As filed with the Securities and Exchange Commission on June 28, 2000.
File No. 33-
File No. 811-8260
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
(Exact Name of Registrant)
CUNA MUTUAL LIFE INSURANCE COMPANY
(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)
Approximate date of proposed public offering:
As soon as practicable after the effective date of this Registration Statement
Title of Securities Being Offered: Interest in the Separate Account issued
through Variable Annuity Contracts.
The Registrant hereby amends this Registration Statement on such dates as may be
necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
<PAGE>
PROSPECTUS , 2000
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MEMBERS Variable Annuity II
A Flexible Premium Deferred Variable Annuity Contract
Issued by
CUNA Mutual Life Insurance Company
================================================================================
Inside this Prospectus, you will find basic information about the Contract and
the Variable Account that you should know before investing. Please read it
carefully and keep it for future reference. The Company may sell the Contract to
individuals, or to or in connection with retirement plans, including plans that
qualify for special federal tax treatment under the Internal Revenue Code of
1986, as amended.
The investment performance of the mutual fund portfolios underlying the
Subaccounts you select will affect the Contract Value to the Payout Date, except
for amounts you invest in the Fixed Account and will affect the size of variable
Income Payments after the Payout Date. You bear the entire investment risk on
any amounts you allocate to the Variable Account.
The following mutual funds are available through the Subaccounts of the CUNA
Mutual Life Variable Annuity Account:
Ultra Series Fund
o Money Market Fund
o Bond Fund
o Balanced Fund
o Growth and Income Stock Fund
o Capital Appreciation Stock Fund
o Mid-Cap Stock Fund
o Emerging Growth Fund
o High Income Fund
o International Stock Fund
o Global Securities Fund
This Prospectus must be accompanied by a current prospectus for the Ultra Series
Fund.
Purchase payments not allocated to the Subaccounts may be allocated to the Fixed
Account Option.
The Statement of Additional Information ("SAI") contains additional information
about the Contract and the Variable Account. You will find its table of contents
on the last page of this Prospectus. The SAI has been filed with the Securities
and Exchange Commission (SEC) and is incorporated by reference. You may obtain a
copy of the SAI dated _____, 2000 free of charge by contacting the Company.
Additionally, the SEC maintains a website at http://www.sec.gov that contains
the SAI material incorporated by reference and other information.
Investment in a variable annuity contract is subject to risks, including the
possible loss of money. Unlike credit union and bank accounts, money invested in
the Variable Account is not insured. Money in the Variable Account is not
deposited in or guaranteed by any credit union or bank and is not guaranteed by
any government agency.
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The Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
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<PAGE>
Table of Contents
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DEFINITIONS..................................................................1
EXPENSE TABLES...............................................................3
FINANCIAL HIGHLIGHTS.........................................................5
SUMMARY......................................................................5
The Contract.................................................................5
Charges and Deductions.......................................................6
Payout Provisions...........................................................6
Federal Tax Status...........................................................6
CUNA MUTUAL LIFE INSURANCE COMPANY, THE CUNA MUTUAL LIFE VARIABLE ANNUITY
ACCOUNT, AND THE UNDERLYING FUNDS...........................................7
CUNA Mutual Life Insurance Company...........................................7
CUNA Mutual Life Variable Annuity
Account.....................................................................7
The Underlying Funds.........................................................8
Availability of Funds........................................................9
Voting Rights................................................................9
Material Conflicts..........................................................10
Substitution of Securities..................................................10
THE FIXED ACCOUNT OPTION....................................................10
Preservation Plus Program...................................................11
Fixed Contract Value........................................................11
Fixed Periods...............................................................11
Market Value Adjustment.....................................................12
DESCRIPTION OF THE CONTRACT.................................................14
Issuance of a Contract......................................................14
Right to Examine............................................................14
Purchase Payments...........................................................14
Allocation of Purchase Payments.............................................15
Contract Value..............................................................15
Transfer Privileges.........................................................16
Surrenders (Redemption) and Partial Withdrawals.............................17
Contract Loans..............................................................19
Death Benefit Before the Payout Date........................................19
Proportional Adjustment for Partial Withdrawal..............................20
MISCELLANEOUS MATTERS.......................................................21
Payments....................................................................21
Modification................................................................21
Reports to Owners...........................................................22
Inquiries...................................................................22
INCOME PAYMENT OPTIONS......................................................23
Payout Date and Proceeds....................................................23
Election of Income Payment Options..........................................23
Fixed Income Payments.......................................................23
Variable Income Payments....................................................24
Description of Income Payment Options.......................................24
Death Benefit After the Payout Date.........................................25
CHARGES AND DEDUCTIONS......................................................26
Mortality and Expense Risk Charges..........................................26
Fund Expenses...............................................................26
Surrender Charge (Contingent Deferred Sales Charge).........................26
Annual Contract Fee.........................................................26
Transfer Processing Fee.....................................................27
Lost Contract Request.......................................................27
Premium Taxes...............................................................27
Other Taxes.................................................................27
RIDERS AND ENDORSEMENTS.....................................................28
Maximum Anniversary Value Death Benefit.....................................28
5% Annual Guarantee Death Benefit...........................................28
Enhanced Death Benefit Rider Charges........................................28
Waiver of Surrender Charge..................................................28
Executive Benefits Plan Endorsement.........................................29
ADVERTISING AND SUBACCOUNT PERFORMANCE SUMMARY..............................30
FEDERAL TAX MATTERS.........................................................32
Introduction................................................................32
Tax Status of the Contract..................................................32
Taxation of Annuities.......................................................33
Transfers or Exchanges of a Contract........................................35
Withholding.................................................................35
Multiple Contracts..........................................................36
Taxation of Qualified Plans.................................................38
Possible Charge for the Company's Taxes.....................................38
Other Tax Consequences......................................................38
LEGAL PROCEEDINGS...........................................................39
FINANCIAL STATEMENTS........................................................39
<PAGE>
Definitions
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Accumulation Unit
A unit of measure used to calculate Variable Contract Value.
Annuitant
The person or persons named in the application and on whose life the first
income payment is to be made. 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 . Only spouses may be joint Annuitants.
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.
Contract Anniversary
The same date in each contract year as the Contract Issue Date.
Contract Issue Date
The date on which the Company issues the Contract and upon which the Contract
becomes effective. This date is shown on the data page of the Contract and is
also used to determine Contract Years and Contract Anniversaries.
Contract Value
The total amount invested under the Contract. It is the sum of the Variable
Contract Value, the Fixed Contract Value and the Loan Account Value.
Contract Year
A twelve-month period beginning on the Contract Issue Date or on a Contract
Anniversary.
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.
Fixed Account Option
An allocation option under the Contract funded by our General Account. It is not
part of or dependent upon the investment performance of the Variable Account.
Fixed Amount
Any portion of Fixed Contract Value allocated to a particular Fixed Period with
a particular expiration date (including interest thereon) less any withdrawals
or transfers.
Fixed Contact Value
The value of the Contract Value in the Fixed Account Option.
Fixed Period
A choice under the Fixed Account of a specific number of years for which the
Company agrees to credit a particular effective annual interest rate.
Fund
An investment portfolio of Ultra Series Fund 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.
Home Office
The Company's principal office at 2000 Heritage Way, Waverly, Iowa 50677.
Income Payment
One of several periodic payments made by the Company to the Payee under an
Income Payment Option.
Income Payment Option
The form of Income Payments selected by the Owner under the Contract.
Loan Account
For any Contract, a portion of the Company's General Account to which Variable
Contract Value or Fixed Contract Value is transferred to provide collateral for
any loan taken under the Contract.
Loan Amount
The sum of your loan principal plus any accrued loan interest.
Net Purchase Payment
A purchase payment less any deduction for premium expense charges.
Owner
The person(s) ("you") who own(s) the Contract and who is (are) entitled to
exercise all rights and privileges provided in the Contract.
Payee
The person receiving income payments during the Payout Period. The Annuitant is
the Payee unless the Owner specifies otherwise.
Payout Date
The date on which Payout Proceeds are applied to an Income Payment Option.
Payout Proceeds
The Contract Value less any Loan Amount, less any premium expense charge, less a
pro-rated portion of the annual Contract fee, plus or minus any applicable
market value adjustment, less any applicable rider charges and any applicable
surrender charges as of the Payout Date. This is the amount applied to Income
Payments under one of the Income Payment Options.
Premium Expense Charge
An amount we may deduct from your purchase payments to cover taxes we are
charged by your state of residence.
Qualified Contract
A contract that is issued in connection with retirement plans that qualify for
special federal income tax treatment under Section(s) 401, 403(b), 408, 408A or
457 of the Code.
Subaccount
A subdivision of the Variable Account, the assets of which are invested in a
corresponding Fund.
Subaccount Value
Before the Payout Date, that part of any Net Purchase Payment allocated to the
Subaccount plus any Contract Value transferred to that Subaccount, adjusted by
interest income, dividends, net capital gains or losses (realized or
unrealized), and decreased by withdrawals (including any applicable surrender
charges, administrative fee, any charge for riders or Premium Expense Charge)
and any Contract value transferred out of that Subaccount.
Surrender Value
The Contract Value less any applicable surrender charges, market value
adjustment, Premium Expense Charges, annual contract fee, any charge for riders
and Loan Amount.
Valuation Day
For each Subaccount, each day that the New York Stock Exchange is open for
business except days that the Subaccount's corresponding Fund does not value its
shares.
Valuation Period
The period beginning at the close of regular trading on the New York Stock
Exchange on any Valuation Day and ending at the close of regular trading on the
next succeeding Valuation Day.
Variable Account
CUNA Mutual Life Variable Annuity Account.
Variable Contract Value
The sum of the Subaccount Values.
Written Request
A Written Request or request in a form satisfactory to the Company which is
signed by the Owner and received at the Home Office. A Written Request includes
a telephone or fax request made pursuant to the terms of an executed telephone
or fax authorization, with original signature, on file at the Home Office.
<PAGE>
Expense Tables
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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*
Maximum Annual Contract Fee.............................$30**
Annual Rider Charges
(as a percentage of monthly average Contract Value)
Maximum Anniversary Value Death Benefit Rider...........0.15%
5% Annual Guarantee Death Benefit Rider.................0.15%
Variable Account Annual Expenses
(as a percentage of net assets)
Mortality and Expense Risk Charge..................1.15%
Total Variable Account Expenses....................1.15%
Annual Fund Expenses
(as percentage of average net assets)
<TABLE>
<CAPTION>
Other Total Annual
Portfolio Name Management Fees Expenses 12b-1 Fees Fund Expenses
-------------- --------------- --------- ---------- -------------
<S> <C> <C> <C> <C>
Money Market Fund 0.45% 0.01% None 0.46%
Bond Fund 0.55% 0.01% None 0.56%
Balanced Fund 0.70% 0.01% None 0.71%
Growth and Income Stock Fund 0.60% 0.01% None 0.61%
Capital Appreciation Stock Fund 0.80% 0.01% None 0.81%
Mid-Cap Stock Fund 1.00% 0.01% None 1.01%
Emerging Growth Fund 0.75% 0.01% None 0.76%
High Income Fund 0.55% 0.01% None 0.56%
International Stock Fund 1.05% 0.01% None 1.06%
Global Securities Fund 1.00% 0.01% None 1.01%
</TABLE>
*The Company reserves the right to charge a $10 transfer fee on each transfer
after the first 12 transfers in any Contract Year.
**The Company does not deduct the annual Contract fee if the Contract Value is
$25,000 or more.
The tables are intended to assist you in understanding the costs and expenses
that you will bear directly or indirectly. The tables reflect the expenses for
the Variable Account and for each of the underlying Funds available as
investment options for the fiscal year ended December 31, 1999. Expenses of the
Funds are not fixed or specified under the terms of the Contract, and actual
expenses may vary.
An Owner would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets:
<PAGE>
<TABLE>
<CAPTION>
If the Contract is surrendered (or annuitized under If the Contract is not surrendered or is annuitized (for
income payout option 1) at the end of the applicable income payout options 2 and 4) at the end of the
time period: applicable time period:
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Subaccount 1 3 Subaccount 1 3
Year Years Year Years
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Money Market Money Market
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Bond Bond
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Balanced Balanced
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Growth and Income Stock Growth and Income Stock
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Capital Appreciation Stock Capital Appreciation Stock
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Mid-Cap Stock Fund Mid-Cap Stock Fund
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Emerging Growth Fund Emerging Growth Fund
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
High Income Fund High Income Fund
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
International Stock Fund International Stock Fund
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
Global Securities Fund Global Securities Fund
-------------------------------- ------------ ----------- ------------------------------ ------------ -----------
</TABLE>
The examples provided above assume that no transfer charges, Premium Expense
Charges, or market value adjustment have been assessed. The examples also assume
that the annual Contract fee is $30 and that the average Contract Value is
$42,510, which translates the Contract fee into an assumed 0.0007057% 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. Also, actual expenses may be greater or
less than those shown.
<PAGE>
Financial Highlights
================================================================================
Although the Separate Account and many of the Funds have been in existence for
some time, the Subaccounts for this contract are new and do not have any
history. Accordingly, there is no Subaccount information to report at this time.
In future years, the prospectus will contain financial information for each
class of Accumulation Units. The value of an Accumulation Unit is determined on
the basis of changes in the per share value of the underlying mutual funds and
the assessment of various charges.
Summary
================================================================================
The following section summarizes certain provisions that we describe in more
detail later in the prospectus.
The Contract
Issuance of a Contract. The Company issues Contracts to individuals or to
employers or other groups in connection with retirement plans.
Right to Examine Period. You have the right to return the Contract within 10
days after you receive it and the Company will return the Contract Value or the
amount required by law. State or federal law may require additional return
privileges. If you return the Contract, it will become void.
Purchase Payments. Generally, you must make payments totaling $5,000 within the
first 12 months of the Contract. Certain Qualified Contracts, Section 1035
contracts, and Contracts sold to employees have lower minimum purchase amounts.
Unless you pay the minimum purchase amount in full at the time of application,
an automatic purchase payment plan must be established resulting in the minimum
purchase amount being paid before the end of the first 12 months after the
Contract Issue Date.
Allocation of Purchase Payments. You may allocate purchase payments to one or
more of the Subaccounts of the Variable Account and/or to the Fixed Account
Option. Each Subaccount invests solely in a corresponding underlying Fund. The
investment performance of the Fund(s) will affect the Subaccount in which you
invest your money and your Contract Value.
Transfers. On or before the Payout Date, you may transfer all or part of the
Contract Value between Subaccount(s) or a Fixed Period, subject to certain
restrictions.
No fee is charged for transfers, but the Company reserves the right to charge
$10 for each transfer over 12 during a Contract Year.
Partial Withdrawal. You may withdraw part of your Contract's Surrender Value by
Written Request to the Company on or before the Payout Date, subject to certain
Limitations.
Surrender. You may surrender the Contract and receive its Surrender Value, by
Written Request to the Company.
Charges and Deductions
The Contract contains the following charges and deductions:
Surrender Charge (Contingent Deferred Sales Charge). There are no sales charges
deducted at the time purchase payments are made. However, a surrender charge is
deducted when you surrender or partially withdraw purchase payment(s) within
seven years of their being paid.
The surrender charge is 7% of the amount of the payment withdrawn or surrendered
within one year of having been paid. The surrender charge decreases by 1% for
each full year that has passed since the payment was made.
Annual Contract Fee. The Contract has an annual Contract fee of $30. (This fee
is waived if the Contract Value is $25,000 or more.)
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 Company may use any profits from this charge to finance other
expenses, including expenses incurred in the administration of the Contracts and
distribution expenses related to the Contracts. The charges are deducted from
the Variable Account at a rate of ____ per day which is an annual rate of 1.15%.
Premium Expense Charges. The Company deducts a charge for any state or local
premium taxes applicable to a Contract. The Company reserves the right to deduct
premium taxes at the time it pays such taxes. State premium taxes currently
range from 0% to 3.5%.
Rider Charges. The Company deducts a charge on each Contract Anniversary for
each of two optional death benefit riders. This charge is at an annual rate of
0.15% of the average monthly Contract Value for the prior Contract Year.
Payout Provisions
You select the Payout Date, subject to certain limitations.
On the Payout Date, the Payout Proceeds will be applied to an Income Payment
option, unless you choose to receive the Surrender Value in a lump sum.
Federal Tax Status
Generally, any distribution from your Contract 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
Matters.
CUNA Mutual Life Insurance Company - The CUNA Mutual Life Variable Annuity
Account, and the Funds
================================================================================
CUNA Mutual Life Insurance Company
CUNA Mutual Life Insurance Company is a mutual life insurance company originally
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
50677-9202. The telephone number is 1-800-798-5500.
As of December 31, 1999, the Company had more than $4 billion in assets and more
than $12 billion of life insurance in force. Effective June 1999, and through
the date of this Prospectus, A.M. Best rated the Company A (Excellent).
Effective March 1999, and through the date of this Prospectus, Duff & Phelps
rated the Company AA. These are the most recent ratings available as of the date
of this Prospectus. Periodically, the rating agencies review the ratings of the
Company. To obtain the most current ratings, contact the Company at the address
or telephone number shown above.
CUNA Mutual Life Variable Annuity Account
The Variable Account was established by the Company as a separate account on
December 14, 1993. The Variable Account invests in the Funds described below.
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 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, are credited to or
charged against that
Subaccount reflect only the Subaccount's investment experience and not the
investment experience of the Company's other assets.
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 that exceed the Company's
liabilities arising under the Contracts may be transferred by the Company to the
General Account and used to pay its liabilities. All obligations arising under
the Contracts are general corporate obligations of the Company.
The Contracts are distributed by the principal underwriter, CUNA Brokerage
Services, Inc., 2000 Heritage Way, Waverly, Iowa 50677. 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.
The Underlying Funds
The Subaccounts invest in the Ultra Series Fund. The Ultra Series Fund a
management investment company of the series type with one or more Funds. Each is
an open-end, management investment company.
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
Fund's prospectuses which must accompany or precede this Prospectus. The
prospectuses should be read carefully and retained for future reference.
The Ultra Series Fund
Currently, the Ultra Series Fund offers Funds as investment options under the
Contracts.
Money Market Fund. This Fund seeks high current income 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.
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.
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.
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.
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.
Mid-Cap Stock Fund. This Fund seeks long-term capital appreciation by investing
in mid-size and small companies. It pursues this objective by purchasing the
common stock of generally smaller, less-developed issuers with valuations,
fundamentals and/or prospects that are attractive to the investment adviser.
Emerging Growth Fund. This Fund seeks long-term growth of capital through
investments primarily in common stock of emerging growth companies.
High Income Fund. This Fund seeks high current income by investing primarily in
a diversified portfolio of lower-rated, higher-yielding income bearing
securities. The Fund also seeks capital appreciation, but only when consistent
with its primary goal.
International Stock Fund. This Fund seeks long-term growth of capital through
investments primarily in common stocks of non-U.S. companies.
Global Securities Fund. This Fund seeks capital appreciation by investing mainly
in common stocks of U.S. and foreign companies.
CIMCO Inc. ("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.
The mutual funds described above are not available for purchase directly by the
general public, and are not the same as other mutual fund portfolios with very
similar or nearly identical names that are sold directly to the public. The
investment performance and results of the portfolios available under the policy
may be lower, or higher, than the investment results of such other (publicly
available) portfolios. There can be no assurance, and no representation is made,
that the investment results of any of the portfolios available under the policy
will be comparable to the investment results of any other mutual fund portfolio,
even if the other portfolio has the same investment adviser or manager and the
same investment objectives and policies, and a very similar name.
Availability of Funds
The Variable Account purchases shares of the Ultra Series Fund in accordance
with a participation agreement. If the participation agreement terminates, the
Variable Account may not be able to purchase additional shares of the Fund(s)
covered by the 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 the Fund.
Voting Rights
Owners with Variable Contract Value are entitled to certain voting rights for
the Funds underlying the Subaccounts in which they are invested. The Company
will vote Fund shares attributable to Owners at special shareholder meetings
based on instructions from such Owners. However, if the law changes and the
Company is allowed to vote in its own right, it may elect to do so.
Owners with voting interests in a Fund will be notified of issues requiring the
shareholders' vote as soon as possible before the shareholder meeting.
Notification will contain proxy materials and a form with which to give the
Company voting instructions. The Company will vote shares for which no
instructions are received in the same proportion as those that are received.
Before the Payout Date, the number of shares which an Owner may vote is
determined by dividing the Subaccount Value by the net asset value of that Fund.
On or after the Payout Date, an Owner's voting interest, if any, is determined
by dividing the dollar value of the liability for future variable Income
Payments to be paid from the Subaccount by the net asset value of the Fund
underlying the Subaccount. The Company will designate a date for this
determination not more than 90 days before the shareholder meeting.
Material Conflicts
The Funds are offered through other separate accounts of the Company and
directly to employee benefit plans affiliated with the Company. The Company does
not anticipate any disadvantages to this. However, it is possible that a
conflict may arise between the interest of the Variable Account and one or more
of the other separate accounts in which these Funds participate.
Materials conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the Owners and those of Owners of other types of
contracts issued by the Company. Material conflicts could also arise between the
interests of Owners (or owners of other types of contracts issued by the
Company) and the interests of participants in employee benefit plans invested in
the Funds. If a material conflict occurs, the Company will take steps to protect
Owners and variable annuity Payees, including withdrawal of the Variable Account
from participation in the Fund(s) involved in the conflict.
Substitution of Securities
The Company may substitute, eliminate, or combine shares of another mutual fund
for shares already purchased or to be purchased in the future if either of the
following occurs:
1) shares of a current Fund are no longer available for investment; or
2) further investment in a Fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
<PAGE>
THE FIXED ACCOUNT OPTION
================================================================================
The Fixed Account Option is an investment option that is funded by assets of the
Company's General Account and pays interest at declared rates. The General
Account contains all of the Company's assets other than those in other separate
accounts. It is used to support the Company's annuity and insurance obligations
and may contain compensation for mortality and expense risks. The General
Account is not subject to the same laws as the Variable Account and the SEC has
not reviewed material in this prospectus relating to the Fixed Account. However,
information relating to the Fixed Account Option is subject to federal
securities laws relating to accuracy and completeness of prospectus disclosure.
Purchase payments will be allocated to the Fixed Account by election of the
Owner.
The Company intends to credit amounts in the Fixed Account Option with interest
at current rates in excess of the minimum fixed rate but is not obligated to do
so. The Company has no specific formula for determining current interest rates.
Fixed Contract Value will not share in the investment performance of the
Company's General Account. Any interest credited on Fixed 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 fixed rate.
Preservation Plus Program
An Owner may elect to allocate the initial Net Purchase Payment between the
Fixed Account Option and the Variable Account so that at the end of the Fixed
Period the portion of the initial Net Purchase Payment allocated to the Fixed
Account Option will equal 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 Fixed Period at least equal to the initial Net Purchase Payment.
Upon request, the Company will calculate the portion of any Net Purchase Payment
that must be allocated to a particular Fixed Period to achieve this result.
Fixed Contract Value
The Fixed Contract value reflects:
o Net Purchase Payments allocated to and Contract Value transferred to Fixed
Periods,
o interest credited to Contract Value in Fixed Periods,
o transfers of Contract Value out of Fixed Periods,
o surrenders and partial withdrawals from Fixed Periods, and
o charges assessed in connection with the Contract.
Fixed Amounts are withdrawn or surrendered on a first-in-first-out basis. The
Fixed Account value is the sum of Fixed Amounts under the Contract. The Fixed
Account value is guaranteed to accumulate at a minimum effective annual interest
rate of 3%.
The Fixed Account Option varies according to the state in which the Contract is
issued. The Company offers fixed periods varying in duration from one year to 10
years and the Company may impose a market value adjustment on amounts withdrawn
prior to the expiration of a fixed period, if allowed by state law. Not all
fixed periods are available in all states and some states may not allow a fixed
account option. Contact the Company for information on the availability of the
Fixed Account Option and fixed periods in your state.
An Owner may allocate some or all of the Net Purchase Payments and transfer some
or all of the Contract Value to the Fixed Account Option for selected periods of
time from one to ten years. The Company also intends to offer a special one year
Fixed Period that requires minimum monthly transfers to other Subaccounts
throughout the Fixed Period (the "DCA One Year Fixed Period"). Purchase Payments
may be allocated to this DCA One Year Fixed Period, but transfers in are not
allowed. Purchase Payment allocations to certain Fixed Periods may be limited to
three years in some states.
Fixed Periods
From time to time the Company will offer to credit Fixed Account value with
interest at specific guaranteed rates for specific periods of time. These
periods of time are known as Fixed Periods. The Company may offer one or more
Fixed Periods of one to ten years' duration at any time, but will always offer a
Fixed Period of one year where allowed by state law. The Company will publish an
effective annual interest rate applicable to each Fixed Period being offered at
that time. Net Purchase Payments allocated or Contract Value transferred to a
Fixed 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 during
the Fixed Period or surrendered). The interest rates available at any time will
vary with the number of years in the Fixed Period but will always be equal to or
greater than an effective annual rate of 3%.
Fixed Periods begin as of the date Net Purchase Payments or transfers of
Contract Value are made to them and end when the number of year(s) in the Fixed
Period have elapsed. The last day of the Fixed Period is the expiration date for
the Fixed Period. Owners may not select Fixed Periods with expiration dates
later than the Contract's current Payout Date. During the 30-day period prior to
the expiration of a Fixed Period, the Owner may transfer the Fixed Amount
related to that Fixed Period to any new Fixed Period or Subaccount available at
that time. Such transfers may be made at any time from the DCA One Year Fixed
Period. In addition, monthly transfers from the DCA One Year Fixed Period to the
Subaccount(s) you designate are required. If no Subaccount is designated,
transfers will be made to the Money Market Subaccount. The minimum transfer
amount is the monthly sum required to fully amortize the Fixed Amount as of the
expiration date of the DCA Fixed Amount. If, at the expiration of a Fixed
Period, less than one year remains until the Payout Date, the Company will
credit interest to the Fixed Amount at the guaranteed rate then applicable to a
one year Fixed Period. For Fixed Periods other than the DCA One Year Fixed
Period, the Company will notify Owners of the available Fixed Periods and
Subaccounts 30 days prior to the expiration of a Fixed Period.
If an Owner does not respond to the notice with instructions as to how to
reinvest the Fixed Amount, then on the expiration date the Company will invest
the Fixed Amount in another Fixed Period of the same duration as the expiring
period. If no Fixed Period of equal duration is available at that time, the
Company will reinvest the Fixed Amount in the next shortest Fixed Period
available. If either of such default Fixed Periods would extend beyond the
Payout Date of the Contract, the Company will reinvest the Fixed Amount in the
Fixed Period of the longest duration that expires before the Payout Date.
Market Value Adjustment
The Company will impose a market value adjustment on Fixed Amounts withdrawn or
surrendered or applied to an Income Payment Option from a Fixed Period of more
than 2 years before expiration of the period except when such a withdrawal,
surrender or annuitization occurs during the last 30 days of the period. The
market value 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 Fixed
Period equal in duration and type to the period from which the Fixed
Amount is being withdrawn, surrendered or annuitized. If a Fixed
Period of such duration is not being offered, "I" equals the linear
interpolation of the guaranteed rates for periods then available. If
the Fixed 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 Fixed Period. If no published rates are available for
maturities equal to the duration of the appropriate Fixed Period,
linear interpolation of other published rates will be used.
J = the guaranteed interest rate then being credited to the Fixed Amount
being withdrawn, surrendered or annuitized.
n = the number of complete months remaining until the expiration of the
Fixed Period.
At a time when I exceeds J, the market value adjustment will reduce the portion
of any Fixed Amount available for withdrawal, surrender or application to an
Income Payment Option. At a time when J exceeds I, the market value adjustment
will increase the portion of any Fixed Amount available for withdrawal,
surrender or application to an Income Payment Option. Moreover, the market value
adjustment will only operate to increase or reduce credited interest in an
amount equal to the excess of 3% per year on a Fixed Amount at the beginning of
any Fixed Period.
The market value adjustment is calculated separately for each Fixed Amount and
is applied before any surrender charge. Owners must instruct the Company as to
which Fixed Periods should be withdrawn or surrendered. Within any Fixed Period,
Fixed 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 Fixed Account value by the Company as fees or charges. In
addition, the sum of the surrender charge and market value adjustment for a
Fixed Amount withdrawn or surrendered will not exceed 10% of the Fixed Amount
withdrawn or surrendered.
Any applicable market value adjustment(s) will be deducted from or added to the
remaining Fixed Amount(s), if any, or from all remaining Fixed Amounts on a
pro-rata basis. If, at the time a partial withdrawal is requested from a Fixed
Amount, the Fixed Account value would be insufficient to permit the deduction of
the market value adjustment from any remaining Fixed Amounts, then the Company
will not permit the partial withdrawal.
The imposition of an market value adjustment may have significant federal income
tax consequences. (See FEDERAL TAX MATTERS.)
<PAGE>
DESCRIPTION OF THE CONTRACT
================================================================================
Issuance of a Contract
In order to purchase a Contract, application must be made through a
representative of CUNA Brokerage Services, Inc. ("CUNA Brokerage"). 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 (78 in Pennsylvania) on the Contract Issue Date.
Right to Examine
Owners have a ten day period to examine the contract. The contract may be
returned to the Home Office for any reason within ten days of receipt and the
Company will refund the Contract Value or another amount required by law. The
refunded Contract Value will reflect the deduction of any contract charges,
unless otherwise required by law. State and/or federal law may provide
additional return privileges.
Liability of the Variable Account under this provision is limited to the
Contract Value in each Subaccount on the date of revocation. Any additional
amounts refunded to the Owner will be paid by the Company.
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:
--------------- ---------------------------------------------
$5,000 Except as described below.
--------------- ---------------------------------------------
$2,000 For Contracts that qualify for special
federal income tax treatment under Sections
401, 408, 408A, or 457 of the Code. This
category includes qualified pension plans,
individual retirement accounts, and certain
deferred compensation plans.
--------------- ---------------------------------------------
$300 For Contracts that qualify for special
federal income tax treatment under Section
403(b) of the Code. This category includes
tax-sheltered annuities.
--------------- ---------------------------------------------
The Value of The value of a Contract exchanged pursuant
a Contract to Section 1035 of the Code, if the Company
approves the transaction prior to the
exchange.
--------------- ---------------------------------------------
$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.
This category includes both individual
retirement accounts and non-individual
retirement accounts.
--------------- ---------------------------------------------
Unless the minimum purchase amount is 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 account, bank account or other source.
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 Payout Date. Additional purchase
payments after the initial purchase payment are not required.
The Company reserves the right not to accept: (1) purchase payments received
after the Contract Anniversary following the Annuitant's 85th birthday (78th
birthday in Pennsylvania), (2) purchase payments of less than $100, and (3)
purchase payments in excess of $1 million.
Allocation of Purchase Payments
The Company allocates purchase payments to Subaccounts and/or the Fixed Account
Option as instructed by the Owner. An allocation to a Subaccount must be for at
least 1% of a purchase payment and be in whole percentages. An allocation to the
Fixed Account Option must be for at least $1,000. A requested allocation of less
than $1,000 will be transferred to the money market fund.
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 to one or
more of the Subaccounts or to the Fixed Account Option within two Valuation Days
of receipt by the Company. 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.
Contract Value
The Contract Value is the sum of Variable Contract Value, Fixed Contract Value
and the Loan Account.
Determining the Variable Contract Value. The Variable Contract Value is
determined at the end of each Valuation Period and reflects the investment
experience of the selected Subaccounts, after applicable charges. The value will
be the total of the values attributable to the Contract in each of the
Subaccounts (i.e. Subaccount Value). The Subaccount Values are determined by
multiplying that Subaccount's Accumulation Unit value by the number of
Accumulation Units.
Determination of Number of Accumulation Units. Any Net Purchase Payment
allocated to a Subaccount or Contract Value transferred to a Subaccount is
converted into Accumulation Units of that Subaccount. The number of Accumulation
Units is determined by dividing the dollar amount being allocated or transferred
to a Subaccount by the Accumulation Unit value for that Subaccount. The number
of Accumulation Units is increased by additional purchase payments or
allocations. The number of Accumulation Units does not change as a result of
investment experience.
Any Contract Value transferred, surrendered or deducted from a Subaccount is
processed by canceling or liquidating Accumulation Units. The number of
Accumulation Units canceled is determined by dividing the dollar amount being
removed from a Subaccount by the Accumulation Unit value.
Determination of Accumulation Unit Value. The Accumulation Unit value for a
Subaccount is calculated for each Valuation Period by subtracting (2) from (1)
and dividing the result by (3), where:
(1) Is:
(a) the net assets of 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.
(2) The 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.
The value of an Accumulation Unit may increase or decrease as a result of
investment experience.
Transfer Privileges
General. Before the Payout Date, the Owner may make transfers between the
Subaccounts and Fixed Amounts as described below.
o Transfers to the Fixed Account must be at least $1,000 (lesser amounts
received are allocated to the Money Market Subaccount).
o Transfers are not allowed to the DCA One Year Fixed Period.
o Except for the DCA One Year Fixed Period, transfers out of the Fixed
Account Option are only permitted during the 30-day period before the
expiration of a Fixed Period.
o Transfers from the DCA One Year Fixed Period may be made throughout its
Fixed Period.
o A minimum monthly transfer to the designated Subaccounts is required from
each DCA Fixed Amount. If no Subaccounts are designated, the minimum
transfer amount will be transferred to the Money Market Subaccount. The
minimum transfer amount is the monthly sum that will amortize the DCA Fixed
Amount on its expiration date.
Amounts transferred to a Subaccount will receive the Accumulation Unit value
next determined after the transfer request is received.
Subject to the above, there is currently no limit on the number of transfers
that can be made among or between Subaccounts or to or from the Fixed Account
Option.
Transfers may be made by written request or by telephone.
The Company will send a written confirmation of all transfers made pursuant to
telephone instructions. The Company will use reasonable procedures to confirm
that telephone instructions are genuine and will not be liable for following
telephone instructions that are reasonably determined to be genuine.
The Company may modify or terminate the transfer privileges at any time for any
reason.
Dollar-Cost Averaging. Dollar Cost Averaging is a long-term transfer program
that allows you to make regular (monthly, quarterly, semi-annual or annual)
level investments over time. The level investments will purchase more
Accumulation Units 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. If continued over an extended period of time,
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
guarantee a profit or protect against a loss.
Dollar Cost Averaging (DCA) Transfers. An Owner may choose to systematically or
automatically transfer (on a monthly, quarterly, semi-annual or annual basis) a
specified dollar amount from the Money Market Subaccount to one or more
Subaccounts. A minimum monthly amount must be systematically transferred from
the DCA One Year Fixed Period to one or more Subaccounts. The minimum monthly
transfer amount is the monthly sum that will amortize the DCA Fixed Amount on
its expiration date.
Portfolio Rebalancing. 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 the
Subaccounts. 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. This is not applicable if the
purchase payment allocations include an allocation to a fixed period.) If the
Owner does not specify a frequency for rebalancing, we will rebalance quarterly.
Other Types of Automatic Transfers. An Owner may also choose to 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: (1) a specified dollar amount, (2) a specified number of Accumulation
Units, (3) 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.
The minimum DCA or automatic transfer amount is the equivalent of $100 per
month. If less than $100 remains in the Subaccount or DCA One Year Fixed Period
from which transfers are being made, the entire amount will be transferred. The
amount transferred to a Subaccount must be at least 1% of the amount transferred
and must be stated in whole percentages. Once elected, automatic transfers
remain in effect until the earliest of: (1) the Variable Contract Value in the
Subaccount or DCA One Year Fixed Period from which transfers are being made is
depleted to zero; (2) the Owner cancels the election; 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 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 stop the automatic
transfer programs.
Surrenders (Redemption) and Partial Withdrawals
Surrender. At any time before the Payout Date, the Owner may surrender the
Contract and receive its Surrender Value. The Surrender Value will be paid in a
lump sum unless the Owner requests payment under an Income Payment Option.
Partial Withdrawals. At any time before the Payout Date, an Owner may make
withdrawals of the Surrender Value. 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 on the
Valuation Day the request is received. Any applicable market value adjustment or
surrender charge will be deducted from the remaining Contract Value.
The Owner may specify the amount of the partial withdrawal to be made from
Subaccounts or the Fixed Periods. If the Owner does not so specify, or if the
amount in the designated Subaccounts or Fixed Periods is not enough to comply
with the request, the partial withdrawal will be made proportionately from the
accounts.
A contingent deferred sales charge may apply to surrenders and partial
withdrawals.
Systematic Withdrawals. An Owner may elect to receive periodic partial
withdrawals under the Company's systematic withdrawal plan. Under the plan, the
Company will make partial withdrawals (on a monthly, quarterly, semi-annual or
annual basis) from designated Subaccounts. Such withdrawals must be at least
$100 each and may only be made from Variable Contract Value. Generally, 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 withdrawals may be: (1) a specified dollar amount, (2) a specified whole
number of Accumulation Units, (3) 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 Request, 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.
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.
There are federal income tax consequences to surrenders and partial withdrawals.
Owners should consult with their tax adviser. The Company reserves the right to
stop 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 are subject to the terms
of the Contract, the retirement program and the Code. Loans are described in
more detail in the SAI.
Death Benefit Before the Payout Date
Death of an Owner. If any Owner dies before the Payout 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 a sole surviving Owner or a new Owner:
(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 he or she may
elect, within 60 days of the date the Company receives Due Proof of
Death:
(a) to receive the Surrender Value in a single sum within 5 years of
the deceased Owner's death; or
(b) to apply the Surrender Value within 1 year of the deceased
Owner's death to one of the Income Payment Options provided that
payments under the option are payable over the new Owner's life
or over a period not greater than the new Owner's life
expectancy.
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 Payout 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 Income Payment
Option.
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 Income 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.
Basic Death Benefit. If the Annuitant is age 75 or younger on the Contract Date,
the basic death benefit is an amount equal to the greater of:
(1) aggregate Net Purchase Payments made under the Contract less a
proportional adjustment for 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;
or
For Contracts issued 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. The death benefit will be reduced by any outstanding
Loan Amount and any applicable Premium Expense Charges not previously deducted.
The contract also offers additional guaranteed death benefit choices as riders
to the contract. These additional choices enhance the death benefit and are
available at an additional charge. Please see the Riders section for more
details.
Proportional Adjustment for Partial Withdrawals
When calculating the death benefit amount, as described above, an adjustment is
made to aggregate Net Purchase Payments for partial withdrawals taken from the
contract. The proportional adjustment for partial withdrawals is calculated by
dividing (1) by (2) and multiplying the result by (3) where: (1) Is the partial
withdrawal amount; (2) Is the Contract Value immediately prior to the partial
withdrawal; and (3) Is the sum of Net Purchase Payments immediately prior to the
partial withdrawal less any adjustment for prior partial withdrawals.
<PAGE>
MISCELLANEOUS MATTERS
================================================================================
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 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, partial withdrawal
or transfer from the Fixed Account Option for up to six months from the date of
receipt of Written Request 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:
(1) to permit the Contract or the Variable Account to comply with any
applicable law or regulation issued by a government agency; or
(2) 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) to reflect a change in the operation of the Variable Account; or
(4) to provide for the addition or substitution of investment options; or
(5) to combine the Variable Account with any of our other separate accounts; or
(6) to eliminate or combine any Subaccounts and transfer the assets of any
Subaccount to any other Subaccount; or
(7) to add new Subaccounts and make such Subaccounts available to any class of
contracts as we deem appropriate; or
(8) to 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; or
(9) to deregister the Variable Account under the 1940 Act if such registration
is no longer required; or
(10) to 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; or
(11) to restrict or eliminate any voting rights of Owners or other persons
having such rights as to the Variable Account; or
(12) to make any other changes to the Variable Account or its operations as may
be required by the 1940 Act or other applicable law or regulation.
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 Fixed 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 in writing to the Company at its Home
Office.
<PAGE>
INCOME PAYMENT OPTIONS
================================================================================
Payout Date and Proceeds
The Owner selects the Payout Date. For Non-Qualified Contracts, the Payout Date
may not be after the later of the Contract Anniversary following the Annuitant's
85th birthday or 10 years after the Contract Issue Date. For Qualified
Contracts, the Payout 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 Payout Date subject to the following limitations: (1)
the Owner's Written Request must be received at the Home Office at least 30 days
before the current Payout Date, and (2) the requested Payout Date must be a date
that is at least 30 days after receipt of the Written Request.
On the Payout Date, the Payout Proceeds will be applied under the life Income
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. Unless the Owner instructs the Company otherwise, amounts in the
Fixed Account Option will be used to provide a fixed income payment option and
amounts in the Variable Account will be used to provide a variable Income
Payment Option.
The Payout Proceeds equal the Contract Value:
(1) plus or minus any applicable market value adjustment;
(2) minus any applicable surrender charge if Income Payment Option 1 or
Option 2 variable Income Payments are selected;
(3) minus the pro-rated portion of the annual Contract fee or rider
charges (unless the Payout Date falls on the Contract Anniversary);
(4) minus any applicable Loan Amount; and
(5) minus any applicable Premium Expense Charges not yet deducted.
Election of Income Payment Options
On the Payout Date, the Payout Proceeds will be applied under an Income Payment
Option, unless the Owner elects to receive the Surrender Value in a single sum.
If an election of an Income Payment Option is not on file at the Home Office on
the Payout Date, the proceeds will be paid as a life income annuity with
payments for ten years guaranteed. An Income Payment Option may be elected,
revoked, or changed by the Owner at any time before the Payout Date while the
Annuitant is living. The election of an option and any revocation or change must
be made by Written Request. The Owner may elect to apply any portion of the
Payout Proceeds to provide either variable Income Payments or fixed Income
Payments or a combination of both.
The Company reserves the right to refuse the election of an Income Payment
Option other than paying the Payout Proceeds in a lump sum if the total amount
applied to an Income Payment Option would be less than $2,500, or each Income
Payment would be less than $20.00.
Fixed Income Payments
Fixed Income 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 Income Payment Option
chosen, the age of the Annuitant, the gender of the Annuitant (if applicable),
the amount applied to purchase the Income Payments and the applicable income
purchase rates in the Contract. The income purchase rates in the Contract are
based on a minimum guaranteed interest rate of 3.5%. The Company may, in its
sole discretion, make Income Payments in an amount based on a higher interest
rate.
Variable Income Payments
The dollar amount of the first variable Income Payment is determined in the same
manner as that of a fixed Income Payment. Variable Income Payments after the
first payment are similar to fixed Income 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 Income Payments through the use of Income Units. The
amount of the first variable Income Payment associated with each Subaccount is
applied to purchase Income Units at the Income Unit value for the Subaccount as
of the Payout Date. The number of Income Units of each Subaccount attributable
to a Contract then remains fixed unless an exchange of Income Units is made as
described below. Each Subaccount has a separate Income 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 Income Payment after the first is equal to the
sum of the amounts determined by multiplying the number of Income Units by the
Income 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 Income Payment 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 Payout Date, a Payee may change the selected Subaccount(s) by Written
Request up to four times per Contract Year. Such a change will be made by
exchanging Income Units of one Subaccount for another on an equivalent dollar
value basis. See the Statement of Additional Information for examples of Income
Unit value calculations and variable Income Payment calculations.
Description of Income Payment Options
Option 1 - Interest Option. (Fixed Income 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 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 - Installment Option. The proceeds are paid out in 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.
If variable Income Payments are elected under Option 2, the Payee may elect to
receive the commuted value of any remaining payments in a lump sum. The commuted
value of the payments will be calculated as described in the contract.
Option 3A - Life Income Guaranteed Period Certain. The proceeds are paid in
monthly installments during the Payee's lifetime with the guarantee that
payments will be made for a period of five, ten, fifteen, 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. 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 Payee
dies after the first payment, two payments if the Payee 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
original joint Payees 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 minimum amount of each fixed payment and
the initial payment amount for variable income payout options will be determined
from the tables in the Contract that apply to the particular option using the
Payee's age (and if applicable, gender). 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 Payout
Proceeds 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.
Death Benefit After the Payout Date
If an Owner dies after the Payout Date, any surviving Owner becomes the sole
Owner. If there is no surviving Owner, the Payee receiving Income 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 Payout
Date will have the effect stated in the Income Payment Option pursuant to which
Income Payments are being made.
<PAGE>
CHARGES AND DEDUCTIONS
================================================================================
Mortality and Expense Risk Charges
The Company deducts a mortality and expense risk charge from the Variable
Account. The charges are computed on a daily basis, and are equal to an annual
rate of 1.15% of the average daily net assets of the Variable Account.
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 Income Payments received. The mortality
risk that the Company assumes also includes a guarantee to pay a death benefit
if the Annuitant dies before the Payout 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.
The Company may use any profits from this charge to finance other expenses,
including expenses incurred in the administration of the Contracts and
distribution expenses related to the Contracts.
Fund Expenses
Because the Variable Account purchases shares of the Funds, the net assets of
the Variable Account will reflect the investment management fees and other
operating expenses incurred by such Funds.
Surrender Charge (Contingent Deferred Sales Charge)
Charge for Partial Withdrawal or Surrender. No sales charge deduction is made
from purchase payments when amounts are deposited into the contracts. However,
if any amount is withdrawn or surrendered within seven years of being received
by the Company, the Company will deduct a surrender charge. The surrender charge
is calculated by multiplying the applicable charge percentage (as shown below)
by the amount of purchase payments surrendered. There is no surrender charge for
withdrawal of Contract Value in excess of aggregate purchase payments (less
withdrawals of such payments). The surrender charge is calculated using the
assumption that all Contract Value in excess of aggregate purchase payments
(less withdrawals of such 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 Date of Surrender
Payment and Charge of Purchase
as Percentage Payment
-----------------------------------------------------
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 + 0%
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.
Annual Contract Fee
On each Contract Anniversary before the Payout Date, the Company deducts an
annual Contract fee of $30 to pay for administrative expenses. The fee is
deducted from each Subaccount and from the Fixed Account Option based on a
proportional basis. 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 application to an Income Payout Option. After the Payout
Date, the annual Contract fee is deducted from variable Income 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 Payout Date when a Contract with a Contract Value of
$25,000 or more has been applied to a payout option.
Transfer Processing Fee
Currently no fee is charged for transfers. However, the Company reserves the
right to charge $10 for the 13th transfer and each additional transfer during a
Contract Year. The transfer charge is not applicable to transfers from the DCA
Fixed Period. Each written request is considered to be one transfer, regardless
of the number of Subaccounts or Fixed Amounts affected by the transfer. The
transfer fee is deducted from the account from which the transfer is made. If a
transfer is made from more than one account at the same time, the transfer fee
is deducted pro-rata from the account.
Lost Contract Request
You can obtain a certification of your contract at no charge. There will be a
$30 charge for a duplicate contract.
Premium Taxes
Various states and other governmental entities levy a premium tax on annuity
contracts issued by insurance companies. Premium tax rates currently range from
0% to 3.5%. This range is subject to change. 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 Payout Proceeds upon application to an income 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.
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 Income
Payments, as appropriate.
<PAGE>
RIDERS AND ENDORSEMENTS
================================================================================
Maximum Anniversary Value Death Benefit
This rider provides a minimum death benefit equal to the maximum anniversary
value less any loan amounts and Premium Expense Charge not previously deducted.
On the issue date, the maximum anniversary value is equal to the initial Net
Purchase Payment. After the issue date, the maximum anniversary value will be
calculated on three different dates:
(1) the date an additional purchase payment is received by the company,
(2) the date of payment of a partial withdrawal, and
(3) on each Contract Anniversary.
When a purchase payment is received, the maximum anniversary value is equal to
the most recently calculated maximum anniversary value plus the Net Purchase
Payment. When a partial withdrawal is paid, the maximum anniversary value is
equal to the most recently calculated maximum anniversary value less an
adjustment for the partial withdrawal. The adjustment for each partial
withdrawal is (1) divided by (2) with the result multiplied by (3) where:
(1) is the partial withdrawal amount;
(2) is the Contract Value immediately prior to the partial withdrawal; and
(3) is the most recently calculated maximum anniversary value less any
adjustments for prior partial withdrawals.
This rider is available for Annuitant's age 75 or less on the issue date. This
rider may not be available in all states.
5% Annual Guarantee Death Benefit
This rider provides a minimum death benefit equal to the 5% annual guarantee
death benefit less any loan amounts and Premium Expense Charge not previously
deducted.
On the Issue Date the 5% annual guarantee value is equal to the initial Net
Purchase Payment. Thereafter, the 5% annual guarantee value on each Contract
Anniversary is the lessor of:
(1) the sum of all Net Purchase Payments received minus an adjustment for
partial withdrawals plus interest compounded at a 5% annual effective rate;
or
(2) 200% of all Net Purchase Payments received.
The adjustment for each partial withdrawal is equal to (1) divided by (2) with
the result multiplied by (3) where: (1) is the partial withdrawal amount; (2) is
the Contract Value immediately prior to the withdrawal; and (3) is the 5% annual
guarantee death benefit immediately prior to the withdrawal, less any
adjustments for earlier withdrawals.
This rider is available for Annuitant's age 75 or less on the issue date. This
rider may not be available in all states.
Enhanced Death Benefit Rider Charges
Each death benefit rider will carry an annual charge of 0.15% of Contract Value.
This charge will be assessed on the each Contract Anniversary . The charge will
be based on the average Contract Value for the previous 12 months. The charge
will be deducted from the Subaccounts and Fixed Amounts on a pro-rata basis. A
pro-rata portion of this charge will be deducted upon contract surrender if the
contract is surrendered on a date other than the Contract Anniversary.
Waiver of Surrender Charge
In most states, the Contract provides that, upon Written Request from the Owner
before the Payout Date, the surrender charge and any applicable market value
adjustment will be waived on any partial withdrawal or surrender if the
Annuitant is:
(1) confined to a nursing home or hospital after the contract is issued (as
described in the Contract); or
(2) becomes terminally ill after the contract is issued (as described in the
Contract); or
(3) becomes unemployed at least one year after the contract is issued, has
received unemployment compensation for at least 30 days and is receiving it
at the time of the withdrawal or surrender (as described in the Contract);
or
(4) The Annuitant's primary residence is located in an are that is declared a
presidential disaster area and $50,000 of damage is sustained to the
residence as a result of the disaster and after the contract is issued (as
described in the Contract).
This waiver is not available in some states, and, therefore, is not described in
Contracts issued in those states. The terms under which the surrender charge and
any applicable market value adjustment will be waived may vary in some states
and are described in contracts issued in those states.
Executive Benefits Plan Endorsement
The Company also offers an Executive Benefits Plan Endorsement in conjunction
with certain deferred compensation plans. The executive benefits plan
endorsement waives the surrender charges on the contract subject to certain
conditions. There is no charge for this benefit. However, if you exercise this
benefit during the first two Contract Years, we reserve the right to charge a
fee to offset expenses incurred. This fee will not exceed $150. The Executive
Benefits Plan Endorsement may not be available in all states.
ADVERTISING AND SUBACCOUNT PERFORMANCE SUMMARY
================================================================================
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, non-standard 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 has been in operation for one, five, and ten
years, respectively, the total standard 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 variable life and
variable universal life 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.
<PAGE>
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 Contract. Any person concerned about specific tax
implications should consult a competent tax adviser before making a 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, 408A or 457 of the Code. The ultimate effect
of federal income taxes on the amounts held under a Contract, or Income
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.
Owner Control. 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 includable in the
variable annuity Owner's gross income. The IRS has stated in published rulings
that a variable Owner will be considered the Owner of separate account assets if
the Owner 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 Owner), 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 Owners 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 Owner 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
Payout 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 Payout 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 Beneficiary" 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 Beneficiary" 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.
Taxation of Annuities
The following discussion assumes that the Contracts will qualify as annuity
contracts for federal income tax purposes.
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 Income
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 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 market value adjustment which results from such a withdrawal. There is,
however, no definitive guidance on the proper tax treatment of market value
adjustments, and the Owner should contact a competent tax adviser with respect
to the potential tax consequences of a market value 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.
Income 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 Income 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 Income 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 Income Payments for the
term of the payments; however, the remainder of each Income Payment is taxable
until the recovery of the investment in the contract, and thereafter the full
amount of each Income 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
includable 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
Income 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 Payout 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 Income Payment
period.
Other tax penalties may apply to certain distributions under a Qualified
Contract.
Possible Changes in Taxation. Although the likelihood of legislative change is
uncertain, there is always the possibility that the tax treatment of the
Contracts could change by legislation or other means. For instance, the
President's 1999 Budget Proposal recommended legislation that, if enacted, would
adversely modify the federal taxation of the Contracts. It is also possible that
any change could be retroactive (that is, effective prior to the date of the
change). A tax adviser should be consulted with respect to legislative
developments and their effect on the Contract.
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 Payout
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
Distributions from Contracts generally are subject to withholding for the
Owner's federal income tax liability. The withholding rate varies according to
the type of distribution and the Owner's tax status. The Owner will be provided
the opportunity to elect to not have tax withheld from distributions.
"Eligible rollover distributions" from section 401(a) plans and section 403(b)
tax-sheltered annuities are subject to a mandatory federal income tax
withholding of 20%. An eligible rollover distribution is the taxable portion of
any distribution from such a plan, except certain distributions such as
distributions required by the Code or distributions in a specified annuity form.
The 20% withholding does not apply, however, if the Owner chooses a "direct
rollover" from the plan to another tax-qualified plan or IRA.
Multiple Contracts
All non-qualified deferred annuity Contracts 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 includable in gross
income under Section 72(e). 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, an Owner 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; 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. Owners, 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 plans.
For qualified plans under Section 401(a), 403(a), 403(b), and 457, the Code
requires that distributions generally must commence no later than the later of
April 1 of the calendar year following the calendar year in which the Owner (or
plan participant) (i) reaches age 70 1/2 or (ii) retires, and must be made in a
specified form or manner. If the plan participant is a "5 percent Owner" (as
defined in the Code), distributions generally must begin no later than April 1
of the calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2. For IRAs described in Section 408,
distributions generally must commence no later tan the later of April 1 of the
calendar year following the calendar year in which the Owner (or plan
participant) reaches age 70 1/2.
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.
The Contract includes a Death Benefit that in some cases may exceed the greater
of the purchase payments or the Contract Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
pension or profit-sharing plan. Because the Death Benefit may exceed this
limitation, employers using the Contract in connection with such plans should
consult their tax adviser.
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." IRA contributions are limited each
year to the lesser of $2,000 or 100% of the Owner's adjusted gross income and
may be deductible in whole or in part depending on the individual's income.
Distributions from certain other types of qualified plans, however, may be
"rolled over" on a tax-deferred basis into an IRA without regard to this limit.
Earnings in an IRA are not taxed while held in the IRA. All amounts in the IRA
(other than nondeductible contributions) are taxed when distributed from the
IRA. Distributions prior to age 59 1/2 (unless certain exceptions apply) are
also subject to a 10% penalty tax. Sales of the Contract for use with IRAs may
be subject to special requirements of the Internal Revenue Service. 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.
Roth IRAs. Effective January 1, 1998, Section 408A of the Code permits certain
eligible individuals to contribute to a Roth IRA. Contributions to a Roth IRA,
which are subject to certain limitations, are not deductible and must be made in
cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover
from or conversion of an IRA to a Roth IRA may be subject to tax and other
special rules may apply. You should consult a tax adviser before combining any
converted amounts with any other Roth IRA contributions, including any other
conversion amounts from other tax years. Distributions from a Roth IRA generally
are not taxed, except that, once aggregate distributions exceed contributions to
the Roth IRA, income tax and a 10% penalty tax may apply to distributions made
(1) before age 59 1/2 (subject to certain exceptions) or (2) during the five
taxable years starting with the year in which the first contribution is made to
the Roth IRA.
Simplified Employee Pension (SEP) IRAs. Employers may establish Simplified
Employee Pension (SEP) IRAs under Code section 408(k) to provide IRA
contributions on behalf of their employees. In addition to all of the general
Code rules governing IRAs, such plans are subject to certain Code requirements
regarding participation and amounts of contributions.
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) taxes. 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. The Contract
includes a Death Benefit that in some cases may exceed the greater of the
Purchase Payments or the Contract Value. The Death Benefit could be
characterized as an incidental benefit, the amount of which is limited in any
tax-sheltered annuity under section 403(b). Because the Death Benefit may exceed
this limitation, employers using the Contract in connection with such plans
should consult their tax adviser.
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.
<PAGE>
LEGAL PROCEEDINGS
================================================================================
The Company and its subsidiaries, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving insurers, substantial damages have been sought and/or
material settlement payments have been made. Although the outcome of any
litigation cannot be predicted with certainty, the Company believes that at the
present time there are not pending or threatened lawsuits that are reasonably
likely to have a material adverse impact on the Separate Account or the Company.
FINANCIAL STATEMENTS
================================================================================
The audited financial statements of the Variable Annuity Account as of December
31, 1999, 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
years ended December 31, 1999, 1998,and 1997, and accompanying notes, are
included in the Statement of Additional Information.
The statutory basis statements of admitted assets, liabilities, and surplus for
the Company as of December 31, 1999, and 1998,and 1997, and the related
statutory basis statements of operations, changes in unassigned surplus, and
cash flows for the years ended December 31, 1999, 1998, and 1997, 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.............................................1
The Contract......................................................1
Incontestability..................................................1
Misstatement of Age or Gender.....................................1
Participation.....................................................1
Contract Loans....................................................1
Loan Amounts......................................................1
Loan Processing...................................................1
Loan Interest.....................................................2
PRINCIPAL UNDERWRITER......................................................2
CALCULATION OF YIELDS AND TOTAL RETURNS....................................2
Money Market Subaccount Yields....................................2
Other Subaccount Yields...........................................4
Average Annual Total Returns......................................5
Other Total Returns...............................................6
Effect of the Annual Contract Fee on Performance Data.............8
VARIABLE ANNUITY PAYMENTS..................................................8
Assumed Investment Rate...........................................8
Amount of Variable Annuity Payments...............................8
Annuity Unit Value................................................9
LEGAL MATTERS.............................................................10
EXPERTS...................................................................10
OTHER INFORMATION.........................................................11
FINANCIAL STATEMENTS......................................................11
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT.................................
CUNA MUTUAL LIFE INSURANCE COMPANY........................................
You may obtain a copy of the Statement of Additional Information free of charge
by writing to or calling us at the address or telephone number shown at the
beginning of this Prospectus.
<PAGE>
MEMBERS VARIABLE ANNUITY II
STATEMENT OF ADDITIONAL INFORMATION
CUNA Mutual Life Insurance Company
2000 Heritage Way
Waverly, Iowa 50677
(800) 798-5500
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Individual Flexible Premium Deferred Variable Annuity Contract
This Statement of Additional Information contains additional information to that
already provided in the Prospectus for the individual flexible premium deferred
variable annuity contract (the "Contract") offered by CUNA Mutual Life Insurance
Company (the "Company").
This Statement of Additional Information is not a Prospectus, and it should be
read only in conjunction with Prospectuses for the following:
1. Contract;
2. Ultra Series Fund
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.
__________, 2000
<PAGE>
TABLE OF CONTENTS
ADDITIONAL CONTRACT PROVISIONS...............................................1
The Contract........................................................1
Incontestability....................................................1
Misstatement of Age or Gender.......................................1
Participation.......................................................1
Contract Loans......................................................1
Loan Amounts........................................................1
Loan Processing.....................................................1
Loan Interest.......................................................2
PRINCIPAL UNDERWRITER........................................................2
CALCULATION OF YIELDS AND TOTAL RETURNS......................................2
Money Market Subaccount Yields......................................2
Other Subaccount Yields.............................................4
Average Annual Total Returns........................................5
Other Total Returns.................................................6
Effect of the Annual Contract Fee on Performance Data...............8
VARIABLE INCOME PAYMENTS.....................................................8
Assumed Investment Rate.............................................8
Amount of Variable Income Payments..................................8
Income Unit Value...................................................9
LEGAL MATTERS...............................................................10
EXPERTS.....................................................................10
OTHER INFORMATION...........................................................11
FINANCIAL STATEMENTS........................................................11
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT...................................
CUNA MUTUAL LIFE INSURANCE COMPANY..........................................
<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 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 Gender
If the age or gender (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 income payment.
Contract Loans
Loan Amounts
Generally, Owners may borrow up to 90% of the Surrender Value of their Contract
unless a lower minimum is required by law. 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
request by the Owner. The written consent of all irrevocable beneficiaries must
be obtained before a loan will be given.
Loan Processing
When a loan is made, the Company transfers an amount equal to the amount
borrowed from the Variable Contract Value or Fixed Contract 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 Fixed Account Option. The Owner must indicate in the loan
application from which Subaccount or Fixed Account Option, and in what amounts,
Contract Value is to be transferred to the Loan Account. If no instructions are
given by the Owner, the transfer(s) are made pro-rata from all Subaccounts
having Variable Contract Value and from all Fixed Amounts. Loans may be repaid
by the Owner at any time before the Payout 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 Fixed Period(s) as requested by the Owner.
Any transfer to a Fixed Period must be at least $1,000. A request to transfer
less will be transferred to the Money Market Subaccount. Loan repayments are not
allowed to the DCA One Year Fixed Period. Amounts transferred from the Fixed
Amount to the Loan Account may be subject to a market value adjustment.
Loan Interest
The Company charges 6.5% interest on Contract loans. The Company pays interest
on the Contract Value in the Loan Account at rates it determines from time to
time, but never less than 3.0%. Consequently, the net cost of a loan is the
difference between 6.5% and the rate being paid 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 Fixed Account (as
described above for the loan itself) to the Loan Account. This transfer
increases the Loan Amount.
Specific loan terms are disclosed at the time of loan application or issuance.
Any Loan Amount outstanding upon the death of the Owner or Annuitant is deducted
from any death benefit paid.
PRINCIPAL UNDERWRITER
CUNA Brokerage Services, Inc., ("CUNA Brokerage"), an affiliate of CUNA Mutual,
is the principal underwriter of the variable annuity contracts described herein.
The offering of the contract is continuous. CUNA Mutual does not anticipate
discontinuing the offering of the Contract, but does reserve the right to do so.
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, or income other than investment income, 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), and exclusive of income other than investment
income 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. Then 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), and exclusive of income other than
investment income 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.
Effective yield = (1 + ((NCS-ES)/UV)) 365/7 - 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.
From time to time, sales literature or advertisements may quote average annual
total returns for periods prior to the date the Variable Account or any
Subaccount commenced operations. The Money Market, Bond, Balanced, and Growth &
Income Stock Funds commenced operations in January, 1985. The Capital
Appreciation Stock Fund commenced operations in January, 1994. The Mid-Cap Stock
Fund commenced operations in May, 1999. The Emerging Growth, High Income,
International Stock and Global Securities Funds commenced operations on
_________, 2000.
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:
<TABLE>
<CAPTION>
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 12/31/99 12/31/99 12/31/99 12/31/99
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Money Market % % % %
Bond % % % %
Balanced % % % %
Growth and Income Stock % % % %
Capital Appreciation Stock % % % %
Mid-Cap Stock* % % % %
Emerging Growth % % % %
High Income % % % %
International Stock % % % %
Global Securities % % % %
</TABLE>
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.
<PAGE>
Such average annual total return information for the Subaccounts is as follows:
<TABLE>
<CAPTION>
Period Since Inception
Subaccount 6/1/94 to 12/31/99 12/31/98 to 12/31/99
---------- ------------------- --------------------
<S> <C> <C>
Money Market % %
Bond % %
Balanced % %
Bond % %
Balanced % %
Growth and Income Stock % %
Capital Appreciation Stock % %
Mid-Cap Stock % %
Emerging Growth % %
High Income % %
International Stock % %
Global Securities % %
</TABLE>
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:
<TABLE>
<CAPTION>
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 12/31/99 12/31/99 12/31/99 12/31/99
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Money Market %
Bond % % % %
Balanced % % % %
Growth and Income Stock % % % %
Capital Appreciation Stock % % % %
Mid-Cap Stock* % % % %
Emerging Growth % % % %
High Income % % % %
International Stock % % % %
Global Securities % % % %
</TABLE>
<PAGE>
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 INCOME PAYMENTS
Assumed Investment Rate
The discussion concerning the amount of variable income 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 Income Payments
The amount of the first variable income 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 income payment as of the Annuity Date,
the income payment option selected, and the age and sex (if, applicable) of the
Annuitant. The Contracts contain tables indicating the dollar amount of the
first income payment under each income payment option for each $1,000 applied at
various ages. These tables are based upon the Annuity 2000 Table (promulgated by
the Society of Actuaries) and an assumed investment rate of 3.5% per year.
The portion of the first monthly variable income payment derived from a
Subaccount is divided by the Income 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
Income Units for Income Units of another Subaccount.
In any subsequent month, for any Contract, the dollar amount of the variable
income payment derived from each Subaccount is determined by multiplying the
number of Income Units of that Subaccount attributable to that Contract by the
value of such Income unit at the end of the Valuation Period immediately
preceding the date of such payment.
The Income 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 income payments, less an adjustment to neutralize the
3.5% assumed investment rate referred to above. Therefore, the dollar amount of
income 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 income payments, if that Subaccount has a cumulative net investment
return of 5% over a one year period, the first income 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 income 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 Income Payments" in the Prospectus.)
Income Unit Value
The value of an Income 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 Income Unit value for each Subaccount's first Valuation Period
was set at $100. The Income 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 Income 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
income payment.
The following illustrations show, by use of hypothetical examples, the method of
determining the Income unit value and the amount of several variable income
payments based on one Subaccount.
<TABLE>
<CAPTION>
Illustration of Calculation of Income 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. Income Unit value for immediately preceding Valuation Period 103.41
4. Factor to compensate for the assumed investment rate of 3.5% 0.99990575
5. Income Unit value of current Valuation Period ((1) / (2)) x (3) x (4) 103.48
Illustration of Variable Income 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 income payment per $1,000 of adjusted Contract Value $5.63
5. First monthly income payment (3)x(4) , 1,000 $101.34
6. Income Unit value $98.00
7. Number of Income Units (5) , (6) 1.034
8. Assume Income Unit value for second month equal to $99.70
9. Second monthly income payment (7)x(8) $103.09
10. Assume Income Uunit value for third month equal to $95.30
11. Third monthly income payment (7)x(10) $98.54
</TABLE>
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 Annuity Account as of December 31,
1999, 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 years
ended December 31, 1999 and 1998, and accompanying notes are included in this
Statement of Additional Information. The 1999 financial statements have been
audited by PricewaterhouseCoopers LLP, independent accountants, 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 statutory basis statements of admitted assets, liabilities and surplus of
the Company as of December 31, 1999 and 1998, and the related statements of
operations, changes in unassigned surplus, and cash flows for the years ended
December 31, 1999, 1998, and 1997, are included in this Statement of Additional
Information. The 1999 financial statements have been audited by
PricewaterhouseCoopers LLP, independent accountants, 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 report of PricewaterhouseCoopers LLP covering the December 31, 1999,
financial statements contains an explanatory paragraph that states that the
Company prepared the financial statements using accounting practices prescribed
or permitted by the Iowa Department of Commerce, Insurance Division, which
practices differ from generally accepted accounting principles.
<PAGE>
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,
1999, 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 years
ended December 31, 1999 and 1998, and accompanying notes, are included in this
Statement of Additional Information.
The Company's statutory basis statements of admitted assets, liabilities and
surplus as of December 31, 1999 and 1998, and the related statutory basis
statements of operations, changes in unassigned surplus, and cash flows for the
years ended December 31, 1999, 1998, and 1997, as well as the Independent
Accountant'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>
CUNA MUTUAL LIFE VARIABLE ANNUITY ACCOUNT
Report on Audits of Financial Statements -
CUNA MUTUAL LIFE INSURANCE COMPANY
Report on Audits of Financial Statements -
<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"). Incorporated herein by
reference to post-effective amendment number 5 to Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 16, 1996.
2. Not Applicable.
3.(a) Distribution Agreement Between CUNA Mutual Life Insurance
Company and CUNA Brokerage Services, Inc. for Variable Annuity
Contracts dated January 1, 1997. Incorporated herein by
reference to post-effective amendment number 6 to Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
(b) Servicing Agreement related to the Distribution Agreement
between CUNA Mutual Life Insurance Company and CUNA Brokerage
Services, Inc. for Variable Annuity Contracts dated January 1,
1997. Incorporated herein by reference to post-effective
amendment number 6 to Form N-4 registration statement
(File No. 33-73738) filed with the Commission on April 18,
1997.
4.(a) Variable Annuity Contract.
(b) State Variations to Contract Form No. 2800. (to be filed by
amendment)
(c) TSA Endorsement. (to be filed by amendment)
(d) IRA Endorsement. (to be filed by amendment)
(e) Roth IRA Endorsement. (to be filed by amendment)
(f) Executive Benefit Plan Endorsement. (to be filed by amendment)
(g) 5% Guarantee Death Benefit Rider.
(h) 7 Year Anniversary Value Death Benefit Rider.
(i) Maximum Anniversary Value Death Benefit Rider.
(j) Waiver of Surrender Charge Endorsement.
5.(a) Variable Annuity Application. (to be filed by amendment)
(b) State Variations to Application Form No. 1676. Incorporated
herein by reference to post-effective amendment number 9 to
Form N-4 registration statement (File No. 33-73738) filed
with the Commission on April 27, 2000.
(c) State Variations to Application Form No.99-VAAPP. Incorporated
herein by reference to post-effective amendment number 9 to
Form N-4 registration statement (File No. 33-73738) filed
with the Commission on April 27, 2000.
6.(a) Certificate of Existence of the Company. Incorporated herein
by reference to post-effective amendment number 5 to Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 16, 1996.
(b) Articles of Incorporation of the Company. Incorporated herein
by reference to post-effective amendment number 6 to Form
N-4 registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
(c) Bylaws of the Company. Incorporated herein by reference to
post-effective amendment number 6 to Form N-4
registration statement (File No. 33-73738) filed with the
Commission on April 18, 1997.
7. Not Applicable.
8. Not Applicable.
9. Opinion of Counsel from Barbara L. Secor, Esquire. (to be
filed by amendment)
10. a. PricewaterhouseCoopers LLP Consent. (to be filed by
amendment)
b. KPMG LLP Consent (to be filed by amendment)
11. Not applicable.
12. Not applicable.
13. Schedules of Performance Data Computation. (to be filed by
amendment)
14. Not applicable.
Power of Attorney. (to be filed by amendment)
<PAGE>
Item 25. Directors and Officers of the Company
Name Position/Office
Directors
James C. Barbre** Director
Robert W. Bream** Director
James L. Bryan** Director & Vice Chairman
Loretta M. Burd** Director & Treasurer
Ralph B. Canterbury** Director
Rudolf J. Hanley** Director
Jerald R. Hinrichs** Director
Michael B. Kitchen** Director
Robert T. Lynch** Director
Brian L. McDonnell** Director & Secretary
C. Alan Peppers** Director
Omer K. Reed** Director
Rosemarie M. Shultz** Director
Neil A. Springer** Director & Chairman of the Board
Farouk D.G. Wang** Director
Larry T. Wilson** Director
Executive Officers
Wayne A. Benson** CUNA Mutual Life Insurance Company*
Chief Officer - Sales
Michael S. Daubs** CUNA Mutual Life Insurance Company*
Chief Officer - Investments
James M. Greaney** CUNA Mutual Life Insurance Company*
Chief Officer - Corporate Services
Steven A. Haroldson CUNA Mutual Life Insurance Company
Chief Officer - Technology
Jeffrey D. Holley CUNA Mutual Life Insurance Company
Chief Officer - Finance
Michael B. Kitchen** CUNA Mutual Life Insurance Company*
President and Chief Executive Officer
Reid A. Koenig*** CUNA Mutual Life Insurance Company*
Chief Officer - Operations
Daniel E. Meylink, Sr.** CUNA Mutual Life Insurance Company*
Chief Officer - Member Services/Lending Services
Faye Patzner** CUNA Mutual Life Insurance Company*
Senior Vice President - General Counsel
* CUNA Mutual Life Insurance Company 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 CUNA Mutual Life Insurance Company or CUNA
Mutual Insurance Society during the last five year period.
** Principal place of business is 5910 Mineral Point Road, Madison, Wisconsin
53705.
*** Principal place of business is 2000 Heritage Way, Waverly, Iowa 50677.
<PAGE>
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 "CUNA Mutual Life
Insurance Company," 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>
CUNA Mutual Insurance Society
ORGANIZATIONAL CHART AS OF June 22, 2000
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: Corporate Property/Casualty Insurance
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 Coverage
November l, 1990*
State of domicile: Wisconsin
b. CUNA Brokerage Services, Inc.
Business: Brokerage
July 19, 1985*
State of domicile: Wisconsin
c. CUNA Mutual General Agency of Texas, Inc.
Business: Managing General Agent
August 14, 1991*
State of domicile: Texas
d. MEMBERS Life Insurance Company
Business: Credit Disability/Life/Health
February 27, 1976*
State of domicile: Wisconsin
Formerly CUMIS Life & CUDIS
e. International Commons, Inc.
Business: Special Events
January 13, 1981*
State of domicile: Wisconsin
f. CUNA Mutual Mortgage Corporation
Business: Mortgage Servicing
November 20, 1978* Incorporated
December 1, 1995 Wholly Owned
State of domicile: Wisconsin
g. CUNA Mutual Insurance Agency, Inc.
Business: Leasing/Brokerage
March 1, 1974*
State of domicile: Wisconsin
Formerly CMCI Corporation
h. Stewart Associates Incorporated
Business: Credit Insurance
March 6, 1998
State of domicile: Wisconsin
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 New Mexico, Inc.
Business: Brokerage of Corporate & Personal Lines
June 10, 1993*
State of domicile: New Mexico
(3) CUNA Mutual Insurance Agency of Hawaii, Inc.
Business: Property & Casualty Agency
June 10, 1993*
State of domicile: Hawaii
(4) CUNA Mutual Casualty Insurance Agency of Mississippi, Inc.
Business: Property & Casualty Agency
June 24, 1993 *
State of domicile: Mississippi
(5) CUNA Mutual Insurance Agency of Kentucky, Inc.
Business: Brokerage of Corporate & Personal Lines
October 5, 1994*
State of domicile: Kentucky
(6) 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
3. CUNA Caribbean Insurance Society Limited
Business: Life and Health
July 4, 1985*
Country of domicile: Trinidad and Tobago
* 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. Family Insurance Services, Inc./Colorado
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Colleague Services Corporation
September 1, 1981
2. C. U. Insurance Services, Inc./Oregon
50% ownership by CUNA Mutual Insurance Agency, Inc.
50% ownership by Oregon Credit Union League
December 27, 1989
3. The CUMIS Group Limited
63.3% ownership by CUNA Mutual Insurance Society (as of 12-31 -96)
4. CIMCO Inc. (CIMCO)
50% ownership by CUNA Mutual Investment Corporation
50% ownership by CUNA Mutual Life Insurance Company
January 1, 1992
5. CUNA Mutual Insurance Agency of Ohio, Inc.
1% of value owned by Boris Natyshak (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
6. 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
7. CMG Mortgage Insurance Company
50% ownership by CUNA Mutual Investment Corporation 50% ownership by
PMI Mortgage Insurance Co.
April 14, 1994
8. Cooperators Life Assurance Society Limited (Jamaica)
CUNA Mutual Insurance Society owns 122,500 shares
Jamaica Co-op Credit Union League owns 127,500 shares
May 10, 1990
9. CU Interchange Group, Inc.
Owned by CUNA Strategic Services, Inc. and various state league
organizations
December 15, 1993 - CUNA Mutual Investment Corporation purchased
100 shares stock
10. CMG Mortgage Reinsurance Company
50% ownership by CUNA Mutual Investment Corporation
50% ownership by PMI Insurance Company
July 26, 1999
11. Credit Union Service Corporation
Owned by Credit Union National Association, Inc. and 18 state league
organizations
March 29, 1996 - CUNA Mutual Investment Corporation purchased 1,300,000
shares of stock
12. finsure.australia limited
50% ownership by CUNA Mutual Australia Holding Company Pty. Limited
50% ownership by CUSCAL
October 15, 1999
13. CUNA Strategic Services, Inc.
CUNA Mutual Insurance Society owns 200.71 shares
December 31, 1999
Partnerships
1. CM CUSO Limited Partnership, a Washington Partnership
CUMIS Insurance Society, Inc. - General Partner
Credit Unions in Washington - Limited Partners
June 14, 1993
Limited Liability Companies
1. "Sofia LTD." (Ukraine)
99.96% CUNA Mutual Insurance Society
.04% CUMIS Insurance Society, Inc.
March 6, 1996
2. 'FORTRESS' (Ukraine)
80% "Sofia LTD."
19% The Ukrainian National Association of Savings and Credit Unions
1% Service Center by UNASCU
September 25, 1996
3. MEMBERS Development Company LLC
49 % CUNA Mutual Investment Corporation
51% Credit Unions & CUSOs
September 24, 1999
4. The Center for Credit Union Innovation LLC
33.3% ownership by CUNA Mutual Insurance Society
33.3% ownership by CUNA & Affiliates
33.3% ownership by American Association of Credit Union Leagues
January 5, 2000
Affiliated (Nonstock)
1. MEMBERS Prime Club, Inc.
August 8, 1978
2. CUNA Mutual Group Foundation, Inc.
July 5, 1967
3. CUNA Mutual Life Insurance Company
July 1, 1990
<PAGE>
CUNA Mutual Life Insurance Company
ORGANIZATIONAL CHART AS OF June 22, 2000
CUNA Mutual Life Insurance Company
An Iowa mutual life insurance company
Fiscal Year End: December 31
CUNA Mutual Life Insurance Company is the controlling company for the following
subsidiaries:
1. CIMCO Inc.
An Iowa Business Act Corporation
50% ownership by CUNA Mutual Life Insurance Company
50% ownership by CUNA Mutual Investment Corporation
CIMCO Inc. is the investment adviser of:
Ultra Series Fund
MEMBERS Mutual Funds
2. Plan America Program, Inc.
A Maine Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
3. CMIA Wisconsin Inc.
A Wisconsin Business Act Corporation
100% ownership by CUNA Mutual Life Insurance Company
<PAGE>
Item 27. Number of Contractowners
As of _______, there were _______ non-qualified contracts outstanding and
_______ qualified contracts outstanding.
<PAGE>
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.
<PAGE>
Item 29. Principal Underwriter
(a) CUNA Brokerage is the registrant's principal underwriter and
for certain variable life insurance contracts issued by CUNA
Mutual Life Variable Account. CUNA Brokerage is also principal
underwriter for the Ultra Series Fund, an underlying Fund for
the Company's variable products. CUNA Brokerage is the
distributor of MEMBERS Mutual Funds, a group of open-end
investment companies.
(b) Officers and Directors of CUNA Brokerage.
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address With the Underwriter With Registrant
<S> <C> <C>
Joseph L. Bauer* Assistant Treasurer Finance Reporting Operations Manager
Wayne A. Benson* Director & President Chief Officer - Sales
Donna C. Blankenheim* Assistant Secretary Vice President
Assistant Secretary
Timothy L. Carlson** Assistant Treasurer None
Jan C. Doyle* Assistant Secretary Assistant Secretary
David S. Emery Vice President Division Vice President Credit Union Services
John C. Fritsche Assistant Vice President None
4455 LBJ Freeway
Suite 1108
Dallas, TX 75244
James E. Gowan Director Vice President Relationship Management Sales
Tracy K. Gunderson* Assistant Secretary Recording Secretary/Technical Writer
Lawrence R. Halverson* Director None
John W. Henry* Director & Vice President Vice President
Michael G. Joneson* Secretary & Treasurer
Marcia L. Martin Director & Assistant Vice Assistant Vice President President Broker/Dealer Ops
Campbell D. McHugh* Compliance Officer None
Daniel E. Meylink, Sr. Director Chief Officer - Members Services
Andrew C. Osen* Associate Compliance Assistant Counsel
Officer
Faye A. Patzner* Vice President - General Senior Vice President and General Counsel
Counsel
Judd T. Schemmel* Associate Compliance Assistant Counsel
Officer
Brian L. Schroeder* Associate Compliance Assistant Director, Insurance & Securities Market
Officer
Barbara L. Secor** Assistant Secretary Assistant Vice President
Assistant Secretary
Helen W. Wagabaza Assistant Secretary Recording Secretary/Technical Writer
John W. Wiley* Associate Compliance Officer None
</TABLE>
*The principal business address of these persons is: 5910 Mineral Point Road,
Madison, Wisconsin 53705.
**Theprincipal 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, 1999, was $23,489,271.00. 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.
<PAGE>
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 CIMCO Inc. or CUNA Mutual Group, both at 5910 Mineral Point Road,
Madison, Wisconsin 53705.
<PAGE>
Item 31. Management Services
All management contracts are discussed in Part A or Part B of this
registration statement.
<PAGE>
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.
(e) The Company represents that the fees and charges deducted
under the Contracts, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by CUNA Mutual Life Insurance
Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant, CUNA
Mutual Life Variable Annuity Account, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of Madison, and State of Wisconsin, on the 28th day
of June, 2000.
CUNA Mutual Life Variable Annuity Account (Registrant)
By CUNA Mutual Life Insurance Company
By: /S/Michael B. Kitchen
Michael B. Kitchen
President
Pursuant to the requirements of the Securities Act of 1933, the registrant, CUNA
Mutual Life Variable Annuity Account, has duly caused this Registration
Statement to be signed on its behalf by the undersigned thereunto duly
authorized, all in the City of Madison, and State of Wisconsin, on the 28th day
of June, 2000.
CUNA Mutual Life Insurance Company (Depositor)
By: /s/Michael B. Kitchen
Michael B. Kitchen
President
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE SIGNATURE AND TITLE DATE
<S> <C> <C> <C>
/s/James C. Barbre * /s/Brian L. McDonnell *
-------------------------------------- --------------------------------------
James C. Barbre, Director Brian L. McDonnell, Director
/s/Robert W. Bream * /s/C. Alan Peppers *
-------------------------------------- --------------------------------------
Robert W. Bream, Director C. Alan Peppers, Director
/s/James L. Bryan * /s/Omer K. Reed *
-------------------------------------- --------------------------------------
James L. Bryan, Director Omer K. Reed, Director
/s/Loretta M. Burd * /s/Richard C. Robertson *
-------------------------------------- --------------------------------------
Loretta M. Burd, Director Richard C. Robertson, Director
/s/Ralph B. Canterbury * /s/Rosemarie M. Shultz *
-------------------------------------- --------------------------------------
Ralph B. Canterbury, Director Rosemarie M. Shultz, Director
/s/Rudolf J. Hanley * /s/Neil A. Springer *
-------------------------------------- -------------------------------------
Rudolf J. Hanley, Director Neil A. Springer, Director
/s/Jerald R. Hinrichs * /s/Kevin S. Thompson 06/28/00
-------------------------------------- --------------------------------------
Jerald R. Hinrichs, Director Kevin S. Thompson,
Attorney-In-Fact
/s/Michael B. Kitchen 06/28/00 /s/Farouk D. G. Wang *
-------------------------------------- --------------------------------------
Michael B. Kitchen, Director Farouk D. G. Wang, Director
/s/Robert T. Lynch * /s/Larry T. Wilson *
-------------------------------------- --------------------------------------
Robert T. Lynch, Director Larry T. Wilson, Director
</TABLE>
*Pursuant to Powers of Attorney filed herewith
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following person in the capacity indicated on
the date indicated.
SIGNATURE AND TITLE DATE
/s/Michael G. Joneson 06/28/00
Michael G. Joneson
Vice President - Accounting & Financial Systems
/s/Jeffrey D. Holley 06/28/00
Jeffrey D. Holley
Chief Financial Officer
/s/Michael B. Kitchen 06/28/00
Michael B. Kitchen
President and Chief Executive Officer
<PAGE>
EXHIBIT INDEX
(a) Financial Statements
All required financial statements are included in Part B.
(b) Exhibits
4. (a) Variable Annuity Contract.
(g) 5% Guarantee Death Benefit Rider
(h) 7 Year Anniversary Value Death Benefit Rider.
(i) Maximum Anniversary Value Death Benefit Rider.
(j) Waiver of Surrender Charge Endorsement.
<PAGE>
EXHIBIT 4.(a)
Variable Annuity Contract
CUNA MUTUAL LIFE INSURANCE COMPANY
A Mutual Insurance Company
2000 Heritage Way, Waverly, Iowa 50677
Telephone: 800/798-5500
FLEXIBLE PREMIUM DEFERRED
VARIABLE AND FIXED ANNUITY
CONTRACT NUMBER: 123456789
READ YOUR CONTRACT CAREFULLY. This is a legal contract between the owner and
CUNA Mutual Life Insurance Company, 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. CUNA Mutual Life Insurance Company 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.
THE DOLLAR AMOUNT OF ANY INCOME PAYMENTS AND OTHER VALUES PROVIDED BY THIS
CONTRACT WILL INCREASE OR DECREASE BASED ON THE INVESTMENT EXPERIENCE OF THE
SUBACCOUNTS SELECTED. THE VARIABLE PROVISIONS ARE DESCRIBED IN SECTION 7.
THIS CONTRACT CONTAINS A MARKET VALUE ADJUSTMENT PROVISION. THE AMOUNT PAYABLE
UPON SURRENDER OR PARTIAL WITHDRAWAL OF THE FIXED CONTRACT VALUE MAY BE ADJUSTED
UPWARD OR DOWNWARD BASED ON A MARKET VALUE ADJUSTMENT FORMULA. SEE SECTION 10.5.
Signed for CUNA Mutual Life Insurance Company, Waverly, Iowa, on the Contract
Issue Date.
President Assistant Secretary
--------------------------------------------------------------------------------
RIGHT TO EXAMINE THIS CONTRACT. If for any reason you decide not to keep this
contract, you may return it to us within [10] days after you receive it. If this
contract is a replacement for an existing contract, you may return it to us
within [30] 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 fixed
account 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 expense charges which have
been deducted prior to allocation. If this contract is an individual retirement
annuity, during the first [10] days of your right to examine period, we will,
instead of the foregoing, refund any purchase payments received by us.
--------------------------------------------------------------------------------
Flexible Purchase Payments as Described Herein
Income Payments Starting on the Payout Date
Death Benefit Payable at Death Prior to the Payout Date
Participating
<PAGE>
--------------------------------------------------------------------------------
CONTRACT GUIDE AND INDEX
--------------------------------------------------------------------------------
Data Page.........................................................Section 1
Definitions.......................................................Section 2
General Information...............................................Section 3
Owner and Beneficiary.............................................Section 4
Accumulation Period...............................................Section 5
Purchase Payments.................................................Section 6
Investment Options................................................Section 7
Transfer Privilege................................................Section 8
Contract Value....................................................Section 9
Withdrawal Provision..............................................Section 10
Death of Annuitant and/or Owner...................................Section 11
Death Benefit Proceeds............................................Section 12
Loans and Dividends...............................................Section 13
Payout Period.....................................................Section 14
Income Payments...................................................Section 15
Death of Owner....................................................Section 16
Option Tables.....................................................Section 17
Additional Benefit Rider(s)
<PAGE>
Contract Number: 123456789
------------------------------------- ------------------------------------------
SECTION 1. DATA PAGE
------------------------------------- ------------------------------------------
FLEXIBLE PREMIUM DEFERRED VARIABLE AND FIXED ANNUITY
ANNUITANT: John Doe CONTRACT NUMBER: 123456789
CO-ANNUITANT: Jane Doe CONTRACT ISSUE DATE: October 1, 2000
PAYOUT DATE: October 1, 2050 LIFE INCOME RATES: Type A
INCOME OPTION: 10 C & L LOAN AVAILABLE: No
OWNER(S): John Doe Jane Doe
INITIAL PURCHASE PAYMENT: $20,000
MINIMUM ADDITIONAL PURCHASE PAYMENT: $100
CHARGES AND FEES*:
Mortality and Expense Risk Charge: [1.15% per year]
Maximum Contract Fee: $30 per year
Maximum Transfer Fee: $10 after 1st 12 transfers in a contract year
Premium Expense Charge on the contract issue date: 0.00%
Surrender Charges: Each purchase payment has an individual surrender charge
schedule, as described in Section 10.3.
* We reserve the right to reduce or waive any of these charges or fees. Any
reduction or waiver will be administered in a non-discriminatory manner.
DEATH BENEFIT RIDERS: Annual Percentage Charge
Maximum Anniversary Value Death Benefit Rider [0.15%]
5% Annual Guarantee Death Benefit Rider [0.15%]
7 Year Anniversary Death Benefit Rider [0.10%]
<PAGE>
INITIAL ALLOCATION OF NET PURCHASE PAYMENTS:
VARIABLE ACCOUNT: CUNA Mutual Life Variable Annuity Account
Subaccounts Fund Percentage
----------- ---- ----------
Mid-Cap Stock Ultra Series 0.00%
Capital Appreciation Stock Ultra Series 0.00%
Growth & Income Stock Ultra Series 15.00%
Balanced Ultra Series 25.00%
Bond Ultra Series 10.00%
Money Market Ultra Series 0.00%
High Income Ultra Series 0.00%
International Stock Ultra Series 0.00%
Emerging Growth Ultra Series 0.00%
Global Securities Ultra Series 0.00%
FIXED ACCOUNT OPTION:
Fixed Current Guaranteed
Periods Interest Rate
1 Year 5.05% 5.00%
3 Year 5.25% 0.00%
5 Year 5.55% 0.00%
7 Year 5.60% 0.00%
10 Year 5.65% 0.00%
DCA Fixed Periods
1 Year 7.00% 25.00%
<PAGE>
SECTION 2. DEFINITIONS
2.1 What are the most commonly used terms and what do they 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 income
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.
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 payout 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 day and month as the contract issue date for
each year the contract remains in force.
contract issue 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 a contract anniversary.
contract value - The total amount invested under the contract. It is the sum of
the variable contract value, the fixed contract value and the loan account
value.
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.
fixed account 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.
fixed amount - Any portion of fixed contract value allocated to a particular
fixed period with a particular expiration date (including interest thereon).
fixed contract value - The value of the contract in the fixed account option.
fixed period - A choice under the fixed account option with a specific number of
years for which we agree to credit a particular effective annual interest rate.
fund - Each investment portfolio (sometimes called a Series) of the 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 CUNA Mutual Life Insurance Company.
home office - CUNA Mutual Life Insurance Company, 2000 Heritage Way, Waverly,
lowa, 50677.
income unit - A unit of measure used to calculate variable income payments.
loan account - For any contract, a portion of our general account to which
variable contract value or fixed contract value is transferred to provide
collateral for any loan taken under the contract. loan amount - The sum of your
loan principal plus any accrued loan interest.
net purchase payment - A purchase payment less any deduction for applicable
premium expense charges.
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 income payments upon whose life payments are based.
payout date - The date when income payments will begin, if the annuitant is
still living. This date is shown on the data page.
premium expense charge - An amount we deduct from your purchase payments to
cover taxes we are currently charged by your state of residence. The initial
charge is shown on the data page.
pro-rata - A method of distribution of variable contract value and fixed
contract value among any of the subaccount(s) or fixed period(s). The
distribution is in the same proportion that the value in each subaccount or
fixed period has to the total value of the affected subaccount(s) or fixed
period(s).
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. If your contract is a qualified contract, the term "fixed
amount" may also be referred to as "guarantee amount", and "income payment" may
also be referred to as "annuity payment".
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,
market value adjustment, premium expense charges not previously deducted, the
annual contract fee, any applicable charge for riders 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 beginning at the close of the New York Stock
Exchange (currently 3:00 p.m. Central Time) of one valuation day, and continuing
to 3:00 p.m. Central Time, or the close of the New York Stock Exchange,
whichever is earlier, of the next succeeding valuation day.
variable account - The CUNA Mutual Life Variable Annuity Account. A segregated
investment account of CUNA Mutual Life Insurance Company into which net purchase
payments may be allocated.
variable contract value - The value of the contract in the variable account.
we, our, us - CUNA Mutual Life Insurance Company.
written request - A signed and dated written notice in a form satisfactory to us
and received in our home offfice.
you, your - The owner or owners of this contract who are entitled to exercise
all rights and privileges in the policy.
<PAGE>
SECTION 3. GENERAL INFORMATION
3.1 What is the entire contract?
This contract form, the data page, any attached riders and 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.
3.2 When does this contract become incontestable?
This contract is incontestable from its contract issue date. The statements
contained in the application (in the absence of fraud) are considered
representations and not warranties.
3.3 What if the annuitant's date of birth or gender 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
gender has been misstated and the Type A life income rates apply (see the data
page and Section 17), we will adjust the payments under this contract based on
the correct gender. Any underpayment will be added to the next payment. Any
overpayment will be subtracted from future payments.
3.4 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 fixed 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 payout period, it will be deducted in equal
amounts from any variable income payments made during a contract year. This fee
is to reimburse us for the expense of maintaining this contract.
3.5 What premium expense charges may be deducted?
We will deduct any applicable premium expense charge from surrender value, death
benefit amount or the amount applied to an income payout option. However, we
reserve the right to charge for the premium expense charge when it is incurred.
The premium expense charge rate for your state as of the contract issue date is
shown on the data page.
In addition, we reserve the right to deduct certain other premium expense
charges from surrender value, death benefit amount or income payments, as
appropriate. Such premium expense charges 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 income payments under this contract.
3.6 Will annual reports be sent?
We will send you a report, without charge, at least annually which provides
information about your contract required by any applicable law.
3.7 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 4. OWNER AND BENEFICIARY
4.1 What are your rights 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. Assignment of your contract as collateral security will not be
allowed.
4.2 How can you change the owner or beneficiary of this contract?
You may change the owner or beneficiary of this contract by written request 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 request.
If the owner is more than one person, the written request 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.
SECTION 5. ACCUMULATION PERIOD
5.1 What is the accumulation period?
The accumulation period is the first of two periods of your contract. The
accumulation period begins on the contract issue date stated on the data page.
This period will continue until the payout date unless the contract is
terminated before that date.
SECTION 6. PURCHASE PAYMENTS
6.1 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.
6.2 Are additional purchase payments required?
Additional purchase payments after the initial purchase payment are not
required.
6.3 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 fixed period of the fixed account option.
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 fixed period of the
fixed account option become part of the fixed contract 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 request. The allocation may be 100% to any available
subaccount or fixed period, or may be divided among any of the subaccounts or
fixed periods in whole percentage points totaling 100%. The minimum allocation
to any subaccount or fixed period is 1%. The minimum net purchase payment
allocated to a fixed period is $1,000. If you request an allocation of less than
$1,000 to a fixed period, the net purchase payment will automatically be
allocated to the money market subaccount. Any change will be effective at the
time we receive your written request.
SECTION 7. INVESTMENT OPTIONS
7.1 What is the fixed account option?
The fixed account option is an allocation option supported by assets in our
general account. The fixed account 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 fixed account option.
7.2 What are the fixed account periods and what happens when a fixed period
ends?
The fixed account periods as of the contract issue date are shown on the data
page. The minimum net purchase payment or transfer amount to a fixed period is
$1,000. The fixed period selected will determine the guaranteed interest rate. A
fixed 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 fixed period selected
has elapsed. The last day of a fixed period is the expiration date.
DCA fixed period. You may allocate net purchase payments to a DCA fixed period
that we make available. Transfers from subaccount(s) or a fixed period will not
be allowed to a DCA fixed period. A minimum amount is required to be transferred
monthly from a DCA fixed period to deplete the fixed amount by the expiration
date. The minimum transfer amount is the monthly sum required to fully amortize
the fixed amount as of the expiration date. See Section 8.1.
All other fixed periods. You may allocate net purchase payments or transfer
amounts to one or more of the fixed periods that we make available. We will
notify you prior to the expiration date for the fixed amount. You may exercise
one of the following options by written request at any time during the 30 day
time period prior to the expiration date:
a.) You may transfer the fixed amount to any available fixed period at the
current guaranteed interest rate for that period. You may only choose fixed
periods other than a DCA fixed period. The fixed period selected cannot
extend past the payout date.
b.) You may transfer the fixed amount to any available subaccount.
c.) If there is less than 1 year to the payout date, you may continue to
accumulate interest on the fixed amount at the current guaranteed interest
rate available for the 1 year fixed period.
If we are not notified during the 30 day time period prior to the expiration
date, a new fixed period will begin automatically on the day following the
expiration date. The new fixed period will be the same duration as the previous
fixed period. If the new fixed period would extend beyond the payout date, it
will automatically be the longest duration that does not extend beyond the
payout date. If there is less than 1 year to the payout date, we will continue
to credit interest at the current guaranteed interest rate available for the 1
year fixed period.
7.3 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 issue 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 issue date are shown on the data page. Net purchase payments
allocated and transfers to a subaccount are invested in the fund supporting that
subaccount.
7.4 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
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.
<PAGE>
SECTION 8. TRANSFER PRIVILEGE
8.1 Can you transfer values among and between subaccounts and fixed periods?
Your variable contract value may be transferred among the subaccounts or to an
available fixed period other than a DCA fixed period at any time prior to the
expiration date of the fixed period. Monthly transfers from a DCA fixed period
are required to deplete the fixed amount by the expiration date. Transfers from
any other fixed period will be allowed only during the 30 day period prior to
the expiration date of that fixed period. Transfers are subject to all of the
following:
a.) the transfer request must be by written request;
b.) the transfer request must be received in our home office prior to the
payout date;
c.) the amount transferred to a fixed period must be at least $1,000, or it
will be transferred automatically to the Money Market Subaccount;
d.) the transfer is to a subaccount or fixed period other than a DCA fixed
period; and
e.) the deduction of any transfer fees that we may impose.
Transfers from a DCA fixed period are subject to the following additional
requirements:
a.) monthly transfers will be made automatically to the subaccount(s) you have
designated;
b.) if no subaccounts have been designated, the minimum transfer amount will be
automatically transferred to the money market subaccount;
c.) the minimum transfer amount is the monthly sum required to fully amortize
the fixed amount as of the expiration date;
d.) the initial monthly transfer must occur within one month of the purchase
payment allocation to the DCA fixed period and will occur on the transfer
day you have designated;
e.) if an initial transfer day is not designated, the initial transfer will be
made one month after allocation of the purchase payment to the DCA fixed
period;
f.) subsequent monthly transfers will occur automatically on the same monthly
day as the initial monthly transfer day and will continue until the fixed
amount is depleted;
g.) if a transfer day falls on a weekend or holiday, the transfer will be made
on the following valuation day; and
h.) transfers from a DCA fixed period are not subject to a surrender charge,
market value adjustment or transfer fee.
You may make 12 transfers, in addition to transfers from a DCA Fixed Period, per
contract year without charge. Each transfer after the 12th transfer may be
assessed a transfer fee. The maximum transfer fee is shown on the data page. The
transfer fee charged, if any, will never be greater than the maximum and will be
deducted from the subaccount(s) or fixed period(s) from which the transfer is
made. If a transfer is made from more than one subaccount or fixed 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 fixed amount
for such fixed period(s). We reserve the right to waive the transfer fees and to
modify or eliminate the transfer privilege.
<PAGE>
SECTION 9. CONTRACT VALUE
9.1 What is your contract value?
Your contract value at any time is equal to the sum of the values you have in
the fixed account option, the variable account and the loan account.
9.2 How is your fixed contract value determined?
Your fixed contract value at any time is the sum of all fixed amounts.
Each fixed amount is equal to:
a.) the amount initially allocated or transferred to a fixed period with a
specified expiration date; plus the interest subsequently earned;
b.) less any prior partial withdrawal or amount borrowed; and
c.) less any amounts transferred to any subaccount or fixed period.
As a result of any additional purchase payments or transfer of any portion of
your contract value, fixed amounts allocated to fixed periods of the same
duration may have different expiration dates. Each fixed amount will be treated
separately for purposes of determining any market value adjustment described in
Section 10.5. A market value adjustment is not applicable to any fixed amount
allocated to a DCA fixed period or any fixed period less than 3 years.
We will periodically establish an applicable guaranteed interest rate for each
fixed period made available. Once an interest rate is declared for a fixed
amount, it is guaranteed for the duration of the fixed period. The guaranteed
effective annual interest rate(s) will never be less than 3%.
9.3 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.
9.4 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.
The charge for a valuation period is equal to the daily charge for the
mortality and expense risk 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.
<PAGE>
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.
Cancellation of the appropriate number of accumulation units from a subaccount
will occur upon:
a.) a partial withdrawal or surrender;
b.) a loan;
c.) a transfer from a subaccount;
d.) payment of the death benefit;
e.) the payout date;
f.) the deduction of the annual contract fee;
g.) imposition of any transfer fee; and
h.) the deduction of the applicable charge for riders, if any.
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 10. WITHDRAWAL PROVISION
10.1 What are the rules for a partial withdrawal of the surrender value?
You may make partial withdrawals during the accumulation period by written
request. You must specify the subaccount(s) or fixed 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 canceling accumulation units from appropriate subaccount(s) and/or reducing
appropriate fixed amount(s). Partial withdrawals generally will be effective as
of the date we receive written request.
Any applicable market value adjustment will affect the amount available for
withdrawal from a fixed amount. If, at the time a partial withdrawal is
requested from a fixed amount, the fixed amount would be insufficient to permit
the deduction of a market value 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 fixed amount(s) from which the partial withdrawal
is being made. If such remaining subaccount value(s) or fixed amount(s) are
insufficient for this purpose, the surrender charge will be deducted pro-rata
from all subaccount(s) and fixed amount(s) under the contract based on the
remaining contract value in each subaccount or fixed 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.
10.2 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 request. 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 market value adjustment;
c.) minus any applicable surrender charge;
d.) minus the annual contract fee and any applicable charge for rider(s) if the
surrender does not occur on a contract anniversary;
e.) minus any loan amount; and
f.) minus any applicable premium expense charges 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.
10.3 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 described in Section 10.4. Each purchase
payment has an individual surrender charge schedule which begins when the
purchase payment is credited to your contract and continues for 7 years, as
shown below. 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.
For purposes of assessing a surrender charge, contract value is considered
withdrawn in the following order:
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.
10.4 What amount(s) may be withdrawn without incurring a surrender charge?
The following amounts may be withdrawn without incurring a surrender charge:
a.) earnings not previously withdrawn;
b.) old purchase payments not previously withdrawn; and
c.) your annual free withdrawal amount described below.
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. Free withdrawal amounts not withdrawn in a contract year
are not carried over to increase the free withdrawal amount in a subsequent
contract year.
10.5 When will a market value adjustment be applied and how is it calculated?
A market value adjustment will not be applied at any time to a fixed amount
allocated to a DCA fixed period or any fixed period less than 3 years. A market
value adjustment will be imposed on any other fixed amounts withdrawn (which
includes partial withdrawals, full surrender and amounts borrowed) prior to the
end of the fixed period. A market value adjustment will not be imposed on a
withdrawal during the 30 day period prior to the expiration date of a fixed
period. The interest rate being credited to a DCA fixed period will not be used
as a factor in any market value adjustment calculation.
<PAGE>
The amount of the market value adjustment will be calculated by multiplying the
amount being withdrawn from the fixed 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 fixed periods equal in
duration to the period related to the fixed amount being withdrawn. If the
applicable fixed period is no longer offered, "I" will be the rate
determined by linear interpolation of the guaranteed interest rates for the
fixed periods that are available. If the fixed 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 fixed period.
Linear interpolation will be used if this period of time to maturity is not
quoted.
J = the interest rate being credited to the fixed amount being withdrawn.
N = the number of complete months remaining to the end of the fixed period.
In situations where "I" is greater than "J" the market value adjustment will
have the effect of reducing the amount available for withdrawal. Alternatively,
if "J" is greater than "I", the market value adjustment will have the effect of
increasing the amount available for withdrawal.
No market value 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; or
c.) amounts withdrawn during the 30 day period prior to the expiration date of
the fixed period.
<PAGE>
In no event will:
a.) the market value adjustment exceed an amount equal to the interest earned
in excess of an effective annual rate of 3% on fixed amounts;
b.) the sum of any surrender charges and market value adjustment for a fixed
amount be greater than 10% of the amount withdrawn; or
c.) the market value 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 market value adjustment and
surrender charge.
10.6 Are there any restrictions on payment of surrender, partial withdrawals or
loans?
Generally, the amount of any surrender, partial withdrawal or loan will be paid
to you within seven days of our receipt of your written request.
In accordance with state law, we reserve the right to postpone payment of any
surrender, partial withdrawal or loan of fixed contract value for up to six
months after we receive written request. If payment is postponed for more than
29 days, we will pay interest at the effective annual rate of 3.50% for the
period of postponement.
We reserve the right to postpone payment of any surrender, partial withdrawal or
loan 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 11. DEATH OF ANNUITANT AND/OR OWNER
11.1 What if the annuitant dies during the accumulation period?
If the annuitant dies during the accumulation period, and a co-annuitant
survives, no death benefit will be paid. 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 income
payout options as payee. If the deceased annuitant is also an owner, see Section
11.2.
11.2 What if any owner dies during the accumulation period?
If any owner dies prior to the payout date and the deceased owner is the sole
annuitant, we will pay the death benefit to the beneficiary. The death benefit
must be distributed within 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 payout options as payee, provided:
a.) payments under the income payout option begin not later than one (1) year
after the owner's death; and
b.) 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, the new owner
will be the surviving owner, if any. If there are no surviving owners, the new
owner will be the annuitant (unless otherwise provided). If the sole new owner
is the deceased owner's spouse, the contract may be continued. If the new owner
is someone other than the deceased owner's spouse, the surrender value of the
contract must be distributed within 5 years of the deceased owner's death.
SECTION 12. DEATH BENEFIT PROCEEDS
12.1 What amount will be paid as death benefit proceeds during the accumulation
period?
The amount that will be paid under this contract as death benefit proceeds will
be determined based on the annuitant's age on your contract issue 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 issue date is less than 76, the death
benefit proceeds are equal to the greater of a.) or b.) as follows:
a.) The sum of your net purchase payments made as of the date due proof of
death is received, minus an adjustment for each partial withdrawal made as
of the date due proof of death is received, equal to (1) divided by (2),
with the result multiplied by (3), where:
(1) = the partial withdrawal amount;
(2) = the contract value immediately prior to the partial withdrawal; and
(3) = the sum of your net purchase payments immediately prior to the
partial withdrawal, less any adjustments for prior partial
withdrawals.
b.) The contract value as of the date due proof of death is received.
If the annuitant's age on your contract issue date is 76 or greater, the death
benefit is equal to the contract value as of the date due proof of death is
received.
The death benefit described above will be reduced by any loan amount and any
applicable premium expense charges not previously deducted.
SECTION 13. LOANS AND DIVIDENDS
13.1 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 fixed period(s) from which the loan will
be made. The amount borrowed from such subaccount(s) or fixed period(s) in
connection with the loan will be transferred to the loan account. Any amount
borrowed from a fixed amount will be subject to a market value adjustment, if
applicable, as described in Section 10.5.
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 payout 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
fixed 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 fixed period(s) in the same
proportion as the purchase payments are currently allocated, unless you request
otherwise. Loan repayments are not allowed to a DCA fixed period.
The loan amount will be deducted from any death benefit payable.
<PAGE>
If, on any date, your loan amount causes your surrender value to be equal to or
less than zero, 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.
13.2 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 request that we apply your dividends by:
a.) allocating them to your subaccount(s) of the variable account and the fixed
account option in the same proportion as designated for purchase payments;
or
b.) paying them to you in cash.
Unless you tell us otherwise, dividend option a.) above will be used.
SECTION 14. PAYOUT PERIOD
14.1 What is the payout period?
The payout period is the second of the two periods of your contract. The payout
period begins on the payout date. It continues until we make the last payment as
provided by the income payout option chosen.
On the first day of this period, the contract value (adjusted as described
below) will be applied to the income payout option shown on the data page,
unless you have previously elected another option. Monthly income payments will
begin as provided under that option.
The contract value applied to an income payout option will be adjusted as
follows:
a.) any applicable market value adjustment will be made;
b.) any applicable surrender charge will be deducted for amounts applied to
Option 1 and a variable income payment under Option 2;
c.) any applicable premium expense charge will be deducted;
d.) any loan amount will be deducted;
e.) any applicable charge for riders will be deducted, if the payout date is
not on the contract anniversary; and
f.) if the payout 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 income payments for that
contract year.
SECTION 15. INCOME PAYMENTS
15.1 When will income payments begin?
The first income payment will be paid as of the payout date. The payout date is
shown on the data page. You may change the payout date by written request,
provided that the request is received at our home office at least 30 days prior
to the current payout date. Unless otherwise restricted by law or regulation,
the latest payout date is the later of the contract anniversary following the
annuitant's 85th birthday or 10 years after the contract issue date.
Unless changed as described above, we will use the payout date shown on the data
page.
15.2 What income payout options are available?
There are different ways to receive income payments. We call these income payout
options. Four income payout options are described below. Option 1 is available
only as a fixed income payment. Options 2, 3 and 4 are available in two forms -
as a variable income payment in connection with the variable account and as a
fixed income payment. Other income payout options may be available with our
consent.
Option 1 - Interest Option (Fixed Income 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 or Variable Income Payments). We will pay
monthly income payments for a chosen number of years, not less than 5, nor more
than 30. If the original payee dies before income payments have been made for
the chosen number of years: (a) income payments will be continued for the
remainder of the period to the successor payee; or (b) the present value of the
remaining income 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.
Dividends, if any, will be payable as determined by us. We do not anticipate any
dividends will be paid.
The payee has the right to receive all remaining variable income payments due
under Option 2 in one sum at any time by written request. The single payment
amount will be equal to the present value of the remaining variable income
payments, computed at the interest rate used to create the Option 2 rates.
Option 3 - Life Income Option - Guaranteed Period Certain (Fixed or Variable
Income Payments). We will pay monthly income payments for as long as the payee
lives. If the original payee dies before all of the income payments have been
made for the guaranteed period certain: (a) income payments will be continued
during the remainder of the guaranteed period certain to the successor payee; or
(b) the present value of the remaining income 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.) life income only;
b.) 5 years;
c.) 10 years;
d.) 15 years; or
e.) 20 years.
Dividends, if any, will be payable as determined by us. We do not anticipate any
dividends will be paid.
Option 4- Joint and Survivor Life Income Option - 10 Year Guaranteed Period
Certain (Fixed or Variable Income Payments). We will pay monthly income payments
for as long as either of the original payees is living. If at the death of the
second surviving payee, income payments have been made for less than 10 years:
(a) income payments will be continued during the remainder of the guaranteed
period certain to the successor payee; or (b) the present value of the remaining
income 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. We do not anticipate any
dividends will be paid.
15.3 What are the requirements for choosing an income payout option?
We will automatically make income payments according to a life income payment
option with a guaranteed period certain of 10 years, starting on the payout
date, unless you choose another guaranteed period certain or income payout
option. We will apply your adjusted contract value to purchase a variable and/or
fixed income payment in the same proportion as your contract value is
distributed among the subaccount(s) and the fixed account option. You may change
the income payout option by written request on or prior to the payout date to an
income payout 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 $20, 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
income payment of $20.
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
gender of any payee who is to receive a life income.
The payee may name a successor payee to receive any remaining income payments
due after the payee's death. The payee may exercise any ownership rights that
continue after the payout date.
<PAGE>
15.4 How will fixed income payment values be determined? The minimum dollar
amount of each fixed income payment will be determined by dividing the amount
applied by $1,000, and multiplying the result by the applicable option rate
shown in Section 17. Higher current option rates may be available on the payout
date and are available upon request to our home office.
15.5 How will variable income payment values be determined?
The dollar amount of the initial variable income 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 17. The
total initial variable income payment is the sum of the initial variable income
payments attributable to the subaccount(s).
The dollar amount of the subsequent variable income payments attributable to a
subaccount will be based on the number of income units credited to the contract
for that subaccount and is determined by multiplying (a) by (b), where:
a.) is the number of subaccount income units; and
b.) is the subaccount income unit value for the valuation period immediately
preceding the due date of the payment.
<PAGE>
The number of income units attributable to each subaccount remains fixed unless
there is an exchange of income units.
The number of income units is derived by dividing that portion of the initial
variable income payment attributable to the subaccount by the subaccount's
income unit value for the valuation period which ends immediately preceding the
payout date.
The income unit value for each subaccount was arbitrarily set initially at $100.
Thereafter, the income 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; and
c.) is the income 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.
15.6 Can variable annuity units be exchanged? The payee may exchange the dollar
value of a designated number of income units of a particular subaccount for an
equivalent dollar amount of income units of another subaccount by written
request. On the date of the exchange, the dollar amount of an income payment
would be unaffected by the fact of the exchange.
No more than 4 exchanges of income units may be made during any contract year.
<PAGE>
SECTION 16. DEATH OF OWNER
16.1 What if you die during the payout period?
If you die on or after the payout date, any remaining proceeds will be
distributed at least as rapidly as provided by the income payout option in
effect.
SECTION 17. OPTION TABLES
17.1 What rates will be used to determine payment values?
The rates shown in the following tables are used to determine the minimum
payment values for monthly fixed income payments. Higher current rates may be
available on the payout date, and are available upon request to our home office.
These rates are also used to determine the initial variable income payment
amount.
The Option 2 rates are based on 3.50% interest per year. The Option 3 and 4
rates are based on the Annuity 2000 Table and with compound interest at the
effective rate of 3.50% per year. Rates for years payable and guaranteed periods
certain not shown, if allowed by us, will be calculated on an actuarially
equivalent basis and will be available upon request.
The Type A life income rates for Options 3 and 4 are based on the payee's age
and gender. The Type B life income rates are based on the payee's age. The life
income rates type for this contract is shown on the data page.
<PAGE>
Option 2. Rates - First Payment Due at Beginning of Period.
Years Monthly Payment Payable Under
Payable Option 2 for each $1,000 Applied
------- --------------------------------
10 9.83
15 7.10
20 5.75
25 4.96
30 4.45
Option 3. Life Income Rates - Guaranteed Period Certain - First Payment Due at
Beginning of Period.
<TABLE>
<CAPTION>
Type A Life Income Rates
Per $1,000 Applied
------------ --------------------------------------------------------------------------------------------------------------
Age - Male
------------ --------------------------------------------------------------------------------------------------------------
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> <C>
0 4.75 4.84 4.94 5.04 5.15 5.26 5.39 5.52 5.66 5.81 5.97 6.15 6.33 6.53 6.74 6.96 7.20 7.45 7.72 8.01 8.32
5 4.74 4.83 4.92 5.02 5.13 5.24 5.36 5.49 5.62 5.77 5.92 6.08 6.26 6.44 6.64 6.84 7.06 7.28 7.53 7.78 8.05
10 4.70 4.78 4.87 4.96 5.06 5.16 5.27 5.38 5.50 5.63 5.76 5.90 6.04 6.19 6.34 6.50 6.66 6.82 6.99 7.16 7.34
15 4.62 4.70 4.77 4.85 4.94 5.02 5.11 5.20 5.30 5.39 5.49 5.59 5.69 5.79 5.89 5.99 6.08 6.18 6.27 6.36 6.44
20 4.51 4.57 4.63 4.70 4.76 4.82 4.89 4.95 5.02 5.08 5.14 5.20 5.26 5.31 5.37 5.42 5.46 5.50 5.54 5.58 5.61
------------ --------------------------------------------------------------------------------------------------------------
Age - Female
--------------------------------------------------------------------------------------------------------------
Years 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75
---------------------------------------------------------------------------------------------------------------------------
0 4.44 4.52 4.60 4.68 4.78 4.87 4.97 5.08 5.20 5.33 5.46 5.60 5.75 5.92 6.10 6.29 6.49 6.72 6.96 7.22 7.50
5 4.43 4.51 4.59 4.67 4.76 4.86 4.96 5.07 5.18 5.30 5.43 5.57 5.72 5.88 6.05 6.23 6.43 6.64 6.86 7.10 7.36
10 4.41 4.48 4.56 4.64 4.73 4.82 4.91 5.01 5.12 5.23 5.35 5.47 5.60 5.74 5.89 6.04 6.21 6.38 6.55 6.74 6.93
15 4.37 4.44 4.51 4.58 4.66 4.74 4.82 4.91 5.00 5.10 5.20 5.30 5.40 5.51 5.62 5.73 5.84 5.95 6.06 6.17 6.27
20 4.31 4.37 4.43 4.49 4.56 4.62 4.69 4.76 4.83 4.90 4.97 5.04 5.11 5.18 5.24 5.31 5.37 5.42 5.47 5.52 5.56
Type B Life Income Rates
Per $1,000 Applied
------------ -------------------------------------------------------------------------------------------------------------
Age - Unisex
-------------------------------------------------------------------------------------------------------------
Years 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75
--------------------------------------------------------------------------------------------------------------------------
0 4.50 4.58 4.66 4.75 4.85 4.95 5.05 5.17 5.29 5.42 5.55 5.70 5.86 6.03 6.21 6.41 6.62 6.85 7.09 7.36 7.64
5 4.49 4.57 4.65 4.74 4.83 4.93 5.04 5.15 5.26 5.39 5.52 5.67 5.82 5.98 6.15 6.34 6.54 6.75 6.98 7.22 7.48
10 4.47 4.54 4.62 4.70 4.79 4.88 4.98 5.08 5.19 5.30 5.42 5.55 5.69 5.83 5.97 6.13 6.29 6.46 6.63 6.81 7.00
15 4.42 4.49 4.56 4.63 4.71 4.79 4.88 4.97 5.06 5.15 5.25 5.35 5.46 5.56 5.67 5.78 5.89 5.99 6.10 6.20 6.31
20 4.35 4.41 4.47 4.53 4.60 4.66 4.73 4.80 4.87 4.94 5.01 5.07 5.14 5.21 5.27 5.33 5.38 5.44 5.48 5.53 5.57
</TABLE>
<PAGE>
Option 4. Life Income Factors - Joint and Survivor - 10 Year Guaranteed Period
Certain - First Payment Due at Beginning of Period.
Type A Life Income Rates
Per $1,000 Applied
---------------------------------------
Age Age - Female
----------------------------
Male 55 60 65 70 75
--------------------------------------
55 4.06 4.21 4.36 4.48 4.57
60 4.16 4.38 4.59 4.78 4.93
65 4.25 4.52 4.81 5.09 5.35
70 4.31 4.63 5.00 5.39 5.78
75 4.36 4.71 5.14 5.65 6.18
--------------------------------------
Type B Life Income Rates
Per $1,000 Applied
---------------------------------------
Age - Unisex
Age
---------------------------------------
Unisex 55 60 65 70 75
--------------------------------------
55 4.01 4.14 4.25 4.33 4.39
60 4.14 4.32 4.49 4.63 4.74
65 4.25 4.49 4.74 4.96 5.15
70 4.33 4.63 4.96 5.30 5.61
75 4.39 4.74 5.15 5.61 6.08
--------------------------------------
<PAGE>
FLEXIBLE PREMIUM DEFERRED
VARIABLE AND FIXED ANNUITY
Flexible Purchase Payments as Described Herein
Income Payments Starting on the Payout Date
Death Benefit Payable at Death Prior to the Payout Date
Participating
CUNA MUTUAL LIFE INSURANCE COMPANY
2000 Heritage Way, Waverly, Iowa 50677
Telephone: (319) 352-4090
<PAGE>
Exhibit 4.(g)
4.(g) 5% Guarantee Death Benefit Rider
RIDER SECTION 1. GENERAL INFORMATION
1.1 What is our agreement with you?
Our agreement with you includes this rider and its application, as a part of the
contract to which it is attached. The provisions of the contract apply to this
rider unless they conflict with the rider. If there is a conflict, the rider
provision will apply. The issue date for this rider is the same issue date as
the contract to which it is attached.
We promise to provide the death benefit described in this rider as long as the
contract and this rider are in force and all the terms and conditions of this
rider are met.
1.2 What is the benefit provided by this rider?
This rider provides a 5% annual guarantee death benefit during the accumulation
period.
1.3 When will this rider terminate?
This rider will terminate on the earliest of:
a.) the date death proceeds become payable;
b.) the payout date;
c.) the date you surrender your contract; or
d.) the date you choose to end this rider. You may end it by written request.
Once this rider terminates, the charges for it will cease and the benefit will
no longer be available.
RIDER SECTION 2. RIDER CHARGES
2.1 Is there a charge for this rider?
The annual charge for this rider is shown on the contract data page. The charge
is equal to a percentage of the average contract value for the prior 12 month
period. During the accumulation period, this charge will be deducted pro-rata
from your contract value on each contract anniversary. This charge will also be
deducted on the date of any full surrender or payout date, if not on a contract
anniversary. The charge for a partial year will be in proportion to the number
of months since the prior contract anniversary. A partial month will be counted
as a full month.
RIDER SECTION 3. DEATH BENEFIT PROCEEDS
3.1 What amount will be paid as death benefit proceeds during the accumulation
period? The amount that will be paid under this contract as death benefit
proceeds is equal to the greater of:
a.) the death benefit proceeds provided by the contract to which this rider is
attached;
b.) the death benefit proceeds provided by any other rider attached to the
contract; or
c.) the 5% annual guarantee death benefit described in Rider Section 4 as of
the date due proof of death is received.
The death benefit proceeds described above will be reduced by any loan amount
and any applicable premium expense charges not previously deducted.
RIDER SECTION 4. 5% ANNUAL GUARANTEE DEATH BENEFIT
4.1 How do we determine the 5% annual guarantee death benefit?
On the contract issue date, the 5% annual guarantee value is equal to your
initial purchase payment.
After the contract issue date, the 5% annual guarantee value on each contract
anniversary will be equal to the lesser of a.) or b.) as follows:
a.) The sum of all net purchase payments received, minus an adjustment for each
partial withdrawal as described below, plus interest compounded daily at a
rate equal to 5% per year; or
b.) 200% of all net purchase payments received.
The adjustment for each partial withdrawal is equal to (1) divided by (2), with
the result multiplied by (3), where:
(1) = the partial withdrawal amount;
(2) = the contract value immediately prior to the partial withdrawal; and
(3) = the 5% annual guarantee death benefit immediately prior to the partial
withdrawal, less any adjustments for prior partial withdrawals.
CUNA Mutual Life Insurance Company
A Mutual Insurance Company
President
<PAGE>
Exhibits 4. (h)
4.(h) 7 Year Anniversary Value Death Benefit Rider.
7 YEAR ANNIVERSARY VALUE DEATH BENEFIT RIDER
RIDER SECTION 1. GENERAL INFORMATION
1.1 What is our agreement with you?
Our agreement with you includes this rider and its application, as a part of the
contract to which it is attached. The provisions of the contract apply to this
rider unless they conflict with the rider. If there is a conflict, the rider
provision will apply. The issue date for this rider is the same issue date as
the contract to which it is attached.
We promise to provide the death benefit described in this rider as long as the
contract and this rider are in force and all the terms and conditions of this
rider are met.
1.2 What is the benefit provided by this rider?
This rider provides a 7 year anniversary value death benefit during the
accumulation period.
1.3 When will this rider terminate?
This rider will terminate on the earliest of:
a.) the date death proceeds become payable;
b.) the payout date;
c.) the date you surrender your contract; or
d.) the date you choose to end this rider. You may end it by written request.
Once this rider terminates, the charges for it will cease and the benefit will
no longer be available.
RIDER SECTION 2. RIDER CHARGES
2.1 Is there a charge for this rider?
The annual charge for this rider is shown on the contract data page. The charge
is equal to a percentage of the average contract value for the prior 12 month
period. During the accumulation period, this charge will be deducted pro-rata
from your contract value on each contract anniversary. This charge will also be
deducted on the date of any full surrender or payout date, if not on a contract
anniversary. The charge for a partial year will be in proportion to the number
of months since the prior contract anniversary. A partial month will be counted
as a full month.
RIDER SECTION 3. DEATH BENEFIT PROCEEDS
3.1 What amount will be paid as death benefit proceeds during the accumulation
period? The amount that will be paid under this contract as death benefit
proceeds is equal to the greater of:
a.) the death benefit proceeds provided by the contract to which this rider is
attached;
b.) the death benefit proceeds provided by any other rider attached to the
contract; or
c.) the 7 year anniversary value described in Rider Section 4 as of the date
due proof of death is received.
The death benefit proceeds described above will be reduced by any loan amount
and any applicable premium expense charges not previously deducted.
RIDER SECTION 4. 7 YEAR ANNIVERSARY VALUE
4.1 What is the 7 year anniversary value?
On the contract issue date, the 7 year anniversary value is equal to your
initial purchase payment.
After the contract issue date, the 7 year anniversary value will be calculated
on the following dates:
a.) the date we receive an additional purchase payment;
b.) the date of payment of a partial withdrawal; and
c.) on each 7th contract anniversary.
Such value is calculated on each of these dates as follows:
Purchase payment. The 7 year anniversary value upon receipt of a purchase
payment is equal to:
a.) the most recently calculated 7 year anniversary value;
b.) plus the net purchase payment.
Partial withdrawal. The 7 year anniversary value upon payment of a partial
withdrawal is equal to:
a.) the most recently calculated 7 year anniversary value;
b.) minus an adjustment for each partial withdrawal equal to (1) divided by
(2), with the result multiplied by (3), where:
(1) = the partial withdrawal amount;
(2) = the contract value immediately prior to the partial withdrawal; and
(3) = the most recently calculated 7 year anniversary value immediately
prior to the partial withdrawal, less any adjustments for prior
partial withdrawals.
7th Contract anniversary. The 7 year anniversary value on each 7th contract
anniversary is equal to the greater of:
a.) your contract value; or
b.) the most recently calculated 7 year anniversary value.
CUNA Mutual Life Insurance Company
A Mutual Insurance Company
President
<PAGE>
Exhibits 4. (i)
4.(i) Maximum Anniversary Value Death Benefit Rider.
MAXIMUM ANNIVERSARY VALUE DEATH BENEFIT RIDER
RIDER SECTION 1. GENERAL INFORMATION
1.1 What is our agreement with you?
Our agreement with you includes this rider and its application, as a part of the
contract to which it is attached. The provisions of the contract apply to this
rider unless they conflict with the rider. If there is a conflict, the rider
provision will apply. The issue date for this rider is the same issue date as
the contract to which it is attached.
We promise to provide the death benefit described in this rider as long as the
contract and this rider are in force and all the terms and conditions of this
rider are met.
1.2 What is the benefit provided by this rider?
This rider provides a maximum anniversary value death benefit during the
accumulation period.
1.3 When will this rider terminate?
This rider will terminate on the earliest of:
a.) the date death proceeds become payable;
b.) the payout date;
c.) the date you surrender your contract; or
d.) the date you choose to end this rider. You may end it by written request.
Once this rider terminates, the charges for it will cease and the benefit will
no longer be available.
RIDER SECTION 2. RIDER CHARGES
2.1 Is there a charge for this rider?
The annual charge for this rider is shown on the contract data page. The charge
is equal to a percentage of the average monthly contract value for the prior 12
month period. During the accumulation period, this charge will be deducted
pro-rata from your contract value on each contract anniversary. This charge will
also be deducted on the date of any full surrender or payout date, if not on a
contract anniversary. The charge for a partial year will be in proportion to the
number of months since the prior contract anniversary. A partial month will be
counted as a full month.
RIDER SECTION 3. DEATH BENEFIT PROCEEDS
3.1 What amount will be paid as death benefit proceeds during the accumulation
period? The amount that will be paid under this contract as death benefit
proceeds is equal to the greater of:
a.) the death benefit proceeds provided by the contract to which this rider is
attached;
b.) the death benefit proceeds provided by any other rider attached to the
contract; or
c.) the maximum anniversary value described in Rider Section 4 as of the date
due proof of death is received.
The death benefit proceeds described above will be reduced by any loan amount
and any applicable premium expense charges not previously deducted.
RIDER SECTION 4. MAXIMUM ANNIVERSARY VALUE
4.1 What is the maximum anniversary value?
On the contract issue date, the maximum anniversary value is equal to your
initial purchase payment.
After the contract issue date, the maximum anniversary value will be calculated
on the following dates:
a.) the date we receive an additional purchase payment;
b.) the date of payment of a partial withdrawal; and
c.) on each contract anniversary.
Such value is calculated on each of these dates as follows:
Purchase payment. The maximum anniversary value upon receipt of a purchase
payment is equal to:
a.) the most recently calculated maximum anniversary value;
b.) plus the net purchase payment.
Partial withdrawal. The maximum anniversary value upon payment of a partial
withdrawal is equal to:
a.) the most recently calculated maximum anniversary value;
b.) minus an adjustment for each partial withdrawal equal to (1) divided by
(2), with the result multiplied by (3), where:
(1) = the partial withdrawal amount;
(2) = the contract value immediately prior to the partial withdrawal; and
(3) = the most recently calculated maximum anniversary value immediately
prior to the partial withdrawal, less any adjustments for prior
partial withdrawals.
Contract anniversary. The maximum anniversary value on each contract anniversary
is equal to the greater of:
a.) your contract value; or
b.) the most recently calculated maximum anniversary value.
CUNA Mutual Life Insurance Company
A Mutual Insurance Company
President
<PAGE>
Exhibits 4. (j)
4.(j) Waiver of Surrender Charge Endorsement.
WAIVER OF SURRENDER CHARGE ENDORSEMENT
SECTION 1. GENERAL INFORMATION
What is our agreement with you?
Our agreement with you includes this endorsement as a part of the contract to
which it is attached. The provisions of the contract apply to this endorsement
unless changed by this endorsement.
SECTION 2. BENEFIT
What is the benefit provided by this endorsement?
This endorsement waives any applicable surrender charges and any market value
adjustment for a partial withdrawal or full surrender during the accumulation
period on the contract to which it is attached. This benefit may be exercised
only one time. It is subject to providing proof satisfactory to us that one of
the following conditions has occurred after the contract issue date and prior to
the payout date. Proof must be provided at the time of your request for
surrender or partial withdrawal.
Nursing Home or Hospital. 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.
Terminal Illness. 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.
Unemployment. The annuitant becomes unemployed at least one year after the
contract issue date and the following conditions have been met:
a.) unemployment compensation has been received for at least 30 days as a
result of that unemployment; and
b.) unemployment compensation is being received at the time of your request.
Disaster. The annuitant's primary residence is located in an area of a major
disaster as determined by a Presidential declaration under the Robert T.
Stafford Disaster Assistance and Emergency Relief Act as amended (`the act") and
the following conditions have been met:
a.) the annuitant is eligible and has applied for individual assistance for
damage to their primary residence under the guidelines of the act as
administered through the Federal Emergency Management Agency (FEMA);
b.) the damage is in excess of $50,000, as verified by a licensed appraiser;
and
c.) the request to exercise this benefit is made no later than the 91st day
following the disaster declaration.
CUNA Mutual Life Insurance Company
A Mutual Insurance Company
President
