRACT PROVISIONS
DATA PAGE
DEFINITIONS
GENERAL
SECTION 1. THE ANNUITY CONTRACT
1.1 What is the entire Contract?
1.2 When will the Contract become incontestable?
1.3 What if the Annuitant's date of birth or sex has been misstated?
1.4 What is the annual contract fee?
1.5 What taxes may be deducted?
1.6 Will annual reports be sent?
1.7 Can We modify the Contract?
SECTION 2. OWNER AND BENEFICIARY
2.1 What are Your rights as Owner of this Contract?
2.2 How can You change the Owner or Beneficiary of this Contract?
ACCUMULATION PERIOD
SECTION 3. ACCUMULATION PERIOD DEFINED
3.1 What is the accumulation period?
SECTION 4. PURCHASE PAYMENTS
4.1 When can purchase payments be made?
4.2 Are additional purchase payments required?
4.3 How will Net Purchase Payments be allocated?
SECTION 5. VARIABLE ACCOUNT
5.1 What is the Variable Account?
5.2 Can the Variable Account be modified?
5.3 How is Your Variable Contract Value determined?
5.4 How are Accumulation Unit values determined?
SECTION 6. GUARANTEED INTEREST OPTION
6.1 What is the Guaranteed Interest Option?
6.2 How is Your Guaranteed Interest Option Value determined?
6.3 What happens when a Guarantee Period ends?
SECTION 7. TRANSFER PRIVILEGE AND WITHDRAWAL PROVISION
7.1 Can You transfer values among and between Subaccounts and Guarantee Periods?
7.2 What are the rules for a partial withdrawal of the Surrender Value?
7.3 What are the rules for a full surrender of the Contract?
7.4 When will a surrender charge be applied and how is it calculated?
7.5 When will an interest adjustment be applied and how is it calculated?
7.6 Are there any restrictions on payment of partial withdrawals or surrenders?
<PAGE>
SECTION 8. DEATH OF OWNER AND/OR ANNUITANT AND DEATH PROVISIONS
8.1 What if the Annuitant dies during the accumulation period?
8.2 What if any Owner dies during the accumulation period?
8.3 What amount will be paid as a death benefit during the accumulation period?
SECTION 9. LOANS AND DIVIDENDS
9.1 Are loans available?
9.2 Will dividends be paid?
ANNUITY PERIOD
SECTION 10. ANNUITY PERIOD DEFINED
10.1 What is the annuity period?
SECTION 11. ANNUITY PAYMENTS
11.1 When will annuity payments begin?
11.2 What annuity payment options are available?
11.3 What are the requirements for choosing an annuity payment option?
11.4 How will fixed annuity payment values be determined?
11.5 How will variable annuity payment values be determined?
11.6 Can variable Annuity Units be exchanged?
SECTION 12. DEATH OF OWNER
12.1 What if You die during the annuity period?
SECTION 13. OPTION TABLES
13.1 What rates will be used to determine fixed annuity payment values for
Option 2?
13.2 What rates will be used to determine annuity payment values for
Options 3 and 4?
<PAGE>
DATA PAGE
FLEXIBLE PREMIUM DEFERRED
VARIABLE AND FIXED ANNUITY
ANNUITANT: John Doe CONTRACT NUMBER: 123456
CO-ANNUITANT: Jane Doe CONTRACT DATE: May 1, 1994
ANNUITY DATE: May 1, 2044 LIFE INCOME RATES: Type A
ANNUITY OPTION: 10 C&L LOAN AVAILABLE: No
OWNER(S): John Doe Jane Doe
INITIAL PURCHASE PAYMENT: $20,000
MINIMUM ADDITIONAL PURCHASE PAYMENT: $1,000
INTEREST ADJUSTMENT REFERENCE RATE FACTOR: -.15% for 1 year Guarantee Period
-.15% for 3 year Guarantee Period
-.15% for 5 year Guarantee Period
-.15% for 7 year Guarantee Period
.65% for 10 year Guarantee Period
CHARGES AND FEES:
Variable Account Mortality and Expense Risk Charge: 1.25% Per Yr
Variable Account Administrative Charge: .15% Per Year
Maximum Annual Contract Fee: $30
Maximum Transfer Fee: $10 after 1st 12 transfers in a Contract Year
Premium Tax Rate on the Contract Date: 0.00%
INITIAL ALLOCATION OF NET PURCHASE PAYMENTS:
VARIABLE ACCOUNT: Century Variable Annuity Account
Net Purchase
Subaccounts Fund Percentage Payment
C A Stock Ultra Series
G & I Stock Ultra Series
Balanced Ultra Series 15% $3,000.00
Bond Ultra Series 25% $5,000.00
Money Market Ultra Series 10% $2,000.00
<PAGE>
GUARANTEED INTEREST OPTION:
Guarantee Current Guaranteed
Period Interest Rate
1 year 5.00% 25% $5,000.00
3 year
5 year
7 year
10 year 3.75% 25% $5,000.00
<PAGE>
DEFINITIONS
The following words are used often in this Contract. When We use these words,
this is what We mean:
Accumulation Unit. A unit of measure used to calculate Variable Contract Value.
Age. Age as of last birthday.
Annuitant. The person (or persons) whose life (or lives) determines the annuity
payment benefits payable under the Contract and whose death determines the death
benefit. No more than two Annuitants may be named. Provisions referring to the
death of an Annuitant mean the last surviving Annuitant.
Annuity Date. The date when annuity payments will begin, if the Annuitant is
still living. This date is shown on the Data Page.
Annuity Unit. A unit of measure used to calculate variable annuity payments.
Beneficiary. The person (or persons) named by the Owner to whom the proceeds
payable on the death of the Annuitant will be paid. Prior to the Annuity Date,
if no Beneficiary survives the Annuitant, You or Your estate will be the
Beneficiary.
The Code. The Internal Revenue Code of 1986, as amended.
Contract Anniversary. The same date in each Contract Year as the Contract Date.
Contract Date. The date shown on the Data Page of the Contract which is used to
determine Contract Years and Contract Anniversaries.
Contract Year. A twelve-month period beginning on the Contract Date or on a
Contract Anniversary.
Contract Value. The total amount invested under the Contract. It is the sum of
the Variable Contract Value, the Guaranteed Interest Option Value and the
balance of the Loan Account.
Due Proof of Death. Proof of death satisfactory to Us. Such proof may consist of
a certified copy of the death record, a certified copy of a court decree
reciting a finding of death, or any other proof satisfactory to Us.
Fund. Each investment portfolio (sometimes called a Series) of Ultra Series Fund
or any other open-end management investment company or unit investment trust in
which a subaccount invests.
General Account. Our assets other than those allocated to the Variable Account
or any other separate account of Century Life of America.
Guarantee Amount. Any portion of Guaranteed Interest Option Value allocated to a
particular Guarantee Period with a particular expiration date (including
interest thereon).
Guarantee Period. A specific number of years for which We agree to credit a
particular effective annual interest rate.
<PAGE>
Guaranteed Interest Option. An option under the Contract funded by Our General
Account. It is not part of nor dependent upon the investment performance of the
Variable Account.
Guaranteed Interest Option Value. The value of the Contract in the Guaranteed
Interest Option.
Home Office. Century Life of America, 2000 Heritage Way, Waverly Iowa 50677.
Loan Account. For any Contract, a portion of Our General Account to which
Variable Contract Value or Guaranteed Interest Option Value is transferred to
provide collateral for any loan taken under the Contract.
Loan Amount. The Contract Value in the Loan Account plus any loan interest
accrued on the Contract Value in the Loan Account. Net Purchase Payment. A
purchase payment less any deduction for applicable premium taxes.
New Purchase Payment. At the time of determination, a purchase payment that We
received within the prior seven (7) years.
Non-Qualified Contract. A Contract that is not a "Qualified Contract."
Old Purchase Payment. Any purchase payment other than a New Purchase Payment.
Owner. The person (or persons) who own(s) the Contract and who is entitled to
exercise all rights and privileges provided in the Contract.
Payee. The person receiving annuity payments upon whose life payments are based.
Qualified Contract. A Contract that is issued in connection with plans that
qualify for special federal income tax treatment under Sections 401, 403(b), or
408 of the Code.
SEC. U.S. Securities and Exchange Commission.
Subaccount. A subdivision of the Variable Account, the assets of which are
invested in a corresponding Fund.
Surrender Value. The Contract Value less any applicable surrender charges,
interest adjustment, premium taxes not previously deducted, the annual contract
fee and Loan Amount.
Valuation Day. Each day on which valuation of the assets of a Subaccount is
required by applicable law.
Valuation Period. The period that starts at 3:00 p.m. central time on one
Valuation Day and ends at 3:00 p.m. on the next succeeding Valuation Day.
Variable Account. The Century Variable Annuity Account. A segregated investment
account of Century Life of America into which Net Purchase Payments may be
allocated.
Variable Contract Value. The value of the Contract in the Variable Account.
We, Our, Us. Century Life of America.
<PAGE>
Written Notice. A signed Written Notice in a form satisfactory to Us and
received at the Home Office.
You, Your. The Owner or Owners of this Contract.
<PAGE>
GENERAL
SECTION 1. THE ANNUITY CONTRACT
1.1 What is the entire Contract?
This Contract form, the Data Page, any attached endorsements, and a copy of the
application, if attached to it, are the entire Contract between You and Us. No
one except Our President or Secretary can change or waive any of Our rights or
requirements under this Contract. Any change must be in writing.
1.2 When will the Contract become incontestable?
This Contract is incontestable from its Contract Date. The statements contained
in the application (in the absence of fraud) are considered representations and
not warranties.
1.3 What if the Annuitant's date of birth or sex has been misstated?
If the Annuitant's date of birth has been misstated, We will adjust the payments
under this Contract, based on the correct date of birth. If the Annuitant's sex
has been misstated and the Type A life income rates apply (see the Data Page and
Section 13), We will adjust the payments under this Contract based on the
correct sex. Any underpayment will be added to the next payment. Any overpayment
will be subtracted from future payments.
1.4 What is the annual contract fee?
The maximum annual contract fee is shown on the Data Page. The annual contract
fee We charge will never be greater than the maximum. During the accumulation
period, the contract fee will be deducted pro-rata from Your Contract Value in
the Subaccounts and Guarantee Amounts on each Contract Anniversary. This
contract fee will also be deducted on the date of any full surrender, if not on
a Contract Anniversary. During the annuity period it will be deducted in equal
amounts from any variable annuity payments made during a Contract Year. This fee
is to reimburse Us for the expense of maintaining this Contract.
1.5 What taxes may be deducted?
We will deduct applicable premium tax from Surrender Value, death benefit amount
or the amount applied to an annuity payment option. However, we reserve the
right to charge for the premium tax when it is incurred. The premium tax rate
for Your state as of the Contract Date is shown on the Data Page.
In addition, We reserve the right to deduct certain other taxes from Surrender
Value, death benefit amount or annuity payments, as appropriate. Such taxes may
include taxes levied by any government entity which we, in our sole discretion,
determine have resulted from the establishment or maintenance of the Variable
Account, or from the receipt by Us of purchase payments, or from the issuance or
termination of this Contract, or from the commencement or continuance of annuity
payments under this Contract.
<PAGE>
1.6 Will Annual Reports be sent?
We will send You a report at least annually which provides information about
Your Contract required by any applicable law.
1.7 Can We modify the Contract?
Upon notice to You, We may modify the Contract if:
a) necessary to permit the Contract or the Variable Account to comply with
any applicable law or regulation issued by a government agency; or
b) necessary to assure continued qualification of the Contract under the
Code or other federal or state laws relating to retirement annuities or
variable annuity contracts; or
c) necessary to reflect a change in the operation of the Variable Account;
or
d) the modification provides additional investment options.
In the event of most such modifications, the Company will make appropriate
endorsement to the Contract.
SECTION 2. OWNER AND BENEFICIARY
2.1 What are your Right's as owner of this contract?
The Owner has all rights, title and interest in this Contract during the
accumulation period while the Annuitant is living. You may exercise all rights
and options stated in this Contract, subject to the rights of any irrevocable
Beneficiary.
2.2 How can You change the Owner or Beneficiary of this Contract?
You may change the Owner or Beneficiary of this Contract by Written Notice at
any time while the Annuitant is alive. The change will take effect as of the
date You signed it. We are not liable for any payment We make or action We take
before receiving any such Written Notice.
If the Owner is more than one person, the Written Notice for change must be
signed by all persons named as Owner. A request for change of Beneficiary must
also be signed by any irrevocable Beneficiary.
ACCUMULATION PERIOD
SECTION 3. ACCUMULATION PERIOD DEFINED
3.1 What is the accumulation period?
The accumulation period is the first of two periods of Your Contract. The
accumulation period begins on the Contract Date stated on the Data Page. This
period will continue until the Annuity Date unless the Contract is terminated
before that date.
SECTION 4. PURCHASE PAYMENTS
<PAGE>
4.1 When can purchase payments be made?
The initial purchase payment made is shown on the Data Page.
Additional purchase payments may be made to the Home Office at any time during
the accumulation period. The minimum additional purchase payment is shown on the
Data Page.
We may not accept purchase payments beyond the Contract Anniversary following
the Annuitant's 85th birthday.
4.2 Are additional purchase payments required?
Additional purchase payments after the initial purchase payment are not
required. However, We reserve the right to terminate the Contract and pay the
Contract Value to the Owner if:
a) no purchase payments have been received for two years; and
b) purchase payments total less than $2,000; and
c) the Contract Value is less than $2,000.
4.3 How will Net Purchase Payments be allocated?
Net Purchase Payments will be allocated as You initially designated. Your
initial allocation percentage is shown on the Data Page. This Contract allows
You to allocate Net Purchase Payments to any available Subaccount of the
Variable Account and any available Guarantee Period of the Guaranteed Interest
Option.
However, for Contracts issued in jurisdictions where We must refund Net Purchase
Payments during the "Right to Examine Period," the portion of the initial Net
Purchase Payment allocated to the Variable Account will be allocated to the
Money Market Subaccount for twenty (20) days. After twenty (20) days, We will
reallocate the amount in the Money Market Subaccount to any other Subaccounts
You designated for the initial Net Purchase Payment. This reallocation will be
in proportion to Your initial Variable Account allocation designation.
Net Purchase Payments allocated to a Subaccount become part of the Variable
Contract Value which fluctuates according to the investment performance of the
selected Subaccount(s). Net Purchase Payments allocated to a Guarantee Period of
the Guaranteed Interest Option become part of the Guaranteed Interest Option
Value and earn interest at the rate(s) declared for the selected option(s).
You may change the allocation of subsequent Net Purchase Payments at any time,
without charge, by Written Notice. The allocation may be 100% to any available
Subaccount or Guarantee Period, or may be divided among any of the Subaccounts
or Guarantee Periods in whole percentage points totaling 100%. The minimum
allocation to any Subaccount or Guarantee Period is 10%. The minimum Net
Purchase Payment allocated to a Guarantee Period is $1,000. Any change will be
effective at the time We receive Your Written Notice.
<PAGE>
SECTION 5. VARIABLE ACCOUNT
5.1 What is the Variable Account?
The Variable Account is a segregated investment account to which We allocate
certain assets and liabilities related to the Contracts and to other variable
annuity contracts. The Variable Account is registered with the SEC as a unit
investment trust under the Investment Company Act of 1940 (the "1940 Act"). We
own the assets of the Variable Account. We value the assets of the Variable
Account each Valuation Day.
That portion of the assets of the Variable Account equal to the reserves and
other contract liabilities of the contracts supported by the Variable Account
will not be charged with liabilities arising from any other business that We may
conduct. We have the right to transfer to Our General Account any assets of the
Variable Account that are in excess of such reserves and other contract
liabilities. The income, gains and losses, realized or unrealized, from the
assets allocated to the Variable Account will be credited to or charged against
the Variable Account, without regard to Our other income, gains or losses.
The Variable Account is divided into Subaccounts. The Subaccounts as of the
Contract Date are shown on the Data Page. Each Subaccount invests its assets
solely in the shares or units of designated Funds of underlying investment
companies. The Funds corresponding to the Subaccounts available as of the
Contract Date are shown on the Data Page. Net Purchase Payments allocated and
transfers to a Subaccount are invested in the Fund supporting that Subaccount.
5.2 Can the Variable Account be modified?
Subject to obtaining approval or consent required by applicable law, We reserve
the right to:
a) combine the Variable Account with any of Our other separate accounts;
b) eliminate or combine any Subaccounts and transfer the assets of any
Subaccount to any other Subaccount;
c) add new Subaccounts and make such Subaccounts available to any class of
Contracts as We deem appropriate;
d) add new Funds or remove existing Funds;
e) substitute a different Fund for any existing Fund, if shares or units of
a Fund are no longer available for investment or if We determine that
investment in a Fund is no longer appropriate;
f) deregister the Variable Account under the 1940 Act if such registration
is no longer required;
g) operate the Variable Account as a management investment company under the
1940 Act (including managing the Variable Account under the direction of
a committee) or in any other form permitted by law;
h) restrict or eliminate any voting rights of Owners or other persons having
such rights as to the Variable Account; and
<PAGE>
i) make any other changes to the Variable Account or its operations as may
be required by the 1940 Act or other applicable law or regulations.
In the event of any such substitution or other change, We may make changes to
this and other Contracts as may be necessary or appropriate to reflect such
substitution or other changes.
5.3 How is Your Variable Contract Value determined?
Your Variable Contract Value for any Valuation Period is the total of Your
Subaccount values. Your value for each Subaccount is equal to:
a) The number of that Subaccount's Accumulation Units credited to You;
b) multiplied by the Accumulation Unit value for that Subaccount at the end
of the Valuation Period for which the determination is being made.
5.4 How are Accumulation Unit values determined?
The Accumulation Unit value for each Subaccount was arbitrarily set initially at
$10. Thereafter, the Accumulation Unit value for each Subaccount at the end of
every Valuation Period is determined by subtracting (b) from (a) and dividing
the result by (c) (i.e., (a-b)/c), where:
a) is the net result of:
1) the net assets of the Subaccount attributable to the Accumulation
Units (i.e., the aggregate value of the underlying Fund shares
held by the Subaccounts) as of the end of such Valuation Period;
2) plus or minus the cumulative credit or charge with respect to any
taxes reserved for by Us during the Valuation Period which We
determine to be attributable to the operation of the Subaccount.
b) is the cumulative unpaid charge for the Mortality and Expense Risk Charge
and Administrative Expense Charge. The charge for a Valuation Period is
equal to the daily charge for the Mortality and Expense Risk Charge and
Administrative Expense Charge multiplied by the number of days in the
Valuation Period.
c) is the number of Accumulation Units outstanding at the end of such
Valuation Period.
For each Subaccount, Net Purchase Payments or transferred amounts are converted
into Accumulation Units. The number of Accumulation Units credited is determined
by dividing the dollar amount directed to each Subaccount by the value of the
Accumulation Unit for that Subaccount at the end of the Valuation Period in
which the Net Purchase Payment or amount is received.
Surrenders, partial withdrawals or transfers from a Subaccount will result in
the cancellation of the appropriate number of Accumulation Units of that
Subaccount. The following events will also result in the cancellation of an
appropriate number of Accumulation Units of a Subaccount:
<PAGE>
a) payment of the death benefit;
b) the Annuity Date;
c) the deduction of the annual contract fee; and
d) imposition of any transfer charge.
Accumulation Units will be cancelled as of the end of the Valuation Period in
which We receive notice of or instructions regarding the event.
SECTION 6. GUARANTEED INTEREST OPTION
6.1 What is the Guaranteed Interest Option?
The Guaranteed Interest Option is an allocation option supported by assets in
Our General Account. The Guaranteed Interest Option does not depend on the
investment performance of the Variable Account. Subject to applicable law, We
have sole discretion over the investment of assets supporting the Guaranteed
Interest Option.
You may allocate Net Purchase Payments or transfer amounts to one or more of the
Guarantee Periods that We make available. The minimum Net Purchase Payment or
transfer amount to a Guarantee Period is $1,000. The Guarantee Period selected
will determine the guaranteed interest rate. A Guarantee Period will begin on
the date the Net Purchase Payment or transfer amount is applied and will end
when the number of years in the Guarantee Period selected has elapsed. The last
day of a Guarantee Period is the expiration date.
6.2 How is Your Guaranteed Interest Option Value determined?
Your Guaranteed Interest Option Value at any time is the sum of all Guarantee
Amounts. Each Guarantee Amount is equal to:
a) the amount initially allocated or transferred to a Guarantee Period with
a specified expiration date; plus the interest subsequently earned on
that amount;
b) less any prior withdrawal or amount borrowed.
As a result of any additional purchase payments or transfer of any portion of
Your Contract Value, Guarantee Amounts allocated to Guarantee Periods of the
same duration may have different expiration dates, and each Guarantee Amount
will be treated separately for purposes of determining any interest adjustment
described in Section 7.5.
We will periodically establish an applicable guaranteed interest rate for each
Guarantee Period made available. Once an interest rate is declared for a
Guarantee Amount, it is guaranteed for the duration of the Guarantee Period. The
guaranteed effective annual interest rate(s) will never be less than 3%.
<PAGE>
6.3 What happens when a Guarantee Period ends?
We will notify You prior to the expiration date for any Guarantee Amount. At any
time during the thirty (30) day time period prior to the expiration date You may
exercise the following options by Written Notice:
a) You may transfer that Guarantee Amount to any available Guarantee Period
at the current guaranteed interest rate; or
b) You may transfer the Guarantee Amount to any available Subaccount; or
c) If there is less than one (1) year to the Annuity Date, You may continue
to accumulate interest on the Guarantee Amount at the current guaranteed
interest rate available for a one year Guarantee Period.
You may only choose Guarantee Periods that do not extend past the Annuity Date.
If We are not notified during the thirty (30) day time period prior to the
expiration date, a new Guarantee Period of the same duration as the previous
Guarantee Period will begin automatically on the day following the expiration
date. If the new Guarantee Period would result in the Guarantee Period extending
beyond the Annuity Date, the new Guarantee Period will automatically be the
longest Guarantee Period that does not extend beyond the Annuity Date. If there
is less than one (1) year to the Annuity Date, We will continue to credit
interest at the current guaranteed interest rate available for a one year
Guarantee Period.
SECTION 7. TRANSFER PRIVILEGE AND WITHDRAWAL PROVISION
7.1 Can You transfer values among and between Subaccounts and Guarantee Periods?
Your Variable Contract Value may be transferred among the Subaccounts and to the
available Guarantee Periods. Transfers of a Guarantee Amount to the Subaccounts
or available Guarantee Periods will be allowed only during the thirty (30) day
period prior to the expiration date of that Guarantee Period. All transfers are
subject to the following:
a) the transfer request must be by Written Notice;
b) the transfer request must be received in Our Home Office prior to the
Annuity Date;
c) the amount transferred to a Guarantee Period must be at least $1,000; and
d) the deduction of any transfer fees that We may impose.
You may make 12 transfers per Contract Year without charge. Each transfer after
the 12th transfer will be assessed a $10 transfer fee. The transfer fee, if any,
will be deducted from the Subaccount(s) or Guarantee Period(s) from which the
transfer is made. If a transfer is made from more than one Subaccount or
Guarantee Period at the same time, the transfer fee will be deducted pro-rata
from the remaining Variable Contract Value in such Subaccount(s) or from the
remaining Guarantee Amount for such Guarantee Period(s). We reserve the right to
waive the transfer fees and to modify or eliminate the transfer privilege.
<PAGE>
7.2 What are the rules for a partial withdrawal of the Surrender Value?
You have the right to make up to two partial withdrawals per Contract Year
during the accumulation period by Written Notice. You must specify the
Subaccount(s) or Guarantee Amount(s) from which the partial withdrawal is to be
made.
We will pay You the amount You request in connection with a partial withdrawal
by cancelling Accumulation Units from appropriate Subaccounts and/or reducing
appropriate Guarantee Amounts. Partial withdrawals generally will be effective
as of the date We receive Written Notice.
Any applicable interest adjustment will affect the amount available for
withdrawal from a Guarantee Amount. If, at the time a partial withdrawal is
requested from a Guarantee Amount, the Guarantee Amount would be insufficient to
permit the deduction of an interest adjustment, then We will not permit the
partial withdrawal.
Any applicable surrender charge will be deducted from the remaining value in the
Subaccount(s) or the remaining Guarantee Amount(s) from which the withdrawal is
being made. If such remaining Subaccount value(s) or Guarantee Amount(s) are
insufficient for this purpose, the surrender charge will be deducted pro-rata
from all Subaccount(s) and Guarantee Amount(s) under the Contract based on the
remaining Contract Value in each Subaccount or Guarantee Amount.
If a partial withdrawal would cause the Surrender Value to be less than $2,000,
We will treat Your request as a full surrender.
7.3 What are the rules for a full surrender of the Contract?
You have the right to surrender this Contract during the accumulation period by
Written Notice. You will be paid the Surrender Value. The Surrender Value is
equal to:
a) The Contract Value at the end of the Valuation Period in which We receive
Your request;
b) minus any interest adjustment;
c) minus any applicable surrender charge;
d) minus the annual contract fee if the surrender does not occur on a
Contract Anniversary;
e) minus any Loan Amount;
f) minus any applicable premium taxes not previously deducted.
The Surrender Value will not be less than the amount required by state law.
Upon payment of the above Surrender Value, this Contract is terminated and We
have no further obligation under this Contract. We may require that this
Contract be returned to Our Home Office prior to making payment.
<PAGE>
7.4 When will a surrender charge be applied and how is it calculated?
A surrender charge is imposed on the withdrawal of any New Purchase Payment(s)
in excess of the free withdrawal amount. The amount of the surrender charge is
determined separately for each purchase payment and is expressed as a percentage
of the purchase payment as follows:
Number of Years Since Surrender Charge
Purchase Payment was Credited Percent
Less than 1 7%
At least 1 but less than 2 6%
At least 2 but less than 3 5%
At least 3 but less than 4 4%
At least 4 but less than 5 3%
At least 5 but less than 6 2%
At least 6 but less than 7 1%
7 or more 0%
These percentages apply to partial withdrawals and full surrender of New
Purchase Payments in excess of the free withdrawal amount.
Your annual free withdrawal amount is equal to 10% of New Purchase Payments at
the time of withdrawal less free withdrawal amounts previously withdrawn in the
current Contract Year. Your free withdrawal amount will never be less than zero.
Free withdrawal amounts not withdrawn in a Contract Year are not carried over to
increase the free withdrawal amount in a subsequent Contract Year.
For purposes of assessing a surrender charge, Contract Value is considered
withdrawn as follows:
a) Earnings not previously withdrawn;
b) Old Purchase Payments beginning with the oldest payment not previously
withdrawn;
c) New Purchase Payments beginning with the oldest payment not previously
withdrawn.
We will waive the surrender charge described previously, subject to Your
providing satisfactory proof to Us that either of the following conditions has
first occurred after the Contract Date:
a) The Annuitant has been admitted to a nursing home or hospital and has
been confined to such nursing home or hospital
for at least 180 consecutive days; or
b) The Annuitant has been determined to be terminally ill. Terminally ill
means that due to illness or accident the Annuitant's life expectancy is
12 months or less.
7.5 When will an interest adjustment be applied and how is it calculated?
An interest adjustment will be imposed on any Guarantee Amount withdrawn (which
includes partial withdrawals, full surrender and amounts borrowed) prior to the
end of the Guarantee Period, other than a withdrawal during the thirty (30) day
period prior to the expiration date of a Guarantee Period.
<PAGE>
The amount of the interest adjustment will be calculated by multiplying the
amount being withdrawn from the Guarantee Amount (before deduction of any
applicable surrender charge) by the following factor:
0.70 x (I - J) x N/12
where:
I = the guaranteed interest rate being offered for new Guarantee Periods
equal in duration to the period related to the Guarantee Amount being
withdrawn. If the applicable Guarantee Period is no longer offered, "I"
will be the rate determined by linear interpolation of the guaranteed
interest rates for the Guaranteed Periods that are available. If the
Guarantee Periods needed to perform the linear interpolation are not
available, "I" will be the rate payable on the Treasury Constant Maturity
Series published by the Federal Reserve for a security with time to
maturity equal to the applicable Guarantee Period, plus the Interest
Adjustment Reference Rate Factor shown on the Data Page. Linear
interpolation will be used if this period of time to maturity is not
quoted.
J = the interest rate being credited to the Guarantee Amount being withdrawn.
N = the number of complete months remaining to the end of the Guarantee Period.
In situations where "I" is greater than "J" the interest adjustment will have
the effect of reducing the amount available for withdrawal. Alternatively, if
"J" is greater than "I", the interest adjustment will have the effect of
increasing the amount available for withdrawal.
No interest adjustment will be assessed for amounts withdrawn in the following
situations:
a) calculation of the death benefit upon death of the Annuitant;
b) amounts withdrawn to pay fees or charges related to Your Contract; and
c) amounts withdrawn during the thirty (30) day period prior to the
expiration date of the Guarantee Period.
In no event will:
a) the interest adjustment exceed an amount equal to the interest
earned in excess of an effective annual rate of 3% on Guarantee
Amounts;
b) the sum of any surrender charges and interest adjustment for a
Guarantee Amount be greater than 10% of the amount withdrawn;
c) the interest adjustment reduce the amounts withdrawn or
transferred below the amount required under the nonforfeiture laws
of the state with jurisdiction over the Contract.
The total amount withdrawn or surrendered could be less than the total purchase
payment(s) because of the cumulative effect of the interest adjustment and
surrender charge.
<PAGE>
7.6 Are there any restrictions on payment of partial withdrawals or surrenders?
Generally, the amount of any surrender or partial withdrawal will be paid to You
within seven days of Our receipt of Your Written Notice.
In accordance with state law, We reserve the right to postpone payment of
surrenders and partial withdrawal of Guaranteed Interest Option Value for up to
six months after We receive Written Notice. If payment is postponed for more
than 29 days, We will pay interest at the effective annual rate of 3% for the
period of postponement.
We reserve the right to postpone payment of surrenders and partial withdrawals
from the Variable Account for any period when:
a) the New York Stock Exchange is closed other than customary weekend and
holiday closing;
b) trading on the Exchange is restricted;
c) an emergency exists as a result of which it is not reasonable or
practicable to dispose of securities held in the Variable Account or
determine their value; or
d) the SEC permits delay for the protection of security holders.
The applicable rules of the SEC shall govern as to whether the conditions in (b)
and (c) exist.
SECTION 8. DEATH OF ANNUITANT AND/OR OWNER AND DEATH PROVISIONS
8.1 What if the Annuitant dies during the accumulation period?
If the sole Annuitant dies during the accumulation period and the Annuitant is
not an Owner, We will pay the death benefit to the Beneficiary. The Beneficiary
may elect (within 60 days of the date We receive Due Proof of Death) to apply
this sum under one of the annuity payment options as Payee, provided the Annuity
Date is at least two years after the Contract Date.
See Section 8.2 if You are the Annuitant.
8.2 What if any Owner dies during the accumulation period?
If any Owner dies prior to the Annuity Date and the deceased Owner is the sole
Annuitant, We will pay the death benefit to the Beneficiary in one sum within
five (5) years of the deceased Owner's death. The Beneficiary may elect (within
60 days of the date We receive Due Proof of Death) to apply this sum under one
of the annuity payment options as Payee, provided:
a) the Annuity Date is at least two years after the Contract Date;
b) payments under the annuity payment option begin not later than one (1)
year after the Owner's death; and
c) payments will be payable for the life of the Beneficiary, or over a
period not greater than the Beneficiary's life expectancy.
If any Owner dies and the deceased Owner is not the Annuitant (or a co-annuitant
survives the deceased Owner/Annuitant), the new Owner will be the surviving
Owner if any. The new Owner will be the Annuitant (unless otherwise provided) if
there are no surviving Owners. If the sole new Owner is the deceased Owner's
spouse, the Contract may be continued. If the new Owner is someone other than
<PAGE>
the deceased Owner's spouse, the Surrender Value of the Contract must be
distributed within five (5) years of the deceased Owner's death.
8.3 What amount will be paid as a death benefit during the accumulation period?
Prior to the Annuitant's Age 76, the death benefit is equal to the greater of:
(a) the sum of the Net Purchase Payments made less any partial withdrawals,
as of the date Due Proof of Death is received;
(b) the Contract Value as of the date due proof of death is received;
(c) the death benefit anniversary amount as of the date of death, plus any
Net Purchase Payments made and less any partial withdrawals since the
most recent death benefit anniversary, prior to death.
Death benefit anniversaries are the 7th Contract Anniversary and each 7th
subsequent Contract Anniversary thereafter, prior to the Annuitant's Age 76. The
death benefit anniversary amount is the Contract Value on the most recent death
benefit anniversary.
After the Annuitant reaches Age 76, the death benefit is equal to the Contract
Value.
The death benefit described above will be reduced by any Loan Amount and any
applicable premium taxes not previously deducted.
SECTION 9. LOANS AND DIVIDENDS
9.1 Are loans available?
Loans will be available only to certain Qualified Contracts. The Data Page
indicates if loans are available. The maximum loan value is 90% of the Surrender
Value.
You must specify the Subaccount(s) or Guarantee Period(s) from which the loan
will be made. The amount borrowed from such Subaccount(s) or Guarantee Period(s)
in connection with the loan will be transferred to the Loan Account. Any amount
borrowed from a Guarantee Amount will be subject to an interest adjustment as
described in Section 7.5.
Your Loan Amount is equal to any amounts in Your Loan Account plus any accrued
loan interest. Interest on Your Loan Amount will accrue at an effective annual
rate of 6.50%.
Amounts in the Loan Account will be credited interest at an effective annual
rate determined at Our discretion, but not less than 3%.
On each Contract Anniversary and on the Annuity Date (if not on a Contract
Anniversary), any difference between the Loan Amount and the amount in the Loan
Account will be transferred pro-rata from Your values in the Subaccount(s) and
Guarantee Period(s) (as described above) to the Loan Account unless the
difference is paid in cash.
You may repay the Loan Amount in whole or in part while this Contract is in
force. An amount equal to the amount of the loan repayment will be transferred
from the Loan Account to Your Subaccount(s) and Guarantee Period(s) in the same
<PAGE>
proportion as the Purchase Payments are currently allocated, unless You request
otherwise.
The Loan Amount will be deducted from any death benefit payable.
If, on any date, Your Loan Amount exceeds Your Surrender Value, the Contract
will be in default. In this case We will send You a notice of default and tell
You what payment is needed to bring Your Contract out of default. You will have
a 60 day grace period from the date of mailing such notice during which to pay
the default amount. If the required payment is not paid within the grace period,
the Contract will terminate without value.
9.2 Will dividends be paid?
We anticipate that no dividends will be payable on Your Contract. However, while
Your Contract is in force, We will annually determine Your Contract's share in
Our divisible surplus. Your Contract's share, if any, will be paid as a dividend
on Your Contract Anniversary.
You may select a dividend option listed below. If You do not select an option,
dividend option (a) will be used.
(a) Allocation to the Subaccount(s) of the Variable Account and the Guaranteed
Interest Option in the same proportion as designated for purchase payments.
(b) Pay in Cash.
ANNUITY PERIOD
SECTION 10. ANNUITY PERIOD DEFINED
10.1 What is the annuity period?
The annuity period is the second of the two periods of Your Contract. The
annuity period begins on the Annuity Date. It continues until We make the last
payment as provided by the annuity payment option chosen.
On the first day of this period the Contract Value (adjusted as described below)
will be applied to the annuity payment option shown on the Data Page unless You
have previously elected another option. Monthly annuity payments will begin as
provided under that option.
The Contract Value applied to an annuity payment option will be adjusted as
follows:
a) Any applicable interest adjustment will be made.
b) Any applicable surrender charge will be deducted for amounts applied to
Option 1.
c) If the Annuity Date is not on the Contract Anniversary, the annual
contract fee will be deducted on a pro-rated basis. The balance of the
annual contract fee will be deducted from the remaining annuity payments
for that Contract Year.
d) Any Loan Amount will be deducted.
<PAGE>
e) Any applicable premium taxes will be deducted.
SECTION 11. ANNUITY PAYMENTS
11.1 When will annuity payments begin?
The first annuity payment will be paid as of the Annuity Date. The Annuity Date
is shown on the Data Page. You may change the Annuity Date by Written Notice,
provided that the notice is received at Our Home Office at least 30 days prior
to the current Annuity Date. The Annuity Date must be at least two years after
the Contract Date. Unless otherwise restricted by law or regulation, the latest
Annuity Date is the later of the Contract Anniversary following the Annuitant's
85th birthday or 10 years after the Contract Date.
Unless changed as described above, We will use the Annuity Date shown on the
Data Page.
11.2 What annuity payment options are available?
There are different ways to receive annuity payments. We call these annuity
payment options. Four annuity payment options are described below. Options 1 and
2 are available only as a fixed annuity. Options 3 and 4 are available in two
forms - as a variable annuity in connection with the Variable Account and as a
fixed annuity. Other annuity payment options may be available with Our consent.
Option 1 - Interest Option (Fixed Annuity Payments Only). We will pay interest
on the proceeds which We will hold as a principal sum during the lifetime of the
Payee. The Payee may choose to receive interest payments either once a year or
once a month. We will determine the effective rate of interest from time to
time, but it will not be less than an effective annual interest rate of 3.50%.
Option 2 - Installment Option (Fixed Annuity Payments Only). We will pay equal
monthly annuity payments for a chosen number of years, not less than 5 nor more
than 30. If the original Payee dies before annuity payments have been made for
the chosen number of years: (a) annuity payments will be continued for the
remainder of the period to the successor Payee; or (b) the present value of the
remaining annuity payments, computed at the interest rate used to create the
Option 2 rates, will be paid to the successor Payee or to the last surviving
Payee's estate, if there is no successor Payee.
The Option 2 rates shown in Section 13 are based on 3.50% interest per year.
Additional interest, if any, will be payable as We may determine from time to
time.
Option 3 - Life Income - Guaranteed Period Certain (Fixed or Variable Annuity
Payments). We will pay monthly annuity payments for as long as the Payee lives.
If the original Payee dies before all of the annuity payments have been made for
the guaranteed period certain: (a) annuity payments will be continued during the
remainder of the guaranteed period certain to the successor Payee; or (b) the
present value of the remaining annuity payments, computed at the interest rate
used to create the Option 3 rates, will be paid to the successor Payee or to the
last surviving Payee's estate, if there is no successor Payee.
The guaranteed period certain choices are:
(a) 0 years (life income only); or
(b) 10 years; or
<PAGE>
(c) 20 years; or
(d) a period of years such that the total of all monthly annuity payments will
be no less than the amount of the proceeds applied under this option. This
choice is available only for fixed annuity payments.
Dividends, if any, will be payable as determined by Us.
Option 4 - Joint and Survivor Life Income - 10 Year guaranteed period certain
(Fixed or Variable Annuity Payments). We will pay monthly annuity payments for
as long as either of the original Payees is living. If at the death of the
second surviving Payee, annuity payments have been made for less than 10 years:
(a) annuity payments will be continued during the remainder of the guaranteed
period certain to the successor Payee; or (b) the present value of the remaining
annuity payments, computed at the interest rate used to create the Option 4
rates, will be paid to the successor Payee or to the last surviving Payee's
estate, if there is no successor Payee.
Dividends, if any, will be payable as determined by Us.
11.3 What are the requirements for choosing an annuity payment option?
We will automatically make annuity payments according to a Life Income Option
with a guaranteed period certain of 10 years, starting on the Annuity Date,
unless You choose another guaranteed period certain or annuity payment option.
We will apply Your adjusted Contract Value to purchase a variable and/or fixed
annuity in the same proportion as Your Contract Value is distributed among the
Subaccounts and the Guaranteed Interest Option. You may change the annuity
payment option by Written Notice on or prior to the Annuity Date to an annuity
payment option that is acceptable to Us.
The minimum adjusted Contract Value which can be applied under Option 1 is
$2,500. If the monthly interest payment for Option 1 is less than $25, We
reserve the right to pay interest annually.
The minimum adjusted Contract Value which can be applied under Options 2, 3 or 4
is the greater of $2,500 or the amount required to provide an initial monthly
annuity payment of $25.
We may require due proof of the Age of any Payee who is to receive a life
income. For Type A Life Income Rates, We may also require due proof of the sex
of any Payee who is to receive a life income.
The Payee may name a successor Payee to receive any remaining annuity payments
due after the Payee's death. The Payee may exercise any ownership rights that
continue after the Annuity Date.
11.4 How will fixed annuity payment values be determined?
The dollar amount of each fixed annuity payment will be determined by dividing
the amount applied by $1,000 and multiplying the result by the applicable option
rate shown in Section 13.
11.5 How will variable annuity payment values be determined?
The dollar amount of the initial variable annuity payment attributable to each
Subaccount will be determined by dividing the amount applied by $1,000 and
multiplying the result by the applicable option rate shown in Section 13. The
total initial variable annuity payment is the sum of the initial variable
annuity payments attributable to the Subaccounts.
<PAGE>
The dollar amount of the subsequent variable annuity payments attributable to a
Subaccount will be based on the number of Annuity Units credited to the Contract
for that Subaccount and is determined by multiplying (a) by (b), where:
a) is the number of Subaccount Annuity Units; and
b) is the Subaccount Annuity Unit value for the Valuation Period immediately
preceding the due date of the payment.
The number of Annuity Units attributable to each Subaccount remains fixed unless
there is an exchange of Annuity Units. The number of Annuity Units is derived by
dividing that portion of the initial variable annuity payment attributable to
the Subaccount by the Subaccount's Annuity Unit value for the Valuation Period
which ends immediately preceding the Annuity Date.
The Annuity Unit value for each Subaccount was arbitrarily set initially at
$100. Thereafter, the Annuity Unit value for each Subaccount in any Valuation
Period is determined by dividing (a) by (b), then multiplying by (c) and
adjusting the result to compensate for the assumed net investment rate of 3.50%,
where:
a) is the Accumulation Unit value for the current Valuation Period;
b) is the Accumulation Unit value for the immediately preceding Valuation
Period;
c) is the Annuity Unit value for the immediately preceding Valuation Period;
With an assumed net investment rate of 3.50% per year, payments after the
initial payment may increase, decrease or remain constant based on whether the
actual annualized investment return of the selected Subaccount(s) is greater or
less than the assumed 3.50% per year.
11.6 Can variable Annuity Units be exchanged?
The Payee may exchange the dollar value of a designated number of Annuity Units
of a particular Subaccount for an equivalent dollar amount of Annuity Units of
another Subaccount by Written Notice. On the date of the exchange, the dollar
amount of an annuity payment would be unaffected by the fact of the exchange.
No more than 4 exchanges of Annuity Units may be made during any Contract Year.
SECTION 12. DEATH OF OWNER
12.1 What if You die during the annuity period?
If You die on or after the Annuity Date, any remaining proceeds will be
distributed at least as rapidly as provided by the annuity payment option in
effect.
SECTION 13. OPTION TABLES
13.1 What rates will be used to determine fixed annuity payment values for
Option 2?
<PAGE>
The rates below will be used to determine the dollar amount of the monthly fixed
annuity payments for Option 2. The rates show the dollar amount of each monthly
fixed annuity payment for each $1,000 applied. Rates for years payable not
shown, if allowed by Us, will be calculated on an actuarially equivalent basis
and will be available upon request.
Option 2. Rates - First Payment Due at Beginning of Period.
Years Monthly Payment Payable Under
Payable Fixed Option 2 for each $1,000 Applied
10 9.83
15 7.10
20 5.75
25 4.96
30 4.45
13.2 What rates will be used to determine annuity payment values for Options 3
and 4?
The age adjustment table below and the following rates will be used to determine
the dollar amount of the monthly fixed annuity payments and the initial variable
annuity payment for Options 3 and 4.
The Type A life income rates for Options 3 and 4 are based on the Payee's
adjusted age and sex. The Type B life income rates are based on the Payee's
adjusted age. The life income rates type for this Contract is shown on the Data
Page. The adjusted age is the Payee's Age last birthday plus the age adjustment
shown in the table below. The Contract Years elapsed are from the Contract Date
to the effective date of the Annuity Option. Any partial Contract Year is
considered as a full Contract Year.
Contract Years Elapsed Age Adjustment
1- 10 +3
11 - 20 +2
21 - 30 +1
+31 0
The following rates show the dollar amount of each monthly annuity payment for
each $1,000 applied. The rates are based on the 1983A Mortality Tables and with
compound interest at the effective rate of 3.50% per year. Rates for adjusted
ages and guaranteed periods certain not shown, if allowed by Us, will be
calculated on an actuarially equivalent basis and will be available upon
request.
<PAGE>
Option 3. Life Income Rates - Guaranteed Period Certain - First Payment Due at
Beginning of Period.
<TABLE>
Type A Life Income Rates
Per $1,000 Applied
- ------------------------------------------------------------------------------------------------------------------
Adjusted Age - Male
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
0 4.99 5.09 5.20 5.32 5.44 5.57 5.71 5.86 6.02 6.20 6.38 6.58 6.79 7.02 7.26 7.52 7.80 8.09 8.41 8.75 9.12
10 4.91 5.00 5.10 5.20 5.31 5.42 5.54 5.67 5.80 5.94 6.08 6.23 6.38 6.54 6.71 6.87 7.05 7.22 7.40 7.57 7.75
20 4.66 4.72 4.78 4.85 4.91 4.97 5.04 5.10 5.16 5.22 5.28 5.33 5.38 5.43 5.48 5.52 5.55 5.59 5.62 5.64 5.66
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------
Adjusted Age - Female
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
0 4.54 4.62 4.71 4.80 4.90 5.00 5.11 5.23 5.36 5.49 5.64 5.79 5.95 6.13 6.32 6.53 6.75 6.99 7.26 7.54 7.85
10 4.51 4.58 4.66 4.75 4.84 4.93 5.03 5.14 5.25 5.37 5.50 5.63 5.77 5.91 6.07 6.23 6.40 6.58 6.76 6.95 7.14
20 4.38 4.44 4.51 4.57 4.64 4.70 4.77 4.84 4.91 4.98 5.05 5.12 5.19 5.25 5.32 5.37 5.43 5.48 5.52 5.57 5.60
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Type B Life Income Rates
Per $1,000 Applied
- ------------------------------------------------------------------------------------------------------------------
Adjusted Age - Unisex
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Years 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
0 4.63 4.72 4.81 4.91 5.01 5.12 5.23 5.36 5.49 5.63 5.79 5.95 6.12 6.31 6.51 6.73 6.96 7.21 7.48 7.78 8.10
10 4.59 4.67 4.75 4.84 4.94 5.03 5.14 5.25 5.37 5.49 5.62 5.75 5.90 6.05 6.20 6.37 6.54 6.71 6.90 7.08 7.27
20 4.44 4.50 4.57 4.63 4.70 4.76 4.83 4.90 4.97 5.04 5.10 5.17 5.23 5.30 5.35 5.41 5.46 5.51 5.55 5.58 5.62
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Option 4. Life Income Factors - Joint and Survivor - 10 Year Guaranteed Period
Certain - First Payment Due at Beginning of Period.
<TABLE>
Type A Life Income Rates Type B Life Income Rates
Per $1,000 Applied Per $,1000 Applied
- ----------------------------------------------------------- -------------------------------------------------------------
<CAPTION>
Adjusted Adjusted
Age - Adjusted Age - Female Age - Adjusted Age - Unisex
Male 55 60 65 70 75 Unisex 55 60 65 70 75
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------- -------------------------------------------------------------
55 4.16 4.34 4.51 4.65 4.76 55 4.10 4.24 4.35 4.44 4.51
60 4.26 4.51 4.75 4.98 5.16 60 4.24 4.43 4.62 4.77 4.89
65 4.35 4.65 4.98 5.31 5.61 65 4.35 4.62 4.89 5.14 5.34
70 4.41 4.76 5.17 5.62 6.07 70 4.44 4.77 5.14 5.51 5.84
75 4.46 4.84 5.32 5.88 6.48 75 4.51 4.89 5.34 5.84 6.34
- ----------------------------------------------------------- -------------------------------------------------------------
</TABLE>
<PAGE>
FLEXIBLE PREMIUM DEFERRED
VARIABLE AND FIXED ANNUITY
Flexible Purchase Payments as described herein.
Annuity Payments starting on the Annuity Date.
Death benefit payable at death prior to the Annuity Date.
Participating.
Century Life of America
2000 Heritage Way, Waverly, Iowa 50677
Telephone: (319) 352-4090
<PAGE>
AMENDMENT TO POLICY
Section 8.3 is deleted. It is replaced with the following:
The death benefit will be determined based on the Annuitant's Age on
Your Contract Date. If there is more than one Annuitant, We will use
the Age of the last surviving Annuitant.
If the Annuitant's Age on Your Contract Date is:
A. less than 76, the death benefit is equal to the greater of:
1. the sum of the Net Purchase Payments made less any partial
withdrawals, as of the date Due Proof of Death is received;
2. the Contract Value as of the date Due Proof of Death is
received;
3. the death benefit anniversary amount as of the date of
death, plus any Net Purchase Payments made and less any
partial withdrawals since the most recent death benefit
anniversary, prior to death.
Death benefit anniversaries are the 7th Contract Anniversary and each 7th
subsequent Contract Anniversary thereafter.
B. 76 or greater, the death benefit is equal to the Contract Value.
The death benefit described above will be reduced by any Loan Amount
and any applicable premium taxes not previously deducted.
Century Life of America
A Mutual Insurance Company
/s/ Barbara L. Secor
Secretary
<PAGE>
403(B)
TAX SHELTERED VARIABLE
ANNUITY ENDORSEMENT
This variable annuity is issued as part of a 403(b) salary reduction agreement.
It is issued as an agreement between the annuitant and an Internal Revenue Code
(Code) Section (ss. )501(c)(3) organization or public school. This constitutes a
plan qualified under Code ss.403(b) and related regulations. The terms and
conditions listed below will then form a part of the contract. In any conflict
between the terms of this Section and any other Section of this contract; this
Section will govern.
NONTRANSFERABLE AND NONASSIGNABLE
This contract is for the sole benefit of the annuitant or the beneficiary(ies).
This contract is not transferable; except to the Company on surrender or
settlement. It may not be: sold; assigned; discounted; or pledged as collateral
for a loan or as security, for any purpose.
CONTRIBUTION LIMITATIONS
In no event may voluntary salary deferral contributions be made to the contract
in any taxable year in excess of either:
A. the maximum excludable contribution amount, as defined under Code
ss.403(b)(2), ss.415, and ss.402(g);
B. or such greater amount as specified in Code ss.415(c)(4).
The owner may notify the Company that voluntary salary deferral contributions in
excess of the limitations have been made to the contract. The excess amount will
be taxable as ordinary income and may:
A. remain in the contract; or
B. be returned to the owner. Such amount must be returned no later than; the
April 15 following the close of the taxable year in which the excess was
contributed. Any such excess returned is not subject to any surrender
charge or penalty outlined in the contract. Any investment gain resulting
from the allocation of the excess amount to the subaccount(s) will be
returned to the owner along with the excess amount. Any investment loss
resulting from the allocation of the excess amount to the subaccount(s)
will be deducted proportionately from the remaining subaccount value(s)
and guarantee amount(s).
LOANS
If loans are allowed under the contract to which this Endorsement is attached;
loans may be made as follows. The maximum loan value is the greater of; $10,000
or 50 percent of the contract value less any prior loan amount. However, loans
may not exceed the loan value described in this contract. In no event shall the
total contract indebtedness of all 403(b) accounts exceed $50,000 less the
highest total indebtedness during the one-year period prior to the new loan
date. The minimum loan is $100.
<PAGE>
The annuitant must repay each loan within five (5) years of the loan date;
unless the loan will be used to purchase the annuitant's principal residence. In
that event, the Company may fix a reasonable time period for repayment. Terms
for repayment will be established at the time the loan is made. A loan must be
repaid in substantially equal payments; on a quarterly or more frequent basis.
All loan repayments must be clearly marked as such.
If any loan repayments have not been made within 61 days of the due date, the
loan is in default. After this 61-day time period, the loan amount will be
repaid by making a partial withdrawal of the surrender value. An amount equal to
the amount of the loan repayment will be credited to the loan account from the
subaccount(s) and guarantee period(s) in the same proportion as the purchase
payments are currently allocated, unless the owner requests otherwise. The
subaccount(s) and guarantee period(s) from which the partial withdrawal is made
will be further reduced by any charges or adjustments applicable to partial
withdrawals. The amount of the partial withdrawal will be treated as a taxable
distribution to the annuitant.
DISTRIBUTION RESTRICTIONS
Distributions will be governed by: Code ss.403(b)(10); ss.403(b)(11);
ss.401(a)(9); and their related regulations. This includes the incidental death
benefit rules of ss.401(a)(9)(G) of the Code and the minimum distribution
incidental benefit requirement of ss.1.401(a)(9)-2 of the Proposed Income Tax
Regulations. The owner may not surrender this contract, or any portion of this
contract except: when the annuitant attains age 59 1/2; separates from service;
dies; becomes disabled within the meaning of Code ss.72(m)(7); experiences a
"hardship"; or as otherwise permitted by Code ss.403(b)(11) and its related
regulations. In the case of hardship; the owner may not withdraw any income
earned on contributions made according to the salary reduction agreement, within
the meaning of ss.402(g)(3)(C). Payments made prior to age 59 1/2 may be subject
to an IRS premature distribution tax; in addition to current income tax.
Unemployment Compensation Act of 1992 (UCA `92). As required by UCA `92,
mandatory 20 percent withholding will apply if: a payment meets the definition
of an Eligible Rollover Distribution; and are not rolled over, but instead are
paid directly to the annuitant.
Payments to Annuitant. Payment must be made on or before April 1 of the year
following the year of attainment of age 70 1/2. Payments may be made as follows:
A. as a single lump sum; or
B. in equal or substantially equal payments: over the lifetime of the annuitant;
over the lives of the annuitant and the beneficiary(ies); over a specified
period that may not be longer than the annuitant~s life expectancy; or over a
specified period that may not be longer than the joint life and last survivor
expectancy of the annuitant and the beneficiary(ies).
Periodic payments must be made in intervals of no longer than one year. In
addition, periodic payments may increase only as provided in Q&A F-3 of
ss.1.401(a)(9)-1 of the Proposed Income Tax Regulations.
Payments to Beneficiary(ies). If the annuitant dies, payments will be
distributed as follows:
A. If death occurs on or after the date annuity payments have begun; the
remaining payments will be distributed at least as rapidly as under the payment
method used prior to death.
<PAGE>
B. If the death occurs before annuity payments have begun; the death benefit
must be distributed as elected. However, if an election has not been made; the
beneficiary(ies) has the following options for distribution:
1. the full amount to be paid by December 31 of the year containing
the fifth anniversary of the annuitant's death; or
2. in equal or substantially equal payments over the life or life
expectancy of the beneficiary(ies). Such payments must start by
December 31 of the year following the annuitant's death. However,
for a spouse beneficiary, payments are not required to begin until
December 31 of the year the annuitant would have turned 70 1/2. A
spouse beneficiary may also roll all or a portion of the death
benefit to their own individual retirement annuity.
Payment under this Section is considered to have begun:
A. upon an individual reaching his or her required beginning date; or
B. if prior to the required beginning date; payments have begun under an annuity
payment option acceptable under ss.1.401(a)(9) of the Regulations.
Related Distribution Provisions.
A. The return multiples contained in Tables V and VI of 1.72-9 of the Income Tax
Regulations are used to calculate: life expectancy; and joint and last
survivor expectancy.
The life expectancy of the annuitant or spouse beneficiary will be
recalculated annually, for purposes of payment, unless otherwise elected by:
the annuitant, prior to payments beginning; or by the spouse beneficiary, if
the annuitant dies before payments have begun.
If election has been made not to recalculate life expectancy annually;
such election is irrevocable and will apply to all subsequent years.
The life expectancy of a non-spouse beneficiary(ies) may not be
recalculated. Instead, life expectancy will be based on the ages of the
beneficiary(ies) and annuitant in the year the annuitant attains age 70 1/2.
Payments for subsequent years will be based on such life expectancy; reduced
by one for each year which has elapsed.
B. The payment amounts will be no less than the amount obtained by dividing the
amount payable upon the annuitant's death by: the life expectancy of the
annuitant or beneficiary; or the joint and last survivor expectancy of the
annuitant and spouse beneficiary.
C. For a non-spouse beneficiary; the payment amount must be no less than the
amount obtained by dividing the amount payable upon the annuitant's death by
the lesser of: the annuitant~s life expectancy; or a divisor obtained from
the tables available in ss.1.401(a)(9)-2.
D. The beneficiary(ies) may increase the frequency or amount of payments; if the
payments are for a period certain.
<PAGE>
E. For the purpose of distribution requirements; any amount paid to a child
beneficiary will be treated as if it had been paid to the surviving spouse.
This applies only if the remaining amount becomes payable to the surviving
spouse when the child reaches majority age.
F. If there are two or more 403(b) accounts; minimum distribution requirements
of the Code may be satisfied out of one of the 403(b) accounts. This is
possible by receiving the combined required minimum distribution amounts out
of one 403(b) account. This is the alternative method described in Notice
88-38, 1988-1 C.B. 524.
ROLLOVER CONTRIBUTIONS
If the Payee is eligible to receive distributions, the Payee may elect an
Eligible Rollover Distribution paid directly to an Eligible Retirement Plan
specified in a Direct Rollover.
This contract will accept any Eligible Rollover Distribution paid directly to it
as a Direct Rollover from another 403(b) plan. Any Eligible Rollover
Distribution not paid directly to this plan will be accepted as a rollover
contribution if received within 60 days of distribution.
Rollover Contribution Definitions. The following words and phrases, as used in
this section, are defined as follows:
A. Eligible Rollover Distribution. An Eligible Rollover Distribution is a
payment of all or any portion of the Payee's contract value, but does not
include:
1. any minimum payment that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life
(or life expectancy) of the Payee; or the joint lives (or joint life
expectancies) of the Payee and the Payee's beneficiary; or for a
specified period of ten years or more;
2. any minimum payment required under ss.401(a)(9) of the Code;
3. the portion of any payment that is non-taxable.
B. Eligible Retirement Plan. An Eligible Retirement Plan that may accept an
Eligible Rollover Distribution may be: an individual retirement account
described in ss.408(a) of the Code; or an individual retirement annuity
described in ss.408(b) of the Code; or an annuity plan described in ss.403(b)
of the Code; or a custodial account as described in ss.403(b)(7) of the Code.
For an Eligible Rollover Distribution to the surviving spouse, an Eligible
Retirement Plan is: an individual retirement account; or individual
retirement annuity.
C. Payee. Payees include: an employee or former employee; the employee's or
former employee's surviving spouse; the employee's or former employee's
spouse or former spouse who is the alternate payee under a qualified domestic
relations order (defined in ss.414(p) of the Code).
D. Direct Rollover. A Direct Rollover specified by the Payee may be: a payment
from this contract directly to an Eligible Retirement Plan; or a payment from
another 403(b) plan to this contract.
GENERAL PROVISIONS
<PAGE>
Endorsements. This contract, including this Endorsement, will be amended as
required by changes in: the Code; IRS Regulation; or published revenue rulings.
The Company will promptly furnish any endorsements which are required to comply
with such changes. Upon receipt of such endorsement, the annuitant has thirty
(30) days to contact the Company to reject the endorsement. If the thirty (30)
days elapse and the Company has not been contacted, the endorsement is deemed
accepted. Because this contract is established with the intent to comply with
federal regulation, rejection will be deemed a request to remove this
endorsement and will result in a taxable event.
Reporting. The Company is required to report distributions from this contract to
the IRS and, in some cases, to withhold certain amounts from taxable
distributions. The Company will furnish contract reports summarizing total
contributions and total distributions.
Acknowledgment. The undersigned hereby agrees to the terms of this endorsement
and acknowledges understanding of: the distribution restrictions imposed by
ss.403(b)(11); and investment alternatives available under the employer's 403(b)
program.
Signature: Date:
Owner
Signature: Date:
Witness
CENTURY LIFE OF AMERICA
A Mutual Insurance Company
Barbara L. Secor
Secretary
<PAGE>
Flexible Premium Deferred Variable and Fixed Annuity Contract
State Variations
Contract Form No. 2800 attached as Exhibit 4 is a copy of the Contract language
used in the following states:
Alabama Maine
Alaska Minnesota
Arkansas Mississippi
Colorado Missouri
Connecticut Nebraska
Delaware Nevada
Georgia New Mexico
Hawaii Ohio
Illinois Rhode Island
Indiana South Dakota
Iowa Tennessee
Kentucky Vermont
Louisiana Wyoming
The following state contract forms vary from the Form No. 2800 as indicated
below:
Arizona-- Contract No. 2800 AZ adds language to Form No. 2800 stating, "Upon
written request, we will provide you with information regarding the
benefits and provisions of the Contract."
California--Contract No. 2800 CA changes Form 2800 language to allow for a
10-day free look, except for ages 60 and above allowing for a 30-day
free look.
Florida-- Contract No. 2800 FL changes Form 2800 language on the cover page to
add "If you have a question, complaint or need information
concerning your contract, call 1-800-798-5500." Surrender Charge
description added to Data Page. Revises Section 1.7 without change
in meaning. Adds table of values per $1,000 allocated to a Guarantee
Period to Section 6.2.
Idaho-- Contract No. 2800 ID changes Form 2800 language to allow for a
20-day free look and the return of purchase payments during the
Right to Examine Period. First paragraph in Section 4.3 changed to
explain 20-day free look provision. Changes Section 7.6 interest
rate paid for deferral of payment of partial withdrawal and
surrenders as defined in Idaho Code.
Kansas-- Contract No. 2800 KS deletes nursing homes/terminal illness
paragraph from Section 7.4 of Form 2800.
Maryland-- Contract No. 2800 MD adds "Limited Participation as described
herein." Deletes "Fixed" from Form 2800 title on the cover page.
Deletes sentence saying, "we will refund any purchase payments
received by us required by state law" from the Right to Examine
provision. There are no Fixed Accounts, therefore, Section 7.5 from
Form 2800 regarding fixed accounts and Section 6 from Form 2800
regarding Guaranteed Interest Option have been deleted. Deleted all
references to Guaranteed Interest Option throughout the Form 2800
Contract.
<PAGE>
Massachusetts-- Contract Nos. 2800 SMA and UMA allowing for separate forms for
sex distinct and unisex. Also added Table of values to Section 6.2
in Form 2800. Tables were changed on data page and misstatement of
age and sex language was revised from Form 2800.
Michigan-- Contract Nos. 2800 U and 2800 S allowing for separate forms for sex
distinct and unisex. Tables were changed on data page and
misstatement of age and sex language was revised from Form 2800.
Montana-- Contract No. 2800 MT 0294 is unisex only. Revises misstatement of
age and sex, tables etc. and adds Section 1.2 "Does the Contract
Conform with Montana Statutes?" to Form 2800.
North Carolina--Contract No. 2800 NC deletes settlement options 1 & 2 from Form
2800.
North Dakota--Contract No. 2800 ND revises Form 2800 to allow for 20-day free
look in Section 4.3. Tables were changed on data page and
misstatement of age and sex language was revised from Form 2800.
Oklahoma-- Contract No. 2800 OK revises Form 2800 to allow the return of
purchase payments during the Right to Examine Period and revises
Section 4.3 "How Net Purchase Payments Will be Allocated" to
describe the Right to Examine Period provision.
Oregon-- Contract No. 2800 OR revises Form 2800 to delete "Fixed" from the
title on the cover page. There are no Fixed Accounts, therefore,
deletes Section 7.5 regarding Fixed Accounts. Deletes Section 6
regarding Guaranteed Interest Option and deletes all references to
Guaranteed Interest Option throughout the contract Form 2800.
Pennsylvania-- Contract No. 2800 PA changes Form 2800 to allow for issue ages
0-78; revised Free-Look. Revised Section 1.3 related to misstatement
of age and sex adding "to be equal to the amount the contract value
would have purchased based on correct age/sex." Revised Section 4.3
regarding how the initial purchase payment will be allocated.
Section 5.2(i) added: "If such change required endorsement of your
contract, we will notify you and the endorsement may then be either
accepted or rejected." Only one fixed account guarantee period with
no interest adjustment. Therefore, all language referring to the
interest adjustment is deleted, including Section 7.5.
South Carolina-- Contract No. 2800 SC changes Form 2800 by deleting "in the
absence of fraud" from Section 1.2 regarding "When will the contract
become incontestable. "Contract fee deducted from subaccounts only,
not fixed accounts. Revised free-look language to allow the return
of purchase payments and Section 4.3 to describe the return of
purchase payments during the Right to Examine Period.
Texas-- Contract No. 2800 TX revises Form 2800 to allow for a 6 year stepped
up death benefit in Section 8.3. Contract fee deducted from
subaccounts only, not fixed in Section 1.4. One fixed
account/guarantee period, with no interest adjustment. Therefore,
all language regarding interest adjustment deleted including Section
7.5. Section 11.2 "What Annuity Payment Options are Available?" adds
Option 3(d) "The rates for such period of years will be calculated
on an actuarially equivalent basis to those shown in Section 13.2.
<PAGE>
Utah-- Contract No. 2800 UT revises Form 2800 free-look language to allow
the return of purchase payments and Section 4.3 How Will the Net
Purchase Payments be Allocated" to describe the return of purchase
payments during the Right to Examine Period. One fixed
account/guarantee period with no interest adjustment. Therefore, all
language regarding interest adjustment deleted, including Section
7.5.
Virginia-- Contract No. 2800 VA revises Form 2800 to change interest adjustment
to "market value adjustment" throughout contract.
Washington--Contract No. 2800 WA deletes "Fixed" from the title on the cover
page of the Form 2800. There are no Fixed Accounts, therefore,
deletes Section 7.5 regarding Fixed Accounts, and Section 6,
Guaranteed Interest Option. All references to Guaranteed interest
Option removed throughout the contract.
West Virginia--Contract No. 2800 WV limits postponement of payment of partial
withdrawals and surrenders to 30 days in Section 7.6 of Form 2800.
Wisconsin-- Contract No. 2800 WI changes Form 2800 to allow one fixed
account/guarantee period with no interest adjustment. Therefore, all
language regarding interest adjustment deleted, including Section
7.5.
<PAGE>
EXHIBIT 5
VARIABLE ANNUITY APPLICATION
Credit Union No.
(Please Print Clearly)
1. ANNUITANT (OWNER) Sex: | | Male | |Female
Name SS No./Tax ID:
Address Date of Birth:
City State ZIP Daytime Phone ( )
2. CO-ANNUITANT (CO-OWNER Sex: | |Male | |Female
(Not available for QRP, IRA, SEP or 403(b) Plans)
Name SS No./Tax ID:
Address Date of Birth:
City State ZIP Daytime Phone ( )
3. OWNER Sex: | |Male | |Female
If Annuitant(s) are not also the Owner(s), then specify the Owner here.
Name SS No./Tax ID:
Address Date of Birth:
City State ZIP Daytime Phone ( )
4. BENEFICIARY (To list more beneficiaries, use Section 10.) Relationship to
Name Address Annuitant
Primary
Contingent
5. PLAN TYPE (Check the appropriate boxes.)
| | Non-qualified
Qualified: (Check the appropriate plan description.)
| | IRA | | SEP/IRA | | 403(b) | |Other
<PAGE>
6. HOME OFFICE USE ONLY
7. PURCHASE PAYMENTS Please make checks payable to Century Life of America.
Single/Initial Purchase Payment $
(Min. Total First Year: Non-qual. $5000, Qual. or 457 $2000, 403(b) $300)
Future Purchase Payments $
(Min.: $100 or $25 for Automatic & Salary Savings)
By:| |Check | |Automatic* | |Transfer | |Rollover
By:| |Mo. Automatic* | |Salary Savings
Year for which contribution applies
(If Qualified) | |Quarterly | |Semiannual | |Annual
The Initial Purchase Payment applied will be equal to the actual amount received
by Century Life of America.
*You must complete the Authorization on the back for Automatic Purchase Payment
Plans.
8. PURCHASE PAYMENT ALLOCATION %
(Whole %; Must total 100%; Minimum 10% per Subaccount or Guarantee Period.)
ALLOCATION % TO SUBACCOUNT(S) OF THE VARIABLE ACCOUNT:
% Cap. Appreciation Stock % Bond % International Stock
% Growth & Income Stock % Money Market % Other
% Balanced Account % World Governments % Other
ALLOCATION % TO GUARANTEE PERIOD(S) OF THE GUARANTEED INTEREST OPTION:
(NOTE-Min. amount is $1000)
% 1 Year % 3 Year % 5 Year % 7 Year % 10 Year
9. PRESERVATION PLUS PROGRAM | | I will participate in the Preservation Plus
Program. I hereby authorize Century Life of America to allocate a portion of
the initial purchase payment to the Year Guarantee Period. This portion will
be the present value reflecting the guaranteed interest rate as of the
contract issue date for the Guarantee Period indicated. The difference
between the initial purchase payment and the portion allocated to the
Guarantee Period will be allocated as indicated in Section 8.
10. Special Instructions
11. Will this contract replace or change any existing life insurance or annuity
in this or any other company? | |Yes | |No
If Yes:
What Company?
What Contract Number?
12. SUITABILITY Must be completed by Owner.
Annual Earnings Estimated Net Worth
<PAGE>
Occupation | | $ 25,000-$ 49,999 | | $ 25,000-$ 74,999
Employer | | $ 50,000-$ 99,999 | | $ 75,000-$124,999
Address | | $100,000-$199,999 | | $125,000-$249,999
City State ZIP | | $200,000 plus | | $250,000 plus
Other Inc. Other
Financial Objectives Please check one.
| | Preservation of Capital | | Income | | Long Term Growth
| | Maximum Capital Appreciation
Initial Source of Funds: Check all that apply.
| |CDs/Saving Acct. | |Investments | |Stocks/Bonds| |Sale of Personal Property
| |Current Income | |Policy Cash Value, Dividend or Loan | |Policy Surrender
| |Other
13. AGREEMENT
a. I hereby represent my answers to the above questions to be correct and
true to the best of my knowledge and belief and are made as a basis for
my application.
b. I understand that no agent is authorized to make, modify or discharge
any annuity contract provision or waive any of the Company's rights or
requirements.
c. I, the proposed owner(s), certify under penalties of perjury, that the
taxpayer identification number(s) shown under Sections 1 and 2, or under
Section 3 (if Owner is other than the Annuitant), is my correct taxpayer
identification number unless I have marked the box below:
| | I have been notified that I am subject to backup withholding
under Internal Revenue Section 3406(a)(1)(c) and the payor shall
withhold in accordance with withholding requirement imposed by law.
d. I ACKNOWLEDGE RECEIPT OF A CURRENT VARIABLE ANNUITY PROSPECTUS DATED .I
HEREBY REQUEST A STATEMENT OF ADDITIONAL INFORMATION | |YES | |NO
e. I UNDERSTAND THAT CONTRACT VALUES, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A VARIABLE ACCOUNT ARE VARIABLE AND NOT GUARANTEED AS TO A
FIXED DOLLAR AMOUNT.
f. I UNDERSTAND THAT AMOUNTS WITHDRAWN FROM THE GUARANTEED INTEREST OPTION
MAY BE ADJUSTED UPWARD OR DOWNWARD BASED ON AN INTEREST ADJUSTMENT
FORMULA.
Signature of Owner (if other than Proposed Annuitant) Date
Signature of Annuitant(s) Date
Witness or Agent Agent No. Date
<PAGE>
AGENT
To the best of your knowledge, will this contract replace or change any existing
life insurance or annuity in this or any other company? | | Yes | | No If yes,
have all required documents been completed in compliance with applicable state
regulations? | | Yes | | No
If no, explain in Section 10.
Agents Signature
AUTHORIZATION PLEASE ATTACH A BLANK VOIDED CHECK (For Checking and Share Draft
Accounts Only.)
Initial Payment:
| | I hereby authorize a debit entry to my financial institution account
indicated below to initiate the related credit entry to the Century Life of
America account in the amount of $ .
Future Payments:
| | I authorize Century Life of America and the financial institution named
below to initiate variable entries to my account. I elect to receive quarterly
statements for my variable annuity. This authorization will remain in effect
until revoked by me in writing. A monthly debit in the amount of $ will occur on
the first of the month, unless another draft date is checked:
| | 1 | | 5 | | 10 | |15 | |20 | |25
Dollars allocated to a subaccount will purchase units at the next computed
accumulation unit value. There is no additional charge for purchasing units
through the automatic purchase payment plan.
Financial Institution: Account Number:
Address:
If this is a saving account, are electronic debits allowed?
| | Yes | | No
Account Signature of Payor(s)
VARIABLE ANNUITY
OPTIONAL PROGRAMS
Instructions
The annuity owner may use this form to request services for a new or
existing annuity.
Check the appropriate box(es) and supply the information indicated. These
programs are described in more detail in the prospectus.
| | Automatic Personal Portfolio Rebalancing Service: Automatically rebalance
the assets within my annuity. (Complete sections 1, 2, and 6.)
| | Dollar Cost Averaging or Automatic Transfer Program: Automatically move
assets among investment choices. More information on the next page.
(Complete sections 1, 3, and 6.)
<PAGE>
| | Telephone/Fax Authorization. (Complete sections 1, 4, and 6.)
| | Systematic Withdrawal: To request systematic withdrawals from my annuity.
(Complete sections 1, 5, and 6.)
1. Contract Information
| | New Contract
| | Existing Contract No.
Name of Contract Owner
Name of Joint Owner (if applicable)
Social Security Number of Owner
Address
City State Zip
2. Rebalancing Service
| | Begin | | Modify | | Terminate
Frequency:
| | Monthly | | Quarterly | | Semiannually | | Annually
| | Transfer amounts in proportion to my purchase payment allocation schedule.
Use whole percentages - not less than 10%
Must equal 100%
Indicate how you would like assets allocated:
% Capital Appreciation Stock
% Growth and Income
% Balanced
% Bond
% World Governments
% International Stock
% Other
100% Total
<PAGE>
3. Dollar Cost Averaging or Automatic Transfer Program
Dollar Cost Averaging is simply the investing of equal dollar amounts at regular
intervals. This method of investing does not assure profit or protect against
loss in declining markets. Consider your financial ability to continue
purchasing at times when prices are low.
$5,000 minimum in Money Market Subaccount
Minimum transfer $100
| | Begin | | Modify | | Terminate
Transfer:
| | Fixed percent of %
| | Fixed dollar amount of $
| | Fixed number of units
| | Excess amount above a target remainder of $
Frequency:
| | Monthly | | Quarterly | | Semiannually | | Annually
Use whole percentages
Minimum of 10% or $100
Must equal 100%
Transfer to:
| | % Capital Appreciation Stock
| | % Growth and Income
| | % Balanced
| | % Bond
| | % World Governments
| | % International Stock
| | % Other
100% Total
4. Telephone/Fax Authorization
| | Check this box to authorize telephone/fax authorizations
I authorize Century Life of America (the Company) to act pursuant to my
telephone or fax instructions.
I authorize my CUNA Brokerage Services, Inc. representative (name) to call
the Home Office and perform transactions listed in the "By Phone" section
on the next page, based on my specific instructions for each transaction.
If the Company does not use reasonable procedures to determine that the
instructions are genuine, the Company is at risk for losses due to
unauthorized or fraudulent instructions. If the Company uses reasonable
<PAGE>
procedures and believes the instructions are genuine, I am at risk for
losses caused by someone giving unauthorized or fraudulent information to
the Company.
5. Systematic Withdrawal
Be sure to complete the Income Tax Withholding sections Owner must be at least
59 1/2
Frequency:
| | Monthly | | Quarterly | | Semiannually | | Annually
Options: (Select ONE)
| | Specified dollar amount
| | Specified number of accumulation units
| |Specified percent of variable contract value
| |Specified target remainder of variable contract value
$5,000 minimum contract value in subaccount chosen
Each withdrawal must be at least $100
Complete the appropriate section below to reflect the option you selected.
Dollar No. Of Per- Target
Amount Units centage Remain.
Capital Apprec. Stock $ %
Growth and Income $ %
Balanced $ %
Bond $ %
Money Market $ %
International Stock $ %
World Governments $ %
Begin on and terminate on
For Substantially Equal Payments use Form CLS-230 (VANN).
INCOME TAX WITHHOLDING AUTHORIZATION
WAIVING THE TERMINATION OF THE SYSTEMATIC WITHDRAWAL PLAN WHEN SURRENDER CHARGES
ARE ASSESSED
The Systematic Withdrawal Plan is scheduled to automatically terminate if
surrender charges would ever be applicable to an amount withdrawn. By marking
the section below, I am waiving this automatic termination.
| | I authorize Century Companies of America to continue my Systematic
Withdrawal Plan even if surrender charges may be deducted. If I elect the
specified dollar amount option, my contract value will be reduced by my
specified dollar amount plus any applicable surrender charges. If I elect
<PAGE>
the specified number of units, specified percentage, or specified target
remainder options, my check will be reduced by any surrender charge
amount.
INCOME TAX WITHHOLDING
I understand that:
1. The distributions or withdrawals I am to receive may be subject to Federal
income tax withholding (and State income tax in some states) unless I
elect not to have withholding apply. Withholding will only apply to the
taxable portion of my distribution or withdrawal.
2. If I elect not to have withholding apply or if I do not have enough
Federal income tax withheld, I may be responsible for payment of estimated
tax. I may incur penalties under the estimated tax rules if my withholding
and estimated tax payments are not sufficient.
3. If the election section below is not completed, the Company will
automatically withhold.
ELECTION
Please check the appropriate box. (If this is a Tax Sheltered Annuity, a
mandatory 20% Federal withholding is required. In addition, the 20%
Withholding Distribution Notice, Form CLS-180, must be completed.)
| | I do not want to have Federal or State income tax withheld from this
disbursement.
| | Withhold the amount as provided in the Federal and State withholding
guidelines. My check amount will be reduced by any withholding
amount.
4. My election will remain in effect until I revoke it by completing a new
Withholding Election form.
TAXPAYOR IDENTIFICATION NUMBER CERTIFICATION
Under penalties of perjury, I certify that the taxpayer identification number
shown below is my correct taxpayoer identification number and that I am not
subject to backup withholding unless I have marked the following box:
| | I have been notified that I am subject to backup withholding under the
Internal Revenue Code Section 3406(a)(1)(c) and the payor shall withhold in
accordance with withholding requirements imposed by law.
Taxpayor Identification/Social Security No.
Birth Date Date
6. Signatures
Signature of Owner
<PAGE>
Signature of Co-owner(s) (if any)
Signature of Irrevocable Beneficiary(s) (if any)
Daytime Phone Number
Date
<PAGE>
FLEXIBLE PREMIUM
DEFERRED VARIABLE AND FIXED ANNUITY
IRA ENDORSEMENT
Policy No. Endorsement Effective Date
Owner City & State
The contract is to be qualified as an Individual Retirement Annuity under
Section Section 408 of the Internal Revenue Code (Code). The terms and
conditions listed below will then form a part of the owner~s contract effective
as of the date listed above. In any conflict between the terms of this Section
and all or any of the other Sections of the contract, this Section will govern.
INDIVIDUAL RETIREMENT ANNUITY
EXCLUSIVITY, NONFORFEITABLE, NONTRANSFERABLE AND NONASSIGNABLE
The contract is for the exclusive benefit of the owner or his or her
beneficiaries. The interest of the owner is nonforfeitable. The owner must be
the annuitant. A co-owner may not be designated. This contract is not
transferable except to the Company on surrender or settlement. It may not be
pledged as security for any purpose.
PURCHASE PAYMENTS
A. Maximum Payment. The maximum payment under this contract for any tax year
will be no more than the lesser of:
1.$2,000 as an aggregate amount of the purchase payments for this contract
and contributions to all other individual retirement arrangements that the
undersigned has or may create; or
2. 100 percent of compensation. Compensation means wages, salaries,
professional fees, or other amounts derived from or received for personal
service actually rendered (including, but not limited to, commissions paid
sales personnel, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips and bonuses) and includes
earned income, as defined in Code Section 401(c)(2) (reduced by the
deduction the self employed individual takes for contributions made to a
Keogh plan). For purposes of this definition, Section 401(c)(2) will be
applied as if the term trade or business for purposes of Section1402
included service described in subsection (c)(6). Compensation does not
include amounts derived from or received as earnings or profits from
property (including, but not limited to, interest and dividends) or
amounts not includible in gross income. Compensation also does not include
any amount received as a pension or annuity or as deferred compensation.
The term "compensation" shall include any amount includible in the
individual's gross income under Code Section71 with respect to a divorce
or separation instrument described in subparagraph (A) of Code
Section71(b)(2).
3. The above maximum purchase payment limitations do not apply to:
a. a transfer, direct rollover, rollover contributions as permitted by
Code Section402(c), 403(a)(4), 403(b)(8) or 408(d)(3); or
b. a transfer to the owner of a distribution from a qualified employer
plan from a former spouse under a divorce decree or written instrument
incidental to such divorce.
<PAGE>
B. SEP Contributions. The above maximum payment limitations do not apply to a
contribution made in accordance with the terms of a Simplified Employee
Pension Plan (SEP) as described in Code Section408(k) as amended.
C. Refund of Excess Contributions. If the purchase payment received is in excess
of the maximum payment: (1) the excess amount is subject to an excise tax for
the year of the excess and for each year thereafter until corrected; or (2)
the owner may receive a refund of the excess amount plus any investment gain
resulting from allocation to the subaccount(s). Any investment loss resulting
from the allocation of the excess amount to the subaccount(s) will be
deducted proportionately from the remaining subaccount value(s) and guarantee
amount(s).
D. Refund of Premiums. 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 future premiums or
the purchase of additional benefits.
E. Payment. Payment under this contract must be in cash.
DISTRIBUTIONS.
A. Premature Distributions. Any distribution will be reported to the IRS as a
premature distribution and may be subject to an excise tax in addition to
income tax unless the Company is notified of one of the following
circumstances:
1. the distribution is a part of a series of substantially equal periodic
payments made no less frequently than annually over the life expectancy of
the owner or joint life expectancies of the owner and the named
beneficiary(ies);
2. the owner is over age 59 1/2;
3. distribution occurs following the disability (within the meaning of
Section72(m)(7) of the Code) of the owner; or
4. the distribution to the beneficiary(ies) occurs following the death of the
owner.
B. Payments to Owner. Payments of the owner's entire interest will be made to
the owner under this contract on or before April 1 of the year following the
calendar year in which the owner attains the age of 70 1/2 as follows:
1. as a single lump sum;
2. in equal or substantially equal payments: over the lifetime of the owner;
over the lives of the owner and his or her beneficiary(ies); over a
specified period that may not be longer than the owner's life expectancy;
or over a specified period that may not be longer than the joint life and
last survivor expectancy of the owner and his or her named
beneficiary(ies). Periodic payments must be made in intervals of no longer
<PAGE>
than one year. In addition, payments must be either nonincreasing or they
may increase only as provided in Q&A F-3 of Section1.401(a)(9)-1 of the
Proposed Income Tax Regulations.
All distributions made hereunder will be made in accordance with the
requirement of Section401(a)(9) of the Code including: incidental death
benefit requirements of Section401(a)(9)(G) of the Code, and the
regulations thereunder; and the minimum distribution incidental benefit
requirement of Section1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
C. Payments to Beneficiary(ies). If the owner dies, payments will be distributed
as follows:
1. If death occurs on or after the date annuity payments have begun; the
remaining payments will be distributed at least as rapidly as under the
payment method used prior to death.
2. If the death occurs before annuity payments have begun; the death benefit
must be distributed as elected. However, if an election has not been made;
the beneficiary(ies) has the following options for distribution:
a. the full amount to be paid by December 31st of the year containing the
fifth anniversary of the owner's death; or
b. in equal or substantially equal payments over the life or life expectancy
of the beneficiary(ies). Such payments must start by December 31st of the
year following the owner's death. However, for a spouse beneficiary,
payments are not required to begin until December 31st of the year the
owner would have turned 70 1/2. A spouse beneficiary may also roll all or
a portion of the death benefit to their own individual retirement annuity.
3. If the designated beneficiary is the individual's surviving spouse, the
spouse may treat the contract as his or her own IRA. This election will be
deemed to have been made if such surviving spouse makes a regular IRA
contribution to the contract, makes a rollover to or from such contract, or
fails to elect any of the above provisions.
Payment under this Section is considered to have begun if payments are made
because:
1. an individual reaches his or her required beginning date; or
2. if prior to the required beginning date; payments have begun under an
irrevocable annuity payment option acceptable under and over a period
permitted by Section1.401(a)(9) of the Regulations.
D. Other Distribution Provisions.
1. The return multiples contained in Tables V and VI of 1.72-9 of the Income
Tax Regulations are used to calculate: Life expectancy; and joint and last
survivor expectancy.
The life expectancy of the owner or spouse beneficiary will be recalculated
annually for the purposes of payment, unless otherwise elected by: the
owner, prior to payments beginning; or by the spouse beneficiary, if the
owner dies before payments have begun.
<PAGE>
If election has been made not to recalculate life expectancy annually; such
election is irrevocable and will apply to all subsequent years.
The life expectancy of a non-spouse beneficiary(ies) may not be
recalculated. Instead, life expectancy will be based on the age(s) of the
beneficiary(ies) in the year the owner attains age 70 1/2. Payments for
subsequent years will be based on such life expectancy; reduced by one for
each year which has elapsed since the calendar year life expectancy was
first calculated.
2. The payment amounts will be no less than the amount obtained by dividing the
owner's entire interest by: the life expectancy of the owner or beneficiary;
or the joint and last survivor expectancy of the owner and spouse
beneficiary.
3. For a non-spouse beneficiary; the payment amount must be no less than the
amount obtained by dividing the owner's entire interest by the lesser of:
the owner's life expectancy; or a divisor obtained from the tables available
in Section1.401(a)(9)b2.
4. The beneficiary(ies) may increase the frequency or amount of payments; if
the payments are for a period certain.
5. If there are two or more individual retirement accounts or annuities
(IRA's); minimum distribution requirements of the Code may be satisfied out
of one of the IRA's. This is possible by receiving the combined required
minimum distribution amounts out of one IRA. This is the alternative method
described in Notice 88-38, 1988-1 C.B. 524.
GENERAL PROVISIONS.
A. Other Limitations.
1. No amount of life insurance is provided under this contract.
2. Commingling of funds of this contract with any other annuity is
prohibited.
3. The only values which may be held under this contract are those for the
separate interest of the owner.
4. Purchase Payments for this contract will not be invested in
collectibles.
B. Minimum Purchase Payments. The minimum initial purchase payment is $2,000.
Additional purchase payments are not required. The minimum amount for any
subsequent payment is $1000 or $25 per month by Automatic Purchase Payment
Plan.
C. Reinstatement of Policy and Termination. If premium payments are
interrupted, the policy will be reinstated at any date prior to maturity
upon payment of a premium to the Company. The amount required for
reinstatement shall not be more than $50. The Company may choose whether to
accept future payments or to terminate the policy if:
1. no premiums have been received for two full consecutive policy years;
and
2. the paid-up annuity benefit at maturity would be less than $20 per
month.
<PAGE>
The Company may terminate the policy by paying, in cash, the then present
value of the paid-up benefits.
D. Endorsements. The contract, including this Endorsement, will be amended as
required by changes in: the Code; IRS Regulation; or published revenue
rulings. The Company will promptly furnish any endorsements which are
required to comply with such changes. Upon receipt of such endorsement, the
owner has thirty (30) days in which to contact the Company to reject the
endorsement. If the thirty (30) days elapse and the Company has not been
contacted, the endorsement is deemed accepted. Because this contract is
established with the intent to comply with federal regulation, rejection
will be deemed a request to remove this endorsement and will result in a
taxable event.
E. Reporting. The Company is required to report contributions and distributions
from this contract to the IRS and, in some cases, to withhold certain
amounts from taxable distributions. The Company will furnish an annual
report summarizing total contributions and distributions under this
contract.
F. Disclosure. The Company will furnish a disclosure statement describing IRA's
when the contract is delivered or endorsed.
G. Enabling Agreement. The undersigned hereby agrees to the terms of this
Section and requests that this Endorsement be attached to the contract. The
matters which the undersigned agrees to and accepts responsibility for in
the contract (including the Application and this Endorsement) will not be
the responsibility of Century Life of America (the Company). The Company
will not be liable for any direct or indirect damage or loss, including
(without limitation) taxes suffered or incurred by the undersigned or
beneficiary(ies) as a result of those matters.
Unless such damage or loss is caused by willful or negligent act or omission
of the Company in violation of the contract or applicable law, the Company
will not be liable for any direct or indirect damage or loss. This includes
(without limitation) taxes suffered or incurred by the undersigned when the
Company:
1. acts in accordance with or reliance upon any information furnished by the
undersigned or the beneficiary(ies);
2. is required to act without the benefit of information which the undersigned
is required to provide under the provisions of the contract or by law; or
3. administers any other matters arising under or relating to the contract.
Signature Date
Owner
Signature Date
Witness
CENTURY LIFE OF AMERICA
A Mutual Insurance Company
Barbara L. Secor
Secretary
<PAGE>
TELEPHONE AND FAX AUTHORIZATION INFORMATION
Below is a list of transactions that can be performed by phone and by fax.
By Phone - I authorize the Company to accept telephone instructions from me.
Transferring amounts to and from the Subaccounts of the Separate Account
and to or from the General Account. A request received prior to 3:00 p.m.
Central Standard Time will be processed the day the request is received.
Requests received after that time will be processed the following Valuation
Day.
Beginning, modifying, or terminating the Dollar Cost Averaging Program(DCA).
Beginning, modifying, or terminating the Automatic Transfer Program(ATP).
Beginning, modifying, or terminating the Automatic Personal Portfolio
Rebalancing Service. (APPRS)
Changing the Automatic Payment Plan by changing the bill day, changing the
amount, or stopping the draft.
By Fax - I authorize the Company to accept fax (facsimile) instructions on a
form prepared by the Company or on a document acceptable to the Company for all
the following programs available under my policy:
All transactions listed in the "By Phone" section above. Taking out a loan
for an amount not more than $5,000. Making a partial withdrawal for an
amount not more than $5,000.
Terminating this authorization.
RECEIPT
Received from this day of , 19,
in the amount of $ to be applied on the Variable
Annuity
application dated this same date.
Agents Full Name Address of Agent
All checks must be made payable to:
Century Life of America
2000 Heritage Way, Waverly, Iowa 50677
<PAGE>
Flexible Premium Deferred Variable and Fixed Annuity Application
State Variations
Application Form No. 1676 attached as Exhibit 5 is a copy of the Application
language used in the following states:
Alabama Maine
Arkansas Massachusetts
California Mississippi
Colorado Missouri
Connecticut Nebraska
Delaware New Mexico
Hawaii North Dakota
Illinois Rhode Island
Indiana South Dakota
Iowa Tennessee
Kansas Vermont
Louisiana West Virginia
Wyoming
The following application forms vary from the Form No. 1676 as indicated below:
Application Form No. 1676 AZ Section 13 added, "Upon written request, we will
provide the owner with information regarding benefits and provisions of the
contract. If you decide not to keep your contract, return it within 10 days
after you receive it for a refund of purchase payments, adjusted for any
investment gain or loss if allocated to the Subaccount(s) of the Variable
Account. You may return it to Century Life of America, 2000 Heritage Way,
Waverly, Iowa 50677, or to the agent who sold it to you." Form 1676 AZ language
is used in the following states:
Arizona
Application Form No. 1676 FL changes Section 13(e) to "I understand that
contract value placed in the subaccounts of the variable account will increase
or decreased based on the investment experience of the subaccount(s) selected;
adds agent license no line next to the witness or agent line. Form 1676 FL
language is used in the following states:
Florida
Application Form No. 1676(B) adds to Section 8 "the portion of the initial
Purchase Payment allocated to the subaccount(s) of the variable account will be
allocated to the Money Market subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above." Form 1676(B) language is
used in the following states:
Georgia
Idaho
Michigan
Nevada
North Carolina
South Carolina
<PAGE>
Application Form No. 1676 KY adds to Section 13 "(g) - fraud statement". Also
changed signature lines to include: signed at: (city & state), on (date). Form
1676 KY language is used in the following states:
Kentucky
Application Form No. 1676(F) deletes from Section 8 the allocation percentage to
subaccount(s) of the variable account. Section 9, Preservation Plus Program is
deleted in its entirety. Section 12, Agreement Section deleted (f), "I
understand that amounts withdrawn from the guaranteed interest option may be
adjusted upward or downward based on an interest adjustment formula. Form
1676(F) language is used in the following states:
Maryland
Oregon
Application Form No. 1676 MN deletes subsection (c) from Section 13 related to
taxpayer identification. Application Form No. 1676 MN language is used in the
following states:
Minnesota
Application Form No. 1676 MT0294 adds a date in the form number. Application
Form No. 1676 MT0294 language is used in the following states:
Montana
Application Form No. 1676(D) includes only one year guarantee period percentage
allocation in Section 8. Section 13, Agreement (f) is deleted - "I understand
that amounts withdrawn from the guarantee interest option may be adjusted upward
or downward based on an interest adjustment formula." Application Form No.
1676(D) language is used in the following states:
Pennsylvania
Texas
Wisconsin
<PAGE>
Application Form No. 1676(C) adds (g) fraud clause to Section 13, Agreement.
Application 1676(C) language is used in the following states:
Ohio
Application Form No. 1676 OK adds to Section 8 "The portion of the initial
Purchase Payment allocated to the Money Market Subaccount(s) of the Variable
Account will be allocated to the Money market Subaccount for the first 20 days
of your contract. After 20 days, it will be allocated as shown above. Question
13 adds fraud statement. Application Form No. 1676 OK language is used in the
following states:
Oklahoma
Application Form No. 1676(E) adds to Section 8 "The portion of the Initial
Purchase Payment allocated to Subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above. Also, only 1 year guarantee
period % allocation. Section 13, Agreement, (f) is deleted "I understand that
amounts withdrawn from the guaranteed interest option may be adjusted upward or
downward based on an interest adjustment formula." Application Form No. 1676(E)
language is used in the following states:
Utah
Application Form No. 1676 VA changes Section 13, Agreement (f) "interest
adjustment" to "market Value". Application Form No. 1676 VA language is used in
the following states:
Virginia
Application Form No. 1676(G) adds to Section 8 "The portion of the initial
Purchase Payment allocated to the subaccount(s) of the Variable Account will be
allocated to the Money Market Subaccount for the first 20 days of your contract.
After 20 days, it will be allocated as shown above. Application Form No. 1676(G)
language is used in the following states:
Washington
<PAGE>
EXHIBIT 6
April 2, 1992
Corp. No.: 000069607 IOWA
Ref. No.: 55170
SECRETARY OF STATE
CENTURY LIFE OF AMERICA
ATTN; SHERRY BUTTJER
CENTURY LIVE OF AMERICA
2000 HERITAGE WAY
WAVERLY IOWA 50677
CERTIFICATE OF EXISTENCE
Name CENTURY LIFE OF AMERICA
Date 03/03/1896
I, ELAINE BAXTER, secretary of state of the state of IOWA, cusodian of the
records of incorporations, certify that the corporation named on this
certificate is in existence and was duly incorporated under the laws of Iowa on
the date printed above, with perpetual duration, and that articles of
dissolution have not been filed.
/s/ELAINE BAXTER
ELAINE BAXTER
<PAGE>
Century Life of America
Waverly, Iowa
ARTICLES OF INCORPORATION
ARTICLE I
Name and Principal Office
Section 1. The name of this Corporation is Century Life of America (hereinafter
sometimes called the Company).
Section 2. The home office and principal place of business of the Company shall
be located in Bremer County, Iowa.
ARTICLE II
Nature of Business, Objects and Powers
Section 1. The general nature and purpose of the business of this Corporation
shall be that of engaging in, pursuing, maintaining and transacting on the
mutual plan as a legal reserve or level premium company,
(a) a general life and health and accident insurance business and
an annuity business, including all forms of life insurance,
endowments, annuities, accident insurance, disability and
health insurance, all relating to the life and health of
persons, and,
(b) any other type of insurance business which the Company may be
authorized and duly qualified to underwrite and transact under
and by virtue of Iowa Insurance Laws,
and in addition, engaging in, pursuing, maintaining and transacting any other
related or unrelated business which any corporation now or hereafter authorized
and empowered to do an insurance business in this State may now or hereafter
lawfully do, whether or not it be complementary, necessary, or incidental to the
business of writing insurance and otherwise transacting the business of an
insurer.
Section 2. More specifically, and without limitation as to any other right,
power, privilege, franchise, or authority which the corporation may be permitted
under the law of the state of Iowa, and in pursuance of the aforesaid corporate
purposes, the Company in its corporate or assumed name is empowered:
to sue, complain and defend; to have a corporate seal which may be
altered at pleasure, and to use the same by causing it, or a facsimile
thereof to be impressed or affixed or in any other manner reproduced;
to design, create, develop, offer, solicit, sell, write, underwrite,
insure, coinsure, reinsure, administer, settle and otherwise deal in
and with insurance policies and annuity contracts of all types whether
on a participating or nonparticipating basis, and on an individual or
group or blanket basis, providing for benefits on either a fixed or
variable basis; to enter into any lawful contract for the purpose of
ceding or accepting insurance risks, directly or indirectly, either
entirely in its own right or in a shared or multiple capacity with
other insurers; to enter into collateral or supplementary contracts and
otherwise deal contractually with respect to insurance policies or
annuity contracts or the proceeds of same; to act as trustee or advisor
in any capacity, and to offer all services, including those of a
financial, accounting, or data processing nature, directly or
indirectly, incidental to its business, and to form or otherwise
acquire other insurance or business corporations as subsidiaries, and
to invest in, and to establish or manage, one or more investment
companies; to purchase, take, receive, lease, or otherwise acquire,
own, hold, improve, use, or otherwise deal in and with real or personal
property of any kind and description, or any interest therein, wherever
situated; to sell, convey, mortgage, pledge, lease, exchange, transfer
and otherwise dispose of all or any part of its property and assets; to
compensate, or lend money to and otherwise to assist its employees,
agents, officers, and Directors; to purchase, take, receive, subscribe
for, or otherwise acquire, hold, vote, use, employ, sell, mortgage,
lend, pledge, or otherwise dispose of and otherwise use and deal in and
with, shares or other interests in, or obligations of, other domestic
or foreign corporations, associations, partnerships, joint ventures or
individuals, or direct or indirect obligations of the United States or
of any other government, state, territory, governmental district or
municipality, public or quasi-public corporation, or of any
instrumentality thereof; to make contracts and guarantees and incur
liabilities; to lend and borrow money and incur debts for its corporate
purposes; to invest and reinvest its funds, and take and hold real and
personal property as security for the payment of funds so loaned or
invested; to acquire or organize subsidiaries; to conduct its business,
carry on its operations, and have offices and exercise its powers under
authority granted in any state, territory, district, or possession of
the United States or in any foreign country; to make donations for
religious, charitable, scientific or educational purposes; to pay
pensions and establish pension plans, pension trusts, profit-sharing
plans and other incentive, insurance and welfare plans for any or all
of its Directors, officers, agents and employees, policyowners,
insurance policy or contract beneficiaries, or clients; to enter into
general partnerships, limited partnerships, whether the company be a
<PAGE>
limited or general partner, joint ventures, syndicates, pools,
associations and other arrangements in pursuance of any or all of the
purposes for which the Company is organized; to indemnify officers,
Directors, employees and agents, possessing all the rights and powers
with respect thereto permitted to Iowa business corporations as
specified in Subsection 19 of Section 496A.4 of the Iowa Business
Corporation Act and all acts amendatory thereof or additional thereto;
and to engage in and carry on any other type of business which any
corporation now or hereafter authorized and empowered to do an
insurance business in the state of Iowa may now or hereafter lawfully
do,
and it shall have and exercise all powers, rights and privileges necessary or
convenient to effect any or all of the purposes for which the Company is
organized, and generally such additional powers not herein specified as are now
or may hereafter be conferred upon corporations similar to this Company by the
laws of the state of Iowa.
ARTICLE III
Continuation of Corporate Entity
This Corporation shall have no capital stock and is a continuation of the
original corporation doing business on the mutual plan, retaining all of its
original rights, powers, privileges, immunities, and franchises. All of the
contract rights of policyowners of the Company now holding contracts of
insurance or of annuity issued or assumed by the Company are and shall be
retained. Subject to the foregoing, these Articles shall be construed as a
substitute for all prior articles and amendments thereto.
ARTICLE IV
Period of Existence
This Corporation, as renewed, shall have perpetual existence.
ARTICLE V
Exemption from Corporate Debts
The private property of the Members of the Company shall in no case be liable
for corporate debts, but shall be exempt therefrom.
ARTICLE VI
Members
Section 1. Each person who owns one or more life insurance policies, health and
accident insurance policies, or annuity contracts issued by the Company shall be
a Member of the Company, but only so long as at least one of said policies or
contracts remains in full force and effect and has not been surrendered or has
not expired or has not matured by death of the insured or annuitant, or
attainment of maturity date. In the case of multiple ownership of any insurance
policy or annuity contract, the persons owning such policy or contract shall be
deemed collectively to be the Member and the Bylaws may establish procedures for
the exercise of the voting right of such Member.
Section 2. Only those Members who meet such eligibility requirements, as may be
established by law, by these Articles, and the Bylaws as may be amended from
time to time, shall be Voting Members, provided however, that nothing herein
contained, and no Bylaws establishing additional eligibility requirements for
Voting Members shall have the effect of terminating a person's then existing
membership or voting right.
ARTICLE VII
Members Meetings
Section 1. Voting Members shall be entitled to vote in person or by proxy at any
meeting of the Members in accordance with procedures prescribed in the Bylaws.
Section 2. Unless the Board directs otherwise, the annual meeting of the Company
shall be held at the Company's home office and principal place of business on
the second Wednesday of May of each year for the election of Directors, and for
the transaction of any other business properly coming before such annual
meeting.
Section 3. Annual and all special meetings of the Members shall be called or
held as provided in the Bylaws. The Company may make reasonable expenditures in
support of a position or issue at any meeting, or in support of any or all
candidates to be nominated for election to the Board.
ARTICLE VIII
Board of Directors and Officers
Section 1. The corporate powers and business of the Company shall be directed
and controlled by a Board of Directors and by such officers and agents as the
Board of Directors may authorize, elect or appoint.
Section 2. The Board of Directors shall consist of not less than nine (9) nor
more than twenty-one (21) Members as prescribed from time to time in the Bylaws,
and shall be divided into classes, as nearly equal numerically as possible, so
that the terms of one class expire each year. The number of Directors so
<PAGE>
prescribed may not be changed by more than one (1) in any calendar year. Each
Director shall serve a term of approximately three (3) years except as otherwise
provided in the Bylaws, or except where it is necessary to fix a shorter term in
order to preserve classification. The Board of Directors shall have the power to
fill any vacancy in its number occurring for any reason at any time except where
such vacancy occurs due to the expiration of a Director's term of office as
provided herein or in the Bylaws.
Section 3. The Board of Directors shall have the power to adopt such bylaws,
rules and regulations for the transaction of business of the Company as are not
inconsistent with these Articles, or the laws of the state of Iowa, and to amend
or repeal such bylaws, rules and regulations. The Bylaws shall provide for the
election of Directors and establish procedures to accomplish the same.
Section 4. A Director of this Company shall not be personally liable to the
Company or its Members for monetary damages for breach of fiduciary duty as a
Director, except for liability (i) for any breach of the Director's duty of
loyalty to the Company or its Members, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, or
(iii) for any transaction from which the Director derived an improper personal
benefit.
ARTICLE IX
Change of Articles
These Articles of Incorporation may be amended, substituted or changed at any
annual meeting of the Members, or at any special meeting called for that purpose
as hereinafter provided. The proposed substitution or amendment must be offered
in writing, and either signed by not less than one (1) percent of the Voting
Members, or offered by the Board of Directors.
Such proposed substitution or amendment when offered by a Member
(a) must contain the actual signatures as well as the printed
names and addresses of those Members subscribing
to the proposal,
(b) must have the notarized certification of the offering Member
authenticating the signatures of the other subscribing
Members, and
(c) must be filed with the Secretary of the Company at least
ninety (90) days prior to said annual or special meeting.
Such proposed substitution or amendment when offered by the Board of Directors
must be first adopted by two-thirds (2/3) of the total Board membership at a
regular meeting or at a special meeting called for such purpose, or it must be
approved by the unanimous written consent of all of the Directors, certified by
the Secretary, and filed at least thirty (30) days prior to said annual or
special meeting of the Members.
The Secretary shall furnish to each Voting Member a copy of such substitution or
amendment whether proposed by the Board or by Members together with a ballot
containing a suitable space wherein a Voting Member may vote for or against the
same, and a space for the Voting Member's signature and the date of the meeting.
Such material shall be mailed in the United States mail, addressed to the Voting
Members of the Company, or substantially all of them, at their last known post
office addresses, as the same then appear on the records of the Company, not
less than twenty (20) nor more than ninety (90) days prior to the date of the
meeting. The Board of Directors or persons designated by it may make such
statements or recommendations as it sees fit on all matters to be presented to
the Members. All substitutions or amendments when adopted by a majority of
Members voting thereon in person or by duly signed ballot shall be binding upon
all Members and they shall be governed thereby.
Amended and Restated May 11, 1977
Amended effective December 28, 1984
[Name change: Lutheran Mutual Life Insurance Company to
Century Life of America]
Amended effective May 13, 1988
[Article VIII, add Section 4]
<PAGE>
FILED FOR RECORD STATE OF IOWA, BREMER COUNTY:
Doc. No.
July 27, 1988 AT 11:00 AM /s/ Jackie Juke, Recorder
19882099 Jackie Juke
Recording $15.00 Transfer $ By /s/ Donna Ellison, Deputy
Donna Ellison
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
CENTURY LIFE OF AMERICA
The undersigneds hereby certify:
1. That they are Senior Vice President - Finance and Information
Services and Secretary, respectively, of Century Life of
America, an Iowa corporation, organized and doing business as
a mutual life insurance company under and by virtue of
Chapters 491 and 508, respectively, of the 1987 Code of Iowa
as amended;
2. That in accordance with the provisions of Section 491.20 of
Chapter 491 and the Company's own Articles of Incorporation as
previously amended and restated on May 11, 1977, the Board of
Directors, at their meeting held on November 20, 1987, with a
quorum present, by resolution, adopted a proposal to amend the
Company's Articles of Incorporation and directed that said
proposal be submitted to the voting membership for action by
ballot and adoption at the annual meeting of the members to be
held on May 13, 1988; and
3. That the aforesaid proposal to amend the company's Articles of
Incorporation by adding to Article VIII, immediately following
Section 3, a new section which reads as follows:
Section 4. A Director of this Company shall not be
personally liable to the Company or its Members for
monetary damages for breach of fiduciary duty as a
Director, except for liability (i) for any breach of the
Director's duty of loyalty to the Company or its
Members, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing
violation of law, or (iii) for any transaction from
which the Director derived an improper personal benefit.
was in fact mailed to all voting members on a date not less
than 30 days nor more than 90 days prior to the annual
meeting, together with a ballot for use by each voting member
to whom it was addressed, all in accordance with the
applicable provisions of the Company's Articles o
Incorporation and of the corporation and insurance laws of the
sate of Iowa; and
4. That the aforesaid amendment was duly adopted by the voting
membership by a vote of 3,794 votes in favor of the amendment
and 752 votes against the amendment duly perfected on the
record at the annual meeting of the voting membership held on
May 13, 1988, with a quorum present and in accordance with all
applicable Bylaw provisions; and
5. That the aforesaid amendment has caused no changes in the
Company's assets, liabilities, contractual or other
obligations, and no changes in its powers, purposes, nature,
character, or existence as a corporate entity, and no other
changes of any kind in the Company's Articles of Incorporation
have been made, so that with the exception of:
a. the aforesaid amendment as just described; and
<PAGE>
b. the amendment adopted by the voting members to change
the Company name at their special meeting duly called
and held on September 13, 1984, which became effective
at exactly 11:59 p.m. Central Standard Time on Friday,
December 28, 1984,
the amended and substituted Articles of incorporation as
adopted on May 11, 1977, remain in all other respects in full
force and effect; and
6. That the amendment as adopted on May 13, 1988, shall become
effective immediately upon its perfection by approval of the
Commissioner of Insurance and the Attorney General for the
Sate of Iowa in accordance with Chapter 508 of the Iowa
insurance laws, and upon notice by publication and the filing
of this Certificate with the Recorder in Bremer County as
required under Section 491.20 of the 1987 Iowa Code as
amended.
IN WITNESS WHEREOF, the undersigneds have executed this Certificate of Amendment
on the 9th day of June, 1988, under the seal of the Corporation.
CENTURY LIFE OF AMERICA
/s/ Daniel E. Meylink
Daniel E. Meylink Sr., FSA, MAAA
Senior Vice President -
Finance & Information Services
/s/ Arthur J. Hessburg
Arthur J. Hessburg, Secretary
<PAGE>
Century Life of America
Waverly, Iowa
Restated
BYLAWS
ARTICLE I
Definitions
Section 1.1. Terms. When used in these Bylaws, the terms hereinafter provided
shall have the meanings assigned to them unless another meaning is explicitly
indicated:
(a) Member: shall mean a Member of this Company as defined and described in
the Company's Articles.
(b) Policy: shall mean a life insurance policy, accident and health policy,
or annuity contract on an individual or group basis and shall not
include group insurance certificates, settlement contracts, depositary
contracts, or certificates of any kind issued for the purpose of
managing or holding insurance or annuity contract proceeds when a life
policy, accident and health policy, or annuity contract terminates,
expires or otherwise matures by reason of death, surrender or maturity
in its ordinary course, or otherwise.
(c) Record Date: shall mean the last business day of any month immediately
preceding the date of any event or transaction for which it may be
useful or relevant to establish the identity of persons who are Members
or Voting Members, from data contained in the Company's records.
(d) Voting Member: shall mean a Member who meets all of the eligibility
requirements for voting as provided in Section 2.1.
ARTICLE II
Voting Rights of Members
Section 2.1. Eligibility to Vote. Only those Members who have attained age
sixteen (16) on or prior to the Record Date for any meeting shall be eligible to
vote at Members' Meetings. In the case of multiple ownership of any Policy, the
persons designated owners or co-owners on the Company's records as of such
Record Date shall be deemed collectively to be the Voting Member and shall
designate one of their number to cast their vote. In the case where ownership is
claimed by right of assignment, the assignee, if shown on the Company's records
to be the owner as of such Record Date, shall be deemed the Voting Member. In
the case of group policies, the holder of the master policy, and not those
persons holding certificates under the master policy, shall be deemed the Voting
Member.
Section 2.2. Exercise of Voting Rights. Each Voting Member shall be entitled to
cast one (1) vote on each matter to come before a meeting of the Members, either
in person or through an attorney-in-fact designated in a written proxy which
meets the requirements of Section 2.4, regardless of the number of policies or
the amount of insurance or the number of lives insured under any Policy or
Policies owned or controlled by the Voting Member. Except when electing
Directors, voting by Members at any regular or special meeting of the Members
may be by voice vote unless the vote is not all "yea" or "nay" in which case the
vote shall be by written ballot. Each ballot may contain more than one question
or proposition. Any attorney-in-fact holding the voting power of more than one
Member may cast all such votes on one ballot, provided that the ballot shows on
its face the number of votes being cast, and provided it is verified by the
Voting Inspectors as having been cast in accordance with the voting rights
acquired by proxy from the persons whose votes are being cast by proxy.
Section 2.3. Electing Directors. The vote for a Director or Directors at a
meeting of Members shall be by written ballot. Each Voting Member shall be
entitled to cast one (1) vote for each Director's office to be filled. Those
eligible Candidates receiving the highest number of votes cast at such meeting
shall be declared elected.
Section 2.4. Proxy Requirements. No proxy shall be valid unless it is evidenced
by a written form executed by a Voting Member or his or her legal representative
within two (2) months prior to the meeting for which such proxy was given.
Whether or not the duration of such proxy is specified on the proxy form, all
such proxy authority shall be limited to thirty (30) days subsequent to the date
of such meeting or any adjournment thereof, and no proxy shall be valid beyond
the date of such limitation. Unless a Voting Member's proxy shall be received by
the Secretary at least one (1) day prior to the meeting or election at which it
is to be used, it shall not qualify to be voted on behalf of the Voting Member.
Any proxy may, by its terms, be limited as to its use, purpose, or manner in
which it is to be used at the meeting or election for which it is given. Any
such proxy authority shall be revocable by the Voting Member or his or her legal
representative at any time prior to such meeting and shall be deemed to have
been revoked when the person executing the proxy is present at the meeting and
elects to vote in person.
Section 2.5. Proxy Solicitation by this Company. This Company may solicit
proxies from Voting Members and provide such information as this Company deems
pertinent with respect to the Candidates for election as Directors of this
Company or matters being voted upon at the meeting. The fact that this Company,
by mail or otherwise, solicits a proxy from any person shall not constitute nor
be construed as an admission of the validity of any Policy or that such person
is a Member entitled to vote at the meeting; and such fact shall not be
competent evidence in any action or proceeding in which the validity of any
Policy or any claim under it is at issue.
ARTICLE III
Members' Meetings
Section 3.1. Annual Meeting. There shall be an annual meeting of Members for the
purpose of electing Directors and conducting such business as may properly come
before the meeting. Such annual meeting of Members shall be held on the second
Friday in May in the Principal Office of this Company on Heritage Way, Waverly,
Iowa, at the hour of 9:00 a.m. unless the Board otherwise directs. No notice of
such annual meeting need be given except as required by law, unless the Board
designates another date or time or place for the meeting.
<PAGE>
Section 3.2. Special Voting and Special Meetings. A special voting of Members or
special meetings of Members may be called at any time pursuant to a duly adopted
Board resolution or upon a petition filed with the Secretary containing a
complete description of the proposition or propositions to be voted on, the
signatures, the printed names and addresses and the policy numbers of at least
one percent (1%) of the Voting Members. A written notice summarizing the purpose
shall be given.
Section 3.3. Presiding Officer. The Chairman of the Board, or in the absence of
the Chairman, the Vice Chairman, or in the absence of both, the President, or in
the absence of all three, the Chief Operating Officer shall preside over
meetings of the Members. The Secretary, if present, or any Assistant Secretary
of this Company, shall act as secretary for the meetings.
Section 3.4. Place of Meetings. The place of all meetings of Members shall be
the Principal Office of this Company in Waverly, Iowa, unless another place is
designated by the Board, either within or without the state of Iowa, and is
specified in the notice of the meeting.
Section 3.5. Manner of Giving Notice. Whenever written notice is required, it
shall state the time, date and place of the meeting, and if for a special vote
or a special meeting, a summary of the purpose. Notice shall be given by mailing
a copy of the notice to Voting Members not more than ninety (90) nor less than
thirty (30) days prior to the day of the meeting. Notice shall be deemed to have
been given to a Voting Member when a copy of such notice has been deposited in
the United States mail, addressed to the owner or the legal representative of
the owner of any policy used to identify a Member as a Voting Member, at his or
her post office address as the same appears on this Company's records as of the
Record Date for the notice, with postage prepaid. Failure to provide notice to
all Voting Members when notice is required shall not invalidate a meeting unless
such failure was intended and such intentional failure can be shown to have been
caused by a willful or deliberate act. If the date or place of an annual meeting
of Members is changed by the Board after this Company has sent or commenced to
send notices, or if prior to the date of any meeting of Members or any
adjournment thereof the notice of such meeting shall be deficient, the Board may
order a notice by publication in at least two (2) newspapers of general
circulation, one of which shall be located in Des Moines, Iowa, and one in
Waterloo, Iowa, at least ten (10) days prior to the meeting, and no other notice
shall be required. Such other notice shall be given as may be required by the
laws of Iowa pertaining to notice of meetings.
Section 3.6. Quorum. Either twenty-five (25) Voting Members present in person or
one thousand (1000) Voting Members present by proxy shall constitute a quorum at
any meeting of Members. If a quorum is not present, a majority of the Voting
Members present in person or by proxy may only adjourn the meeting from time to
time without further notice.
Section 3.7. Required Majority. Except as otherwise expressly provided in the
Articles or Bylaws, or by law, a majority of the votes cast by Voting Members
present in person and by proxy at any meeting of the Members with a quorum
present shall be sufficient for the adoption of any matter to properly come
before the meeting.
Section 3.8. Appointment of Voting Inspectors. Prior to each meeting of Members,
the Board or its Executive Committee, if any, shall appoint, from among Members
who are not Directors, Candidates for the office of Director or Officers of this
Company, three (3) or more voting inspectors and one (1) or more alternate
inspectors, and shall fix their fees, if any. If an inspector so appointed is
unable or unwilling to act and no alternate is able or willing, or if the Board
or Executive Committee has failed to appoint voting inspectors prior to the
meeting, the President may appoint voting inspectors or alternates as required
from among Members eligible as aforesaid.
Section 3.9. Administration of Proxies and Ballots. All unexpired proxies
intended for use at a meeting of Members shall be delivered to the voting
inspectors prior to the meeting. The voting inspectors shall verify their
validity and tabulate them, certifying their findings and tabulation to the
Secretary. At all meetings of the Members, the voting inspectors shall
distribute, collect, and tabulate ballots and certify under oath the results of
any ballot vote cast by Members. All questions concerning the eligibility of
Members to vote and the validity of the vote cast shall be resolved by voting
inspectors on the basis of this Company's records. In the absence of challenge
before the tabulation of a ballot vote is completed, the inspectors may assume
that the signature appearing on a proxy or a ballot is the valid signature of a
person entitled to vote, that any person signing in a representative capacity is
duly authorized to do so, and that a proxy, if it meets the requirements of
Section 2.4, and otherwise appears to be regular on its face, is valid.
ARTICLE IV
Communications Between Members
Section 4.1. Procedure for Facilitating Communication. No Member who is not an
officer, Director, or employee of this Company acting in the ordinary course of
business shall have access to any of this Company's policyholder records, except
such information pertaining to his or her own Policy or Policies as this Company
may be reasonably required by law to provide. However, any Member desiring to
communicate with other Members in connection with a Members meeting shall no
less than sixty (60) days prior to the date of such meeting furnish a written
request addressed to the Secretary containing the following information:
(a) such Member's full name and address and the policy number of any policy
owned by the Member;
(b) such Member's reasons for desiring to communicate with other Members;
(c) a copy of the proposed communication;
(d) the date of the meeting at which such Member desires to present the
matter for consideration.
Within fifteen (15) days of receipt of such request, this Company shall furnish
the requesting Member with information indicating the number of Voting Members
this Company has as of the last day of the month immediately preceding and
provide an estimate of all costs and expenses for processing and mailing the
proposed communication to the membership; or this Company shall advise the
Member that this Company refuses to mail the proposed communication. This
Company shall not refuse to mail the proposed communication unless it has first
made a determination that the communication is "improper" in accordance with
standards provided in Section 4.3 and has followed the procedures provided in
Section 4.2. Within thirty (30) days (or upon a later date if specified by the
requesting Member) of receiving an amount equal to all of this Company's
estimated costs and expenses and a sufficient number of copies of the proposed
communication, this Company shall process and mail the communication to all of
<PAGE>
the Voting Members by a class of mail specified by the requesting Member, unless
the communication has been determined to be improper.
Section 4.2. Determining Whether Communications are Proper. Each request to
communicate with other Members shall be reviewed by the Board. If the Board
determines that the communication is a proper one, it shall be processed as
provided in Section 4.1. If the Board determines the communication to be
improper, it shall instruct an appropriate officer to communicate a written
refusal specifying the reasons for the refusal.
Section 4.3. Improper Communication Defined. As used in this section, an
"improper communication" is one which contains material which:
(a) at the time and in the light of the circumstances under which it is made
(1) is false or misleading with respect to any material fact, or
(2) omits any material fact necessary to make the statements
therein not false or misleading or necessary to correct any
statement in an earlier communication on the same subject
matter which has become false or misleading; or
(b) relates to a personal claim or a personal grievance against this
Company, its management or any other party, or apparently seeks
personal gain or business advantage by or on behalf of any party; or
(c) relates to any matter of a general, economic, political, racial,
religious, social or other nature that is not significantly related to
the business of this Company or is not within the control of this
Company, in that it is not within the power of this Company to deal
with, alter or effectuate; or
(d) directly or indirectly, and without express factual foundation,
(1) impugns character, integrity or personal reputation, or
(2) makes charges concerning improper, illegal or immoral conduct.
ARTICLE V
Board of Directors
Section 5.1. General Powers. The business and affairs of this Company shall be
directed by the Board which from time to time shall delegate authority and
establish guidelines as it deems necessary or appropriate for the exercise of
corporate powers by officers and employees in the course of business.
Section 5.2. Number, Eligibility, and Tenure. The Board shall consist of twelve
(12) Directors. Directors must be policyholders of this Company. The regular
term of office for a Director shall commence when a Director is elected by
Members and end at the third (3rd) succeeding annual meeting of the Members,
except where a shorter term is provided in order to preserve the Class of
Directors. The vacancies on the Board to be filled at each annual meeting of
Members shall be the offices of those Directors whose regular terms are
scheduled to expire. Directors shall be eligible for reelection. Unless a
Director's regular term of office is sooner terminated by resignation,
retirement, legal incapacity or death, each Director elected at an annual
meeting of Members shall hold office for the term for which elected and until a
successor has been elected or appointed and qualified.
Section 5.3. Classification. Directors shall be divided into three (3) Classes,
which shall be as nearly equal as possible, according to the expiration date of
the regular terms of office. The regular term of office of one of the Classes of
Directors shall expire at each annual meeting of Members.
Section 5.4. Chairman and Vice Chairman of the Board. The Board shall elect a
Chairman and a Vice Chairman from its number. The Chairman of the Board shall
preside at all meetings of Members of this Company and the Board of Directors.
The Chairman shall present an annual report to the Members and appoint
committees which are not standing committees or other committees required to be
elected or appointed by the Board of Directors. The Chairman shall perform such
other duties as shall be assigned from time to time by the Board of Directors.
The Vice Chairman shall, in the absence or disability of the Chairman of the
Board, perform the duties of that office.
Section 5.5. Nomination by Members. Any Member may nominate one or more
Candidates for the Directors' offices to be filled by election at any annual
meeting of Members by filing with the Secretary on behalf of each such
Candidate, on or before January 31 preceding such annual meeting, a Certificate
of Nomination which has been signed by at least one percent (1%) of the Voting
Members and which gives the names, occupations and addresses of their Candidate
or Candidates together with a statement signed by said Candidates that they will
accept office if elected. No signature on any such Certificate shall be counted
unless it is also accompanied by the printed name and address and the policy
number of a Policy owned by the signator.
Section 5.6. Board Sponsored Nominations. The Board may nominate one or more
Candidates for the Directors' offices to be filled by election at any annual
meeting of Members by nominating a Candidate or a slate of Candidates in a
resolution duly adopted at a regular or special meeting of the Board and causing
a Certificate of Nomination to be filed with the Secretary on behalf of each
such Candidate at least thirty (30) days prior to the date of the annual meeting
of Members. Such Certificate of Nomination shall give the names, occupations,
and addresses of their Candidate or Candidates together with a statement signed
by said Candidates that they will accept office if elected.
Section 5.7. Vacancies. Vacancies in the Board which occur prior to the
expiration of a Director's regular term of office by reason of resignation,
<PAGE>
retirement, legal incapacity, or death, or other vacancies which may occur by a
reason of an increase in the number of Directors in between annual meetings of
Members, or vacancies which may occur by reason of any failure on the part of
the Voting Members to elect a sufficient number of Directors at an annual
meeting of Members, may be filled by appointment made in a duly adopted
resolution concurred in by two-thirds (2/3) of the Board membership when voting
at any meeting of the Board, or by appointment made in a unanimous consent
action taken in lieu of meeting. A Director appointed to fill a vacancy shall
hold office for the unexpired portion of the term to which appointed. Unless a
Director's service is otherwise terminated by resignation, retirement, legal
incapacity, or death, a Director, whether appointed or elected, shall serve
until a successor is elected or appointed and qualified.
Section 5.8. Retirement. Directors shall retire from the Board at the end of the
month in the year in which they attain age seventy (70) notwithstanding any
election for a longer term. At any time prior to attaining age seventy (70), any
Director who is also an officer of this Company shall retire from the Board upon
retirement from this Company as an employee or upon termination of employment
for any reason.
Section 5.9. Nonattendance or Failure to Perform. Directors are expected to
attend meetings regularly and to serve diligently while in office. If it appears
that a Director is absent from meetings without good cause, or that he or she is
either unwilling or unable to perform his or her duties satisfactorily for any
reason whatsoever, or that the continued service of such Director on the Board
may be detrimental to the best interests of this Company, the Board may by a
two-thirds (2/3) vote of the total Board membership request such Director to
resign, which resignation shall not be unreasonably withheld.
Section 5.10. Compensation. Directors shall be compensated as established by the
Board, and shall be reimbursed for reasonable expenses incurred in connection
with the discharge of their duties and responsibilities.
ARTICLE VI
Board Meetings
Section 6.1. Regular Meetings. A regular annual meeting of the Board of
Directors shall be held without other notice than this Bylaw on such date in the
months of April, May or June as the Board of Directors shall determine. At such
meetings, the Directors shall elect the officers of this Company and transact
such business as pertains to the annual meetings of the Board. The Board of
Directors may provide by resolution, or the Chairman of the Board, Vice Chairman
or President may designate, the time, date and place, either within or without
the state of Iowa, for the holding of additional regular meetings by giving
notice at a regular or special meeting of Directors or by written notice as
provided in this Article for special meetings.
Section 6.2. Special Meetings. Special meetings of the Board of Directors may be
called by the Chairman of the Board, Vice Chairman, President or Secretary, and
shall be called by the President upon written request of any three (3)
Directors. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the state of
Iowa, as the place for holding any such special meeting of the Board of
Directors.
Section 6.3. Notice. Notice of any special meeting shall be given at least
ninety-six (96) hours previously thereto by written notice delivered personally
or by mail or telegram to each Director at his or her home or business address.
If mailed, such notice shall be deemed to be delivered when deposited in the
United States mail so addressed, with postage thereon prepaid. If notice be
given by telegram, such notice shall be deemed to be delivered when the telegram
is delivered to the telegraph company. Whenever any notice whatever is required
to be given to any Director of this Company under the Articles of Incorporation
or Bylaws or any provision of law, a waiver thereof in writing, signed at any
time, whether before or after the time of meeting, by the Director entitled to
such notice, shall be deemed equivalent to the giving of such notice. The
attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting and objects thereat to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
Section 6.4. Quorum. Except as otherwise provided by law or by the Articles of
Incorporation or these Bylaws, a majority of the number of Directors authorized
by the Articles of Incorporation and established by these Bylaws, shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but a majority of the Directors present (though less than such
quorum) may adjourn the meeting from time to time without further notice.
Section 6.5. Manner of Acting. The act of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or by the
Articles of Incorporation or these Bylaws.
Section 6.6. Presumption of Assent. A Director of this Company who is present at
a meeting of the Board of Directors or a committee thereof at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless his/her dissent shall be entered in the minutes of the meeting or
unless he/she shall file a written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of this Company immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
Director who voted in favor of such action.
Section 6.7. Informal Action Without Meeting. Any action required or permitted
by the Articles of Incorporation or these Bylaws or any provision of law to be
taken by the Board of Directors at a meeting, or by resolution may be taken
without a meeting if a consent resolution in writing, setting forth the action
so taken shall be signed by all of the Directors then in office. Such consent
shall have the same force and effect as a unanimous vote of the Board of
Directors.
Section 6.8. Meetings by Conference Telephone. Directors may participate in a
meeting of the Board of Directors or a committee thereof by means of conference
telephone or similar communications equipment through which all persons
participating in the meeting can hear each other. Such participation will
constitute presence in person at that meeting for the purpose of constituting a
quorum and for all other purposes. The place of any meeting held pursuant to
this section will be deemed to be the place stated in the minutes of such
meeting so long as at least one Director is present at that place at the time of
that meeting.
ARTICLE VII
<PAGE>
Committees
Section 7.1. Committees. The Chairman of the Board may appoint committees except
standing committees or any other committee required to be elected or appointed
by the Board of Directors. The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of Directors as established in
these Bylaws may designate one or more standing committees or other committees
required to be elected or appointed by the Board of Directors, each committee to
consist of three (3) or more Directors or employees of this Company or other
persons elected or appointed by the Board of Directors or appointed by the
Chairman of the Board, as provided in said resolution which to the extent
provided in said resolution as initially adopted, and as thereafter supplemented
or amended by further resolution adopted by a like vote, shall have when the
members thereof are members of the Board of Directors, and may exercise when the
Board of Directors is not in session, the powers of the Board of Directors in
the management of the business and affairs of this Company, except action in
respect to dividends to policyholders, amendment or repeal of these Bylaws,
election of the Executive Officers or the filling of vacancies in the Board of
Directors or committees created pursuant to this Section. The Board of Directors
or its Chairman may elect or appoint one (1) or more of its members or employees
of this Company or other persons as provided in said resolution, as alternate
members of any such committee who may take the place of any absent member or
members at any meeting of such committee, upon request by the President or upon
request by the chairman of such meeting. Each such committee shall fix its own
rules governing the conduct of its activities and shall make such reports to the
Board of Directors of its activities as the Board of Directors may request.
ARTICLE VIII
Executive and Other Officers
Section 8.1. Executive Officers. The Executive Officers of this Company shall
include the President, the Chief Executive Officer, all Senior Vice Presidents,
and such other Officers as the Board may designate as Executive Officers.
Executive Officers shall be appointed by the Board and shall hold office at the
pleasure of the Board as hereinafter provided.
Section 8.2. Powers and Duties of Executive Officers. The Chief Executive
Officer shall be the principal executive officer of this Company and, subject to
the control of the Board of Directors, shall also have all of the authority
designated in these Bylaws for the President of this Company. The President
shall report to the Chief Executive Officer. The President, who may be this
Company's Chief Executive Officer, shall have responsibility for the general
direction and management of this Company's affairs, and shall exercise such
powers and perform such duties as are necessary, appropriate, or are usually
incident to such office, or as may be delegated or assigned by the Board. All
other Executive Officers of this Company shall exercise such powers and perform
such duties as may be necessary or appropriate in order to secure on behalf of
this Company, proper compliance with all applicable law and regulation, or as
may be necessary, appropriate, or usually incident to their designated offices,
and such other duties as may be delegated to them by the Board, or the
President. Section 8.3. Other Officers. The other officers, including Vice
Presidents and Assistant Vice Presidents, if any, the Secretary and Assistant
Secretaries, if any, the Treasurer and Assistant Treasurers, if any, and such
other officers as the Board may from time to time deem necessary or appropriate,
shall be appointed by the Board. Each of these officers shall hold office at the
pleasure of the Board or the President. Such officers shall exercise such powers
and perform such duties as are necessary, appropriate, or are usually incident
to their designated offices, and such other duties as may be delegated or
assigned to them by Board directive, by the President, or by the Executive
Officers to whom they report.
Section 8.4. Vacancies and Absences. Any vacancy in any office may be filled at
any meeting of the Board or by action without meeting as provided in Section
6.7. In the prolonged absence of the Chief Executive Officer or President, or in
the event death or inability of either of them to act, a person designated by
the Board shall exercise the powers and perform the duties of that office on an
interim basis.
Section 8.5. Compensation. Compensation of Executive Officers shall be fixed
from time to time by the Board. Compensation of other officers and employees
shall be fixed by or in the manner provided by the Board.
ARTICLE IX
Miscellaneous
Section 9.1. Principal Office. The location of the principal office of this
Company shall be in the Century Companies of America Building on Heritage Way,
in the city of Waverly, county of Bremer, and state of Iowa. This Company may
have other offices at such locations as may be necessary or convenient for the
conduct of its business.
Section 9.2. Certification and Inspection of Articles and Bylaws. This Company
shall keep in its Principal Office the original or a certified copy of its
Articles and its Bylaws as amended or otherwise altered to date, both of which
shall be open for inspection by any Member or Members at all reasonable times
during office hours.
Section 9.3. Corporate Seal. The Board may adopt, use, and, at will, alter a
corporate seal. Failure to affix a seal does not affect the validity of any
instrument. This corporate seal may be used in facsimile form.
Section 9.4. Execution of Instruments and Policies. The President, Senior Vice
Presidents, Vice Presidents, and such other persons as may be designated
pursuant to duly adopted Board resolutions, shall each have authority to execute
and acknowledge or attest on behalf of this Company all instruments executed in
the name of this Company. The Secretary and Assistant Secretaries shall each
have authority to attest and acknowledge all such instruments.
Policies and endorsements thereon shall be executed by the President and the
Secretary, or in any other manner prescribed by applicable law or regulation, or
directed by the Board. Such policies and endorsements may bear facsimile
signatures of the President and the Secretary. Facsimile signatures of the
President, the Secretary, and the Treasurer may be used on other instruments to
the extent permitted by law and by any Board approved internal control
directives.
<PAGE>
Section 9.5. Official Bonds. In addition to the bonds which law or regulation
require this Company to maintain on its officers, employees, and agents, the
Board may purchase insurance or other indemnification or require a special bond
or bonds from any Director, officer, employee or agent of this Company, in such
sum and with such sureties or insurance carriers as it may deem proper.
Section 9.6. Voting Stock in Other Corporations. Stock held by this Company in
another corporation shall be voted by the President unless the Board of
Directors shall by resolution designate another officer to vote such stock, and,
unless the Board of Directors shall by resolution direct how such stock shall be
voted, the President or other designated officer shall vote the same in his or
her discretion for the best interests of this Company.
ARTICLE X
Indemnification of Company Officials
Section 10.1. Indemnification of Directors, Officers, Employees, and Certain
Other Persons. Directors and officers of this Company shall be indemnified to
the fullest extent now or hereafter permitted by law in connection with any
actual or threatened action or proceeding (including civil, criminal,
administrative or investigative proceedings) arising out of their service to
this Company or to another organization at this Company's request. Persons who
are not Directors or officers of this Company may be similarly indemnified in
respect of such service to the extent authorized at any time pursuant to any
process, procedure, or directive duly adopted for such purpose by this Company's
Board of Directors. The provisions of this Article shall be applicable to
actions or proceedings commenced after the adoption hereof, and to persons who
have ceased to be Directors, officers, or employees, and shall inure to the
benefit of their heirs, executors and administrators.
ARTICLE XI
Emergency Provisions
Section 11.1. Special Bylaw Provisions During Emergencies. If as a result of a
declared, national or state, emergency resulting from actual or threatened enemy
action, or, as a result of a natural or man-made catastrophe, or other unusual
or emergency conditions, it is impossible to convene readily a quorum of the
Board of Directors Executive Committee or any other Committee of the Board, for
action within their respective jurisdictions, thus making it impossible, or
impractical, for this Company to conduct its business in strict accord with the
normal provisions of law, or of these Bylaws or of the Articles of
Incorporation, then, and in any of said events, to provide for continuity of
operations, these emergency Bylaws shall supervene and take effect if necessary
over all other Bylaws for the duration of the emergency period, and all the
powers and duties vested in any committee or committees or the Board of
Directors, so lacking a quorum shall vest automatically in the Emergency
Management Committee which shall consist of all readily available members of the
Board of Directors. Three (3) members of the Emergency Management Committee
shall constitute a quorum provided, however, that:
If there are only two (2) available Directors, they and the first one
of the following listed officials of this Company who is readily
available and accepts the responsibility (even though he/she is not a
Director) shall serve as the Emergency Management Committee or if there
is only one available Director, he/she and the first two of the
following listed officials of this Company who are readily available
and accept the responsibility (even though not Directors) shall serve
as the Emergency Management Committee:
(a) The Chief Executive Officer, if any, or
(b) The President, if any, or
(c) The Executive Vice Presidents in order of seniority based on
their period of service in such office, if any, or
(d) The Senior Vice Presidents in order of seniority based on their
period of service in such office, if any, or
(e) The administrative Vice Presidents in order of seniority based
on their period of service in such office, if any, or
(f) The Treasurer, if any, or
(g) The Department Managers in the order of seniority based on
length of their period of service in such position, if any, or
If there is no readily available Director the first three (3) of those
just previously listed in the above order (even though not Directors),
who are readily available and accept the responsibility, shall serve as
the Emergency Management Committee, provided, however, that an
Emergency Management Committee composed solely of officials who are not
Directors, shall not have the power to fill vacancies on the Board of
Directors but shall as soon as circumstances permit conduct an election
of Directors.
If there are no Directors, Chief Executive Officer, President, Executive Vice
Presidents, Senior Vice Presidents, administrative Vice Presidents, Treasurer or
Department Managers readily available to form an Emergency Management Committee,
then the Commissioner of Insurance of the state of Iowa or the duly designated
person exercising the powers of the Commissioner of Insurance of the state of
Iowa shall appoint three (3) persons to act as the Emergency Management
Committee who shall be empowered to act in the manner and with the powers
hereinabove provided when the Emergency Management Committee is composed solely
of officials who are not Directors.
If the Emergency Management Committee takes an action in good faith, such action
shall be valid and binding as if taken by the Board of Directors, or as the case
may be, the Committee it represents, although it may subsequently develop that
at the time of such action conditions requisite for action by the Emergency
Management Committee did not in fact exist.
If the Emergency Management Committee in good faith elects someone to an office
which it believes to be vacant, the acts of such newly elected officer shall be
valid and binding although it may subsequently develop that such office was not
in fact vacant.
<PAGE>
ARTICLE XII
Adoption, Amendment or Repeal of Bylaws
Section 12.1. Bylaw Amendment by Board of Directors. The Bylaws of this Company
may be amended by a two-thirds (2/3) vote of the Board of Directors at any
meeting of the Board of Directors in any manner not inconsistent with the
insurance laws of the state of Iowa and this Company's Articles of
Incorporation, subject to the power of the Members to alter or repeal any
amendment made by the Board of Directors. Any particular article or section of
these Bylaws may provide for amendment only upon vote of the Members. The Bylaws
of this Company may also be amended, altered, or repealed in any manner not
inconsistent with the insurance laws of the state of Iowa by a vote of
two-thirds (2/3) of the Members voting at an annual meeting or special vote or
meeting of the Members of this Company.
Section 12.2. Initiation of Bylaw Amendment by Members. An amendment to the
Bylaws may be initiated by the direct action of the Members as follows:
One percent (1%) or more of this Company's Members shall sign and file
with the Secretary, not later than ninety (90) days prior to the date
of the annual meeting of this Company, a copy of the proposed amendment
or amendments together with a brief statement of the purpose thereof
and a statement from this Company's General Counsel that the proposed
amendment is acceptable under Iowa law. Such a copy of the proposed
amendment and statement of purpose shall be on a form to be furnished
by the Secretary and shall be signed by the Member, if a natural
person, and by the president or treasurer or other authorized officer,
if a corporate member, such officer having been so authorized by
resolution duly adopted by the board of directors of such corporation.
Upon timely receipt of a proposed amendment to the Bylaws accompanied by the two
required statements, properly prepared and signed and arising by action of the
Members as herein provided, the Secretary shall send or cause to be sent a copy
of such proposed amendment to all Members not less than twenty (20) days prior
to the date of the next annual meeting. The Board of Directors may make a
recommendation to Members as to any such amendment as proposed.
RESTATED BYLAWS: The foregoing shall constitute Restated Bylaws of this Company
which shall supersede and take the place of the heretofore existing Bylaws and
amendments thereto.
Restated Bylaws approved by the Board of Directors October 4,1991
Amended June 19,1993
Amended, Section 5.8, May 10, 1995
Amended, Section 5.2, May 12, 1995
<PAGE>
EXHIBIT 8
PARTICIPATION AGREEMENT
Among
CENTURY LIFE OF AMERICA,
T. ROWE PRICE INVESTMENT SERVICES, INC,
and
T. ROWE PRICE INTERNATIONAL SERIES, INC.
THIS AGREEMENT, made and entered into as of this 22nd day of April, 1994
by and among CENTURY LIFE OF AMERICA (hereinafter, the "Company"), an Iowa
mutual life insurance company, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A hereto as may be
amended from time to time (each account hereinafter referred to as the
"Account"), and the T. Rowe Price International Series, Inc. (the "Fund"), a
corporation organized under the laws of Maryland, and T. Rowe Price Investment
Services, Inc. (hereinafter the "Underwriter"), a Maryland corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is or will be available to act as the investment vehicle
for separate accounts established for variable life insurance and variable
annuity contracts (the "Variable Insurance Products") to be offered by insurance
companies which have entered into participation agreements with the Fund and
Underwriter (hereinafter "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into several
series of shares, each designated a "Portfolio" and representing the interest in
a particular managed portfolio of securities and other assets; and
WHEREAS, the Fund will obtain an order from the Securities and Exchange
Commission ("SEC") granting Participating Insurance Companies and variable
annuity and variable life insurance separate accounts exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (hereinafter the "1940 Act") and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, if and to the extent necessary to permit shares of
the Fund to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
(hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and shares of the Portfolios are registered under the
Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Rowe Price-Fleming International, Inc. (the "Adviser") is duly
registered as an investment adviser under the federal Investment Advisers Act of
1940, as amended, and any applicable state securities laws; and <PAGE>
WHEREAS, the Company has issued or will issue certain variable life
insurance and variable annuity contracts supported wholly or partially by the
Account (the "Contracts"), and said Contracts are listed in Schedule A hereto,
as it may be amended from time to time by mutual written agreement; and
WHEREAS, the Account is duly established and maintained as a segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the SEC
under the Securities Exchange Act of 1934, as amended (hereinafter the "1934
Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios listed in
Schedule A hereto, as it may be amended from time to time by mutual written
agreement (the "Designated Portfolios") on behalf of the Account to fund the
aforesaid Contracts, and the Underwriter is authorized to sell such shares to
the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company,
the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1.1 The Underwriter agrees to sell to the Company those shares of the
Designated Portfolios which the Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Designated Portfolios.
1.2 The Fund agrees to make shares of the Designated Portfolios
available for purchase at the applicable net asset value per share by the
Company and the Account on those days on which the Fund calculates its net asset
value pursuant to rules of the Securities and Exchange Commission, and the Fund
shall use reasonable efforts to calculate such net asset value on each day which
the New York Stock Exchange is open for trading. Notwithstanding the foregoing,
the Board of Trustees or Directors of the Fund (hereinafter the "Board") may
refuse to sell shares of any Designated Portfolio to any person, or suspend or
terminate the offering of shares of any Designated Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Designated Portfolio.
1.3 The Fund and the Underwriter agree that shares of the Fund will be
sold only to Participating Insurance Companies and their separate accounts. No
shares of any Designated Portfolios will be sold to the general public. The Fund
and the Underwriter will not sell Fund shares to any insurance company or
separate account unless an agreement containing provisions substantially the
same as Articles I, III and VII of this Agreement is in effect to govern such
sales.
1.4 The Fund agrees to redeem, on the Company's request, any full or
fractional shares of the Designated Portfolios held by the Company, ordinarily
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption, except
that the Fund reserves the right to suspend the right of redemption or postpone
the date of payment or satisfaction upon redemption consistent with Section
22(e) of the 1940 Act and any rules thereunder, and in accordance with the
procedures and policies of the Fund as described in the then current prospectus.
<PAGE>
1.5 For purposes of Sections 1.1 and 1.4, the Company shall be the
designee of the Fund for receipt of purchase and redemption orders from the
Account, and receipt by such designee shall constitute receipt by the Fund;
provided that the Company receives the order by 4:00 p.m. Baltimore time and the
Fund receives notice of such order by 9:30 a.m. Baltimore time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the SEC.
1.6 The Company agrees to purchase and redeem the shares of the
Designated Portfolios offered by the then current prospectus of the Fund and in
accordance with the provisions of such prospectus.
1.7 The Company shall pay for Fund shares on the next Business Day
after an order to purchase Fund shares is made in accordance with the provisions
of Section 1.5 hereof. Payment shall be in federal funds transmitted by wire by
3:00 p.m. Baltimore time. If payment in federal funds for any purchase is not
received or is received by the Fund after 3:00 p.m. Baltimore time on such
Business Day, the Company shall promptly, upon the Fund's request, reimburse the
Fund for any charges, costs, fees, interest or other expenses incurred by the
Fund in connection with any advances to, or borrowings or overdrafts by, the
Fund, or any similar expenses incurred by the Fund, as a result of portfolio
transactions effected by the Fund based upon such purchase request. For purposes
of Section 2.8 and 2.9 hereof, upon receipt by the Fund of the federal funds so
wired, such funds shall cease to be the responsibility of the Company and shall
become the responsibility of the Fund.
1.8 Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Designated Portfolios' shares. The
Company hereby elects to receive all such income, dividends, and capital gain
distributions as are payable on Designated Portfolio shares in additional shares
of that Portfolio. The Company reserves the right to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10 The Fund shall make the net asset value per share for each
Designated Portfolio available to the Company on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Baltimore time) and shall use its best efforts to make such net
asset value per share available by 7 p.m. Baltimore time.
1.11 The Parties hereto acknowledge that the arrangement contemplated
by this Agreement is not exclusive; the Fund's shares may be sold to other
insurance companies (subject to Section 1.3 and Article VI hereof) and the cash
value of the Contracts may be invested in other investment companies, provided,
however, that (a) such other investment company, or series thereof, has
investment objectives or policies that are substantially different from the
investment objectives and policies of the Fund; or (b) the Company gives the
Fund and the Underwriter 45 days written notice of its intention to make such
other investment company available as a funding vehicle for the Contracts; or
(c) such other investment company was available as a funding vehicle for the
Contracts prior to the date of this Agreement and the Company so informs the
Fund and Underwriter prior to their signing this Agreement; or (d) the Fund or
Underwriter consents to the use of such other investment company, such consent
not to be unreasonably withheld.
<PAGE>
ARTICLE II. Representations and Warranties
2.1 The Company represents and warrants that the Contracts (a) are or,
prior to issuance, will be registered under the 1933 Act or, alternatively (b)
are not registered because they are properly exempt from registration under the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under the 1933 Act. The Company further represents and
warrants that the Contracts will be issued and sold in compliance in all
material respects with all applicable federal and state laws and that the sale
of the Contracts shall comply in all material respects with state insurance
suitability requirements. The Company further represents and warrants that it is
an insurance company duly organized and in good standing under applicable law,
that it has legally and validly established the Account prior to any issuance or
sale thereof as a segregated asset account under Iowa insurance laws, and that
it (a) has registered or, prior to any issuance or sale of the Contracts, will
register the Account as a unit investment trust in accordance with the
provisions of the 1940 Act to send as a segregated investment account for the
Contracts, or alternatively (b) has not registered the Account in proper
reliance upon an exclusion from registration under the 1940 Act.
2.2 The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the State of Iowa and all
applicable federal and state securities laws and that the Fund is and shall
remain registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to time
as required in order to effect the continuous offering of its shares. The Fund
shall register and qualify the shares for sale in accordance with the laws of
the various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3 The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, although it may
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund will undertake to have
the Board of Directors or Trustees of the Fund (the "Board"), a majority of whom
are not interested persons of the Fund, formulate and approve any plan pursuant
to Rule 12b-1 under the 1940 Act to finance distribution expenses.
2.4 The Fund makes no representations as to whether any aspect of its
operations, including but not limited to, investment policies, fees and
expenses, complies with the insurance and other applicable laws of the various
states, except that the Fund represents that the Fund's investment policies,
fees and expenses are and shall at all times remain in compliance with the laws
of the State of Iowa to the extent required to perform this Agreement.
2.5 The Fund represents that it is lawfully organized and validly
existing under the laws of the State of Maryland and that it does and will
comply in all material respects with the 1940 Act.
2.6 The Underwriter represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Underwriter further represents that it will sell and distribute the Fund shares
in accordance with the laws of the State of Iowa and any applicable state and
federal securities laws.
2.7 The Underwriter represents and warrants that the Adviser is and
shall remain duly registered under all applicable federal and state securities
laws and that the Adviser shall perform its obligations for the Fund in
compliance in all material respects with the laws of the State of Iowa and any
applicable state and federal securities laws.
<PAGE>
2.8 The Fund and the Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other individuals
or entities dealing with the money and/or securities of the Fund are and shall
continue to be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than the minimum
coverage as required currently by Rule 17g-1 of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company.
2.9 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
employed or controlled by the Company dealing with the money and/or securities
of the Fund are covered by a blanket fidelity bond or similar coverage for the
benefit of the Fund, in an amount not less than $5 million. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Underwriter in the event that such coverage no
longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3.1 The Underwriter shall provide the Company with as many copies of
the Fund's current prospectus (describing only the Designated Portfolios listed
on Schedule A) as the Company may reasonably request. The Fund shall bear the
expense of printing copies of its current prospectus that will be distributed to
existing Contract owners, and the Company shall bear the expense of printing
copies of the Fund's prospectus that are used in connection with offering the
contracts issued by the Company. If requested by the Company in lieu thereof,
the Fund shall provide such documentation (including a final copy of the new
prospectus on diskette at the Fund's expense) and other assistance as is
reasonably necessary in order for the Company once each year (or more frequently
if the prospectus for the Fund is amended) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document (such
printing to be at the Company's expense).
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Company, and
the Underwriter (or the Fund), at its expense, shall provide copies of such SAI
free of charge to the Company for itself and for any owner of a Contract who
requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of
its proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners.
3.4 The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such portfolio for which instructions have been
received,
<PAGE>
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass-through voting privileges for variable contract owners or to the
extent otherwise required by law. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law.
3.5 Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by the Shared Funding Exemptive Order
and consistent with any reasonable standards that the Fund may adopt and provide
in writing.
3.6 The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the SEC's interpretation of the requirements of Section 16(a)
with respect to periodic elections of directors or trustees and with whatever
rules the SEC may promulgate with respect thereto.
ARTICLE IV. Sales Material and Information
4.1 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material that the Company develops or uses and in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter is named, at
least fifteen Business Days prior to its use. No such material shall be used if
the Fund or its designee reasonably object to such use within fifteen Business
Days after receipt of such material. The Fund or its designee reserves the right
to reasonably object to the continued use of any such sales literature or other
promotional material in which the Fund (or a Designated Portfolio thereof) or
the Adviser or the Underwriter is named, and no such material shall be used if
the Fund or its designee so object.
4.2 The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus or SAI for
the Fund shares, as such registration statement and prospectus or SAI may be
amended or supplemented from time to time, or in reports or proxy statements for
the Fund, or in sales literature or other promotional material approved by the
Fund or its designee or by the Underwriter, except with the permission of the
Fund or the Underwriter or the designee of either.
4.3 The Fund, Underwriter, or its designee shall furnish, or shall
cause to be furnished, to the Company, each piece of sales literature or other
promotional material that it develops or uses and in which the Company, and/or
its Account, is named at least fifteen Business Days prior to its use. No such
material shall be used if the Company reasonably objects to such use within
fifteen Business Days after receipt of such material. The Company reserves the
right to reasonably object to the continued use of any such sales literature or
other promotional material in which the Company and/or its Account is named, and
no such material shall be used if the Company so objects.
4.4. The Fund and the Underwriter shall not give any information or
make any representations on behalf of the Company or concerning the Company, the
Account, or the Contracts other than the information or representations
contained in a registration statement, prospectus, or SAI for the Contracts, as
such registration statement, prospectus, or SAI may be amended or supplemented
from time to time, or in published reports for the Account which are in the
public domain or approved by the Company for distribution to Contract Owners, or
<PAGE>
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5 The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, SAIs, reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above, that
relate to the Fund or its shares, contemporaneously with the filing of such
document(s) with the SEC or other regulatory authorities.
4.6 The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or interests therein
are not registered under the 1933 Act), SAIs, reports, solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to the Contracts or the Account, contemporaneously with the
filing of such document(s) with the SEC or other regulatory authorities.
4.7 The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Designated Portfolio,
and of any material change in the Fund's registration statement, particularly
any change resulting in a change to the registration statement or prospectus for
any Account. The Fund will work with the Company so as to enable the Company to
solicit proxies from Contract Owners, or to make changes to its prospectus or
registration statement, in an orderly manner. The Fund will make reasonable
efforts to attempt to have changes affecting Contract prospectuses become
effective simultaneously with the annual updates for such prospectuses.
4.8 For purposes of this Article IV, the phrase "sales literature and
other promotional materials" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
SAIs, shareholder reports, proxy materials, and any other communications
distributed or made generally available with regard to the Funds.
ARTICLE V. Fees and Expenses
5.1 The Fund and the Underwriter shall pay no fee or other compensation
to the Company under this Agreement, except that if the Fund or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then the Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the Underwriter in
writing, and such payments will be made out of existing fees otherwise payable
to the Underwriter, past profits of the Underwriter, or other resources
available to the Underwriter. No such payments shall be made directly by the
Fund. Currently, no such payments are contemplated.
5.2 All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
<PAGE>
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3 The Company shall bear the expenses of distributing the Fund's
prospectus to owners of Contracts issued by the Company and of distributing the
Fund's proxy materials and reports to such Contract owners.
ARTICLE VI. Diversification and Qualification
6.1 The Fund will invest its assets in such a manner as to ensure that
the Contracts will be treated as annuity or life insurance contracts, whichever
is appropriate, under the Internal Revenue Code of 1986, as amended (the "Code")
and the regulations issued thereunder (or any successor provisions). Without
limiting the scope of the foregoing, the Fund will comply with Section 817(h) of
the Code and Treasury Regulation ss.1.817-5, and any Treasury interpretations
thereof, relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts, and any amendments or other
modifications or successor provisions to such Section or Regulations. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately diversify
the Fund so as to achieve compliance within the grace period afforded by
Regulation 817.5.
6.2 The Fund represents that it is or will be qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provisions) and that it will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future.
6.3 The Company represents that the Contracts are currently, and at the
time of issuance shall be, treated as life insurance or annuity insurance
contracts, under applicable provisions of the Code, and that it will make every
effort to maintain such treatment, and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be so treated in
the future. The Company agrees that any prospectus offering a contract that is a
"modified endowment contract" as that term is defined in Section 7702A of the
Code (or any successor or similar provision), shall identify such contract as a
modified endowment contract.
ARTICLE VII. Potential Conflicts
7.1 The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
<PAGE>
7.2. The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3 If it is determined by a majority of the Board, or a majority of
its disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4 If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment in
the Fund and terminate this Agreement with respect to each Account provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund gives written
notice that this provision is being implemented, and until the end of that six
month period the Fund shall continue to accept and implement orders by the
Company for the purchase (and redemption) of shares of the Fund.
7.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Fund shall continue to
accept and implement orders by the Company for the purchase (and redemption) of
shares of the Fund.
7.6 For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contract if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination; provided, however, that such
<PAGE>
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7 If and to the extent the Shared Funding Exemption Order or any
amendment thereto contains terms and conditions different from Sections 3.4,
3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement, then the Fund and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with the Shared Funding Exemptive Order, and Sections
3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of this Agreement shall continue in
effect only to the extent that terms and conditions substantially identical to
such Sections are contained in the Shared Funding Exemptive Order or any
amendment thereto. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to mixed or
shared funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1., 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1 Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold harmless the Fund and
the Underwriter and each of its directors and officers, and each person, if any,
who controls the Fund or Underwriter within the meaning of Section 15 of the
1933 Act (collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement, prospectus (which shall include
an offering memorandum, if any), or SAI for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the Company by or
on behalf of the Fund for use in the Registration Statement,
prospectus or SAI for the Contracts or in the Contracts or
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus, SAI,
or sales literature of the Fund not supplied by the Company
or persons under its control) or wrongful conduct of the
<PAGE>
Company or persons under its authorization or control, with
respect to the sale or distribution of the Contracts or
Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, SAI, or sales literature of the Fund
or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the qualification requirements specified in Article VI of
this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company,
as limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against an Indemnified Party, the Company shall be entitled to participate, at
its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2 Indemnification by the Underwriter
<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of it directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts; and
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Registration Statement or prospectus or SAI or sales
literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein to make the statements therein not
misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished
to the Underwriter or Fund by or on behalf of the Company
for use in the Registration Statement, prospectus or SAI for
the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale
of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus, SAI or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful
conduct of the Fund or Underwriter or persons under their
control, with respect to the sale or distribution of the
Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, SAI or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Underwriter to
provide the services and furnish the materials under the
terms of this Agreement (including a failure, whether
unintentional or in good faith or otherwise, to comply with
the diversification and other qualification requirements
specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
<PAGE>
performance or such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled to participate,
at its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the Underwriter will not be liable to such party under this Agreement for any
legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of the Account.
8.3 Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts paid in
settlement with the written consent of the Fund) or litigation (including legal
and other expenses) to which the Indemnified Parties may be required to pay or
may become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or expenses (or
actions in respect thereof) or settlements, are related to the operations of the
Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
and other qualification requirements specified in Article
VI of this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
<PAGE>
the Company, the Fund, the Underwriter or the Account whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the expense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify the
Fund of the commencement of any litigation or proceeding against it or any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
9.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Maryland.
9.2 This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, any Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. Termination
10.1 This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party, for any reason with
respect to some or all Designated Portfolios, by
six (6) months' advance written notice delivered to
the other parties; or
(b) termination by the Company by written notice to the
Fund and the Underwriter based upon the Company's
determination that shares of the Fund are not
reasonably available to meet the requirements of
the Contracts; or
(c) termination by the Company by written notice to the
Fund and the Underwriter in the event any of the
Portfolio's shares are not registered, issued or
sold in accordance with applicable state and/or
federal law or such law precludes the use of such
<PAGE>
shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event
that formal administrative proceedings are
instituted against the Company by the NASD, the
SEC, the Insurance Commissioner or like official of
any state or any other regulatory body regarding
the Company's duties under this Agreement or
related to the sale of the Contracts, the operation
of any Account, or the purchase of the Fund shares,
provided, however, that the Fund or Underwriter
determines in its sole judgment exercised in good
faith, that any such administrative proceedings
will have a material adverse effect upon the
ability of the Company to perform its obligations
under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against
the Fund or Underwriter by the NASD, the SEC, or
any state securities or insurance department or any
other regulatory body, provided, however, that the
Company determines in its sole judgment exercised
in good faith, that any such administrative
proceedings will have a material adverse effect
upon the ability of the Fund or Underwriter to
perform its obligations under this Agreement; or
(f) termination by the Company by written notice to the
Fund and the Underwriter with respect to any
Designated Portfolio in the event that such
Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to
comply with the Section 817(h) diversification
requirements specified in Article VI hereof, or if
the Company reasonably believes that such Portfolio
may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written
notice to the Company in the event that the
Contracts fail to meet the qualifications specified
in Article VI hereof; or
(h) termination by either the Fund or the Underwriter
by written notice to the Company, if either one or
both of the Fund or the Underwriter respectively,
shall determine, in their sole judgment exercised
in good faith, that the Company has suffered a
material adverse change in its business,
operations, financial condition, or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(i) termination by the Company by written notice to the
Fund and the Underwriter, if the Company shall
determine, in its sole judgment exercised in good
faith, that the Fund or the Underwriter has
suffered a material adverse change in its business,
operations, financial condition or prospects since
the date of this Agreement or is the subject of
material adverse publicity; or
(j) termination by the Fund or the Underwriter by
written notice to the Company, if the Company gives
the Fund and the Underwriter the written notice
specified in Section 1.11(b) hereof and at the time
such notice was given there was no notice of
termination outstanding under any other provision
of this Agreement; provided, however, any
termination under this Section 10.1(j) shall be
effective forty-five days after the notice
specified in Section 1.11(b) was given.
<PAGE>
10.2 Notwithstanding any termination of this Agreement, the Fund and
the Underwriter shall at the option of the Company, continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts"). Specifically,
the owners of the Existing Contracts may be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the Fund upon the
making of additional purchase payments under the Existing Contracts. The parties
agree that this Section 10.2 shall not apply to any termination's under Article
VII and the effect of such Article VII terminations shall be governed by Article
VII of this Agreement. The parties further agree that this Section 10.2 shall
not apply to any terminations under Section 10.1(g) of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any termination of this Agreement, each party's
obligation under Article VIII to indemnify the other parties shall survive.
ARTICLE XI. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Nancy M. Morris, Esq.
If to the Company:
Century Life of America
2000 Heritage Way
Waverly, Iowa 50677
Attention: Chief Legal Officer
If to Underwriter:
T. Rowe Price Investment Services
100 East Pratt Street
Baltimore, Maryland 21202
Attention: John Cammack
ARTICLE XII. Miscellaneous
<PAGE>
12.1 All persons dealing with the Fund must look solely to the property
of the Fund, and in the case of a series company, the respective Designated
Portfolios listed on Schedule A hereto as though each such Designated Portfolio
had separately contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree that neither the
Board, officers, agents or shareholders of the Fund assume any personal
liability or responsibility for obligations entered into by or on behalf of the
Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written consent
of the affected party until such time as such information may come into the
public domain.
12.3 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Iowa Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner consistent with the
Iowa variable annuity laws and regulations and any other applicable law or
regulations.
12.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8 This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto.
12.9 The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutory accounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any) filed with any state or
federal regulatory body or otherwise made available
to the public, as soon as practical and in any event
within 90 days after the end of each fiscal year;
<PAGE>
(b) the Company's quarterly statements (statutory) (and
GAAP, if any) filed with any state of federal
regulatory body or otherwise made available to the
public, as soon as practical and in any event within
45 days after the end of each quarterly period;
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the
delivery thereof to stockholders and/or
policyholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the
Securities and Exchange Commission or any state
insurance regulatory, as soon as practical after the
filing thereof;
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
COMPANY: CENTURY LIFE OF AMERICA
By its authorized officer
By: /s/ Kevin Lentz
Title: Chief Operating Officer
Date: April 22, 1994
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Title: Vice President
Date: April 22, 1994
UNDERWRITER: T. ROWE PRICE INTERNATIONAL SERVICES, INC.
By its authorized officer
By: /s/ Henry H. Hopkins
Title: Vice President
Date: April 22, 1994
<PAGE>
SCHEDULE A
Name of Separate Account and
Date Established by Board of Contracts Funded by
Directors Separate Account Designated Portfolios
- --------- ---------------- ---------------------
Century Variable Annuity Variable Annuity T. Rowe Price
Account International Series, Inc.
File 33-73738 T. Rowe Price International
Established December 14, 811-6260 Stock Portfolio
1993
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of
the 22th day of April, 1994, by and among Century Life of America, T. Rowe Price
International Series, Inc. And T. Rowe Price Investment Services, Inc., the
parties hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on its
behalf by its duly authorized representative.
COMPANY: CENTURY LIFE OF AMERICA
By its authorized officer,
By: /s/ Daniel E. Meylink, Sr.
Title: President
Date: November 30, 1994
FUND: T. ROWE PRICE INTERNATIONAL SERIES, INC.
By its authorized officer,
By: /s/ George A. Murnahn
Title: Vice President
Date: December 21, 1994
UNDERWRITER: T. ROWE PRICE INVESTMENT SERVICES, INC.
By its authorized officer,
By: /s/ Nancy Morris
Title: Vice President
Date: December 21, 1994
<PAGE>
Revised: November 1994
SCHEDULE A
Name of Separate Account
and Date Established by Contracts Funded by
Board of Directors Separate Account Designated Portfolios
- ------------------ ---------------- ---------------------
Century Variable Annuity
Account Variable Annuity T. Rowe Price International
File 33-73738 Series, Inc.
Established December 14, 811-6260 T. Rowe Price International
1993 Stock Portfolio
Century Variable Account Variable Universal T. Rowe Price International
Life Series, Inc.
File 33-19718 T. Rowe Price International
Established August 16, 1983 Stock Portfolio
(effective upon SEC Order,
File No.812-9280)
Century Group Variable Group Variable Annuity T. Rowe Price International
Annuity Account Offered Exclusively Series, Inc.
to Qualified Plans T. Rowe Price International
Not Registered in Stock Portfolio (effective
Established August 16, 1983 Reliance on Qualified upon SEC Order, File No.
Plan Exemption to 812-9280)
Registration
Requirements
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
CENTURY LIFE OF AMERICA,
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 29th day of April, 1994, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), CENTURY LIFE OF AMERICA, an Iowa corporation (the "Company) on its own
behalf and on behalf of the Century Variable Annuity Account (the "Account") and
other segregated asset accounts of the Company (the "Accounts"), and
MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Investor Services, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (the "NASD");
<PAGE>
WHEREAS, CUNA Brokerage Services, Inc., the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. Sale of Trust Shares
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that Business Day,
as defined below) and which are available for purchase by such Accounts,
executing such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the Shares. For
purposes of this Section 1.1, the Company shall be the designee of the Trust for
receipt of such orders from Policy owners and receipt by such designee shall
constitute receipt by the Trust; provided that the Trust receives notice of such
orders by 9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the "NYSE")
is open for trading and on which the Trust calculates its net asset value
pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset value
on each day which the NYSE is open for trading. Notwithstanding the foregoing,
the Board of Trustees of the Trust (the "Board") may refuse to sell any Shares
to the Company and the Accounts, or suspend or terminate the offering of the
Shares if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
necessary in the best interests of the Shareholders of such Portfolio.
1.3 The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements with the
Trust and MFS (the "Participating Insurance Companies")and their separate
accounts, qualified pension and retirement plans and MFS or its affiliates. The
Trust and MFS will not sell Trust shares to any insurance company or separate
account unless an agreement containing provisions substantially the same as
Articles III and VII of this Agreement is in effect to govern such sales. The
Company will not resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed by Policy
holders on that Business Day), executing such requests on a daily basis at the
net asset value next computed after receipt by the Trust or its designee of the
request for redemption. For purposes of this Section 1.4, the Company shall be
the designee of the Trust for receipt of requests for redemption from Policy
owners and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 9:30
a.m. New York time on the next following Business Day.
<PAGE>
1.5. Purchase, redemption and exchange orders placed by the Company
shall be placed separately for each Portfolio and shall not be netted. However,
with respect to payment of the purchase price by the Company and of redemption
proceeds by the Trust, the Company and the Trust shall net purchase and
redemption orders with respect to each Portfolio and shall transmit one net
payment per Portfolio in accordance with Section 1.6.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an order to
purchase the Shares is made in accordance with the provisions of Section 1.1
hereof. In the event of net redemptions, the Trust shall pay the redemption
proceeds by 2:00 p.m. New York time on the next Business Day after an order to
redeem the Shares is made in accordance with the provisions of Section 1.4
hereof. All such payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the Accounts
or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or capital
gain distributions payable on the Shares. The Company hereby elects to receive
all such dividends and distributions as are payable on a Portfolio's Shares in
additional Shares of that Portfolio. The Trust shall notify the Company of the
number of Shares so issued as payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day as soon
as reasonably practical after the net asset value per share is calculated and
shall use its best efforts to make such net asset value per share available by
6:30 p.m. New York time. In the event that the Trust is unable to meet the 6:30
p.m. time stated herein, it shall provide additional time for the Company to
place orders for the purchase and redemption of Shares. Such additional time
shall be equal to the additional time which the Trust takes to make the net
asset value available to the Company. If the Trust provides materially incorrect
share net asset value information, the Company shall be entitled to an
adjustment to the number of shares purchased or redeemed to reflect the correct
net asset value per share. Any material error in the calculation or reporting of
net asset value per share, dividend or capital gains information shall be
reported promptly upon discovery to the Company.
ARTICLE II. Certain Representations, Warranties and Covenants
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold, and
distributed in compliance in all material respects with all applicable state and
federal laws, including without limitation the 1933 Act, the Securities Exchange
Act of 1934, as amended (the "1934 Act"), and the 1940 Act. The Company further
represents and warrants that it is an insurance company duly organized and in
good standing under applicable law and that it has legally and validly
established the Account as a segregated asset account under Iowa law and has
registered or, prior to any issuance or sale of the Policies, will register the
Accounts as unit investment trusts in accordance with the provisions of the 1940
Act (unless exempt therefrom) to serve as segregated investment accounts for the
Policies, and that it will maintain such registrations for so long as any
Policies are outstanding. The Company shall amend the registration statements
under the 1933 Act for the Policies and the registration statements under the
1940 Act for the Accounts from time to time as required in order to effect the
<PAGE>
continuous offering of the Policies or as may otherwise be required by
applicable law. The Company shall register and qualify the Policies for sale in
accordance with the securities laws of the various states only if and to the
extent deemed necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life insurance,
endowment or annuity contracts under applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), that it will make every effort to
maintain such treatment and that it will notify the Trust or MFS immediately
upon having a reasonable basis for believing that the Policies have ceased to be
so treated or that they might not be so treated in the future.
2.3 The Company represents and warrants that CUNA Brokerage Services,
Inc., the underwriter for the individual variable annuity and the variable life
policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that the Company
and CUNA Brokerage Services, Inc. will sell and distribute such policies in
accordance in all material respects with all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The Commonwealth
of Massachusetts and all applicable federal and state securities laws and that
the Trust is and shall remain registered under the 1940 Act. The Trust shall
amend the registration statement for its Shares under the 1933 Act and the 1940
Act from time to time as required in order to effect the continuous offering of
its Shares. The Trust shall register and qualify the Shares for sale in
accordance with the laws of the various states only if and to the extent deemed
necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and any applicable
regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it shall
perform its obligations for the Trust in compliance in all material respects
with any applicable federal securities laws and with the securities laws of The
Commonwealth of Massachusetts. MFS represents and warrants that it is not
subject to state securities laws other than the securities laws of The
Commonwealth of Massachusetts and that it is exempt from registration as an
investment adviser under the securities laws of The Commonwealth of
Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably request so that
it may carry out fully the obligations imposed upon it by the conditions
contained in the exemptive application pursuant to which the SEC has granted
exemptive relief to permit mixed and shared funding (the "Mixed and Shared
Funding Exemptive Order").
ARTICLE III. Prospectus and Proxy Statements; Voting
<PAGE>
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the Shares as
the Company may reasonably request for distribution to existing Policy owners
whose Policies are funded by such Shares. The Trust or its designee shall
provide the Company, at the Company's expense, with as many copies of the
current prospectus for the Shares as the Company may reasonably request for
distribution to prospective purchasers of Policies. If requested by the Company
in lieu thereof, the Trust or its designee shall provide such documentation
(including a "camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial printer)
and other assistance as is reasonably necessary in order for the parties hereto
once each year (or more frequently if the prospectus for the Shares is
supplemented or amended) to have the prospectus for the Policies and the
prospectus for the Shares printed together in one document; the expenses of such
printing to be apportioned between (a) the Company and (b) the Trust or its
designee in proportion to the number of pages of the Policy and Shares'
prospectuses, taking account of other relevant factors affecting the expense of
printing, such as covers, columns, graphs and charts; the Trust or its designee
to bear the cost of printing the Shares' prospectus portion of such document for
distribution to owners of existing Policies funded by the Shares and the Company
to bear the expenses of printing the portion of such document relating to the
Accounts; provided, however, that the Company shall bear all printing expenses
of such combined documents where used for distribution to prospective purchasers
or to owners of existing Policies not funded by the Shares. In the event that
the Company requests that the Trust or its designee provides the Trust's
prospectus in a "camera ready" or diskette format, the Trust shall be
responsible for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of providing
the prospectus in such format (e.g., typesetting expenses), and the Company
shall bear the expense of adjusting or changing the format to conform with any
of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and provide
such statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any owner
of a Policy funded by the Shares. The Trust or its designee, at the Company's
expense, shall print and provide such statement to the Company (or a master of
such statement suitable for duplication by the Company) for distribution to a
prospective purchaser who requests such statement or to an owner of a Policy not
funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's proxy
materials, reports to Shareholders and other communications to Shareholders in
such quantity as the Company shall reasonably require for distribution to Policy
owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of printing or
providing documents to the extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but are not
limited to, the printing of the Shares' prospectus or prospectuses for
distribution to prospective purchasers or to owners of existing Policies not
funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
<PAGE>
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from
Policy owners: and
(c) vote the Shares for which no instructions have been received in the
same proportion as the Shares of such Portfolio for which instructions
have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contract owners. The Company
will in no way recommend action in connection with or oppose or interfere with
the solicitation of proxies for the Shares held for such Policy owners. The
Company reserves the right to vote shares held in any segregated asset account
in its own right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate accounts
holding Shares calculates voting privileges in the manner required by the Mixed
and Shared Funding Exemptive Order. The Trust and MFS will notify the Company of
any changes of interpretations or amendments to the Mixed and Shared Funding
Exemptive Order.
ARTICLE IV. Sales Material and Information
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the Trust, or
any affiliate of MFS are named, at least three (3) Business Days prior to its
use. No such material shall be used if the Trust, MFS, or their respective
designees reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS or concerning the Trust or any
other such entity in connection with the sale of the Policies other than the
information or representations contained in the registration statement,
prospectus or statement of additional information for the Shares, as such
registration statement, prospectus and statement of additional information may
be amended or supplemented from time to time, or in reports or proxy statements
for the Trust, or in sales literature or other promotional material approved by
the Trust, MFS or their respective designees, except with the permission of the
Trust, MFS or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a prompt and
timely basis. The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Trust, MFS or any of their
affiliates which is intended for use only by brokers or agents selling the
Policies (i.e., information that is not intended for distribution to Policy
holders or prospective Policy holders) is so used, and neither the Trust, MFS
nor any of their affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or the Accounts is named, at
least three (3) Business Days prior to its use. No such material shall be used
if the company or its designee reasonably objects to such use within three (3)
Business Days after receipt of such material.
4.4 The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf of the
Company or concerning the Company, the Accounts, or the Policies in connection
with the sale of the Policies other than the information or representations
<PAGE>
contained in a registration statement, prospectus, or statement of additional
information for the Policies, as such registration statement, prospectus and
statement of additional information may be amended or supplemented from time to
time, or in reports for the Accounts, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to respond to any
request for approval on a prompt and timely basis. The parties hereto agree that
this Section 4.4 is neither intended to designate nor otherwise imply that MFS
is an underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least one
complete copy of all registration statements, prospectuses, statements of
additional information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Policies, or
to the Trust or its Shares, prior to or contemporaneously with the filing of
such document with the SEC or other regulatory authorities. The Company and the
Trust shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates to the
Policies, the Trust or its Shares, and the party that was the subject of the
examination shall provide the other party with a copy of relevant portions of
any "deficiency letter" or other correspondence or written report regarding any
such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio, and of
any material change in the Trust's registration statement, particularly any
change resulting in change to the registration statement or prospectus or
statement of additional information for any Account. The Trust and MFS will
cooperate with the Company so as to enable the Company to solicit proxies from
Policy owners or to make changes to its prospectus, statement of additional
information or registration statement, in an orderly manner. The Trust and MFS
will make reasonable efforts to attempt to have changes affecting Policy
prospectuses become effective simultaneously with the annual updates for such
prospectuses.
4.7. For purposes of this Article IV and Article VIII, the phrase
"sales literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
video tape display, signs or billboards, motion pictures, or other public
media), and sales literature (such as brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published articles), distributed or made
generally available to customers or the public, educational or training
materials or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. Fees and Expenses
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other compensation to
the Trust, except that if the Trust or any Portfolio adopts and implements a
plan pursuant to Rule 12b-1 under the 1940 Act to finance distribution and
Shareholder servicing expenses, then, subject to obtaining any required
exemptive orders or regulatory approvals, the Trust may make payments to the
Company or to the underwriter for the Policies if and in amounts agreed to by
the Trust in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof, reimburse other
parties for expenses initially paid by one party but allocated to another party.
In addition, nothing herein shall prevent the parties hereto from otherwise
<PAGE>
agreeing to perform, and arranging for appropriate compensation for, other
services relating to the Trust and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal and
state laws, including preparation and filing of the Trust's registration
statement, and payment of filing fees and registration fees; preparation and
filing of the Trust's proxy materials and reports to Shareholders; setting in
type and printing its prospectus and statement of additional information (to the
extent provided by and as determined in accordance with Article III above);
setting in type and printing the proxy materials and reports to Shareholders (to
the extent provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by any
federal or state law with respect to its Shares; all taxes on the issuance or
transfer of the Shares; and the costs of distributing the Trust's prospectuses
and proxy materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any, under
Rule 12b-1 under the 1940 Act. The Trust shall not bear any expenses of
marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and of
distributing the Trust's Shareholder reports and proxy materials to Policy
owners. The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal securities
and state insurance laws; the cost of preparing, printing and distributing the
Policy prospectus and statement of additional information; and the cost of
preparing, printing and distributing annual individual account statements for
Policy owners as required by state insurance laws.
ARTICLE VI. Diversification and Related Limitations
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817(h)(l) of the
Code and Treas. Reg. 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, as they may be amended
from time to time (and any revenue rulings, revenue procedures, notices, and
other published announcements of the Internal Revenue Service interpreting these
sections), as if those requirements applied directly to each such Portfolio. In
the event that any Portfolio is not so diversified at the end of any applicable
quarter, the Trust and MFS will make every effort to (a) adequately diversify
the Portfolio so as to achieve compliance within the grace period afforded by
Treas. Reg. 1.817.5 and (b) notify the Company.
6.2. The Trust and MFS represent that each Portfolio of the Trust will
elect to be qualified as a Regulated Investment Company under Subchapter M of
the Code and that every effort will be made to maintain such qualification
(under Subchapter M or any successor or similar provision) and that the Trust or
its designee will notify the Company promptly upon having a reasonable basis for
believing that any Portfolio of the Trust has ceased to so qualify or that any
Portfolio might not so qualify in the future.
ARTICLE VII. Potential Material Conflicts
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of the
variable annuity contract owners and the variable life insurance policy owners
of the Company and/or affiliated companies ("contract owners") investing in the
Trust. The Board shall have the sole authority to determine if a material
irreconcilable conflict exists, and such determination shall be binding on the
<PAGE>
Company only if approved in the form of a resolution by a majority of the Board,
or a majority of the disinterested trustees of the Board. The Board will give
prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set forth in the
Trust's exemptive application pursuant to which the SEC has granted exemptive
relief to permit mixed and shared funding by providing the Board, as it may
reasonably request, with all information necessary for the Board to consider any
issues raised and agrees that it will be responsible for promptly reporting any
potential or existing conflicts of which it is aware to the Board including, but
not limited to, an obligation by the Company to inform the Board whenever
contract owner voting instructions are disregarded. The Company also agrees
that, if a material irreconcilable conflict arises, it will at its own cost
remedy such conflict up to and including (a) withdrawing the assets allocable to
some or all of the Accounts from the Trust or any Portfolio and reinvesting such
assets in a different investment medium, including (but not limited to) another
Portfolio of the Trust, or submitting to a vote of all affected contract owners
whether to withdraw assets from the Trust or any Portfolio and reinvesting such
assets in a different investment medium and, as appropriate, segregating the
assets attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract owners
the option of segregating the assets attributable to their contracts or
policies, and (b) establishing a new registered management investment company
and segregating the assets underlying the Policies, unless a majority of Policy
owners materially adversely affected by the conflict have voted to decline the
offer to establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately remedies any
material irreconcilable conflict. In the event that the Board determines that
any proposed action does not adequately remedy any material irreconcilable
conflict, the Company will withdraw from investment in the Trust each of the
Accounts designated by the disinterested trustees and terminate this Agreement
within six (6) months after the Board informs the Company in writing of the
foregoing determination; provided, however, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the disinterested
trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shares
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees, officers and
each person, if any, who controls the Trust or MFS within the meaning of Section
<PAGE>
15 of the 1933 Act, and any agents or employees of the foregoing (each an
"Indemnified Party," or collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or expenses (including reasonable counsel fees) to which an Indemnified Party
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Shares or the Policies and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
registration statement, prospectus or statement of additional
information for the Policies or contained in the Policies or sales
literature or other promotional material for the Policies (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in
reasonable reliance upon and in conformity with information furnished
to the Company or its designee by or on behalf of the Trust or MFS for
use in the registration statement, prospectus or statement of
additional information for the Policies or in the Policies or sales
literature or other promotional material (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus, statement of additional
information or sales literature or other promotional material of the
Trust not supplied by the Company or its designee, or persons under its
control and on which the Company has reasonably relied) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the registration statement,
prospectus, statement of additional information, or sales literature or
other promotional literature of the Trust, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company; or
(e) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of the
agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. Indemnification by the Trust
The Trust agrees to indemnify and hold harmless the Company and each of
its directors and officers and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act, and any agents or employees of
the foregoing (each an "Indemnified Party," or collectively, the "Indemnified
<PAGE>
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages liabilities (including amounts paid in settlement with the written
consent of the Trust) or expenses (including reasonable counsel fees) to which
any Indemnified Party may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement, prospectus, statement of additional information
or sales literature or other promotional material of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in
reasonable reliance upon and in conformity with information furnished
to the Trust, MFS, the Underwriter or their respective designees by or
on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust or in
sales literature or other promotional material for the Trust (or any
amendment or supplement) or otherwise for use in connection with the
sale of the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or representations contained in
the registration statement, prospectus, statement of additional
information or sales literature or other promotional material for the
Policies not supplied by the Trust, MFS, the Underwriter or any of
their respective designees or persons under their respective control
and on which any such entity has reasonably relied) or wrongful conduct
of the Trust or persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification and other qualification
requirements specified in Article VI of this Agreement) or arise out of
or result from any other material breach of this Agreement by the
Trust; or
(d) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset value per
share or dividend or capital gain distribution rate; or
(e) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms of the
Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3 In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including
without limitation, the Company, or any Participating Insurance Company or any
Policy holder, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any representation,
warranty, and/or covenant made by the Company hereunder or by any Participating
Insurance Company under an agreement containing substantially similar
representations, warranties and covenants; (ii) the failure by the Company or
any Participating Insurance Company to maintain its segregated asset account
(which invests in any Portfolio) as a legally and validly established segregated
asset account under applicable state law and as a duly registered unit
investment trust under the provisions of the 1940 Act (unless exempt therefrom);
or (iii) the failure by the Company or any Participating Insurance Company to
<PAGE>
maintain its variable annuity and/or variable life insurance contracts (with
respect to which any Portfolio serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable provisions of the
Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to any
losses, claims, damages, liabilities or expenses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's willful
misfeasance, willful misconduct, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5 of commencement of action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this section,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any Indemnified Party otherwise than under this section. In case any
such action is brought against any Indemnified Party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying party of its intention to assume the defense of an
action, the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of its
respective officers, directors, trustees, employees or 1933 Act control persons
in connection with the Agreement, the issuance or sale of the Policies, the
operation of the Accounts, or the sale or acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this Article VIII.
The indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. Applicable Law
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE X. Notice of Formal Proceedings
The Trust, MFS, and the Company agree that each such party shall
promptly notify the other parties to this Agreement, in writing, of the
institution of any formal proceedings brought against such party or its
<PAGE>
designees by the NASD, the SEC, or any insurance department or any other
regulatory body regarding such party's duties under this Agreement or related to
the sale of the Policies, the operation of the Accounts, or the purchase of the
Shares.
ARTICLE XI. Termination
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares
of Portfolios are not reasonably available to meet the requirements of
the Policies or are not "appropriate funding vehicles" for the
Policies, as reasonably determined by the Company. Without limiting the
generality of the foregoing, the Shares of a Portfolio would not be
"appropriate funding vehicles" if, for example, such Shares did not
meet the diversification or other requirements referred to in Article
VI hereof; or if the Portfolio did not qualify under Subchapter M of
the Code, as referred to in Section 6.2 hereof (or the Company
reasonably believes the shares or the Portfolio may not so comply or
qualify); or if the Company would be permitted to disregard Policy
owner voting instructions pursuant to Rule 6e-2 or 6e-3(T) under the
1940 Act. Prompt notice of the election to terminate for such cause and
an explanation of such cause shall be furnished to the Trust by the
Company; or
(c) at the option of the Trust or MFS upon institution of
formal proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Policies, the operation of the Accounts, or the purchase of the Shares;
or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body
regarding the Trust's or MFS' duties under this Agreement or related to
the sale of the shares; or
(e) at the option of the Company, the Trust or MFS upon
receipt of any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any subaccounts)
to substitute the shares of another investment company for the
corresponding Portfolio Shares in accordance with the terms of the
Policies for which those Portfolio Shares had been selected to serve as
the underlying investment media. The Company will give thirty (30)
day's prior written notice to the Trust of the date of any proposed
vote or other action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice
to the Company, if either one or both of the Trust or MFS respectively,
shall determine, in their sole judgment exercised in good faith, that
the Company has suffered a material adverse change in its business,
operations, financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Trust
and MFS, if the Company shall determine, in its sole judgment exercised
in good faith, that the Trust or MFS has suffered a material adverse
<PAGE>
change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section ll.l(a) may be exercised for cause
or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem the Shares attributable to the Policies (as opposed to the
Shares attributable to the Company's assets held in the Accounts), and the
Company shall not prevent Policy owners from allocating payments to a Portfolio
that was otherwise available under the Policies, until thirty (30) days after
the Company shall have notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this Agreement,
for all Policies in effect on the effective date of termination of this
Agreement (the "Existing Policies"), except as otherwise provided under Article
VII of this Agreement. Specifically, without limitation, the owners of the
Existing Policies shall be permitted to transfer or reallocate investments under
the Policies, redeem investments in any Portfolio and/or invest in the Trust
upon the making of additional purchase payments under the Existing Policies.
ARTICLE XII. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, Secretary
If to the Company:
Century Life of America
2000 Heritage Way
Waverly, Iowa 50677
Attn: Chief Legal Officer
<PAGE>
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. Miscellaneous
13.1. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Policies and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement or as otherwise required by applicable law or regulation, shall
not disclose, disseminate or utilize such names and addresses and other
confidential information without the express written consent of the affected
party until such time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities (including
without limitation the SEC, the NASD, and state insurance regulators) relating
to this Agreement or the transactions contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of The Commonwealth of Massachusetts, and the Company agrees that this
Agreement is executed on behalf of the Trust by an officer of the Trust as an
officer and not individually, and that the obligations of or arising out of this
Agreement are not binding upon any of the trustees, officers, or Shareholders
individually but are binding only upon the assets and property of the Trust or
the Portfolios of the Trust to which such obligations relate.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
CENTURY LIFE OF AMERICA
By its authorized officer,
By: /s/ Kevin Lentz
Title: Chief Operating Officer
Date: April 27, 1994
MFS VARIABLE INSURANCE TRUST
By its authorized officer,
By: /s/ A. Keith Brodkin
Title: President
Date: April 29, 1994
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
Title: Senior Executive Vice President
Date: April 29, 1994
<PAGE>
As of April 29, 1994
SCHEDULE A
Accounts, Policies and Portfolios Subject
to the Participation Agreement
Name of Separate Account Portfolios
and Date Established by Policies Funded by Applicable
Board of Directors Separate Account to Policies
- ------------------ ---------------- -----------
Century Variable Annuity
Account (December 14, 1993) Individual Variable Annuity World Government Series
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of
the 29th day of April, 1994, by and among MFS(R) Variable Insurance Trust SM,
Century Life of America, and Massachusetts Financial Services Company, the
parties hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on its
behalf by its duly authorized representative. With respect to the Century
Variable Account, the Amendment is expected to take effect January 2, 1995. With
respect to the Century Group Variable Annuity Account, the Amendment is expected
to take effect in early 1995.
CENTURY LIFE OF AMERICA
By its authorized officer,
By: /s/ Daniel E. Meylink, Sr.
Title: President
Date: November 30, 1994
MFS VARIABLE INSURANCE TRUST
By its authorized officer,
By: /s/ Stephen E. Caven
Title: President
Date: 11/30/94
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
Title: Senior Executive Vice President
Date: 11/30/94
<PAGE>
Revised: 1994
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS SUBJECT TO THE
PARTICIPATION AGREEMENT
Name and Separate Account and Policies Funded by Portfolios Applicable
Date Established by Board of Directors Separate Account to Policies
- -------------------------------------- ---------------- -----------
Century Variable Annuity Account Variable Annuity World Governments
File 33-73738 Series
Established December 14, 1993 811-6260
Century Variable Account Variable Universal World Governments
Life Series
Established August 16, 1983 File 33-19718
Century Group Variable Annuity Account Group Variable Annuity World Governments
Offered Exclusively Series
Established August 16, 1983 to qualified Plans
Not Registered in
Reliance on Qualified
Plan Exemption to
Registration
Requirements
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of
the 29th day of April, 1994, by and among MFS(R) Variable Insurance Trust sm,
Century Life of America, and Massachusetts Financial Services Company, the
parties hereby agree to an amended Schedule A as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on its
behalf by its duly authorized representative. The Amendment shall take effect on
May 1, 1996.
CENTURY LIFE OF AMERICA
By its authorized officer,
By: /s/ Michael B. Kitchen
Title: President
Date:
MFS VARIABLE INSURANCE TRUST
By its authorized officer,
By: /s/ Stephen E. Caven
Stephen E. Caven
Secretary
Date: 2/2/96
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By: /s/ Arnold D. Scott
Arnold D. Scott
Senior Executive Vice President
Date: 2/1/96
<PAGE>
As of May 1, 1996
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
Name of Separate Account
and Date Established Policies Funded Portfolios
by Board of Directors by Separate Account Applicable to Policies
- --------------------- ------------------- ---------------------
Century Variable Annuity Variable Annuity File World Governments Series
Account Est. 12/14/93 33-73738 Emerging Growth Series
811-6260
Century Variable Variable Universal Life World Governments Series
Account Est. 8/16/83 33-19718 Emerging Growth Series
Century Group Variable Group Variable Annuity World Governments Series
Annuity Account Est. 8/16/93 Offered Exclusively to Emerging Growth Sereis
Qualified Plans Not Registered
in Reliance on Qualified Plan
Exemption to Registration Requirements
<PAGE>
EXHIBIT 9
BARBARA L. SECOR
Assistant Vice President, Associate General Counsel
and Secretary
Telephone:
(319) 352-1000, ext. 2157
FAX (319) 352-5987
February 12, 1996
CENTURY LIFE OF AMERICA
2000 HERITAGE WAY
WAVERLY IA 50677
Ladies and Gentlemen:
With reference to the registration statement on Form N-4 to be filed by Century
Life of America (the "Company") and Century Variable Annuity Account (the
"Account") with the Securities and Exchange Commission for the purpose of
registering under the Securities Act of 1933, as amended, deferred variable
annuity contracts (the "Contracts"), I have examined such documents and such law
as I considered necessary and appropriate, and on the basis of such examination,
it is my opinion that:
1. The Company is a corporation duly organized and validly existing as a
mutual life insurance company under the laws of the State of Iowa and
is duly authorized by the Insurance Division of the Department of
Commerce of the State of Iowa to issue the Contracts.
2. The Account is a duly authorized and existing separate account
established pursuant to the provisions of Section 508A.1 of the Iowa
Code (1993).
3. Unless provided to the contrary under the contracts, that portion of
the assets of the Account equal to the reserves and other contracts
liabilities with respect to the Account will not be chargeable with
liabilities arising out of any other business that the Company may
conduct.
4. The Contracts, when issued as contemplated by the Form N-4 registration
statement, will constitute legal, validly issued and binding
obligations of the Company.
I hereby consent to the filing of this opinion as an exhibit to the Form N-4
registration statement for the Contracts and the Account and to the use of my
name under the caption "Legal Matters" in the statement of additional
information.
Sincerely,
/s/ Barbara L. Secor
Barbara L. Secor
Assistant Vice President & Associate General Counsel
CENTURY LIFE OF AMERICA
<PAGE>
EXHIBIT 10
The Board of Directors of Century Life of America
and Contract Owners of Century Variable Annuity Account:
We consent to the use of our reports included herein and to the reference to our
Firm under the heading "Condensed Financial Information" in the Prospectus and
"Experts" in the Statement of Additional Information of the Century Variable
Annuity Account.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Des Moines, Iowa
April 19, 1996
<PAGE>
EXHIBIT 13
MEMBERS Variable Annuity - Hypothetical Performance - Balanced
Ending Date for Period 12/31/95 Inception Date 01/03/85
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 01/03/85
Beginning Units 101.112235 101.112235 107.991361 132.978723 200.000000 239.234450
Beginning Price 9.89 9.89 9.26 7.52 5.00 4.18
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 4,014
Units for Annual Charge 0.121348 0.121348 0.388345 0.796481 2.388641 3.138580
Ending Units 100.990887 100.990887 107.603016 132.182242 197.611359 236.095870
Ending Price 11.92 11.92 11.92 11.92 11.92 11.92
Contract Value 1,203.81 1,203.81 1,282.63 1,575.61 2,355.53 2,814.26
Return w/o Surr Chg 20.38% 20.38% 8.65% 9.52% 8.95% 9.87%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 0.00
ERV 1,140.81 1,140.81 1,237.63 1,548.61 2,355.53 2,814.26
Return w Surr Chrg 14.08% 14.08% 7.37% 9.14% 8.95% 9.87%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,203.81 1,203.81 1,282.63 1,575.61 2,355.53 2,814.26
Cumm Return w/o Surr Chg 20.38% 20.38% 28.26% 57.56% 135.55% 181.43%
ERV 1,140.81 1,140.81 1,237.63 1,548.61 2,355.53 2,814.26
Cumm Return w Surr Chg 14.08% 14.08% 23.76% 54.86% 135.55% 181.43%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Balanced
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 101.112235 101.112235 ERR ERR ERR 100.000000
Beginning Price 9.89 9.89 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.121348 0.121348 ERR ERR ERR 0.189982
Ending Units 100.990887 100.990887 ERR ERR ERR 99.810018
Ending Price 11.92 11.92 11.92 11.92 11.92 11.92
Contract Value 1,203.81 1,203.81 ERR ERR ERR 1,189.74
Return w/o Surr Chg 20.38% 20.38% ERR ERR ERR 11.60%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,140.81 1,140.81 ERR ERR ERR 1,135.74
Return w Surr Chrg 14.08% 14.08% ERR ERR ERR 8.37%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,203.81 1,203.81 ERR ERR ERR 1,189.74
Cumm Return w/o Surr Chg 20.38% 20.38% ERR ERR ERR 18.97%
ERV 1,140.81 1,140.81 ERR ERR ERR 1,135.74
Cumm Return w Surr Chg 14.08% 14.08% ERR ERR ERR 13.57%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Bond
Ending Date for Period 12/31/95 Inception Date 01/03/85
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 01/03/85
Beginning Units 101.112235 101.112235 103.519669 123.001230 170.940171 200.400802
Beginning Price 9.89 9.89 9.66 8.13 5.85 4.99
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 4,014
Units for Annual Charge 0.121348 0.121348 0.372264 0.736721 2.041574 2.629111
Ending Units 100.990887 100.990887 103.147405 122.264509 168.898597 197.771691
Ending Price 11.36 11.36 11.36 11.36 11.36 11.36
Contract Value 1,147.26 1,147.26 1,171.75 1,388.92 1,918.69 2,246.69
Return w/o Surr Chg 14.73% 14.73% 5.43% 6.79% 6.73% 7.64%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 0.00
ERV 1,084.26 1,084.26 1,126.75 1,361.92 1,918.69 2,246.69
Return w Surr Chrg 8.43% 8.43% 4.06% 6.37% 6.73% 7.64%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,147.26 1,147.26 1,171.75 1,388.92 1,918.69 2,246.69
Cumm Return w/o Surr Chg 14.73% 14.73% 17.18% 38.89% 91.87% 124.67%
ERV 1,084.26 1,084.26 1,126.75 1,361.92 1,918.69 2,246.69
Cumm Return w Surr Chg 8.43% 8.43% 12.68% 36.19% 91.87% 124.67%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Bond
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 101.112235 101.112235 ERR ERR ERR 100.000000
Beginning Price 9.89 9.89 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.121348 0.121348 ERR ERR ERR 0.189982
Ending Units 100.990887 100.990887 ERR ERR ERR 99.810018
Ending Price 11.36 11.36 11.36 11.36 11.36 11.36
Contract Value 1,147.26 1,147.26 ERR ERR ERR 1,133.84
Return w/o Surr Chg 14.73% 14.73% ERR ERR ERR 8.26%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,084.26 1,084.26 ERR ERR ERR 1,079.84
Return w Surr Chrg 8.43% 8.43% ERR ERR ERR 4.97%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,147.26 1,147.26 ERR ERR ERR 1,133.84
Cumm Return w/o Surr Chg 14.73% 14.73% ERR ERR ERR 13.38%
ERV 1,084.26 1,084.26 ERR ERR ERR 1,079.84
Cumm Return w Surr Chg 8.43% 8.43% ERR ERR ERR 7.98%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Capital Appreciation
Ending Date for Period 12/31/95 Inception Date 01/03/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 01/03/94
Beginning Units 100.000000 100.000000 ERR ERR ERR 103.842160
Beginning Price 10.00 10.00 ERR ERR ERR 9.63
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 727
Units for Annual Charge 0.120013 0.120013 ERR ERR ERR 0.248076
Ending Units 99.879987 99.879987 ERR ERR ERR 103.594084
Ending Price 12.90 12.90 12.90 12.90 12.90 12.90
Contract Value 1,288.45 1,288.45 ERR ERR ERR 1,336.36
Return w/o Surr Chg 28.84% 28.84% ERR ERR ERR 15.67%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,225.45 1,225.45 ERR ERR ERR 1,282.36
Return w Surr Chrg 22.55% 22.55% ERR ERR ERR 13.30%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,288.45 1,288.45 ERR ERR ERR 1,336.36
Cumm Return w/o Surr Chg 28.84% 28.84% ERR ERR ERR 33.64%
ERV 1,225.45 1,225.45 ERR ERR ERR 1,282.36
Cumm Return w Surr Chg 22.55% 22.55% ERR ERR ERR 28.24%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Capital Appreciation
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 100.000000 100.000000 ERR ERR ERR 100.000000
Beginning Price 10.00 10.00 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.120013 0.120013 ERR ERR ERR 0.189982
Ending Units 99.879987 99.879987 ERR ERR ERR 99.810018
Ending Price 12.90 12.90 12.90 12.90 12.90 12.90
Contract Value 1,288.45 1,288.45 ERR ERR ERR 1,287.55
Return w/o Surr Chg 28.84% 28.84% ERR ERR ERR 17.30%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,225.45 1,225.45 ERR ERR ERR 1,233.55
Return w Surr Chrg 22.55% 22.55% ERR ERR ERR 14.17%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,288.45 1,288.45 ERR ERR ERR 1,287.55
Cumm Return w/o Surr Chg 28.84% 28.84% ERR ERR ERR 28.76%
ERV 1,225.45 1,225.45 ERR ERR ERR 1,233.55
Cumm Return w Surr Chg 22.55% 22.55% ERR ERR ERR 23.36%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Growth and Income
Ending Date for Period 12/31/95 Inception Date 01/03/85
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 01/03/85
Beginning Units 101.832994 101.832994 114.025086 150.150150 228.832952 279.329609
Beginning Price 9.82 9.82 8.77 6.66 4.37 3.58
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 4,014
Units for Annual Charge 0.122213 0.122213 0.410043 0.89933 2.732999 3.664599
Ending Units 101.710781 101.710781 113.615043 149.250820 226.099953 275.665010
Ending Price 12.76 12.76 12.76 12.76 12.76 12.76
Contract Value 1,297.83 1,297.83 1,449.73 1,904.44 2,885.04 3,517.49
Return w/o Surr Chg 29.78% 29.78% 13.18% 13.75% 11.18% 12.12%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 0.00
ERV 1,234.83 1,234.83 1,404.73 1,877.44 2,885.04 3,517.49
Return w Surr Chrg 23.48% 23.48% 11.99% 13.43% 11.18% 12.12%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,297.83 1,297.83 1,449.73 1,904.44 2,885.04 3,517.49
Cumm Return w/o Surr Chg 29.78% 29.78% 44.97% 90.44% 188.50% 251.75%
ERV 1,234.83 1,234.83 1,404.73 1,877.44 2,885.04 3,517.49
Cumm Return w Surr Chg 23.48% 23.48% 40.47% 87.74% 188.50% 251.75%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Growth and Income
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 101.832994 101.832994 ERR ERR ERR 100.000000
Beginning Price 9.82 9.82 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.122213 0.122213 ERR ERR ERR 0.189982
Ending Units 101.710781 101.710781 ERR ERR ERR 99.810018
Ending Price 12.76 12.76 12.76 12.76 12.76 12.76
Contract Value 1,297.83 1,297.83 ERR ERR ERR 1,273.58
Return w/o Surr Chg 29.78% 29.78% ERR ERR ERR 16.50%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,234.83 1,234.83 ERR ERR ERR 1,219.58
Return w Surr Chrg 23.48% 23.48% ERR ERR ERR 13.36%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,297.83 1,297.83 ERR ERR ERR 1,273.58
Cumm Return w/o Surr Chg 29.78% 29.78% ERR ERR ERR 27.36%
ERV 1,234.83 1,234.83 ERR ERR ERR 1,219.58
Cumm Return w Surr Chg 23.48% 23.48% ERR ERR ERR 21.96%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Money Market
Ending Date for Period 12/31/95 Inception Date 01/03/85
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 01/03/85
Beginning Units 98.425197 98.425197 101.626016 107.526882 142.653352 151.057402
Beginning Price 10.16 10.16 9.84 9.30 7.01 6.62
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 4,014
Units for Annual Charge 0.118123 0.118123 0.365455 0.644037 1.703738 1.981762
Ending Units 98.307074 98.307074 101.260561 106.882845 140.949614 149.075640
Ending Price 10.55 10.55 10.55 10.55 10.55 10.55
Contract Value 1,037.14 1,037.14 1,068.30 1,127.61 1,487.02 1,572.75
Return w/o Surr Chg 3.71% 3.71% 2.23% 2.43% 4.05% 4.20%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 0.00
ERV 974.14 974.14 1,023.30 1,100.61 1,487.02 1,572.75
Return w Surr Chrg -2.59% -2.59% 0.77% 1.94% 4.05% 4.20%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,037.14 1,037.14 1,068.30 1,127.61 1,487.02 1,572.75
Cumm Return w/o Surr Chg 3.71% 3.71% 6.83% 12.76% 48.70% 57.28%
ERV 974.14 974.14 1,023.30 1,100.61 1,487.02 1,572.75
Cumm Return w Surr Chg -2.59% -2.59% 2.33% 10.06% 48.70% 57.28%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - Money Market
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 98.425197 98.425197 ERR ERR ERR 100.000000
Beginning Price 10.16 10.16 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.118123 0.118123 ERR ERR ERR 0.189982
Ending Units 98.307074 98.307074 ERR ERR ERR 99.810018
Ending Price 10.55 10.55 10.55 10.55 10.55 10.55
Contract Value 1,037.14 1,037.14 ERR ERR ERR 1,053.00
Return w/o Surr Chg 3.71% 3.71% ERR ERR ERR 3.31%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 974.14 974.14 ERR ERR ERR 999.00
Return w Surr Chrg -2.59% -2.59% ERR ERR ERR -0.06%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,037.14 1,037.14 ERR ERR ERR 1,053.00
Cumm Return w/o Surr Chg 3.71% 3.71% ERR ERR ERR 5.30%
ERV 974.14 974.14 ERR ERR ERR 999.00
Cumm Return w Surr Chg -2.59% -2.59% ERR ERR ERR -0.10%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - International Stock
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 100.100100 100.100100 ERR ERR ERR 100.000000
Beginning Price 9.99 9.99 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.120133 0.120133 ERR ERR ERR 0.189982
Ending Units 99.979967 99.979967 ERR ERR ERR 99.810018
Ending Price 10.96 10.96 10.96 10.96 10.96 10.96
Contract Value 1,095.78 1,095.78 ERR ERR ERR 1,093.92
Return w/o Surr Chg 9.58% 9.58% ERR ERR ERR 5.83%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,032.78 1,032.78 ERR ERR ERR 1,039.92
Return w Surr Chrg 3.28% 3.28% ERR ERR ERR 2.50%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,095.78 1,095.78 ERR ERR ERR 1,093.92
Cumm Return w/o Surr Chg 9.58% 9.58% ERR ERR ERR 9.39%
ERV 1,032.78 1,032.78 ERR ERR ERR 1,039.92
Cumm Return w Surr Chg 3.28% 3.28% ERR ERR ERR 3.99%
</TABLE>
MEMBERS Variable Annuity - Hypothetical Performance - World Governments
Ending Date for Period 12/31/95 Inception Date 06/01/94
Avg Annual Charge 0.12%
Daily Equivalent 0.00000329
Initial Investment 1,000.00
<TABLE>
Average Annual Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Beginning Date 12/31/94 12/31/94 12/31/92 12/31/90 12/31/85 06/01/94
Beginning Units 99.900100 99.900100 ERR ERR ERR 100.000000
Beginning Price 10.01 10.01 ERR ERR ERR 10.00
Ending Date 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
Days in Period 365 365 1,095 1,826 3,652 578
Units for Annual Charge 0.119893 0.119893 ERR ERR ERR 0.189982
Ending Units 99.780207 99.780207 ERR ERR ERR 99.810018
Ending Price 11.29 11.29 11.29 11.29 11.29 11.29
Contract Value 1,126.52 1,126.52 ERR ERR ERR 1,126.86
Return w/o Surr Chg 12.65% 12.65% ERR ERR ERR 7.83%
Surrender Charge 63.00 63.00 45.00 27.00 0.00 54.00
ERV 1,063.52 1,063.52 ERR ERR ERR 1,072.86
Return w Surr Chrg 6.35% 6.35% ERR ERR ERR 4.54%
</TABLE>
<TABLE>
Cummulative Returns
<CAPTION>
Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception
<S> <C> <C> <C> <C> <C> <C>
Contract Value 1,126.52 1,126.52 ERR ERR ERR 1,126.86
Cumm Return w/o Surr Chg 12.65% 12.65% ERR ERR ERR 12.69%
ERV 1,063.52 1,063.52 ERR ERR ERR 1,072.86
Cumm Return w Surr Chg 6.35% 6.35% ERR ERR ERR 7.29%
</TABLE>
VA--MONEY MARKET FUND
12/31/95 01/31/96
AB
VA SEVEN-DAY AVERAGE YIELD:
DAILY
DIVIDEND
FACTOR, PER LESS ANNUAL CHARGE
DATE DISPLAY RATE TABLE & M&E CHARGES
---- ------------------ -------------
Dec 31, 1995 0.000137047 0.000041646 0.000095401
Dec 30, 1995 0.000137047 0.000041646 0.000095401
Dec 29, 1995 0.000136876 0.000041646 0.000095230
Dec 28, 1995 0.000136667 0.000041646 0.000095021
Dec 27, 1995 0.000136091 0.000041646 0.000094445
Dec 26, 1995 0.000133742 0.000041646 0.000092096
Dec 25, 1995 0.000133742 0.000041646 0.000092096
-----------
SUM 0.000659689 BASE PERIOD RETURN
DIV BY # DAYS 7
-----------
AVERAGE 0.000094241
TIMES # DAYS IN YR 365
-----------
SEVEN DAY YIELD 3.44%
===========
VA SEVEN-DAY EFFECTIVE YIELD:
BASE PERIOD
RETURN (ABOVE) 0.0006596888
PLUS 1 1
------------
1.0006596888
COMPOUNDED:
TO 365/7 POWER 1.0349847791
LESS 1 -1
------------
EFFECTIVE YIELD 3.50%
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, James C. Barbre, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald
T.Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys
and agents for me and in my name as director of Century Life of America on
behalf of Century Life of America and Century Variable Annuity Account (or
otherwise) with full power to prepare, review, execute, deliver and file
Post-Effective Amendments with the Securities and Exchange Commission for the
Century Variable Annuity Account, Registration No. 33-73738. This Power of
Attorney shall terminate at the end of my appointed term as Director in May
1999.
WITNESS MY HAND AND SEAL this 11th day of January, 1996.
/s/ James C. Barbre
James C. Barbre
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, W. F. Broxterman, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 8th day of January, 1996.
/s/ W. F. Broxterman
W. F. Broxterman
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Ralph B. Canterbury, a director of Century
Life of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
<PAGE>
WITNESS MY HAND AND SEAL this 8th day of January, 1996.
/s/ Ralph B. Canterbury
Ralph B. Canterbury
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, James A. Halls, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director in May 1999.
WITNESS MY HAND AND SEAL this 8th day of January, 1996.
/s/ James A. Halls
James A. Halls
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Jerald R. Hinrichs, a director of Century
Life of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 8th day of January, 1996.
/s/ Jerald R. Hinrichs
Jerald R. Hinrichs
Director, Century Life of America
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Michael B. Kitchen, a director of Century
Life of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director in May 1999.
WITNESS MY HAND AND SEAL this 5th day of January, 1996.
/s/ Michael B. Kitchen
Michael B. Kitchen
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Robert T. Lynch, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 8th day of January, 1996.
/s/ Robert T. Lynch
Robert T. Lynch
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Omer K. Reed, a director of Century Life of
America, a life insurance company incorporated under the laws of and domiciled
in the State of Iowa, hereby appoint, authorize and empower Gerald T. Conklin,
Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and agents
for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century
<PAGE>
Variable Annuity Account, Registration No. 33-73738. This Power of Attorney
shall terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 8th day of January, 1996.
/s/ Omer K. Reed
Omer K. Reed
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Gerald J. Ring, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director in May 1999.
WITNESS MY HAND AND SEAL this 11th day of January, 1996.
/s/ Gerald J. Ring
Gerald J. Ring
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Donald F. Roby, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 11th day of January, 1996.
/s/ Donald F. Roby
Donald F. Roby
Director, Century Life of America
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Rosemarie M. Shultz, a director of Century
Life of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 22nd day of January, 1996.
/s/ Rosemarie M. Shultz
Rosemarie M. Shultz
Director, Century Life of America
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that I, Neil A. Springer, a director of Century Life
of America, a life insurance company incorporated under the laws of and
domiciled in the State of Iowa, hereby appoint, authorize and empower Gerald T.
Conklin, Linda L. Lilledahl, or John M. Waggoner, severally, as my attorneys and
agents for me and in my name as director of Century Life of America on behalf of
Century Life of America and Century Variable Annuity Account (or otherwise) with
full power to prepare, review, execute, deliver and file Post-Effective
Amendments with the Securities and Exchange Commission for the Century Variable
Annuity Account, Registration No. 33-73738. This Power of Attorney shall
terminate at the end of my appointed term as Director.
WITNESS MY HAND AND SEAL this 11th day of January, 1996.
/s/ Neil A. Springer
Neil A. Springer
Director, Century Life of America
<PAGE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 119,795,163
<INVESTMENTS-AT-VALUE> 124,849,112
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 124,849,112
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,258
<TOTAL-LIABILITIES> 14,258
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 10,321,845
<SHARES-COMMON-PRIOR> 2,481,566
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 124,834,854
<DIVIDEND-INCOME> 6,600,973
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 895,349
<NET-INVESTMENT-INCOME> 5,705,624
<REALIZED-GAINS-CURRENT> 31,039
<APPREC-INCREASE-CURRENT> 5,830,352
<NET-CHANGE-FROM-OPS> 11,567,015
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12,359,249<F1>
<NUMBER-OF-SHARES-REDEEMED> 5,518,972<F1>
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 7,840,277
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1> UNITS CALCULATED
</FN>
</TABLE>
