<PAGE> 1
As filed with the Securities and Exchange Commission on March 1, 1999
Registration Nos. 033-89028
811-8964
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No.__ [ ]
Post-Effective Amendment No. 7 [X]
----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [X]
----
IL ANNUITY AND INSURANCE CO.
----------------------------
SEPARATE ACCOUNT 1
------------------
(Exact Name of Registrant)
IL ANNUITY AND INSURANCE COMPANY
--------------------------------
(Name of Depositor)
2960 North Meridian Street, Indianapolis, Indiana 46208
-------------------------------------------------------
(Address of Depositor's Principal Executive Offices)
Depositor's Telephone Number, including Area Code:
(317) 927-6500
Name and Address of Agent for Service: Copy to:
Janis B. Funk, Esq., Counsel Stephen E. Roth, Esq.
Indianapolis Life Insurance Company Sutherland Asbill & Brennan LLP
2960 North Meridian Street 1275 Pennsylvania Avenue, N.W.
Indianapolis, Indiana 46208 Washington, D.C. 20004-2415
Approximate date of proposed public offering:
As soon as practicable after effectiveness of the Registration Statement.
-------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on __________ pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[X] on May 1, 1999 pursuant to paragraph (a) of the Rule 485
Title of securities being registered: Units of Interests in a separate
account under flexible premium deferred variable annuity contracts and the
guarantee of IL Annuity and Insurance Co. relating thereto.
<PAGE> 2
<TABLE>
<CAPTION>
PROSPECTUS VISIONARY
MAY 1, 1999
<S> <C>
Please read this prospectus FLEXIBLE PREMIUM DEFERRED
carefully before investing, VARIABLE ANNUITY
and keep it for future issued by
reference. It contains IL ANNUITY AND INSURANCE
important information about COMPANY
the Visionary variable through the
annuity. IL ANNUITY AND INSURANCE CO.
SEPARATE ACCOUNT 1
To learn more about the The Contract has 16 funding
Contract, you may want to choices--one fixed account
look at the Statement of (paying a guaranteed minimum
Additional Information dated fixed rate of interest) and 15
May 1, 1999 (known as the Variable Accounts which invest
"SAI"). For a free copy of in the following mutual fund
the SAI, contact us at: portfolios:
IL Annuity and Insurance Company
Administrative Office THE ALGER AMERICAN FUND
2960 North Meridian Street - MidCap Growth
Indianapolis, Indiana 46208 - Small Capitalization
Telephone: (800) 388-1331 FIDELITY VARIABLE INSURANCE PRODUCTS
("VIP") FUND
IL Annuity and Insurance - Equity-Income
Company has filed the SAI - Growth
with the U.S. Securities and - Money Market
Exchange Commission (the FIDELITY VIP FUND II
"SEC") and has incorporated - Asset Manager
it by reference into this - Contrafund
prospectus. The SAI's table - Index 500
of contents appears at the - Investment Grade Bond
end of this prospectus. OCC ACCUMULATION TRUST
- Managed
The SEC maintains an Internet - Small Cap
website (http://www.sec.gov) T. ROWE PRICE FIXED INCOME
that contains the SAI, SERIES, INC.
material incorporated by - Limited-Term
reference, and other T. ROWE PRICE INTERNATIONAL
information. SERIES, INC.
- International Stock
VARIABLE ANNUITY CONTRACTS VAN ECK WORLDWIDE INSURANCE TRUST
INVOLVE CERTAIN RISKS, AND - Worldwide Hard Assets
YOU MAY LOSE SOME OR ALL OF
YOUR INVESTMENT.
</TABLE>
- The investment performance of the portfolios in which the
Variable Accounts invest will vary.
- We do not guarantee how any of the portfolios will perform.
- The Contract is not a deposit or obligation of any bank, and
no bank endorses or guarantees the Contract.
- Neither the U.S. Government nor any federal agency insures your
investment in the policy.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED
OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
GLOSSARY.....................................................................2
HIGHLIGHTS...................................................................5
THE CONTRACT............................................................5
FEES AND CHARGES........................................................8
ANNUITY PROVISIONS......................................................9
FEDERAL TAX STATUS......................................................9
FEE TABLE...................................................................10
THE COMPANY AND THE SEPARATE ACCOUNT........................................13
IL ANNUITY AND INSURANCE COMPANY.......................................13
IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1........................14
THE FUNDS...................................................................14
INVESTMENT OBJECTIVES OF THE PORTFOLIOS................................15
INVESTMENT ADVISERS TO THE FUNDS.......................................18
AVAILABILITY OF THE FUNDS..............................................19
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS......................19
DESCRIPTION OF THE CONTRACT.................................................21
ISSUING A CONTRACT.....................................................21
PREMIUM PAYMENTS.......................................................21
FREE-LOOK PERIOD.......................................................21
ALLOCATING YOUR PREMIUM PAYMENTS.......................................22
SEPARATE ACCOUNT VALUE.................................................23
RANSFER.....................................................................24
FULL AND PARTIAL WITHDRAWALS................................................27
CHARGES AND DEDUCTIONS......................................................28
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)........................28
CONTRACT FEE...........................................................30
ASSET-BASED ADMINISTRATION CHARGE......................................30
TRANSFER FEE...........................................................30
MORTALITY AND EXPENSE RISK CHARGE......................................31
FUND EXPENSES..........................................................31
PREMIUM TAXES..........................................................31
OTHER TAXES............................................................31
CONTRACT LOANS..............................................................32
DEATH BENEFITS..............................................................33
DEATH OF PAYEE AFTER THE ANNUITY START DATE............................35
THE MATURITY BENEFIT........................................................35
THE PAY-OUT PHASE -- ANNUITY PAYMENTS.......................................39
ANNUITY PAYMENTS ON THE ANNUITY START DATE.............................39
PAYOUT PLAN OPTIONS.........................................................40
ELECTION OF PAYOUT PLAN OPTIONS........................................40
FIXED ANNUITY PAYMENTS.................................................40
VARIABLE ANNUITY PAYMENTS..............................................40
DESCRIPTION OF PAYOUT PLAN OPTIONS.....................................41
HISTORICAL PERFORMANCE DATA.................................................42
FEDERAL TAX MATTERS.........................................................45
TAXATION OF NON-QUALIFIED CONTRACTS....................................45
1
<PAGE> 4
TAXATION OF QUALIFIED CONTRACTS........................................47
OUR INCOME TAXES.......................................................48
POSSIBLE TAX LAW CHANGES...............................................48
OTHER PROVISIONS............................................................49
PAYMENTS...............................................................49
MODIFICATION...........................................................49
REPORTS TO OWNERS......................................................50
INQUIRIES..............................................................50
DISTRIBUTION OF THE CONTRACTS...............................................50
LEGAL PROCEEDINGS...........................................................51
VOTING RIGHTS...............................................................51
COMPANY HOLIDAYS............................................................52
YEAR 2000 MATTERS...........................................................52
FINANCIAL STATEMENTS........................................................52
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS.......................54
APPENDIX A..................................................................56
2
<PAGE> 5
GLOSSARY
For your convenience, we are providing a glossary of the special terms we
use in this prospectus.
ACCUMULATION UNIT -- The measurement we use to calculate the value of each
variable account on each Valuation Day before we start making annuity payments
to you.
ANNUITANT -- You are the annuitant, unless you state otherwise in your
application. The annuitant is the person (or persons) whose life (or lives)
determines the dollar amount of the annuity payment benefits we will pay under
the Contract and whose death determines the death benefit. The annuitant may
not be changed.
ANNUITY START DATE -- The date when we start making annuity payments under the
Contract. (The term "Annuity Commencement Date" is use in the Contract.)
ANNUITY SERVICE OFFICE -- USA Administration Services, Inc., the administrator
for the Contracts. The mailing address for the Annuity Service Office is P.O.
Box 2948, Overland Park, KS 66201-1348 or 12900 Metcalfe Avenue, Overland Park,
KS 66213-2620. You can call the Annuity Service Office at 1-888-232-6486.
ANNUITY UNIT -- A measurement we use to calculate the value of your annuity
payments if you choose to receive annuity payments from the Variable Accounts.
BENEFICIARY -- The person you name to receive the death benefit if the
annuitant dies before we start making annuity payments.
COMPANY ("WE,""US,""OUR") -- IL Annuity and Insurance Company.
CONTINGENT OWNER -- The person or persons you designate to become owner of your
annuity following your death.
CONTRACT VALUE -- The total amount you have accumulated under the Contract. It
is the total of the money you have in the separate account and the fixed
account.
DATE OF ISSUE -- The date we issue your contract. It is shown on the
specifications page of the Contract. We measure contract years and contract
anniversaries from the Date of Issue and is the date on which the first
contract year begins.
DUE PROOF OF DEATH -- Proof of death that we find satisfactory. Such proof may
be: (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 we find satisfactory.
ELIGIBLE PREMIUM PAYMENT -- That part of a premium payment that you initially
allocated to a particular Eligible Variable Account at the time of payment,
provided payment was made at least ten (10) years prior to the Maturity Benefit
Date.
ELIGIBLE VARIABLE ACCOUNT -- Currently all variable accounts.
3
<PAGE> 6
FIXED ACCOUNT -- An option to which you can direct your money under the
Contract. It provides a guarantee of principal and interest. The assets
supporting the fixed account are held in our general account.
FUNDS -- The open-end management investment company listed on the front page of
this Prospectus. This Contract allows you to invest in certain investment
portfolios of the Funds.
MATURITY BENEFIT -- A guarantee we provide regarding your Contract's value in
the Variable Accounts on the Maturity Benefit Date.
MATURITY BENEFIT DATE -- The later of the annuitant's age 70 or 10 years after
the date of issue. Special rules apply to joint owners.
OWNER ("YOU" OR "YOUR") -- The person(s) having the privileges of ownership
stated in the Contract. Joint owner may be permitted.
PAYEE -- The person or persons entitled to receive annuity payments. You may
name a "successor payee" who will receive any guaranteed annuity payments after
the death of the sole surviving payee.
PAY-IN PERIOD -- The period that begins when we issue your Contract and ends
when you receive annuity payments. During the pay-in period, earnings
accumulate on a tax-deferred basis.
PAYOUT PERIOD -- The period that beings on the Annuity Start Date during which
you receive annuity payments based on the money you have accumulated under your
Contract.
PAYOUT PLAN --The arrangement you choose under which we pay annuity payments to
you after the Annuity Start Date. You may choose whether the dollar amount of
the payments you receive will be fixed, or will vary with the investment
experience of the variable accounts in which you are invested at that time, or
whether you will receive a combination of fixed and variable payments.
PORTFOLIO -- A separate investment portfolio of a Fund in which a variable
account invests.
QUALIFIED CONTRACT -- A Contract that is issued in connection with retirement
plans that qualify for special federal income tax treatment under sections
401(a), 403(b), 408 or 408A of the Internal Revenue Code.
SEPARATE ACCOUNT -- IL Annuity and Insurance Co. Separate Account 1. a separate
investment account divided into variable accounts that we established to
receive and invest the premium payments we receive under the Contract. Assets
in the separate account are not part of our general account.
VALUATION DAY -- each day on which the New York Stock Exchange ("NYSE") is open
for business, except for the holidays listed in this prospectus under
"Holidays."
VALUATION PERIOD -- The period beginning at the close of the NYSE on each
Valuation Day and ending at the close of the NYSE for the next succeeding
Valuation Day.
VARIABLE ACCOUNT -- A subdivision of the Separate Account that invests
exclusively in shares of a single
4
<PAGE> 7
portfolio of a Fund. The investment performance of each variable account is
linked directly to the investment performance of the portfolio in which it
invests.
WRITTEN REQUEST -- Your signed written notice or request. We must receive your
written request at the Annuity Service Office and it must be in a form we find
satisfactory.
5
<PAGE> 8
HIGHLIGHTS
These highlights provide only a brief overview of the more important
features of the Visionary contract. More detailed information about the
Contract appears later in this Prospectus. Please read this Prospectus
carefully.
THE CONTRACT
An annuity is a contract where you agree to make one or more payments to
us and, in return, we agree to pay a series of payments to you at a later date
chosen by you. The Visionary is a special kind of annuity that is:
- FLEXIBLE PREMIUM - you may add premium payments at any time.
- TAX-DEFERRED - you do not have to pay taxes on earnings until
you take money out by a full or partial cash withdrawals, or we
make annuity payments to you, or we pay the death benefit.
- VARIABLE - its value fluctuates with the performance of the mutual
fund portfolios in which you invest. You bear the investment risk
on the amounts you invest.
- AVAILABLE WITH RETIREMENT PLANS - you may purchase this annuity in
connection with retirement plans, including those that qualify for
favorable federal tax treatment.
Like all deferred annuities, the Contract has two phases: the "pay-in"
period and the "pay-out" period. During the pay-in period, you can allocate
money to any combination of investment alternatives. Any earnings on your
investments accumulate tax-deferred. The pay-out period begins once you start
receiving regular annuity payments from your Contract Value. The money you can
accumulate during the pay-in period, as well as the annuity payout option you
choose, will determine the dollar amount of any annuity payments you receive.
HOW TO INVEST
You may purchase the Contract with a single payment of $1,000 or more
under most circumstances. We will not issue a Contract if you are older than 85
on the date of issue.
You can pay additional premiums of $1,000 or more with some limitations.
Send your premium payments to the Annuity Service Office, P.O. Box 2948,
Overland Park, KS 66201-1348 or 12900 Metcalf Avenue, Overland Park, KS
66213-2620. You can call the Service Center office at 1-888-232-6486.
CANCELLATION -- THE 10 DAY FREE-LOOK PERIOD
You have the right to cancel the Contract for a refund within 10 days
after you receive it (or within 20 days if the Contract is replacing another
annuity contract or insurance policy). You must return the Contract to our
Annuity Service Office along with your written request to cancel the Contract.
We will treat the returned Contract as if it were never issued. In some states
you may have more than 10 days. The amount that we refund will vary according
to state requirements. If we refund your original premium payment, we will put
your premium payment to the Money Market Variable Account during the free-look
period.
6
<PAGE> 9
INVESTMENT OPTIONS
You may invest your money in any of 14 portfolios by directing it into the
corresponding variable account. The portfolios now available to you under the
Contract are:
<TABLE>
<S> <C>
THE ALGER AMERICAN FUND OCC ACCUMULATION TRUST
- MidCap Growth - Managed
- Small Capitalization - Small Cap
FIDELITY VIP FUND T. ROWE PRICE FIXED INCOME
- Equity-Income SERIES, INC.
- Growth - Limited-Term Bond
- Money Market T. ROWE PRICE INTERNATIONAL
FIDELITY VIP FUND II SERIES, INC.
- Asset Manager - International Stock
- Contrafund VAN ECK WORLDWIDE INSURANCE TRUST
- Index 500 - Worldwide Hard Assets
- Investment Grade Bond
</TABLE>
Each variable account invests exclusively in shares of one portfolio of a
Fund. Each portfolio's assets are held separately from the other portfolios and
each portfolio has separate investment objectives and policies. The portfolios
are described in the prospectuses for the Funds that accompany this prospectus.
Depending on market conditions, you can make or loss money in any of the
variable accounts. We reserve the right to offer other investment choices in
the future.
The value of your investment in the variable accounts will fluctuate daily
based on the investment results of the portfolios in which you invest, and on
the fees and charges deducted.
You may also direct your money to the fixed account and receive a
guaranteed rate of return. Money you place in the fixed account will earn
interest for one year periods at a fixed rate that is guaranteed by us never to
be less than 3.0%.
TRANSFERS
During the pay-in period, you may transfer your contract value from the
Variable Accounts and the fixed account to other Variable Account(s) and the
fixed account, subject to certain restrictions. Transfers may reduce the value
of Maturity Benefit guarantee.
Transfers to the fixed account must be at least $1,000. During the pay-in
period, you may transfer up to 20% of the fixed account value, as determined at
the beginning of the contract year, from the fixed account to one or more of
the Variable Accounts in any contract year. We do not charge a fee for
transfers from the fixed account to one or more Variable Accounts, nor do we
consider such transfers to be transfers for purposes of assessing a transfer
charge.
Once you begin to receive annuity payments, you may make one transfer
between the Variable Accounts each contract year.
7
<PAGE> 10
PARTIAL WITHDRAWALS
During the pay-in period, you may receive a cash withdrawal of part of
your contract value by sending a written request to the Annuity Service Office.
The minimum amount you can withdraw is $250.
Your cash withdrawal may be subject to a withdrawal charge, if you remove
the money during the first nine contract years. In any contract year after the
first contract year, you may withdraw a portion of your contract value, called
the free withdrawal amount, without incurring a withdrawal charge. Withdrawals
may reduce the value of the Maturity Benefit guarantee.
You may have to pay federal income taxes and a penalty tax on any money
you withdraw from the Contract. The federal tax laws may prohibit certain
premature withdrawals from the Contract before or after the Annuity Start Date.
FULL WITHDRAWAL
During the pay-in period, you may cancel the Contract and receive its
surrender value by sending us a written request. As with partial withdrawals,
you may have to pay federal income taxes and a penalty tax on any money you
withdraw from the Contract. The federal tax laws may prohibit certain premature
withdrawals from the Contract before or after the Annuity Start Date.
DEATH BENEFIT
We will pay the death benefit to the beneficiary on the annuitant's death
before the Annuity Start Date.
The death benefit will equal the greater of:
(1) the sum of premium payments made under the Contract, LESS partial
withdrawals as of the date the death benefit is determined; or
(2) the contract value as of the date the death benefit is determined.
In determining the death benefit, we will also subtract any premium taxes
that apply.
MATURITY BENEFIT
The Maturity Benefit guarantees a minimum contract value on the Contract's
tenth anniversary, provided certain conditions are met.
We will not credit your Contract with any Maturity Benefit if you elect to
receive annuity payments before the Maturity Benefit Date.
Transfers and withdrawals from an Eligible Variable Account will reduce
the value of the Maturity Benefit.
FEES AND CHARGES
Withdrawal Charge. We will deduct a withdrawal charge if you withdraw all
or part of your contract value during the first nine contract years. The amount
of the withdrawal charge depends upon the number
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<PAGE> 11
of years since we issued your Contract.
We do not assess a withdrawal charge on the death benefit or on annuity
payments under an annuity payout plan with a life contingency or an annuity
payout plan with at least 10 years of guaranteed payments.
The withdrawal charge may be waived in cases of extended hospitalization,
long-term care, terminal illness, or to pay for post secondary education, as
provided in the Contract.
Contract Fee. We deduct a quarterly contract fee of $7.50 from your
contract value at the end of each contract quarter during the pay-in period and
on the date of full withdrawal. Certain exceptions apply.
Transfer Fee. You may make 12 free transfers each contract year. We impose
a $25 charge per transfer on each transfer after the twelfth during a contract
year before the Annuity Start Date.
Mortality and Expense Risk Charge. We will deduct a daily mortality and
expense risk charge from your value in the variable accounts at an annual rate
of 1.25%. We will continue to deduct this charge after you begin to receive
annuity payments if you choose to receive variable annuity payments.
Asset-Based Administrative Charge. We will deduct a daily administrative
charge from your value in the variable account at an annual rate of 0.15%. We
will continue to assess this charge after you begin to receive annuity payments
if you choose to receive variable annuity payments.
Premium Taxes. We will deduct state premium taxes, which currently range
from up to 3.5%, if your state requires us to pay the tax. If necessary, we
will make the deduction either: (a) from premium payments as we receive them,
(b) from your contract value upon partial or full withdrawal, (c) when annuity
payments begin, or (d) upon payment of a death benefit.
Portfolio Fees and Charges. Each portfolio deducts investment charges from
the amounts you have invested in the portfolios. These charges range from ___%
to ___ %. See the Fee Table in this Prospectus and the prospectuses for the
portfolios.
ANNUITY PROVISIONS
Payout Options. The Contract allows you to receive periodic annuity
payments beginning on the Annuity Start Date you select. You may choose among
several payout plans. You may receive income payments for a specific period of
time or for life, with or without a guaranteed number of payments.
We will use your adjusted contract value on the Annuity Start Date to
calculate the amount of your annuity payments under the payment plan you
choose. If you select a variable payout option, the dollar amount of your
payments may go up or down depending on the investment results of the
portfolios you invest in at that time.
FEDERAL TAX STATUS
Generally, a distribution, including a full or partial withdrawal or death
benefit payment, may be taxed. In certain circumstances, a 10% penalty tax may
apply. For a further discussion of the federal tax status of variable annuity
contracts, see "Federal Tax Status."
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<PAGE> 12
INQUIRIES
If you need additional information, please contact us at:
Service Center
P.O. Box 2948
Overland Park, KS 66201-1348
or 12900 Metcalf Avenue
Overland Park, KS 66213-2620
1-888-232-6486.
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<PAGE> 13
FEE TABLE
The Fee Table illustrates the current expenses and fees under the Contract
as well as the portfolios' fees and expenses for the 1998 calendar year. The
purpose of this table is to help you understand the various costs and expenses
that you will pay directly and indirectly.
YOUR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Charge Imposed on Premium Payments....................................... None
Maximum Withdrawal Charge (contingent
deferred sales charge) as a percentage of
premium payments(1).......................................................... 7.0%
Transfer Fee.............................. No fee for first twelve transfers in a contract year
Annualized Contract Fee(2)..................................................... $ 30
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of net assets)
Mortality and Expense Risk Charge............................. 1.25%
Administrative Expenses....................................... 0.15
----
Total Separate Account Annual Expenses........................ 1.40%
====
</TABLE>
ANNUAL FUND EXPENSES
(as a percentage of average net assets after expense cap or expense deferral)
<TABLE>
<CAPTION>
Total Annual
Other Expenses Expenses (after
Management Fees (after waivers and
NAME OF PORTFOLIO (after waivers) reimbursement) reimbursement)
- ---------------------------------------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
Alger American Fund _________ _________ _________
MidCap Growth Portfolio...............
Small Capitalization Portfolio........ _________ _________ _________
Fidelity VIP Fund _________ _________ _________
Equity Income Portfolio...............
Growth Portfolio...................... _________ _________ _________
Money Market Portfolio................ _________ _________ _________
Fidelity VIP Fund II _________ _________ _________
Asset Manager Portfolio...............
Contrafund Portfolio.................. _________ _________ _________
Index 500 Portfolio(3)................ _________ _________ _________
Investment Grade Bond Portfolio....... _________ _________ _________
OCC Accumulation Trust _________ _________ _________
Managed Portfolio(4)..................
Small Cap Portfolio(4)................ _________ _________ _________
T. Rowe Price Fixed Income Series, Inc. _________ _________ _________
Limited-Term Bond Portfolio(5)........
T. Rowe Price International Series, Inc. _________ _________ _________
International Stock Portfolio(5)......
Van Eck Worldwide Insurance Trust _________ _________ _________
Worldwide Hard Assets Portfolio.......
</TABLE>
Premium taxes may be applicable, depending on the laws of various states.
The purpose of these tables is to assist you in understanding the costs and
expenses that you will bear
11
<PAGE> 14
directly or indirectly. The table reflects the actual charges and expenses for
the separate account and for each portfolio for the fiscal year ended December
31, 1998.
(1) A withdrawal charge is deducted only if a full or partial withdrawal
occurs during the first nine years since the date we issued your
Contract. We do not assess a withdrawal charge if the Contract
terminates due to your death or the annuitant's death, or if you
decide to begin to receive annuity payments under an annuity payout
plan with a life contingency or an annuity payout plan with at least
10 years of guaranteed payments.
(2) We waive this fee for Qualified Contracts. We also waive this fee for
Non-Qualified Contracts with cumulative premium payments of at least
$100,000.
(3) [ADD INFORMATION ON PORTFOLIO FEES AND WAIVERS.]
EXAMPLES
(NOTE: The examples shown below are entirely hypothetical. They do not
represent past or future performance or expenses. Actual performance and/or
expenses may be more or less than shown.)
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets and charges and expenses reflected in the Fee Table
above:
1. If You surrender your Contract (or if you elect to annuitize under
a period certain option for a specified period of less than 10
years) at the end of the applicable time period:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN FUND
MidCap Growth $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Small Capitalization $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity-Income $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Growth $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Money Market $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
Asset Manager $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Contrafund $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Index 500 $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Investment Grade Bond $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
Small Cap $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED
INCOME SERIES, INC.
Limited-Term Bond $ $ $ $
- --------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL
SERIES, INC. $ $ $ $
International Stock
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
<S> <C>
-----------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE
TRUST $ $ $ $
Worldwide Hard Assets
-----------------------------------------------------------------------------------------------------------
2. If You do not surrender your Contract (or if you elect to annuitize
under a life contingency option or under a period certain option for a
minimum specified period of 10 years) at the end of the applicable
time period:
-----------------------------------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------------------------------------------------
Alger American Fund
MidCap Growth $ $ $ $
-----------------------------------------------------------------------------------------------------------
Small Capitalization $ $ $ $
-----------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity-Income $ $ $ $
-----------------------------------------------------------------------------------------------------------
Growth $ $ $ $
-----------------------------------------------------------------------------------------------------------
Money Market $ $ $ $
-----------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
Asset Manager $ $ $ $
-----------------------------------------------------------------------------------------------------------
Contrafund $ $ $ $
-----------------------------------------------------------------------------------------------------------
Index 500 $ $ $ $
-----------------------------------------------------------------------------------------------------------
Investment Grade Bond $ $ $ $
-----------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed $ $ $ $
-----------------------------------------------------------------------------------------------------------
Small Cap $ $ $ $
-----------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME
SERIES, INC.
Limited-Term Bond $ $ $ $
-----------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL
SERIES, INC. $ $ $ $
International Stock
-----------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE
INSURANCE TRUST $ $ $ $
Worldwide Hard Assets
-----------------------------------------------------------------------------------------------------------
</TABLE>
The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples also reflect the contract fee of
$30 as being assessed on an average contract value of $[30,000,] which
translates the contract fee into a [0.10%] charge for the purposes of the
examples based on a $1,000 investment.
THE EXAMPLES DO NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESSER THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RATE OF
RETURN IS HYPOTHETICAL. IT DOES NOT REPRESENT PAST OR FUTURE ANNUAL
RETURNS, WHICH MAY BE GREATER OR LESS THAN THIS ASSUMED RATE.
THE COMPANY AND THE SEPARATE ACCOUNT
IL ANNUITY AND INSURANCE COMPANY
13
<PAGE> 16
IL Annuity and Insurance Company, formerly known as Sentry
Investors Life Insurance Company, is a stock life insurance company
organized under the laws of the Commonwealth of Massachusetts on December
21, 1965 and incorporated on March 9, 1966. We changed our name to "IL
Annuity and Insurance Company" on January 17, 1995.
On October 31, 1994, we entered into an assumption reinsurance
agreement with Sentry Life Insurance Company ("Sentry"). Under that
agreement, Sentry assumed all of our existing insurance in-force and
related assets and liabilities.
On November 1, 1994, we became a wholly-owned subsidiary of the
Indianapolis Life Group of Companies, Inc. ("Indianapolis Life Group"),
which is a majority-owned subsidiary of Indianapolis Life Insurance
Company. Indianapolis Life Insurance Company is a mutual life insurance
company chartered under Indiana law in 1905 with assets as of December 31,
1997 which approximated $1.702 billion.
At the end of 1997, American United Life Insurance Company ("AUL")
and Indianapolis Life Insurance Company took preliminary steps toward an
affiliation. At that time, AUL invested $8,910,000 in Indianapolis Life
Group and on March 30, 1998 AUL invested an additional $18,090,000. As a
result of this investment and related transactions, both companies intend
that Indianapolis Life Insurance Company will retain ownership of 75% of
the stock of Indianapolis Life Group and AUL will own the remaining 25% of
the Indianapolis Life Group stock. The Agreement to Affiliate does contain
provisions which would allow AUL to invest additional amounts in
Indianapolis Life Group, and potentially to own up to 49.9% of the
outstanding Indianapolis Life Group stock. The companies do not currently
intend for AUL to make additional investments.
We are subject to regulation by the Insurance Department of the
State of Massachusetts as well as by the insurance departments of all other
states and jurisdictions in which we do business. We submit annual
statements on our operations and finances to insurance officials in these
states and jurisdictions. The forms for the Contract described in this
Prospectus are filed with and (where required) are approved by insurance
officials in each state and jurisdiction where we sell the Contracts.
IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1
We established IL Annuity and Insurance Co. Separate Account I
(the "separate account") that which is not specifically related to, or
dependent on, as a separate account under Massachusetts insurance law on
November 1, 1994. The separate account will receive and invest net premium
payments made under the Contracts. In addition, the separate account may
receive and invest premium payments for any other variable annuity
contracts that we issue in the future.
The assets in the separate account are our property. However, the
portion of the assets in the separate account equal to the reserves and
other contract liabilities of the separate account are not chargeable with
the liabilities arising out of any other business that we conduct and that
which is not specifically related to, or dependent on, the separate
account. The assets of the separate account are available to cover our
general liabilities only to the extent that the separate account's assets
exceed its liabilities arising under the Contracts and any other contracts
supported by the separate account. We have the right to transfer to the
general account any assets of the separate account which are in excess of
reserves and other contract liabilities. All obligations arising under the
Contracts are our general corporate obligations. Income, gains and losses,
whether or not realized, from assets allocated to the separate account are
credited to or charged against the separate account without regard to our
other
14
<PAGE> 17
income, gains or losses or those of any other separate account.
The separate account currently is divided into fourteen Variable
accounts that are available for investment but may, in the future, include
additional Variable accounts. Each Variable Account invests exclusively in
shares of a single corresponding fund. The income, gains and losses,
whether or not realized, from the assets allocated to each Variable Account
are credited to or charged against that Variable Account without regard to
income, gains or losses from any other Variable Account.
The separate 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 separate account or
the Company by the SEC. The separate account is also subject to the laws of
the State of Massachusetts which regulate the operations of insurance
companies domiciled in Massachusetts.
THE FUNDS
Each Variable Account of the separate account invests in shares of
a designated portfolio of a series-type mutual fund. Each Fund currently
available under the Contract is registered with the SEC under the
Investment Company Act of 1940 (the "1940 Act") as an open-end, management
investment company. Such registration does not involve supervision of the
management or investment practices or policies of the companies or their
funds by the SEC.
The assets of each portfolio are separate from the assets of other
portfolios, and each portfolio has separate investment objectives and
policies. As a result, each portfolio operates as a separate investment
portfolio and the income or losses of one portfolio has no effect on the
investment performance of any other portfolio.
Each of the Funds is managed by an investment adviser registered
with the SEC under the Investment Advisers Act of 1940, as amended. Each
investment manager is responsible for the selection of portfolio
investments consistent with the portfolios's investment objectives and
policies, and conducts securities trading for the portfolio.
Certain Variable Accounts invest in portfolios that have similar
investment objectives and/or policies. Before choosing Variable Accounts,
you should carefully read the individual prospectuses for the Funds along
with this prospectus.
In addition, the investment objectives and policies of certain
portfolios are similar to the investment objectives and policies of other
portfolios that may be managed by the same investment adviser or manager.
The investment results of the portfolios, however, may be higher or lower
than the results of such other portfolios. We make no assurance, and no
representation, that the investment results of any of the portfolios will
be comparable to the investment results of any other portfolio, even if the
other portfolio has the same investment adviser or manager.
15
<PAGE> 18
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
The investment objectives of the portfolios are:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE AND CERTAIN POLICIES
- ------------------------------------------------------------------------------
<S> <C>
THE ALGER seeks to obtain long-term capital
AMERICAN MIDCAP appreciation. Except during temporary
GROWTH PORTFOLIO defensive periods, the Portfolio invests at
least 65% of its total assets in equity
securities of companies that, at the time of
purchase, have total market capitalization
within the range of companies included in the
S&P MidCap 400 Index, updated quarterly. The
S&P MidCap 400 Index is designed to track the
performance of medium capitalization
companies. As of March 31, 1998, the range of
market capitalization of these companies was
$210 million to $14.3 billion.
- ------------------------------------------------------------------------------------------------------------------------
THE ALGER seeks to obtain long-term capital
AMERICAN SMALL appreciation. Except during temporary
CAPITALIZATION defensive periods, the Portfolio invests at
PORTFOLIO least 65% of its total assets in equity
securities of companies that, at the time of
purchase, have total market capitalization
within the range of companies included in the
Russell 2000 Growth Index ("Russell Index") or
the S&P SmallCap 600 Index updated quarterly.
Both indexes are broad indices of small
capitalization stocks. As of March 31, 1997,
the range of market capitalization of the
companies in the Russell Index was $20
million to $4.25 billion; the range of
capitalization of the companies in the S&P
SmallCap 600 Index at that date was $31
million to $3.7 billion.
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks reasonable income by investing primarily
EQUITY-INCOME in income-producing equity securities.
PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks to achieve capital appreciation by
GROWTH PORTFOLIO investing in common stocks and securities
convertible into common stock of companies
that the adviser believes have above-average
growth potential. The Portfolio, however, is
not restricted to any one type of security and
may pursue capital appreciation through the
purchase of bonds and preferred stocks.
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks to earn a high level of current income
MONEY MARKET while maintaining a stable $1.00 share price
PORTFOLIO by investing in high-quality, short-term
money market securities of different types.
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks to obtain high total return with
ASSET MANAGER reduced risk over the long-term by
PORTFOLIO allocating its assets among stocks, bonds,
short-term and other instruments of U.S. and
foreign issuers.
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks capital appreciation by investing in
CONTRAFUND PORTFOLIO companies that the adviser believes to be
undervalued due to an overly pessimistic
appraisal by the public.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 19
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks to match the total return of the S&P 500
INDEX 500 PORTFOLIO while keeping expenses low. The adviser
normally invests at least 80% (65% if
Portfolio assets are below $20 million) of the
Portfolio's assets in equity securities of
companies that compose the S&P 500.
- ------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks high current income by investing in
INVESTMENT GRADE fixed-income obligations of all types.
BOND PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION seeks growth of capital over time through
MANAGED PORTFOLIO investment in a portfolio consisting of common
stocks, bonds and cash equivalents, the
percentages of which will vary based on
management's assessments of relative
investment values.
- ------------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION seeks capital appreciation through investment
SMALL CAP PORTFOLIO in a diversified portfolio of equity
securities of companies with market
capitalizations of under $1 billion.
- ------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE seeks a high level of income consistent with
LIMITED-TERM BOND moderate fluctuation in principal value. The
PORTFOLIO Portfolio will invest at least 65% of total
assets in short- and intermediate-term,
investment-grade debt securities.
- ------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE seeks long-term growth of capitaL THROUGH
INTERNATIONAL investments primarily in common STOCKS OF
STOCK PORTFOLIO established, non-u.s. companies.
- ------------------------------------------------------------------------------------------------------------------------
VAN ECK seeks long-term capital appreciation by
WORLDWIDE HARD investing globally, primarily in "Hard Asset
ASSETS PORTFOLIO Securities" of companies that are directly or
indirectly engaged to a significant extent in
the exploration, development, production or
distribution of one or more of the following:
(a) precious metals, (b) ferrous and
non-ferrous metals, (c) energy, (d) forest
products, (e) real estate, and (f) other basic
non-agricultural commodities.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
WE MAKE NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVE.
YOU CAN FIND MORE DETAILED INFORMATION, INCLUDING A DESCRIPTION OF EACH
PORTFOLIO'S INVESTMENT OBJECTIVE AND POLICIES AND A DESCRIPTION OF RISKS
INVOLVED IN INVESTING IN EACH OF THE PORTFOLIOS AND OF EACH PORTFOLIO'S
FEES AND EXPENSES, IN THE PROSPECTUSES FOR THE FUNDS. CURRENT COPIES OF
THESE PROSPECTUSES ACCOMPANY THIS PROSPECTUS. YOU SHOULD READ THE
INFORMATION CONTAINED IN THE PROSPECTUSES FOR THE FUNDS CAREFULLY BEFORE
YOU MAKE ANY DECISION TO DIRECT YOUR MONEY INTO THE VARIABLE ACCOUNTS.
An investment in a Variable Account, or in any portfolio,
including the Money Market Portfolio, is not insured or guaranteed by the
U.S. Government and there can be no assurance that the Money Market
Portfolio will be able to maintain a stable net asset value per share.
We cannot guarantee that each Fund will always be available for
its variable annuity contracts, but in the unlikely event that a fund is
not available, the Company will do everything reasonably
17
<PAGE> 20
practicable to secure the availability of a comparable fund. Shares of each
portfolio are purchased and redeemed at net asset value, without a sales
charge.
INVESTMENT ADVISERS TO THE FUNDS
THE ALGER AMERICAN FUND. Fred Alger Management, Inc. ("Alger
Management") serves as investment adviser for the MidCap Growth and Small
Capitalization Portfolios of The Alger American Fund. Fred Alger & Company,
Incorporated, an affiliate of Alger Management, will serve as the
portfolios' broker in effecting substantially all of the portfolio
transactions on security exchanges.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II. The portfolios of the VIP Fund and the VIP Fund
II are managed by Fidelity Management & Research Company ("FMR"). On behalf
of the Money Market Portfolio, FMR has entered in a subadvisory agreement
with FMR Texas, Inc., under which FMR Texas, Inc. has primary
responsibility for providing investment management services to the
portfolio. On behalf of the Asset Manager Portfolio and the Contrafund
Portfolio, FMR has entered into subadvisory agreements with Fidelity
Investment Management and Research (U.K.) Inc. ("FMR (U.K.)") and Fidelity
Management and Research (Far East) Inc. ("FMR Far East"), under which those
entities provide research and investment recommendations with respect to
companies based outside the United States. FMR (U.K.) focuses primarily on
companies based in Europe, while FMR Far East focuses primarily on
companies based in Asia and the Pacific Basin.
OCC ACCUMULATION TRUST.. The OCC Trust receives investment advice
with respect to each of its portfolios from OpCap Advisors. OpCap Advisors
is a subsidiary of Oppenheimer Capital which is a subsidiary of Oppenheimer
Financial Corp.
T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Associates,
Inc. is responsible for the selection and management of the portfolio
investments of T. Rowe Price Limited-Term Bond Portfolio and receives a
single, all-inclusive fee based on the portfolio's average daily net assets
to cover investment management and operating expenses.
T. ROWE PRICE INTERNATIONAL SERIES, INC. Rowe
Price-Fleming International, Inc. ("Price-Fleming") is responsible for the
selection and management of the portfolio's investments. Incorporated in
1979 as a joint venture between T. Rowe Price Associates, Inc. ("T. Rowe
Price") and Robert Fleming Holdings Limited ("Fleming"), Price-Fleming
receives a single, all-inclusive fee based on the portfolio's average daily
net assets to cover investment management and operating expenses.
VAN ECK WORLDWIDE INSURANCE TRUST. Van Eck Associates Corporation
serves as investment adviser and manager to the Van Eck Worldwide Hard
Assets Portfolio pursuant to an Advisory Agreement with the Van Eck Trust.
We have entered into agreements with the investment adviser of
several of the Funds whereby each such investment adviser will pay us a
servicing fee based on an annual percentage of the average aggregate net
assets we invest on behalf of the separate account. These agreements
reflect administrative services we provide to the Funds. Payments of such
amounts by the Funds will not increase the fees the Funds or their
shareholders pay.
AVAILABILITY OF THE FUNDS
18
<PAGE> 21
The separate account purchases shares of each of the Funds in
accordance with a participation agreement between the Company and the Fund.
The termination provisions of these agreements vary. A summary of the
termination provisions of these agreements may be found in the SAI.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to applicable law, to make additions
to, deletions from, or substitutions for the shares of a fund that are held
in the separate account or that the separate account may purchase. If the
shares of a fund are no longer available for investment or if, in our
judgment, further investment in any fund should become inappropriate, we
may redeem the shares, if any, of that fund and substitute shares of
another fund. We will not substitute any shares attributable to a
Contract's interest in a Variable Account without notice and prior approval
of the SEC and state insurance authorities, to the extent required by the
1940 Act or other applicable law.
We also reserve the right to establish additional Variable
Accounts of the separate account, each of which would invest in shares of a
new corresponding fund having a specified investment objective. We may, in
our sole discretion, establish new Variable Accounts or eliminate or
combine one or more Variable Accounts if marketing needs, tax
considerations or investment conditions warrant. We may make any new
Variable Accounts available to you on a basis that we determine. Subject to
obtaining any approvals or consents required by applicable law, we may
transfer the assets of one or more Variable Accounts to any other Variable
Account if, in our sole discretion, marketing, tax, or investment
conditions warrant.
In the event of any such substitution or change, we may change the
Contract to reflect the substitution or change. If we consider it to be in
the Owner's and annuitant's best interest, and subject to any approvals
that may be required under applicable law, the separate account may be:
- operated as a management investment company under the 1940
Act,
- deregistered under that Act if registration is no
longer required,
- combined with other Company separate
accounts,
- transferred to another separate account of ours.
In addition, we may, when permitted by law, restrict or eliminate
any voting rights under the Contracts.
We will continue to pay a Maturity Benefit on premium payments
allocated to an Eligible Variable Account if:
- the portfolio underlying an Eligible Variable Account changes its
investment objective;
- we determine that an investment in the portfolio underlying an
Eligible Variable Account is no longer appropriate in light of the
purposes of the separate account; or
- shares of a portfolio underlying an Eligible Variable Account are
no longer available for investment by the separate account and we
are forced to redeem all shares of the portfolio held by the
Eligible Variable Account.
19
<PAGE> 22
DESCRIPTION OF THE CONTRACT
ISSUING A CONTRACT
You may purchase a contract by submitting an application through
one of our licensed representatives. A licensed representative is also a
registered representative of IL Securities, Inc., or a broker-dealer having
a selling agreement with IL Securities, Inc., or a broker-dealer having a
selling agreement with such broker-dealer. We may sell contracts to or in
connection with retirement plans that do or do not qualify for special
federal tax treatment under the Internal Revenue Code. You may not be older
than 85 on the date of issue.
PREMIUM PAYMENTS
Initial premium payments must be at least $1,000 and no greater
than $250,000. You may make subsequent premium payments at any time until
the earliest of: (a) the Annuity Start Date; (b) full withdrawal of your
contract value; or (c) the date you reach attained age 85 (age 70 1/2 for
Qualified Contracts other than Roth IRAs under Internal Revenue Code
section 408A). Additional premium payments must be at least $1,000. We will
not accept total premiums under the Contract in excess of $250,000. We
reserve the right to waive these limitations.
Under our Automatic Premium Payment Plan, you can select an
annual, semi-annual, or monthly payment schedule where we will
automatically deduct premium payments from a bank or credit union account
or other source. The minimum amount for automatic payments is $1,000.
FREE-LOOK PERIOD
The Contract provides for an initial "free-look" period. You have
the right to return the Contract within 10 days of receiving it (or within
20 days if the Contract is replacing another annuity contract or insurance
policy). In some states, this period may be longer than 10 days. We will
cancel the Contract when we receive a written request for cancellation and
the returned Contract at our Annuity Service Office before the end of this
period.
The amount that we will refund will vary according to state
requirements. In most states, we will refund to you an amount equal to the
sum of:
- the difference between the premium payments paid and the
amounts allocated to the Variable Accounts and the fixed
account under the Contract; and
- the contract value as of the date we receive the Contract
and the written request for cancellation at our Annuity
Service Office.
You bear the investment risk only for premiums allocated to the
Variable Accounts during the period prior to our receipt of the Contract
and written request for cancellation.
A few states require the return of premium payments. If state law
requires that we return your premium payments, the amount of the refund
will be the greater of:
- the premium payments made under the Contract; and
- the contract value (without reduction of any withdrawal
charge) on the date
20
<PAGE> 23
we receive the Contract at
our Annuity Service Office, plus any amount that may have
been deducted for premium taxes.
ALLOCATING YOUR PREMIUM PAYMENTS
Net premium payment is your premium payment minus any applicable
premium taxes. You select how we allocate your initial net premium payment
among the Variable Accounts and the fixed account. Any allocation must be
for at least 1% of a premium payment and be in whole percentages.
You must properly complete an application for a Contract and send
it to our Annuity Service Office along with all the information necessary
to process it, including payment of the initial premium payment. Within two
valuation days after we receive your application, we will allocate the
initial net premium payment, as you designate, to one or more of the
Variable Accounts or to the fixed account. If the application is not
properly completed, we may retain the premium payment for up to five
valuation days while we attempt to complete the application. If the
application is not complete at the end of the 5-day period, we will inform
you of the reason for the delay and we will return your initial premium
payment immediately, unless you specifically consent to us retaining the
premium payment until the application is complete. Once the application is
complete, the initial net premium payment will be allocated within two
valuation days as you designated.
In jurisdictions where we must refund aggregate premium payments
in the event you exercise the free-look right, we will place any portion of
the initial net premium payments allocated to a Variable Account into the
Money Market Variable Account for a 15-day period following the date on
which we credit the initial premium payment to the Contract. At the end of
that period, we will allocate the amount in the Money Market Variable
Account to the Variable Accounts as you designated.
We will allocate any subsequent net premium payments as of the end
of the valuation period in which we receive the payment. We will allocate
subsequent payments in accordance with the allocation schedule in effect at
the time the premium payment is received. However, you may direct
individual payments to a specific Variable Account or to the fixed account
(or any combination thereof) without changing the existing allocation
schedule. You may change the allocation schedule at any time by written
request. If you change the premium payment allocation schedule, it will not
change the allocation of existing contract value among the Variable
Accounts or the fixed account.
THE CONTRACT VALUES ALLOCATED TO A VARIABLE ACCOUNT WILL VARY WITH
THAT VARIABLE ACCOUNT'S INVESTMENT EXPERIENCE. YOU BEAR THE ENTIRE
INVESTMENT RISK FOR AMOUNTS ALLOCATED TO THE VARIABLE ACCOUNTS. YOU SHOULD
PERIODICALLY REVIEW YOUR PREMIUM PAYMENT ALLOCATION SCHEDULE IN LIGHT OF
MARKET CONDITIONS AND THEIR OVERALL FINANCIAL OBJECTIVES.
SEPARATE ACCOUNT VALUE
The separate account value will reflect the investment experience
of the selected Variable Accounts, any net premium payments paid, any
surrenders or partial withdrawals, any transfers, and any charges assessed
in connection with the Contract. There is no guaranteed minimum separate
account value. A Contract's separate account value depends upon a number of
variables, therefore it cannot be predetermined.
21
<PAGE> 24
CALCULATING SEPARATE ACCOUNT VALUE. The separate account value is
determined at the end of each valuation period. The value will be the
aggregate of the values attributable to the Contract in each of the
Variable Accounts, determined for each Variable Account by multiplying that
Variable Account's unit value for the relevant valuation period by the
number of accumulation units of that Variable Account allocated to the
Contract.
NUMBER OF ACCUMULATION UNITS. Any amounts allocated or transferred
to the Variable Accounts will be converted into Variable Account
accumulation units. The number of accumulation units to be credited to a
Contract is determined by dividing the dollar amount being allocated or
transferred to a Variable Account by the accumulation unit value for that
Variable Account at the end of the valuation period during which the amount
was allocated or transferred. The number of accumulation units in any
Variable Account will be increased at the end of the valuation period by
any net premium payments allocated to the Variable Account during the
current valuation period and by any amounts transferred to the Variable
Account from another Variable Account or from the fixed account during the
current valuation period.
Any amounts transferred, surrendered or deducted from a Variable
Account will be processed by canceling or liquidating accumulation units.
The number of accumulation units to be canceled is determined by dividing
the dollar amount being removed from a Variable Account by the accumulation
unit value for that Variable Account at the end of the valuation period
during which the amount was removed. The number of accumulation units in
any Variable Account will be decreased at the end of the valuation period
by:
- any amounts transferred (including any applicable
transfer fee) from that Variable Account to another
Variable Account or to the fixed account,
- any amounts withdrawn or surrendered during that
valuation period,
- any withdrawal charge or premium tax assessed upon a
partial withdrawal or surrender, and
- the quarterly contract fee, if assessed during that
valuation period.
ACCUMULATION UNIT VALUE. The accumulation unit value for each
Variable Account's first valuation period was set at $10. The accumulation
unit value for a Variable Account is calculated for each subsequent
Valuation Period by multiplying the accumulation unit Value at the end of
the immediately preceding Valuation Period by the Net Investment Factor for
the Valuation Period for which the value is being determined.
NET INVESTMENT FACTOR. The Net Investment Factor is an index that
measures the investment performance of a Variable Account from one
Valuation Period to the next. Each Variable Account has its own Net
Investment Factor, which may be greater or less than one. The Net
Investment Factor for each Variable Account for a Valuation Period equals 1
plus the fraction obtained by dividing (a) by (b) where:
(a) is the net result of:
1. the investment income, dividends, and capital
gains, realized or unrealized, credited during
the current Valuation Period; PLUS
2. the amount credited or released from reserves for
taxes attributed to the operation
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<PAGE> 25
of the Variable Account; MINUS
3. the capital losses, realized or unrealized,
charged during the current Valuation Period; MINUS
4. any amount charged for taxes or any amount set
aside during the Valuation Period as a reserve
for taxes attributable to the operation or
maintenance of the Variable Account; MINUS
5. the amount charged for mortality and expense risk
for that Valuation Period; MINUS
6. the amount charged for administration for that
Valuation Period; and
(b) is the value of the assets in the Variable Account at the end
of the preceding Valuation Period, adjusted for allocations
and transfers to and withdrawals and transfers from the
Variable Account occurring during that preceding Valuation
Period.
TRANSFERS
GENERAL. Before the Annuity Start Date and subject to the restrictions
described below, you may transfer all or part of the amount in a Variable
Account or the fixed account to another Variable Account or the fixed account.
If you transfer contract value from an Eligible Variable Account, the
transfer will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")
Transfers to the fixed account must be at least $1,000. Prior to the
Annuity Start Date, you may transfer up to 20% of the fixed account value (as
determined at the beginning of the contract year) from the fixed account to one
or more of the Variable Accounts in any contract year. No fee is charged for
transfers from the fixed account to one or more Variable Accounts and such a
transfer is not considered a transfer for purposes of assessing a transfer
charge.
We will make transfers as of the valuation day on which we receive a
written request for such transfer at our Annuity Service Office before 4:00
p.m. Eastern Time. Transfers received after 4:00 p.m. Eastern Time will be
made as of the next valuation day. There currently is no limit on the total
number of transfers that can be made prior to the Annuity Start Date among or
between Variable Accounts or to the fixed account.
TELEPHONE TRANSFERS. You may make transfers by telephone, if we have a
valid telephone transfer authorization form on file signed by you. A telephone
transfer authorization form that we receive at the Annuity Service Office is
valid until you rescind or revoke it in writing, or until we receive a
subsequently dated form signed by you.
We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow such procedures, we will
not be liable for any losses due to unauthorized or fraudulent instructions.
We, however, may be liable for such losses if we do not follow those reasonable
23
<PAGE> 26
procedures. Reasonable procedures for telephone transfers include:
- providing written confirmation for all transfers made by
telephone,
- requiring a form of personal identification prior to
acting on telephone instructions, and
- tape recording telephone instructions.
We reserve the right to modify, restrict, suspend or eliminate the
transfer privileges (including the telephone transfer facility) at any time,
for any class of Contracts, for any reason. In particular, we reserve the right
to deny transfers requested by a third party holding your power of attorney
where that third party simultaneously requests transfers on behalf of other
contract owners.
TRANSFER FEE. We reserve the right to impose a transfer charge of $25
for the thirteenth and each subsequent request you make to transfer contract
value from he Variable Accounts during a single contract year. (See "Charges
and Deductions.")
DOLLAR-COST AVERAGING. You may systematically or automatically
transfer (on a monthly or quarterly basis) specified dollar amounts from one or
more Variable Accounts or the fixed account to one or more other Variable
Accounts. This is known as the dollar-cost averaging method of investment. You
must make this election at the time of your application or any time thereafter
before the Annuity Start Date by sending us a written request. The fixed dollar
amount will purchase more accumulation units of a Variable Account 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 of units had been made
at the highest value and greater than if all purchases had been made at the
lowest value. The dollar-cost averaging method of investment reduces the risk
of making purchases only when the price of accumulation units is high. It does
not assure a profit or protect against a loss in declining markets.
The minimum transfer amount for dollar-cost averaging is $100 to each
Variable Account. Once elected, dollar-cost averaging remains in effect for the
life of the Contract until:
- the separate account value in the Variable Account from which
transfers are being made is depleted, and
- the value of the fixed account is expended if transfers are
being made from the fixed account, or
- until you cancel the election (by written request or by
telephone if we have your telephone authorization form on
file.
There is no additional charge for dollar-cost averaging and a transfer
under this program is not considered a transfer for purposes of assessing a
transfer change. We reserve the right to discontinue offering the dollar-cost
averaging facility at any time and for any reason. Dollar-Cost Averaging from
an Eligible Variable Account will reduce the amount of the Eligible Premium
Payments on which the Maturity Benefit is based. (See "Maturity Benefit.")
INTEREST SWEEP. Prior to the Annuity Start Date, your may elect to
have any interest credited to the fixed account automatically transferred on a
quarterly basis to one or more Variable Accounts. There is no charge for
interest sweep transfers. An interest sweep transfer is not considered a
transfer for purposes of assessing a transfer charge. Amounts transferred out
of the fixed account due to an interest sweep transfer are counted toward the
20% of fixed account value that may be transferred out of the fixed account
during any contract year.
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<PAGE> 27
AUTOMATIC ACCOUNT BALANCING. If elected at the time of the application
or requested at any time before the Annuity Start Date by written request, you
may instruct us to automatically balance (on a monthly or quarterly basis)
contract value in order to match your currently effective premium payment
allocation schedule. Such percentage allocations must be in whole percentages
and be at least 1% per allocation. You may start and stop Automatic Account
Balancing at any time. There is no additional charge for using Automatic
Account Balancing and an account balancing transfer is not considered a
transfer for purposes of assessing a transfer charge. We reserve the right to
discontinue offering the automatic account balancing service at any time and
for any reason. Automatic Account Balancing from an Eligible Variable Account
will reduce the amount of the Eligible Premium Payments on which the Maturity
Benefit is based. (See "Maturity Benefit.")
FULL AND PARTIAL WITHDRAWALS
FULL WITHDRAWALS. At any time before the Annuity Start Date, you may
surrender the contract for its surrender value. The surrender value is equal
to the contract value MINUS
- any applicable withdrawal charges; MINUS
- any premium taxes not previously deducted; MINUS
- the contract fee unless waived. For Qualified Plans,
any outstanding loan balance is also deducted.
The surrender value will be determined as of the valuation day on the
date that we receive the written surrender request and the Contract at the our
Annuity Service Office. The surrender value will be paid in a lump sum unless
you request payment under a payout plan option. A full withdrawal may have
adverse federal income tax consequences, including a penalty tax. (See
"Taxation of Annuities.")
PARTIAL WITHDRAWALS. At any time before the Annuity Start Date, you
may submit a written request to withdraw part of the contract value in amounts
not less than $250. The remaining surrender value must equal at least $1,000.
If the remaining contract value is reduced to less than $1,000 by the partial
withdrawal, we reserve the right to pay you the surrender value in a lump sum.
We will withdraw the amount requested from the contract value as of the
Valuation Day that the written request requesting the partial withdrawal is
received. Any applicable withdrawal charge also will be deducted from the
remaining contract value. (See "Withdrawal Charge.")
You may specify the amount of the partial withdrawal to be made from
the Variable Accounts or the fixed account. If you do not so specify, or if the
amount in the designated Variable Accounts or fixed account is inadequate to
comply with the request, the partial withdrawal will be made on a pro rata
basis from the fixed account and Variable Accounts in which contract value is
invested based on the proportion that the Variable Account Values and the fixed
account value bear to the contract value prior to the partial withdrawal.
If you withdraw contract value from an Eligible Variable Account, the
withdrawal will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit.")
For purposes of calculating the Maturity Benefit, withdrawals from the
Variable Accounts and the fixed account will be accounted for on a last-in,
first-out ("LIFO") basis. (See "Maturity Benefit.") For purposes of calculating
the withdrawal charge, all withdrawals will be deemed to be first from premium
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<PAGE> 28
payments, then from earnings. (See "Withdrawal Charge.")
A partial withdrawal may have adverse federal income tax consequences,
including a penalty tax. (See "Taxation of Annuities.")
SYSTEMATIC WITHDRAWAL PROGRAM. The Systematic Withdrawal Program
provides an automatic monthly or quarterly payment to you from amounts
accumulated in the Variable Accounts and/or the fixed account. The minimum
amount that may be withdrawn is $100. To use the program, you must maintain a
$1,000 balance in the Contract. You may elect to participate in the Systematic
Withdrawal Program at any time before the Annuity Start Date by sending a
written request to the Annuity Service Office. Once elected, the program
remains in effect unless the balance in the Contract drops below $1,000. The
program may be canceled at any time by sending a written request, or by calling
us provided you have a telephone authorization form on file.
A withdrawal charge will be assessed on each systematic withdrawal
made during the first nine contract years, unless the amount withdrawn
qualifies as a free withdrawal amount. (See "Withdrawal Charge -- Free
Withdrawal Amount.") Withdrawals under the Systematic Withdrawal Program are
permitted an Annual free withdrawal amount during the first contract year. No
other charges are deducted for this program.
All systematic withdrawals will be paid to you on the same day each
month, provided that day is a Valuation Day. If it is not, then payment will be
made on the next Valuation Day. Systematic withdrawals may be taxable, subject
to withholding, and subject to a 10% penalty tax. (See "Federal Tax Matters.")
We reserve the right to discontinue offering the Systematic Withdrawal Program
at any time and for any reason.
FULL AND PARTIAL WITHDRAWAL RESTRICTIONS. Your right to make full and
partial withdrawals is subject to any restrictions imposed by applicable law or
employee benefit plan.
RESTRICTIONS ON DISTRIBUTIONS FROM CERTAIN TYPES OF CONTRACTS. There
are certain restrictions on surrenders of and partial withdrawals from
Contracts used as funding vehicles for Internal Revenue Code section 403(b)
retirement programs. Section 403(b)(11) of the Internal Revenue Code restricts
the distribution under section 403(b) annuity contracts of:
- elective contributions made in years beginning after December
31, 1988;
- 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.
CHARGES AND DEDUCTIONS
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
GENERAL. No charge for sales expenses is deducted from premium
payments at the time premium payments are paid. However, within certain time
limits described below, a withdrawal charge (contingent
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<PAGE> 29
\
deferred sales charge) is deducted from the contract value if a full or partial
withdrawal is made before the Annuity Start Date. Also, a withdrawal charge is
deducted from amounts applied to certain payout plan options. (See "Annuity
Payments on the Annuity Start Date".)
In the event withdrawal charges are not sufficient to cover sales
expenses, we bear the loss. Conversely, if the amount of such charges proves
more than enough to cover such expenses, we will retain the excess. We do not
currently believe that the withdrawal charges imposed will cover the expected
costs of distributing the Contracts. Any shortfall will be made up from our
general assets which may include amounts derived from the mortality and expense
risk charge.
CHARGE FOR PARTIAL OR FULL WITHDRAWAL. You will be charged for any
partial or full withdrawal of premium payments during the first nine contract
years. The withdrawal charge is assessed as a percentage of the amount
withdrawn based on the number of years between the request for withdrawal and
the date of issue and is based on the rates in the table below. The withdrawal
charge is separately calculated for each withdrawal of contract value within
the first nine years from the Contract's date of issue. Amounts subject to the
withdrawal charge will be deemed to be first from premium payments, then from
earnings. No withdrawal charge applies to contract value in excess of aggregate
premium payments.
<TABLE>
<CAPTION>
NUMBER OF CHARGE AS PERCENTAGE
CONTRACT YEARS OF PREMIUM PAYMENTS
---------------- ----------------------
<S> <C>
0-6....... 7.0%
7......... 6.0%
8......... 4.0%
9......... 2.0%
10........ 0%
</TABLE>
Any applicable withdrawal charge is deducted pro-rata from the
remaining value in the Variable Accounts or fixed account from which the
withdrawal is being made. If such remaining separate account value or fixed
account value is insufficient for this purpose, the withdrawal charge is
deducted pro-rata from all Variable Accounts and the fixed account in which the
Contract is invested based on the remaining contract value in each Variable
Account and the fixed account.
FREE WITHDRAWAL AMOUNT. In each contract year after the first contract
year, you may withdraw up to 10% of contract value, as determined at the
beginning of the contract year, without a withdrawal charge (the "Annual Free
Withdrawal Amount"). Any amounts withdrawn in excess of this 10% after the
first and through the ninth full contract year will be assessed a withdrawal
charge. This right is not cumulative from contract year to contract year. Such
withdrawals may be subject to the 10% federal penalty tax if you make them
before age 59 1/2. Withdrawals under the Systematic Withdrawal Program are
permitted an Annual free withdrawal amount during the first contract year.
WAIVER OF WITHDRAWAL CHARGE. The withdrawal charge on any full or
partial withdrawal if the annuitant or the annuitant's spouse is confined for a
specified period to a hospital or a long term care facility. If the annuitant
becomes terminally ill prior to the Annuity Start Date, we will waive the
withdrawal charge on any full withdrawal or any partial withdrawal, provided
the partial withdrawal is at least $500 and a $5,000 balance remains in the
accounts after the withdrawal. These types of waivers must be permitted by your
state laws, and you must provide us with a written request prior to the Annuity
Start Date. The Contract describes these waivers in more detail.
If your Contract includes a Post-Secondary Education Rider, if you,
your spouse, your child or the annuitant is enrolled in a college, university,
vocational, technical, trade or business school, we will
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<PAGE> 30
waive the withdrawal charge on one withdrawal of up to 20% of contract value in
each contract year. Withdrawals for education must be made prior to the Annuity
Start Date while the annuitant is alive, and must be permitted by state law.
The maximum withdrawal permitted under the Post-Secondary Education Rider, when
combined with the Annual free withdrawal amount, is 20% of contract value per
contract year. Prior to the withdrawal, we must receive at our home office
written proof of enrollment satisfactory to us within one (1) year of the date
of enrollment. (See "Free Withdrawal Amount" and the "Statement of Additional
Information".)
EMPLOYEE AND AGENT PURCHASES. If permitted by state law, we will waive
the withdrawal charge on any full or partial withdrawals from Contracts sold to
our agents or employees. This waiver also applies to the Agents or employees of
our affiliates and subsidiaries.
CONTRACT FEE
We deduct from the contract value a quarterly contract fee of $7.50 to
reimburse us for administrative expenses relating to the Contract. The fee will
be deducted proportionately from each Variable Account and the fixed account at
the end of each Contract quarter (or on the date of full surrender of the
Contract). This fee does not apply after an annuity payout plan has begun. We
do not expect to make a profit on this fee. The contract fee is currently
waived for all Qualified Contracts and for Non-Qualified Contracts whose
cumulative premium payments on the date the contract fee is assessed are equal
to or greater than $100,000. We reserve the right to modify this waiver upon 30
days written notice to you.
ASSET-BASED ADMINISTRATION CHARGE
We deduct a daily administration charge to compensate us for certain
expenses we incur in administrating the Contract. The charge is deducted from
the assets of the separate account at an annual rate of 0.15%. This charge will
continue to be assessed after annuitization if annuity payments are made on a
variable basis. We do not expect to make a profit from this charge.
TRANSFER FEE
A transfer fee of $25 will be imposed for the 13th and each subsequent
transfer that you make during a Contract year. Each written request will be
considered to be one transfer, regardless of the number of Variable Accounts
affected by the transfer. The transfer fee will be deducted from the Variable
Account from which the transfer is made. If a transfer is made from more than
one Variable Account at the same time, the transfer fee will be deducted
pro-rata from the remaining separate account value in such Variable Account(s).
We reserve the right to waive the transfer fee.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily mortality and expense risk charge from the assets of
the separate account to compensate us for assuming mortality and expense risks.
The charge is at a daily rate of 0.003404%. If applied on an annual basis this
rate would be 1.25% (approximately 0.90% for mortality risk and 0.35% for
expense risk). This charge will continue to be assessed after the Annuity Start
Date if annuity payments are made on a variable basis.
The mortality risk we assume is that annuitants may live for a longer
period of time than
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<PAGE> 31
estimated when the guarantees in the Contract were established. Because of
these guarantees, each annuitant is assured that longevity will not have an
adverse effect on the annuity payments received. The mortality risk that we
assume also includes a guarantee to pay a death benefit if the annuitant dies
before the Annuity Start Date. The expense risk that we assume is the risk that
the administrative fees and transfer fees (if imposed) may be insufficient to
cover actual future expenses. We may use any profits from this charge to pay
the costs of distributing the Contracts.
FUND EXPENSES
The net assets of the separate account will reflect the investment
advisory fees and other operating expenses incurred by the Funds in which the
Variable Accounts have invested. See the accompanying prospectuses for the
Funds.
PREMIUM TAXES
Various states and other governmental entities levy a premium tax,
currently ranging up to 3.5%, on annuity contracts. Premium tax rates are
subject to change from time to time by legislative and other governmental
action. In addition, other government units within a state may levy such taxes.
The timing of tax levies varies from one taxing authority to another.
If premium taxes are applicable to a Contract, they will be deducted either (a)
from premium payments as they are received, (b) from contract value upon full
or partial withdrawal, (c) from adjusted contract value upon application to a
payout plan option, or (d) upon payment of a death benefit. We, however,
reserves the right to deduct premium taxes at the time such taxes are paid to
the taxing authority.
OTHER TAXES
We do not currently deduct a charge against the separate account for
any federal, state or local taxes (other than premium taxes). We may, however,
make such a charge in the future from surrender value, death benefits or
annuity payments, as appropriate. Such taxes may include taxes levied by any
government entity which the Company determines to have resulted from:
- the establishment or maintenance of the separate account,
- receipt by the Company of premium payments,
- issuance of the Contracts, or
- the payment of annuity payments.
CONTRACT LOANS
If your Contract was issued in connection with retirement programs
meeting the requirements of section 403(b) of the Internal Revenue Code (other
than those programs subject to Title I of the Employee Retirement Income
Security Act of 1984), you may borrow from us using your Contracts as
collateral. Loans such as these are subject to the provisions of any applicable
retirement program and to the Internal Revenue Code. You should consult your
tax and retirement plan advisers prior to taking a contract loan.
At any time prior to the year you reach age 70 1/2, Owners may borrow
the lesser of:
- the maximum loan amount permitted under the Internal Revenue
Code, and
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<PAGE> 32
- 90% of the surrender value of your Contract less any existing
loan amount, determined as of the date of the loan.
Loans in that exceed the maximum amount permitted under the Internal
Revenue Code will be treated as a taxable distribution rather than a loan. The
minimum loan amount is $1,000. We will only make contract loans after approving
a written application by you. The written consent of all assignees and
irrevocable beneficiaries must be obtained before a loan will be given.
When a loan is made, we transfer an amount equal to the amount
borrowed from separate account value or fixed account value to the loan
account. The loan account is part of our general account and contract value in
the loan account does not participate in the investment experience of any
Variable Account or fixed account. You must indicate in the loan application
from which Variable Accounts or fixed account, and in what amounts, contract
value is to be transferred to the loan account. In the absence of any such
instructions from you, the transfer(s) are made pro-rata on a last- in, first
out ("LIFO") basis from all Variable Accounts having separate account value and
from the fixed account. You may repay the loans at any time before the Annuity
Start Date. Upon the repayment of any portion of a loan, we will transfer an
amount equal to the repayment from the loan account to the Variable Account(s)
or fixed account designated by you or according to your current premium payment
allocation instructions.
We charge interest on contract loans at an effective annual rate of
6.0%. We pay interest on the contract value in the loan account at rates we
determine from time to time but never less than an effective annual rate of
3.0%. Consequently, the net cost of a loan is the difference between 6.0% and
the rate being paid from time to time on the contract value in the loan
account. We may declare from time to time higher current interest rates.
Different current interest rates may be applied to the loan account than the
rest of the fixed account. If not repaid, loans will automatically reduce the
amount of any death benefit, the amount payable upon a partial or full
withdrawal of contract value and the amount applied on the Annuity Start Date
to provide annuity payments.
If at any time, the loan amount of a Contract exceeds the surrender
value, the Contract will be in default. In this event, we will send a written
request of default to you stating the amount of loan repayment needed to
reinstate the Contract. You will have 60 days, from the day the notice is
mailed, to pay the stated amount. If we do not receive the required loan
repayment within 60 days, we will terminate the Contract without value. In
addition, in order to comply with the requirements of the Internal Revenue
Code, loans must be repaid in substantially equal installments, at least
quarterly, over a period of no longer than five years. This can be longer for
certain home loans. 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.
Any loan amount outstanding upon the death of you or annuitant is
deducted from any death benefit paid. In addition, a contract loan, whether or
not repaid, will have a permanent effect on the contract value because the
investment experience of the separate account and the interest rates applicable
to the fixed account do not apply to the portion of contract value transferred
to the loan account. The longer the loan remains outstanding, the greater this
effect is likely to be.
DEATH BENEFITS
DEATH BENEFIT BEFORE THE ANNUITY START DATE
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<PAGE> 33
DEATH OF AN OWNER. If the Contract is owned by joint owners and one
owner dies prior to the Annuity Start Date, the surviving owner becomes the
sole owner. If the Contract is owned by one person and a contingent owner is
named, the contingent owner will become the owner if the sole owner dies. If
there is no surviving owner, your estate will become the owner. If you or the
joint owner who is the annuitant dies before the Annuity Start Date, then the
provisions relating to the death of an annuitant (described below) will govern.
The following options are available to sole surviving owners or new
owners of Non-Qualified Contracts who are not the annuitant:
(1) If the owner is the spouse of the deceased owner, he or she
may continue the Contract as the new owner.
(2) If the owner is not the spouse of the deceased owner:
(a) he or she may elect to receive the contract value,
LESS any premium taxes not yet deducted, in a single
sum within 5 years of the deceased owner's death; or
(b) he or she may elect to receive the contract value paid
out under one of the approved payout plan options,
provided that distributions begin within one year of
the deceased owner's death and the distribution period
under the payout plan is for the life of, or for a
period not exceeding the life expectancy of, the sole
surviving or new owner.
If he or she does not elect one of the above options, we will pay the
contract 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 contract value is paid.
Similar rules apply to Qualified Contracts.
DEATH OF THE ANNUITANT. If the annuitant dies before the Annuity Start
Date, we will pay the death benefit described below to the beneficiaries that
you name in a lump sum. You also may name contingent beneficiaries. If you have
named two or more primary beneficiaries, they will share equally in the death
benefit unless you have specified otherwise. If there are no living primary
beneficiaries at the time of the annuitant's death, payments will be made to
those contingent beneficiaries who are living when payment of the death benefit
is due. If all the beneficiaries have predeceased the annuitant, we will pay
the death benefit to you, if living, or the annuitant's estate. In lieu of a
lump sum payment, the beneficiary may elect, within 60 days of the date we
receive due proof of the annuitant's death, to apply the death benefit to a
payout plan 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 a payout plan option if:
(1) payments under the option begin within one (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.
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<PAGE> 34
DEATH BENEFIT AMOUNT. If the annuitant dies before the Annuity Start
Date, the death benefit is an amount equal to the greater of:
(1) aggregate premium payments made under the Contract, LESS
partial withdrawals as of the date we receive due proof of
the deceased's death and payment instructions; or
(2) contract value as of the date we receive due proof of the
deceased's death and payment instructions;
LESS any applicable premium taxes not previously deducted. If the Contract is
a Qualified Contract, any outstanding loan amount on the date the death benefit
is paid will also be deducted.
DEATH OF PAYEE AFTER THE ANNUITY START DATE
If the payee dies after the Annuity Start Date, any joint payee
becomes the sole payee. If there is no joint Payee, the successor payee becomes
the sole payee. If there is no successor payee, the remaining benefits are paid
to the estate of the last surviving payee. The death of the payee after the
Annuity Start Date will have the effect stated in the payout plan option
pursuant to which annuity payments are being made. If you die on or after the
Annuity Start Date, any payments that remain must be made at least as rapidly
as under the payout plan in effect on the date of your death.
THE MATURITY BENEFIT
If the Contract is in the accumulation phase on the Maturity Benefit
Date, we will calculate the Maturity Benefit for each Eligible Variable Account
in which you have value. The Maturity Benefit will be credited to the contract
value of an Eligible Variable Account only if the value of the Eligible
Variable Account on the Maturity Benefit Date is less than:
- the sum of the Eligible Premium Payments for such Eligible
Variable Account, MINUS
- a percentage of all prior withdrawals and transfers from the
Eligible Variable Account.
Eligible Premium Payments are those premium payments that initially
were allocated to a particular Eligible Variable Account at the time of
payment, provided the payment was made at least ten (10) years prior to the
Maturity Benefit Date.
The Maturity Benefit to be credited to each Eligible Variable Account
on the Maturity Benefit Date is equal to:
- the sum of the Eligible Premium Payments for that
particular Eligible Variable Account; MINUS
- a percentage of all prior withdrawals and transfers from that
Eligible Variable Account; MINUS
- the value of that Eligible Variable Account on the Maturity
Benefit Date.
The Maturity Benefit Date is the later of the annuitant's age 70 and
10 years after the date of issue. If the Contract is owned by joint owners who
are spouses at the time one joint owner dies, the
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<PAGE> 35
Maturity Benefit Date will become the date the surviving spouse attains age 70.
If the Contract is owned by joint owners who are not spouses and one of the
joint owners dies before the Maturity Benefit Date, the Maturity Benefit is not
available to the sole surviving owner. Currently, all Variable Accounts are
Eligible Variable Accounts. The Van Eck Worldwide Hard Assets Variable Account
became an Eligible Variable Account on March 5, 1998. Only new allocations made
to the Van Eck Worldwide Hard Assets Variable Account on or after March 5, 1998
will be treated as Eligible premium payments for purposes of calculating the
Maturity Benefit on the Maturity Benefit Date, provided the new allocations
have been held in that Variable Account for ten (10) years.
The Maturity Benefit will not be credited to contract value if you
choose an Annuity Start Date that is earlier than the Maturity Benefit Date.
A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN
ELIGIBLE VARIABLE ACCOUNT WILL REDUCE THE AMOUNT OF ELIGIBLE PREMIUM PAYMENTS
HELD IN THE ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR
WITHDRAWAL REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT. EXAMPLES #3, #4
AND #6 BELOW ILLUSTRATE HOW THIS FEATURE OF THE MATURITY BENEFIT WORKS.
For purposes of calculating the value of an Eligible Variable Account,
we deem all transfers and withdrawals to be first a withdrawal of premium
payments, then of earnings. Transfers out of an Eligible Variable Account
include transfers resulting from Dollar Cost Averaging or Automatic Account
Balancing. Withdrawals out of an Eligible Variable Account include withdrawals
resulting from the systematic withdrawal payments.
The following examples illustrate how the Maturity Benefit works:
EXAMPLE #1:
Suppose you buy a Contract with a single premium payment of $50,000 at
age 55 and immediately allocates the $50,000 to an Eligible Variable
Account. You do not withdraw or transfer any amounts from the Eligible
Variable Account. As of the Maturity Benefit Date (which is fifteen years
later when you are age 70), the $50,000 qualifies as an Eligible Premium
Payment because it was made fifteen years prior to the Maturity Benefit
Date and so it meets the requirement that payment be made ten years prior
to the Maturity Benefit Date.
On the Maturity Benefit Date (age 70), we will calculate the Maturity
Benefit for the Eligible Variable Account. We will total the value of all
Eligible Premium Payments in the Eligible Variable Account -- in this case
$50,000. If the value of the Eligible Variable Account on the Maturity
Benefit Date is less than $50,000, IL Annuity will automatically credit the
difference to contract value.
EXAMPLE #2:
Assume the same facts as in Example #1, except that you specify an
Annuity Start Date of age 65 and begins to receive payments under one of
the payout options available under the Contract. At age 70 (the Maturity
Benefit Date), we do not calculate the Maturity Benefit and does not credit
a Maturity Benefit to contract value. By selecting an Annuity Start Date
(age 65) that is earlier than the Maturity Benefit Date (age 70), you
forfeited all eligibility for the Maturity Benefit.
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EXAMPLE #3:
Assume the same facts as in Example #1, except that you transfer $40,000
from the Eligible Variable Account at age 69. At that time, the total value
of the Eligible Variable Account is $100,000. The transfer of $40,000
reduced the value of the Eligible Variable Account by 40% ($40,000/$100,000
= .40). No additional transfers or withdrawals are made prior to the
Maturity Benefit Date. On the Maturity Benefit Date, the sum of the
Eligible Premium Payments is $50,000 and is reduced by 40% to take into
account the transfer at age 69 ($50,000 H .40 = $20,000), leaving $30,000
($50,000 -- $20,000 = $30,000). If on the Maturity Benefit Date the value
of the Eligible Variable Account is less than $30,000, we will
automatically credit the difference to contract value.
EXAMPLE #4:
Assume the same facts as in Example #1, except that at age 65 you deposit
(or transfers) an additional $50,000 premium payment into the Eligible
Variable Account. At age 69, when the value of the Eligible Variable
Account is $150,000, you withdraw $40,000. The withdrawal reduced the value
of the Eligible Variable Account by 26.667% ($40,000/$150,000 = .26667). No
additional transfers or withdrawals are made before the Maturity Benefit
Date. On the Maturity Benefit Date, the sum of Eligible Premium Payments is
$50,000. (The second premium payment of $50,000 does not qualify as an
Eligible Premium Payment because it was made only five years prior to the
Maturity Benefit Date and does not meet the requirement that payment be
made ten years prior to the Maturity Benefit Date.) This sum is then
reduced by 26.667% to take into account the transfer at age 69 ($50,000 H
.26667 = $13,333.33), leaving $36,666.67 ($50,000 -- $13,333.33 =
$36,666.67). If on the Maturity Benefit Date the value of the Eligible
Variable Account is less than $36,666.67, we will automatically credit the
difference to contract value.
EXAMPLE #5:
Assume you deposit premium payments of $5,000 per year into the same
Eligible Variable Account beginning at age 55 until the Maturity Benefit
Date. By age 70, you had paid $75,000 in premium payments and had taken no
withdrawals or transfers. The sum of the Eligible Premium Payments on the
Maturity Benefit Date (age 70) is $25,000 because only the five premium
payments made prior to age 60 ($5,000 H 5 = $25,000) meet the requirement
that payment be made ten years prior to the Maturity Benefit Date. If on
the Maturity Benefit Date the value of the Eligible Variable Account is
less than $25,000, we will automatically credit the difference to contract
value.
EXAMPLE #6:
Assume the same facts as in Example #5, except that you transfer $10,000
out of the Eligible Variable Account at age 68 when the value of the
Eligible Variable Account is $100,000. The transfer reduced the value of
the Eligible Variable Account by 10% ($10,000/$100,000 = .10). The next
year, you withdraw $9,000 when the value of the Eligible Variable Account
is $90,000. The withdrawal reduced the value of the Eligible Variable
Account by 10% ($9,000/$90,000 = .10). No additional transfers or
withdrawals are made prior to the Maturity Benefit Date. On the Maturity
Benefit Date the sum of the Eligible Premium Payments ($25,000) is reduced
by 20% to take into account both the 10% transfer at age 68 and the 10%
withdrawal at age 69 ($25,000 H .20 = $5,000), leaving $20,000 ($25,000 --
$5,000 = $20,000). If on the Maturity Benefit Date the value of the
Eligible Variable Account is less than $20,000, we will automatically
credit the difference to contract value.
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EXAMPLE #7:
Spousal joint owners: If the Contract is owned by joint owners who are
spouses at the time one of the joint owners dies, the surviving spouse may
continue the Contract. The Maturity Benefit Date will become the date the
surviving spouse attains age 70. On that date, we will calculate the
Maturity Benefit for each Eligible Variable Account with value.
EXAMPLE #8:
If the Contract is owned by joint owners who are not spouses and one of
the joint owners dies, the Maturity Benefit is not available to the sole
surviving owner.
We will continue to pay a Maturity Benefit on premium payments
allocated to an Eligible Variable Account if:
- the portfolio underlying an Eligible Variable Account
changes its investment objective;
- we determine that an investment in the portfolio underlying
an Eligible Variable Account is no longer appropriate in
light of the purposes of the separate account; or
- shares of a portfolio underlying an Eligible Variable Account
are no longer available for investment by the separate
account and we are forced to redeem all shares of the
portfolio held by the Eligible Variable Account.
THE PAY-OUT PHASE -- ANNUITY PAYMENTS
ANNUITY PAYMENTS ON THE ANNUITY START DATE
You select the Annuity Start Date. If you do not specify, the Annuity
Start Date is the later of the annuitant's age 70 or ten (10) years after the
date of issue. For non-qualified contracts, the Annuity Start Date may be no
later than the contract anniversary following the annuitant's 85th birthday.
For Qualified Contracts purchased in connection with qualified plans under
Internal Revenue Code sections 401(a), 401(k), 403(b) and 457, the Internal
Revenue Code requires that the Annuity Start Date must be no later than April 1
of the calendar year following the later of the year in which you (a) reach age
70 1/2 or (b) retire and the payment must be made in a specified form or
manner. If you are a "5 percent owner" (as defined in the Internal Revenue
Code), or in the case of an IRA that satisfies Internal Revenue Code section
408, the Annuity Start Date must be no later than the date described in (a).
Roth IRAs under section 408A of the Internal Revenue Code do not require
distributions at any time prior to your death.
If you change the Annuity Start Date to a date earlier than the
Maturity Benefit Date, then you will lose your eligibility for the Maturity
Benefit.
The Annuity Start Date may be changed subject to the following
limitations:
- your written request must be received at the Annuity Service
Office at least 31 days before the current Annuity Start
Date, and
- the requested Annuity Start Date must be a contract
anniversary or the date on which you fully withdraw the
surrender value.
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\
On the Annuity Start Date, the adjusted contract value will be applied
under the life income payout plan option with ten years guaranteed, unless you
elect to have the proceeds paid under another payment option or to receive the
surrender value in a lump sum. (See "Payout Plan Options.") In certain states,
the surrender value will be applied to the payout plan option rather than the
adjusted contract value. Unless you instruct us otherwise, amounts in the fixed
account will be used to provide a fixed-payout plan option and amounts in the
separate account will be used to provide a variable payout plan option.
The adjusted contract value is the contract value:
(1) MINUS the pro-rated portion of the contract fee (unless the
Annuity Start Date falls on the contract quarter);
(2) MINUS any applicable premium taxes not yet deducted.
For Qualified Contracts, the amount of any outstanding loan is also
deducted, and distributions must satisfy certain requirements specified in the
Internal Revenue Code.
PAYOUT PLAN OPTIONS
ELECTION OF PAYOUT PLAN OPTIONS
On the Annuity Start Date, the adjusted contract value will be applied
under a payout plan option, unless you elect to receive the surrender value in
a single sum. (See "Annuity Payments on the Annuity Start Date.") If you have
not selected a payout plan option before the Annuity Start Date, the proceeds
will be paid as a life income annuity with payments for ten years guaranteed.
You may elect, revoke, or change a payment option at any time before the
Annuity Start Date while the annuitant is living. An election of a payout plan
option and any revocation or change must be made by written request signed by
you and/or the beneficiary, as appropriate. You may elect to apply any portion
of the adjusted contract value to any payout plan described below or any other
plan that we offer. The payout plans we currently offer provide either variable
annuity payments or fixed annuity payments or a combination of both.
Prior to the Annuity Start Date, you can apply the entire surrender
value under a payout plan option, or a beneficiary can apply the death benefit
under a payout plan option. The payout plan options available are described
below.
We reserves the right to refuse the election of a payout plan option
other than paying the adjusted contract value in a lump sum if the total amount
applied to a payout plan option would be less than $2,500, or the amount of
payments would be less than $25.
FIXED ANNUITY PAYMENTS
Fixed annuity payments are periodic payments we make to the designated
annuitant. The payments are of a fixed amount and are guaranteed by us. The
amount of each payment depends only on:
- the form and duration of the payout plan option chosen,
- the age of the annuitant,
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- the sex of the annuitant (if applicable),
- the amount applied to purchase the annuity payments and the
applicable annuity purchase rates in the Contract.
The annuity purchase rates in the Contract are based on a minimum
guaranteed interest rate of 3.0%. We may, in our sole discretion, make annuity
payments in an amount based on a higher interest rate.
VARIABLE ANNUITY PAYMENTS
We determine the dollar amount of the first variable annuity payment
in the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a particular payout plan option, the dollar amount
of the first variable annuity payment and the first fixed annuity payment would
be the same (assuming such fixed payment is based on the minimum guaranteed
3.0% interest rate). However, after the first payment, the amount of each
variable annuity payment varies to reflect the net investment performance of
the Variable Account(s) that you or annuitant select.
The net investment performance of a Variable Account is translated
into a variation in the amount of variable annuity payments through the use of
annuity units. The amount of the first variable annuity payment associated with
each Variable Account is applied to purchase annuity units at the annuity unit
value for the Variable Account on the Annuity Start Date. The number of annuity
units of each Variable Account attributable to a Contract then remains fixed
unless an exchange of annuity units is made as described below. Each Variable
Account has a separate annuity unit value that changes with each valuation
period in substantially the same manner as do accumulation units of the
Variable Account.
The dollar value of each variable annuity payment after the first is
equal to the sum of the amounts determined by multiplying the number of annuity
units under a Contract of a particular Variable Account by the annuity unit
value for the Variable Account for the valuation period which ends immediately
preceding the date of each such payment. If the net investment return of the
Variable Account for a payment period is equal to the pro-rated portion of the
3.0% annual assumed investment rate, the variable annuity payment attributable
to that Variable Account for that period will equal the payment for the prior
period. To the extent that such net investment return exceeds an annualized
rate of 3.0% 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 3.0%, the payment for that period
will be less than the payment for the prior period. You may choose an assumed
interest rate of 3.0%, 4.0%, or 5.0% at the time a variable payout plan is
selected.
After the Annuity Start Date, a annuitant may change the selected
Variable Account(s) by written request once per contract year. No charge is
assessed for this transfer. Such a change will be made by exchanging annuity
units of one Variable Account for another Variable Account on an equivalent
dollar value basis. See the SAI for examples of annuity unit value calculations
and variable annuity payment calculations.
DESCRIPTION OF PAYOUT PLAN OPTIONS
OPTION 1 -- INSTALLMENT INCOME FOR A FIXED PERIOD. The proceeds are
paid out in equal monthly installments for a fixed number of years between 1
and 30 years. The amount of the payment is not guaranteed if a variable payout
plan is selected. If a fixed payout plan is selected, the payments for
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each $1,000 applied will not be less than those shown in the Fixed Period Table
in section 13 of the Contract. 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 in a lump sum. If there is no successor payee, the present
value of the remaining payments will be paid to the estate of the last
surviving payee.
OPTION 2 -- INSTALLMENT INCOME IN A FIXED AMOUNT. The proceeds are
paid out in equal monthly installments of $5.00 or more for each $1,000 applied
until the full amount is paid out. 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 in a lump sum. If there is no successor payee,
the present value of the remaining payments will be paid to the estate of the
last surviving payee.
OPTION 3 -- ONE LIFE INCOME. The proceeds are paid in monthly
installments during the payee's lifetime:
- for as long as the payee lives,*
- while the payee is living with the guarantee that payments
will be made for a period certain of ten years; or
- while the payee is living with the guarantee that payments
will be made for a period certain of twenty years.
The amount of each payment is not guaranteed if a variable payout plan
is selected. If a fixed payout plan is selected, the payment for each $1,000
applied will not be less than that shown in the One Life Table in section 12 of
the Contract. Payments guaranteed for 10 or 20 years certain may be commuted.
Payments guaranteed only for the life of the payee may not be commuted.
OPTION 4 -- JOINT AND SURVIVOR LIFE INCOME. The proceeds are paid out
in monthly installments jointly to two payees and after one dies to the
surviving Payee.* If one payee dies before the due date of the first payment,
the surviving payee will receive payments under the One Life Income Option 3
with payments guaranteed for 10 years certain. The payments may not be
commuted.
The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the annuitant's age (and if
applicable, sex). Age will be determined from the last birthday at the due date
of the first payment.
* IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT
IF THE PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE SECOND
PAYMENT OR TO RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE PAYEE DIES (OR
PAYEES DIE) BEFORE THE DUE DATE OF THE THIRD PAYMENT, AND SO ON.
HISTORICAL PERFORMANCE DATA
From time to time, we may advertise or include in sales literature
yields, effective yields and total returns for the Variable Accounts. These
figures are based on historical earnings and do not indicate or project future
performance. We also may, from time to time, advertise or include in sales
literature Variable Account performance relative to certain performance
rankings and indices compiled by independent organizations. More detailed
information as to the calculation of performance, as well as comparisons with
unmanaged market indices, appears in the SAI.
Performance data for the Variable Accounts is based on the investment
performance of the corresponding portfolio of a Fund and reflects its expenses.
(See the prospectuses for the Funds.)
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The "yield" of the Money Market Variable Account refers to the
annualized income generated by an investment in the Variable Account 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 Variable Account is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The yield of a Variable Account (other than the Money Market Variable
Account) refers to the annualized income generated by an investment in the
Variable Account over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period and
is shown as a percentage of the investment.
Yield quotations do not reflect the withdrawal charge.
The "total return" of a Variable Account refers to return quotations
assuming an investment under a Contract has been held in the Variable Account
for various periods of time. When a Variable Account or portfolio has been in
operation for one, five, and ten years, respectively, the total return for
these periods will be provided.
The average annual total return quotations represent the average
annual compounded rates of return that would equate an initial investment of
$1,000 under a 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 Variable Account from the beginning
date of the measuring period to the end of that period. This standardized
version of average annual total return reflects all historical investment
results, less all charges and deductions applied against the Variable Account
(including any withdrawal charge that would apply if you 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 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 withdrawal charge. In addition, we may from time to time
disclose average annual total return in non-standard formats and cumulative
total return for Contracts funded by the Variable Accounts.
We may disclose yield and total returns for the portfolios, including
such disclosures for periods prior to the date the Variable Account commenced
operations. Sales literature or advertisements may quote adjusted yields and
total returns for the portfolios since their inception reduced by some or all
of the fees and charges under the Contract. Such adjusted historic portfolio
performance may include data that precedes the inception dates of the Variable
Accounts. This data is designed to show the performance that could have
resulted if the Contract had been in existence during that time.
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 SAI.
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In advertising and sales literature (including illustrations), the
performance of each Variable Account 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 Variable Account.
Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technology ("CDA"),
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 rankings compare only
variable annuity issuers. The performance analyses prepared by Lipper, CDA,
VARDS and Morningstar rank or illustrate 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 Variable Account 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 the expense
of operating or managing an investment portfolio. Other independent ranking
services and indices may also be used as a source of performance comparison.
We may also report other information including the effect of
systematic withdrawals, systematic investments and tax-deferred compounding on
a Variable Account's investment returns, or returns in general. This
information may be illustrated by tables, graphs, or charts. All income and
capital gains derived from Variable Account investments are reinvested and can
lead to substantial long-term accumulation of assets, provided that the
Variable Account investment experience is positive.
FEDERAL TAX MATTERS
The following discussion is general in nature and is not intended as
tax advice. Each person concerned should consult a competent tax advisor. No
attempt is made to consider any applicable state tax or other tax laws.
We believe that our Contracts will qualify as annuity contracts for
Federal income tax purposes and the following discussion assumes that they will
so qualify. Further information on the tax status of the Contract can be found
in the SAI under the heading "Tax Status of the Contracts."
When you invest in an annuity contract, you usually do not pay taxes
on your investment gains until you withdraw the money -- generally for
retirement purposes. In this way, annuity contracts have been recognized by the
tax authorities as a legitimate means of deferring tax on investment income.
We believe that if you are a natural person you will not be taxed on
increases in the Contract Value of your Contract until a distribution occurs or
until annuity payments begin. (The agreement to assign or pledge any portion of
a Contract's accumulation value and, in the case of a Qualified Contract
described below, any portion of an interest in the qualified plan, generally
will be treated as a
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distribution.) When annuity payments begin, you will be taxed only on the
investment gains you have earned and not on the payments you made to purchase
the Contract. Generally, withdrawals from your annuity should only be made once
the annuitant reaches age 59-1/2, dies or is disabled, otherwise a tax penalty
of ten percent of the amount treated as income could be applied against any
amounts included in income, in addition to the tax otherwise imposed on such
amount.
If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your Contract is called a Qualified
Contract. If your annuity is independent of any formal retirement or pension
plan, it is called a Non-Qualified Contract.
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON. If a non-natural person owns a non-qualified
annuity contract, the owner generally must include in income any increase in
the excess of the accumulation value over the investment in the contract
(generally, the premiums or other consideration paid for the contract) during
the taxable year. There are some exceptions to this rule and a prospective
owner that is not a natural person should discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by
natural persons.
WITHDRAWALS. When a withdrawal from a Non-Qualified Contract occurs,
the amount received will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the accumulation value immediately
before the distribution over the Owner's investment in the contract (generally,
the premiums or other consideration paid for the Contract, reduced by any
amount previously distributed from the Contract that was not subject to tax) at
that time. In the case of a surrender under a Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
Owner's investment in the contract.
PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution from
a Non-Qualified Contract, there may be imposed a federal tax penalty equal to
ten percent of the amount treated as income. In general, however, there is no
penalty on distributions:
- made on or after the taxpayer reaches age 59 1/2
- made on or after the death of an Owner;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal periodic
payments for the life (or life expectancy) of the taxpayer.
Other exceptions may apply under certain circumstances and special
rules may apply in connection with the exceptions enumerated above. You should
consult a tax adviser with regard to exceptions from the penalty tax.
ANNUITY PAYMENTS. Although tax consequences may vary depending on the
payout option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an annuity payment is generally
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determined in a manner that is designed to allow you to recover your investment
in the contract ratably on a tax-free basis over the expected stream of annuity
payments, as determined when annuity payments start. Once your investment in
the contract has been fully recovered, however, the full amount of each annuity
payment is subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of your death or the death of the Annuitant. Generally, such
amounts are includible in the income of the recipient as follows: (a) if
distributed in a lump sum, they are taxed in the same manner as a surrender of
the Contract, or (b) if distributed under a payout option, they are taxed in
the same way as annuity payments.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT. A transfer or
assignment of ownership of a Contract, the designation of an annuitant, the
selection of certain Annuity Start Dates, or the exchange of a Contract may
result in certain tax consequences to you that are not discussed herein. An
Owner contemplating any such transfer, assignment or exchange, should consult a
tax advisor as to the tax consequences.
WITHHOLDING. Annuity distributions are generally subject to
withholding for the recipient's federal income tax liability. Recipients can
generally elect, however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. All annuity contracts that are issued by us (or
our affiliates) to the same Owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in such
Owner's income when a taxable distribution occurs.
TAXATION OF QUALIFIED CONTRACTS
The tax rules that apply to Qualified Contracts vary according to the
type of retirement plan and the terms and conditions of the plan. Your rights
under a Qualified Contract may be subject to the terms of the retirement plan
itself, regardless of the terms of the Qualified Contract. Adverse tax
consequences may result if you do not ensure that contributions, distributions
and other transactions with respect to the Contract comply with the law.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs), as defined in Sections 219 and
408 of the Internal Revenue Code (Code), permit individuals to make annual
contributions of up to the lesser of $2,000 or 100% of adjusted gross income.
The contributions may be deductible in whole or in part, depending on the
individual's income. Distributions from certain pension plans may be rolled
over into an IRA on a tax-deferred basis without regard to these limits.
So-called Simple IRAs under Section 408(p) of the Code, and Roth IRAs under
Section 408A, may also be used in connection with variable annuity contracts.
Simple IRAs allow employees to defer a percentage of annual compensation up to
$6,000 to a retirement plan, provided the sponsoring employer makes matching or
non-elective contributions. The penalty for a premature distribution from a
SIMPLE IRA that occurs within the first two years after the employee begins to
participate in the plan is 25%, rather than the usual 10%. Contributions to
Roth IRAs are not tax-deductible, and contributions must be made in cash, or as
a rollover or transfer from another Roth IRA or IRA. A rollover or conversion
of an IRA to a Roth IRA may be subject to tax. Distributions from Roth IRAs are
generally not taxed. In addition to the 10% penalty which generally applies to
distributions made before age 591/2, a 10% penalty will be imposed for any
distribution made from a Roth IRA during the five taxable years starting after
you first contribute to any Roth IRA.
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CORPORATE PENSION AND PROFIT-SHARING PLANS under Section 401(a) of the
Code allow corporate employers to establish various types of retirement plans
for employees, and self-employed individuals to establish qualified plans for
themselves and their employees.
Adverse tax consequences to the retirement plan, the participant or
both may result if the Contract is transferred to any individual as a means to
provide benefit payments, unless the plan complies with all the requirements
applicable to such benefits prior to transferring the Contract.
TAX-SHELTERED ANNUITIES under Section 403(b) of the Code permit public
schools and other eligible employers to purchase annuity contracts and mutual
fund shares through custodial accounts on behalf of employees. Generally, these
purchase payments are excluded for tax purposes from employee gross incomes.
However, these payments may be subject to Social Security taxes.
Distributions of salary reduction contributions and earnings (other
than your salary reduction accumulation as of December 31, 1988) are not
allowed prior to age 59 1/2, separation from service, death or disability.
Salary reduction contributions may also be distributed upon hardship, but would
generally be subject to penalties.
OTHER TAX ISSUES. You should note that the Contract includes a death
benefit that in some cases may exceed the greater of the Premium Payments or
the Contract Value. The death benefit could be viewed as an incidental benefit,
the amount of which is limited in any 401(a) or 403(b) plan. Because the death
benefit may exceed this limitation, employers using the Contract in connection
with corporate pension and profit-sharing plans, or tax-sheltered annuities,
should consult their tax adviser.
Qualified Contracts (other than Roth IRAs) have minimum distribution
rules that govern the timing and amount of distributions. You should refer to
your retirement plan, adoption agreement, or consult a tax advisor for more
information about these distribution rules.
OUR INCOME TAXES
At the present time, we make no charge for any Federal, state or local
taxes (other than the charge for state and local premium taxes) that we incur
that may be attributable to the investment divisions (that is, the Variable
Accounts) of the separate account or to the Contracts. We do have the right in
the future to make additional charges for any such tax or other economic burden
resulting from the application of the tax laws that we determine is
attributable to the investment divisions of the separate account or the
Contracts.
Under current laws in several states, we may incur state and local
taxes (in addition to premium taxes). These taxes are not now significant and
we are not currently charging for them. If they increase, we may deduct charges
for such taxes.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contracts could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract.
We have the right to modify the Contract in response to legislative
changes that could otherwise
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diminish the favorable tax treatment that annuity contract owners currently
receive. We make no guarantee regarding the tax status of any contact and do
not intend the above discussion as tax advice.
OTHER PROVISIONS
PAYMENTS
Any full or partial withdrawal, death benefit payment, (or in the case
of Qualified Contracts, payment of contract loan proceeds) will usually be paid
within seven days of receipt of a written request, any information or
documentation reasonably necessary to process the request, and (in the case of
a death benefit) receipt and filing of due proof of death. However, payments
may be postponed if:
1. the New York Stock Exchange is closed, other than customary
weekend and holiday closings, or trading on the exchange is
restricted as determined by the SEC; or
2. the SEC permits by an order the postponement for the
protection of owners; or
3. the SEC determines that an emergency exists that would make
the disposal of securities held in the separate account or
the determination of the value of the separate account's net
assets not reasonably practicable.
If a recent check or draft has been submitted, we have the right to
delay payment until we have assured ourselves that the check or draft has been
honored.
We have the right to defer payment of any full or partial withdrawal
or transfer from the fixed account for up to six months from the date we
receive your written request for such a surrender or transfer. If payment is
not made within 30 days after we receive the documentation necessary to
complete the transaction, or such shorter period required by a particular
state, 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 state.
MODIFICATION
Upon notice to you, we may modify the Contract if:
1. necessary to permit the Contract or the separate account to
comply with any applicable law or regulation issued by a
government agency; or
2. necessary to assure continued qualification of the Contract
under the Internal Revenue Code or other federal or state
laws relating to retirement annuities or variable annuity
contracts; or
3. necessary to reflect a change in the operation of the
separate account; or
4. the modification provides additional investment options.
In the event of most such modifications, we will make appropriate
endorsement to the Contract.
REPORTS TO OWNERS
At least annually, you will mail to you, at your last known address of
record, a report setting forth:
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- the contract value (including the contract value in each
Variable Account and the fixed account) of the Contract,
- premium 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
You may make inquiries regarding a Contract by writing to us at our
Annuity Service Office.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be offered to the public on a continuous basis. We
do not anticipate discontinuing the offering of the Contracts, but reserves the
right to discontinue the offering. Applications for Contracts are solicited by
agents who are licensed by applicable state insurance authorities to sell our
variable annuity contracts and who are also registered representatives of IL
Securities, Inc. or broker-dealers having selling agreements with IL
Securities, Inc. or broker-dealers having selling agreements with such
broker-dealers. IL Securities, Inc. is a wholly-owned subsidiary of the
Indianapolis Life Group of Companies, Inc., which, in turn, is a wholly-owned
subsidiary of Indianapolis Life Insurance Company 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.
IL Securities, Inc. acts as the principal underwriter, as defined in
the 1940 Act, of the Contracts for the separate account pursuant to an
Underwriting Agreement between us and IL Securities, Inc. IL Securities, Inc.
is not obligated to sell any specific number of Contracts. The principal
business address for IL Securities, Inc. is P.O. Box 1230, 2960 North Meridian
Street, Indianapolis, Indiana 46208.
We may pay sales commissions to broker-dealers up to an amount equal
to 7.2% of the premium payments paid under a Contract. In addition, asset-based
trailer commissions of up to 1.25% may be paid. We may also pay up to 1.25% on
premium payments to IL Securities to compensate it for certain distribution
expenses. These broker-dealers are expected to compensate sales representatives
in varying amounts from these commissions. We also may pay other distribution
expenses such as production incentive bonuses, agent's insurance and pension
benefits, and agency expense allowances. These distribution expenses do not
result in any additional charges against the Contracts that are not described
under "Charges and Deductions."
LEGAL PROCEEDINGS
We and our affiliates, like other life insurance companies, are
involved in lawsuits, including class action lawsuits. In some class action and
other lawsuits involving other 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, we believe that at the present
time there are not pending or threatened lawsuits that are reasonably likely to
have a material adverse impact on the Variable Account or the Company.
VOTING RIGHTS
45
<PAGE> 48
In accordance with our view of current applicable law, we will vote
Fund shares held in the separate account at regular and special shareholder
meetings of the Funds in accordance with instructions received from persons
having voting interests in the corresponding Variable Accounts. If, however,
the 1940 Act or any regulation thereunder should be amended, or if the present
interpretation thereof should change, or we otherwise determine that we are
allowed to vote the shares in our own right, we may elect to do so.
The number of votes that an owner or annuitant has the right to
instruct will be calculated separately for each Variable Account of the
separate account, and may include fractional votes. Prior to the Annuity Start
Date, an owner holds a voting interest in each Variable Account to which the
contract value is allocated. After the Annuity Start Date, the annuitant has a
voting interest in each Variable Account from which variable annuity payments
are made.
For each owner, the number of votes attributable to a Variable Account
will be determined by dividing the contract value attributable to that owner's
Contract in that Variable Account by the net asset value per share of the Fund
in which that Variable Account invests. For each annuitant, the number of votes
attributable to a Variable Account will be determined by dividing the liability
for future variable annuity payments to be paid from that Variable Account by
the net asset value per share of the Fund in which that Variable Account
invests. This liability for future payments is calculated on the basis of the
mortality assumptions, the 3.0% assumed investment rate used in determining the
number of annuity units of that Variable Account credited to the annuitant's
Contract and annuity unit value of that Variable Account on the date that the
number of votes is determined. As variable annuity payments are made to the
annuitant, the liability for future payments decreases as does the number of
votes.
The number of votes available to an owner or annuitant will be
determined as of the date coincident with the date established by the Fund for
determining shareholders eligible to vote at the relevant meeting of the Fund's
shareholders. Voting instructions will be solicited by written communication
prior to such meeting in accordance with procedures established for the Fund.
Each owner or annuitant having a voting interest in a Variable Account will
receive proxy materials and reports relating to any meeting of shareholders of
the Fund in which that Variable Account invests.
Fund shares as to which no timely instructions are received and shares
held by us in a Variable Account as to which no owner or annuitant has a
beneficial interest will be voted in proportion to the voting instructions
which are received with respect to all Contracts participating in that Variable
Account. Voting instructions to abstain on any item to be voted upon will be
applied to reduce the total number of votes eligible to be cast on a matter.
COMPANY HOLIDAYS
We are closed on the following holidays: the Friday following
Thanksgiving, the day preceding Christmas when Christmas falls on Tuesday
through Saturday, the day following Christmas when Christmas falls on Sunday or
Monday, and the day following New Year's Day when it falls on a Sunday, the
Monday following New Year's Day when New Year's Day falls on a Saturday, and
the day preceding or following Independence Day when it falls on Saturday or
Sunday.
YEAR 2000 MATTERS
46
<PAGE> 49
Like all financial services providers, we use systems that may be
affected by Year 2000 transition issues. We also rely on service providers,
including the portfolios and the administrator, that may be affected by Year
2000 issues. We have developed, and are in the process of implementing, a Year
2000 transition plan. In addition, we are in the process of confirming that the
portfolios and its service providers are also engaged in similar transition
plans. The resources that are being devoted to this effort are substantial. It
is difficult to predict with precision whether the amount of resources
ultimately devoted, or the outcome of these efforts, will have any negative
impact on our operations. However, as of the date of this Prospectus, it is not
anticipated that owners will experience negative effects on their investment,
or on the services provided in connection therewith, as a result of Year 2000
transition implementation. We currently anticipates that our systems will be
Year 2000 compliant in a timely manner, but there can be no assurance that we
will be successful, or that interaction with other service providers will not
impair services at that time.
FINANCIAL STATEMENTS
IL Annuity and Insurance Company, formerly known as Sentry Investors
Life Insurance Company, became a wholly-owned subsidiary of the Indianapolis
Life Group of Companies, Inc. on November 1, 1994. Just before that date, we
entered into an assumption reinsurance agreement with Sentry Life Insurance
Company ("Sentry") whereby Sentry assumed all of the insurance in-force and
related assets and liabilities from us. The effect of the reinsurance agreement
was to transfer all of the insurance related assets and liabilities to Sentry,
leaving only bonds, cash and state insurance department licenses to be acquired
by the Indianapolis Life Group of Companies, Inc. We did not issue any business
through December 31, 1994.
The audited statement of net assets of IL Annuity and Insurance Co.
Separate Account 1 as of December 31, 1998 and the related statement of
operations for the year then ended and statements of changes in net assets for
the two years then ended, as well as the Report of the Independent Auditors,
are included in the SAI ("SAI"). Our audited balance sheets as of December 31,
1998 and 1997, and the related statements of income, shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998,
as well as the Report of the Independent Auditors, are contained in the SAI.
Our financial statements should be considered only as bearing on our ability to
meet our obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the separate
account.
47
<PAGE> 50
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
Additional information about the Contract and the separate account is
contained in the SAI. A SAI is available (at no cost) by writing to us at the
address shown on the front cover or by calling 1-800-388-1331. The following is
the Table of Contents for that Statement.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Contract Provisions.............................................................2
The Contract........................................................................2
Incontestability....................................................................2
Incorrect Age or Sex................................................................2
Nonparticipation....................................................................3
Options.............................................................................3
Tax Status of the Contracts.........................................................3
Calculation of Variable Account and Adjusted Historic Portfolio Performance Data.............3
Money Market Variable Account Yields................................................3
Other Variable Account Yields.......................................................5
Average Annual Total Returns for the Variable Accounts .............................6
Non-Standard Variable Account Total Returns ........................................7
Effect of the Contract Fee on Performance Data .....................................8
Other Information ..................................................................9
Variable Account Performance Figures ..............................................10
Adjusted Historical Portfolio Performance Figures .................................15
Net Investment Factor ......................................................................22
Variable Annuity Payments ..................................................................22
Assumed Investment Rate ...........................................................23
Amount of Variable Annuity Payments ...............................................23
Annuity Unit Value ................................................................24
Addition, Deletion or Substitution of Investments ..........................................25
Resolving Material Conflicts ......................................................26
Termination of Participation Agreements ....................................................26
The Alger American Fund ...........................................................26
Fidelity Variable Insurance Products Fund and Fund II .............................27
OCC Accumulation Trust ............................................................28
Royce Capital Fund ................................................................28
SAFECO Resource Series Trust ......................................................29
SoGen Variable Funds, Inc. ........................................................30
T. Rowe Price Fixed Income Series, Inc. ...........................................31
T. Rowe Price International Series, Inc. ..........................................31
Van Eck Worldwide Insurance Trust .................................................31
Voting Rights ..............................................................................32
Safekeeping of Account Assets ..............................................................33
Distribution of the Contracts ..............................................................33
Legal Matters ..............................................................................34
Experts ....................................................................................34
OTHER INFORMATION ..........................................................................34
FINANCIAL STATEMENTS .......................................................................34
</TABLE>
48
<PAGE> 51
APPENDIX A
CONDENSED FINANCIAL INFORMATION
The following condensed financial information shows accumulation unit
values for each Variable Account for each year since the Variable Account
started operation. Accumulation unit value is the unit we use to calculate the
value of your interest in a Variable Account. Accumulation unit value does not
reflect the deduction of certain charges that we subtract from your Contract
Value. The data is obtained from the audited financial statement of the
Separate Account that can be found in the SAI.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Fund: MidCap Growth Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $10.812 $12.263 294,506
- -----------------------------------------------------------------------------------------------------------------------------
1996 $9.786 $10.812 109,955
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $9.786 2,764
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Alger American Fund: Small Capitalization Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $9.955 $10.936 372,229
- -----------------------------------------------------------------------------------------------------------------------------
1996 $9.675 $9.955 181,361
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $9.675 1,709
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Equity-Income Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $11.958 $15.114 781,937
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.616 $11.958 195,400
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.616 3,789
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Growth Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $10.868 $13.240 462,381
- -----------------------------------------------------------------------------------------------------------------------------
1996 $9.604 $10.868 164,945
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $9.604 2,199
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Money Market Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $10.456 $10.888 486,050
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.00 $10.456 179,504
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $0 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Asset Manager Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
50
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1997 $11.817 $14.066 212,897
- -----------------------------------------------------------------------------------------------------------------------------
1996 $8.224 $11.817 61,512
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $8.224 255
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Contrafund Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $12.105 $14.824 638,524
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.091 $12.105 203,860
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.091 5,731
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Index 500 Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $12,734 $16.672 826,178
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.514 $12.734 193,803
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.514 3,538
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE> 54
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Investment Grade Bond Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $10.422 $11.214 274,009
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.247 $10.422 57,476
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.247 1,668
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust: Managed Variable Account*
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $12.567 $15.160 672,203
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.380 $12.567 133,102
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.380 161
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust: Small Cap Variable Account*
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $12.148 $14.649 162,435
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.388 $12.148 40,024
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.388 1,182
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
T. Rowe Price Fixed Income Series, Inc.: Limited-Term Bond Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
52
<PAGE> 55
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
1997 $9.946 $10.767 136,902
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.042 $9.946 27,325
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.042 1,485
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc.: International Stock Variable Account
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $11.780 $11.979 368,187
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.487 $11.780 122,831
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.487 2,530
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust: Worldwide Hard
Assets Variable Account**
- -----------------------------------------------------------------------------------------------------------------------------
Accumulation Accumulation Number of
unit value at unit value at accumulation
the beginning the end of the units outstanding
of the year year at the end of the
year
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- -----------------------------------------------------------------------------------------------------------------------------
1997 $12.356 $11.983 166,188
- -----------------------------------------------------------------------------------------------------------------------------
1996 $10.621 $12.356 29,990
- -----------------------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.621 58
- -----------------------------------------------------------------------------------------------------------------------------
-------------------
</TABLE>
* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for
Value Accumulation Trust.
** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account
was called Van Eck Gold and Natural Resources.
*** Period from September 1, 1997 to December 31, 1997.
53
<PAGE> 56
PROSPECTUS
MAY 1, 1999
Please read this prospectus carefully before
investing, and keep it for future reference. It
contains important information about the Visionary
Choice variable annuity.
To learn more about the Visionary Choice Contract,
you may want to look at the Statement of Additional
Information dated May 1, 1999 (known as the "SAI").
For a free copy of the SAI, contact us at:
IL Annuity and Insurance Company
Administrative Office
2960 North Meridian Street
Indianapolis, Indiana 46208
Telephone: (888) 232-6486
We have filed the SAI with the U.S. Securities and
Exchange Commission ("SEC") and have incorporated
it by reference into this prospectus. The SAI's
table of contents appears at the end of this
prospectus.
The SEC maintains an Internet website
(http://www.sec.gov) that contains the SAI,
material incorporated by reference, and other
information.
VARIABLE ANNUITY CONTRACTS INVOLVE CERTAIN RISKS,
AND YOU MAY LOSE SOME OR ALL OF YOUR INVESTMENT.
- - The investment performance of the portfolios in
which the Variable Accounts invest will vary.
- - We do not guarantee how any of the portfolios
will perform.
- - The Contract is not a deposit or obligation of
any bank, and no bank endorses or guarantees
the Contract.
- - Neither the U.S. Government nor any federal
agency insures your investment in the policy.
VISIONARY CHOICE
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
issued by
IL ANNUITY AND INSURANCE COMPANY
through the
IL ANNUITY AND INSURANCE CO.
SEPARATE ACCOUNT 1
The Contract has 19 funding choices--one fixed account
(paying a guaranteed minimum fixed rate of interest)
and 18 Variable Accounts which invest in the following
mutual fund portfolios:
THE ALGER AMERICAN FUND
- MidCap Growth
- Small Capitalization
FIDELITY VARIABLE INSURANCE PRODUCTS ("VIP") FUND
- Equity-Income
- Growth
- Money Market
FIDELITY VIP FUND II
- Asset Manager
- Contrafund
- Index 500
- Investment Grade Bond
OCC ACCUMULATION TRUST
- Managed
- Small Cap
ROYCE CAPITAL FUND
- Royce Micro-Cap
SAFECO RESOURCE SERIES TRUST
- SAFECO Equity
- SAFECO Growth
SoGEN VARIABLE FUNDS, INC.
- SoGen Overseas Variable
T. ROWE PRICE FIXED INCOME SERIES, INC.
- Limited-Term Bond
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- International Stock
VAN ECK WORLDWIDE INSURANCE TRUST
- Worldwide Hard Assets
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE> 57
TABLE OF CONTENTS
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fee Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ABOUT IL ANNUITY AND THE SEPARATE ACCOUNT . . . . . . . . . . . . . . . 14
THE PORTFOLIOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE PAY-IN PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
TRANSFERS BETWEEN INVESTMENT OPTIONS . . . . . . . . . . . . . . . . . 23
FEES AND CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
THE PAYOUT PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Access to Your Money . . . . . . . . . . . . . . . . . . . . . . . . . 33
CONTRACT LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
THE LIVING BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . 39
THE FIXED ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS . . . . . . . . . . . . 43
VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FEDERAL TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 46
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . 53
Condensed Financial Information . . . . . . . . . . . . . . . . . . . . 54
<PAGE> 58
GLOSSARY
For your convenience, we are providing a glossary of the special terms we
use in this prospectus.
ACCUMULATION UNIT - The measurement we use to calculate the value of each
variable account on each business day before we start making annuity payments
to you.
ANNUITANT - You are the annuitant, unless you state otherwise in your
application. The annuitant is the person (or persons) whose life (or lives) we
use to determine the dollar amount and duration of the annuity payments that we
will pay under the Contract and whose death determines the death benefit. You
may choose joint annuitants in some cases. You may not change the annuitant
you name in the application.
ANNUITY START DATE - The date when we will begin to pay annuity payments to the
annuitant. (You are the annuitant, unless you tell us otherwise at the time of
your application.)
ANNUITY UNIT - The measurement we use to calculate the value of your annuity
payments if you choose to receive annuity payments from the Variable Accounts.
BENEFICIARY - The person you name to receive the death benefit if the annuitant
dies before we start making annuity payments.
BUSINESS DAY - Each day on which the New York Stock Exchange is open for
business, except for the holidays listed in this prospectus under "Holidays."
COMPANY ("WE," "US," "OUR") - IL Annuity and Insurance Company.
CONTRACT ANNIVERSARY - The same date in each year as the date of issue.
CONTRACT VALUE - The total amount you have accumulated under the Contract. It
is equal to the money you have under the Contract in the separate account and
the fixed account.
DATE OF ISSUE - The date we issue your Contract. It is shown on the
specifications page of the Contract and is the date on which the first contract
year begins.
DEATH BENEFIT ANNIVERSARY - Every third contract anniversary beginning on the
date of issue.
DUE PROOF OF DEATH - Proof of death that we find satisfactory. Such proof may
be: (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 us.
ELIGIBLE PREMIUM PAYMENT - That portion of your first Premium Payment that you
allocate to a particular Eligible Variable Account on the date of issue. We use
it as a benchmark for calculating the Living Benefit.
ELIGIBLE VARIABLE ACCOUNT - Currently all variable accounts.
1
<PAGE> 59
FIXED ACCOUNT - An option to which you can direct your money under the
Contract. It provides a guarantee of principal and interest. The assets
supporting the fixed account are held in our general account.
FUNDS - The open-end management investment company listed on the front page of
this Prospectus. This Contract allows you to invest in certain investment
portfolios of the Funds.
LIVING BENEFIT - A guarantee we provide regarding your Contract's value in the
Variable Accounts on the Living Benefit Date, provided you select the Living
Benefit option on your application.
LIVING BENEFIT DATE - 10 years after the date of issue.
OWNER ("YOU" OR "YOUR") - The person(s) having the privileges of ownership
stated in the Contract. Joint owner may be permitted.
PAYEE - The person(s) entitled to receive annuity payments. You may name a
"Successor Payee" to receive any guaranteed annuity payments after the death of
the sole surviving payee.
PAY-IN PERIOD - The period that begins when we issue your Contract and ends
when you receive annuity payments. During the pay-in period, earnings
accumulate on a tax-deferred basis.
PAYOUT PERIOD - The period that beings on the Annuity Start Date during which
you receive annuity payments based on the money you have accumulated under your
Contract.
PAYOUT OPTION - The arrangement you choose under which we pay annuity payments
to you after the Annuity Start Date. You may choose whether the dollar amount
of the payments you receive will be fixed, or will vary with the investment
experience of the variable accounts in which you are invested at that time, or
whether you will receive a combination of fixed and variable payments.
PORTFOLIO - A separate investment portfolio of a Fund in which a variable
account invests.
PREMIUM PAYMENT YEAR - The twelve-month period beginning on the date we receive
any premium payment. It is used to calculate the withdrawal charge if you
choose the date of premium payment withdrawal charge option.
QUALIFIED CONTRACT - A Contract issued in connection with retirement plans that
qualify for special federal income tax treatment under Sections 401(a), 403(b),
408, or 408A of the Internal Revenue Code.
SEPARATE ACCOUNT - IL Annuity and Insurance Co. Separate Account 1, a separate
investment account divided into variable accounts that we established to
receive and invest the premium payments we receive under the Contract. Assets
in the separate account are not part of our general account.
SERVICE CENTER - USA Administration Services, Inc., the administrator for the
Contracts. The mailing address for the Service Center is P.O. Box 29163,
Overland Park, KS 66201-1348 or 12900 Metcalf Avenue, Overland Park, KS
66213-2620. You can call the Service Center office at 1-888-232-6486.
2
<PAGE> 60
VARIABLE ACCOUNT - A subdivision of the separate account that invests
exclusively in shares of a single portfolio of a Fund. The investment
performance of each variable account is linked directly to the investment
performance of the portfolio in which it invests.
WRITTEN REQUEST - Your signed, written notice or request. We must receive your
written request at the Service Center and it must be in a form satisfactory to
us.
3
<PAGE> 61
HIGHLIGHTS
These highlights provide only a brief overview of the more important
features of the Visionary Choice contract. More detailed information about the
Contract appears later in this Prospectus. Please read this Prospectus
carefully.
THE CONTRACT
An annuity is a contract where you agree to make one or more payments to us
and, in return, we agree to pay a series of payments to you at a later date
chosen by you. Visionary Choice is a special kind of annuity that is:
- - FLEXIBLE PREMIUM - you may add premium payments at any time.
- - TAX-DEFERRED - you do not have to pay taxes on earnings until you take
money out by a full or partial cash withdrawals, or we make annuity
payments to you, or we pay the death benefit.
- - VARIABLE - its value fluctuates with the performance of the mutual fund
portfolios in which you invest. You bear the investment risk on the amounts
you invest.
- - AVAILABLE WITH RETIREMENT PLANS - you may purchase this annuity in
connection with retirement plans, including those that qualify for
favorable federal tax treatment.
Like all deferred annuities, the Contract has two phases: the "pay-in"
period and the "pay-out" period. During the pay-in period, you can allocate
money to any combination of investment alternatives. Any earnings on your
investments accumulate tax-deferred. The pay-out period begins once you start
receiving regular annuity payments from your Contract Value. The money you can
accumulate during the pay-in period, as well as the annuity payout option you
choose, will determine the dollar amount of any annuity payments you receive.
HOW TO INVEST
You may purchase the Contract with a single payment of $1,000 or more under
most circumstances. We will not issue a Contract if you are older than 85 on
the date of issue.
You can pay additional premiums of $1,000 or more with some limitations.
Send your premium payments to the Service Center, P.O. Box 29163, Overland
Park, KS 66201-1348 or 12900 Metcalf Avenue, Overland Park, KS 66213-2620. You
can call the Service Center office at 1-888-232-6486.
CANCELLATION -- THE 10 DAY FREE-LOOK PERIOD
You may return your Contract for a refund within 10 days after you receive
it. The amount of the refund will generally be the total purchase payments you
paid, plus or minus any gains or losses on the amounts you invested in the
variable accounts. We determine the value of the refund as of the date we
receive the refunded Contract. We will pay the refund within 7 days after we
receive the Contract. The Contract will then be deemed void. In some states
you may have more than 10 days, or receive a different refund amount. If we
refund your original premium payment, we will put your premium payment to the
Money Market Variable Account during the free-look period.
INVESTMENT OPTIONS
4
<PAGE> 62
You may invest your money in any of 18 portfolios by directing it into the
corresponding variable account. The portfolios now available to you under the
Contract are:
<TABLE>
<S> <C>
THE ALGER AMERICAN FUND ROYCE CAPITAL FUND
- MidCap Growth - Royce Micro-Cap
- Small Capitalization SAFECO RESOURCE SERIES TRUST
FIDELITY VIP FUND - SAFECO Equity
- Equity-Income - SAFECO Growth
- Growth SoGEN VARIABLE FUNDS, INC.
- Money Market - SoGen Overseas Variable
FIDELITY VIP FUND II T. ROWE PRICE FIXED INCOME SERIES, INC.
- Asset Manager - Limited-Term Bond
- Contrafund T. ROWE PRICE INTERNATIONAL SERIES, INC.
- Index 500 - International Stock
- Investment Grade Bond VAN ECK WORLDWIDE INSURANCE TRUST
OCC ACCUMULATION TRUST - Worldwide Hard Assets
- Managed
- Small Cap
</TABLE>
Each variable account invests exclusively in shares of one portfolio of a
Fund. Each portfolio's assets are held separately from the other portfolios
and each portfolio has separate investment objectives and policies. The
portfolios are described in the prospectuses for the Funds that accompany this
prospectus.
The value of your investment in the variable accounts will fluctuate daily
based on the investment results of the portfolios in which you invest, and on
the fees and charges deducted.
Depending on market conditions, you can make or loss money in any of the
variable accounts. We reserve the right to offer other investment choices in
the future.
You may also direct your money to the fixed account and receive a
guaranteed rate of return. Money you place in the fixed account will earn
interest for one year periods at a fixed rate that is guaranteed by us never to
be less than 3.0%.
TRANSFERS
You have the flexibility to transfer assets within your Contract. At any
time during the pay-in period, you may transfer amounts among the variable
accounts and between the fixed account and any variable account. Certain
restrictions apply to transfers to and from the fixed account. Transfers may
reduce the value of the Living Benefit guarantee.
Once you begin to receive annuity payments, you may make one transfer among
the variable accounts each contract year.
ACCESS TO YOUR MONEY
During the pay-in period, you may receive a cash withdrawal of part of
your contract value. The minimum amount you can withdraw is $250. You may
also fully withdraw all your value from the Contract and receive its
surrender value.
5
<PAGE> 63
Full and partial withdrawals may be subject to a withdrawal charge,
depending upon the withdrawal charge option you chose at the time of purchase
and the timing of the withdrawal. In any contract year after the first contract
year, you may withdraw a portion of your contract value, called the free
withdrawal amount, without incurring a withdrawal charge.
Withdrawals will reduce the value of the Living Benefit guarantee.
You may have to pay federal income taxes and a penalty tax on any money you
withdraw from the Contract.
DEATH BENEFIT
We will pay the death benefit to the beneficiary on the annuitant's death
before the Annuity Start Date.
The death benefit will equal the greater of:
- the sum of premium payments made under the Contract, LESS partial
withdrawals as of the date we determine the death benefit; or
- the contract value as of the date we determine the death benefit.
If you elect the enhanced death benefit option, the enhanced death benefit
will be the greater of:
- the contract value as of the date we determine the enhanced death
benefit; or
- the highest contract value on any Death Benefit Anniversary,
adjusted for any premium payments received, withdrawals taken
and charges incurred between such Death Benefit Anniversary and the
date we determine the enhanced death benefit.
We set the value of the enhanced death benefit initially on the first Death
Benefit Anniversary (that is, the third Contract anniversary) and reset it
every third Contract Anniversary if the value is greater. Once reset, this
value will never decrease unless you make a partial withdrawal.
In determining both the enhanced and the standard death benefit, we will
subtract any applicable premium taxes not previously deducted.
A different death benefit calculation applies if the annuitant dies at or
after age 75.
LIVING BENEFIT
The Living Benefit guarantees a minimum contract value on the Contract's
tenth anniversary, provided certain conditions are met.
We will not credit your Contract with any Living Benefit if you elect to
receive annuity payments before the Living Benefit Date.
Transfers and withdrawals from an Eligible Variable Account will reduce the
value of the Living Benefit.
FEES AND CHARGES
6
<PAGE> 64
Withdrawal Charge. We will deduct a withdrawal charge if you withdraw all
or part of your contract value during certain time periods. The amount of the
withdrawal charge depends on the withdrawal charge option and free withdrawal
option you choose at the time you purchase the Contract.
We do not assess a withdrawal charge on the death benefit or on annuity
payments under an annuity payout plan with a life contingency or an annuity
payout plan with at least 10 years of guaranteed payments.
You may choose between two withdrawal charge options. If you choose the
DATE OF ISSUE WITHDRAWAL CHARGE OPTION, we will calculate the withdrawal charge
from the date of issue. If you choose the DATE OF PREMIUM PAYMENT WITHDRAWAL
CHARGE OPTION, we will calculate the withdrawal charge from the date you make a
premium payment.
In any contract year after the first contract year, you may withdraw a
portion of your contract value without incurring a withdrawal charge. This
amount is called the free withdrawal amount.
The withdrawal charge may be waived in cases of extended hospitalization,
long-term care, terminal illness, or to pay for post secondary education, as
provided in the Contract.
Contract Fee. We deduct a quarterly contract fee of $7.50 from your
contract value at the end of each contract quarter during the pay-in period and
on the date of full withdrawal. Certain exceptions apply.
Transfer Fee. You may make 12 free transfers each contract year. We
impose a $25 charge per transfer on each transfer after the twelfth during a
contract year before the Annuity Start Date.
Mortality and Expense Risk Charge. We will deduct a daily mortality and
expense risk charge from your value in the variable accounts at an annual rate
of 1.25%. We will continue to deduct this charge after you begin to receive
annuity payments if you choose to receive variable annuity payments.
Asset-Based Administrative Charge. We will deduct a daily administrative
charge from your value in the variable account at an annual rate of 0.15%. We
will continue to assess this charge after you begin to receive annuity payments
if you choose to receive variable annuity payments.
Premium Taxes. We will deduct state premium taxes, which currently range
from up to 3.5%, if your state requires us to pay the tax. If necessary, we
will make the deduction either: (a) from premium payments as we receive them,
(b) from your contract value upon partial or full withdrawal, (c) when annuity
payments begin, or (d) upon payment of a death benefit.
Portfolio Fees and Charges. Each portfolio deducts investment charges from
the amounts you have invested in the portfolios. These charges range from ___%
to ___ %. See the Fee Table in this Prospectus and the prospectuses for the
portfolios.
ANNUITY PROVISIONS
Payout Options. The Contract allows you to receive periodic annuity
payments beginning on the Annuity Start Date you select. You may choose among
several payout plans. You may receive income payments for a specific period of
time or for life, with or without a guaranteed number of payments.
7
<PAGE> 65
We will use your adjusted contract value on the Annuity Start Date to
calculate the amount of your annuity payments under the payment plan you
choose. If you select a variable payout option, the dollar amount of your
payments may go up or down depending on the investment results of the
portfolios you invest in at that time.
FEDERAL TAX STATUS
Generally, a distribution, including a full or partial withdrawal or death
benefit payment, may be taxed. In certain circumstances, a 10% penalty tax may
apply. For a further discussion of the federal tax status of variable annuity
contracts, see "Federal Tax Status."
INQUIRIES
If you need additional information, please contact us at:
Service Center
P.O. Box 29163
Overland Park, KS 66201-1348
or 12900 Metcalf Avenue
Overland Park, KS 66213-2620
1-888-232-6486.
8
<PAGE> 66
FEE TABLE
The Fee Table illustrates the current expenses and fees under the Contract
as well as the portfolios' fees and expenses for the 1998 calendar year. The
purpose of this table is to help you understand the various costs and expenses
that you will pay directly and indirectly.
YOUR TRANSACTION EXPENSES
<TABLE>
<S> <C>
Sales Charge Imposed on Premium Payments . . . . . . . . . . . . . . . . . . None
Maximum Withdrawal Charge (contingent
deferred sales charge) as a percentage of
premium payments(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0%
Transfer Fee . . . . . . . . . . . . . . No fee for first twelve transfers in a contract year
Annualized Contract Fee(2) . . . . . . . . . . . . . . . . . . . . . . . . . $ 30
</TABLE>
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of net assets)
<TABLE>
<S> <C>
Mortality and Expense Risk Charge . . . . . . . 1.25%
Administrative Expenses . . . . . . . . . . . . 0.15
----
Total Separate Account Annual Expenses . . . 1.40%
====
</TABLE>
ANNUAL FUND EXPENSES
(as a percentage of average net assets after expense cap or expense deferral)
<TABLE>
<CAPTION>
TOTAL ANNUAL
OTHER EXPENSES EXPENSES (AFTER
MANAGEMENT FEES (AFTER WAIVERS AND
NAME OF PORTFOLIO (AFTER WAIVERS) REIMBURSEMENT) REIMBURSEMENT)
----------------- --------------- ------------- -------------
<S> <C> <C> <C>
Alger American Fund
MidCap Growth Portfolio . . . . . ------- ------- -------
Small Capitalization Portfolio . ------- ------- -------
Fidelity VIP Fund
Equity Income Portfolio . . . . . ------- ------- -------
Growth Portfolio . . . . . . . . ------- ------- -------
Money Market Portfolio . . . . . ------- ------- -------
Fidelity VIP Fund II
Asset Manager Portfolio . . . . . ------- ------- -------
Contrafund Portfolio . . . . . . ------- ------- -------
Index 500 Portfolio . . . . . . . ------- ------- -------
Investment Grade Bond Portfolio ------- ------- -------
OCC Accumulation Trust
Managed Portfolio . . . . . . . . ------- ------- -------
---------
Small Cap Portfolio . . . . . . . ------- ------- -------
Royce Capital Fund -
Royce Mid-Cap Portfolio
---------
SAFECO Resources Series Trust
SAFECO Equity Portfolio
---------
SAFECO Growth Portfolio -------
SoGen Variable Funds, Inc.
---------
SoGen Overseas Portfolio
---------
T. Rowe Price Fixed Income Series, Inc.
Limited-Term Bond Portfolio(5) ------- ------- -------
T. Rowe Price InternationalSeries, Inc.
International Stock Portfolio(5) . . . ------- ------- -------
</TABLE>
9
<PAGE> 67
<TABLE>
<S> <C> <C> <C>
Van Eck Worldwide Insurance Trust
Worldwide Hard Assets Portfolio ------- ------- -------
</TABLE>
(1) The amount of the withdrawal charge depends on the withdrawal charge
option and free withdrawal option you choose at the time you purchase
the Contract. We do not assess a withdrawal charge if the Contract
terminates due to your death or the annutant's death, or if you decide
to begin to receive annuity payments under an annuity payout plan with
a life contingency or an annuity payout plan with at least 10 years of
guaranteed payments.
(2) We aive this fee for Qualified Contracts. We also waive this fee for
Non-Qualified Contracts with cumulative premium payments of at least
$100,000.
(3) [ADD INFORMATION ON PRTFOLIO FEES AND WAIVERS.]
The purpose of these tables is to assist you in understanding the costs and
expenses that you will bear directly or indirectly. The table reflects the
actual charges and expenses for the separate account and for each portfolio for
the fiscal year ended December 31, 1998.
EXAMPLES
(NOTE: The examples shown below are entirely hypothetical. They do not
represent past or future performance or expenses. Actual performance and/or
expenses may be more or less than shown.)
Examples 1 and 2 show expenses for Contracts with a DATE OF ISSUE WITHDRAWAL
CHARGE OPTION.
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return on assets and charges and expenses reflected in the Fee Table
above:
1. If You surrender your Contract (or if you elect to annuitize under a
period certain option for a specified period of less than 10 years) at
the end of the applicable time period:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALGER AMERICAN FUND
MidCap Growth $ $ $ $
------------------------------------------------------------------------------------------------
Small Capitalization $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity-Income $ $ $ $
------------------------------------------------------------------------------------------------
Growth $ $ $ $
------------------------------------------------------------------------------------------------
Money Market $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
Asset Manager $ $ $ $
------------------------------------------------------------------------------------------------
Contrafund $ $ $ $
------------------------------------------------------------------------------------------------
Index 500 $ $ $ $
------------------------------------------------------------------------------------------------
Investment Grade Bond $ $ $ $
------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed $ $ $ $
------------------------------------------------------------------------------------------------
Small Cap $ $ $ $
------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 68
<TABLE>
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ROYCE CAPITAL FUND $ $ $ $
Royce Micro-Cap
------------------------------------------------------------------------------------------------
SAFECO RESOURCES SERIES TRUST $ $ $ $
SAFECO Equity
------------------------------------------------------------------------------------------------
SAFECO Growth $ $ $ $
------------------------------------------------------------------------------------------------
SoGEN VARIABLE FUNDS, INC. $ $ $ $
SoGen Overseas Variable
------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, $ $ $ $
INC.
Limited-Term Bond
------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, $ $ $ $
INC.
International Stock
------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST $ $ $ $
Worldwide Hard Assets
------------------------------------------------------------------------------------------------
</TABLE>
2. If You do not surrender your Contract (or if you elect to annuitize
under a life contingency option or under a period certain option for a
minimum specified period of 10 years) at the end of the applicable
time period:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALGER AMERICAN FUND
MidCap Growth $ $ $ $
------------------------------------------------------------------------------------------------
Small Capitalization $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity-Income $ $ $ $
------------------------------------------------------------------------------------------------
Growth $ $ $ $
------------------------------------------------------------------------------------------------
Money Market $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
Asset Manager $ $ $ $
------------------------------------------------------------------------------------------------
Contrafund $ $ $ $
------------------------------------------------------------------------------------------------
Index 500 $ $ $ $
------------------------------------------------------------------------------------------------
Investment Grade Bond $ $ $ $
------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed $ $ $ $
------------------------------------------------------------------------------------------------
Small Cap $ $ $ $
------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND $ $ $ $
Royce Micro-Cap
------------------------------------------------------------------------------------------------
SAFECO RESOURCES SERIES TRUST $ $ $ $
SAFECO Equity
------------------------------------------------------------------------------------------------
SAFECO Growth $ $ $ $
------------------------------------------------------------------------------------------------
SoGEN VARIABLE FUNDS, INC. $ $ $ $
SoGen Overseas Variable
------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 69
<TABLE>
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
T. ROWE PRICE FIXED INCOME SERIES, $ $ $ $
INC.
Limited-Term Bond
------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, $ $ $ $
INC.
International Stock
------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST $ $ $ $
Worldwide Hard Assets
------------------------------------------------------------------------------------------------
</TABLE>
Examples 3 and 4 show Contracts with a DATE OF PREMIUM PAYMENT WITHDRAWAL
OPTION.
3. If You surrender your Contract (or if you elect to annuitize under a
period certain option for a specified period of less than 10 years) at
the end of the applicable time period:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALGER AMERICAN FUND
MidCap Growth $ $ $ $
------------------------------------------------------------------------------------------------
Small Capitalization $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity-Income $ $ $ $
------------------------------------------------------------------------------------------------
Growth $ $ $ $
------------------------------------------------------------------------------------------------
Money Market $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
Asset Manager $ $ $ $
------------------------------------------------------------------------------------------------
Contrafund $ $ $ $
------------------------------------------------------------------------------------------------
Index 500 $ $ $ $
------------------------------------------------------------------------------------------------
Investment Grade Bond $ $ $ $
------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed $ $ $ $
------------------------------------------------------------------------------------------------
Small Cap $ $ $ $
------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND $ $ $ $
Royce Micro-Cap
------------------------------------------------------------------------------------------------
SAFECO RESOURCES SERIES TRUST $ $ $ $
SAFECO Equity
------------------------------------------------------------------------------------------------
SAFECO Growth $ $ $ $
------------------------------------------------------------------------------------------------
SoGEN VARIABLE FUNDS, INC. $ $ $ $
SoGen Overseas Variable
------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, $ $ $ $
INC.
Limited-Term Bond
------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, $ $ $ $
INC.
International Stock
------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 70
<TABLE>
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
VAN ECK WORLDWIDE INSURANCE TRUST $ $ $ $
Worldwide Hard Assets
------------------------------------------------------------------------------------------------
</TABLE>
4. If You do not surrender your Contract (or if you elect to annuitize
under a life contingency option or under a period certain option for a
minimum specified period of 10 years) at the end of the applicable
time period:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
1 YEAR 3 5 10 YEARS
YEARS YEARS
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALGER AMERICAN FUND
MidCap Growth $ $ $ $
------------------------------------------------------------------------------------------------
Small Capitalization $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
Equity-Income $ $ $ $
------------------------------------------------------------------------------------------------
Growth $ $ $ $
------------------------------------------------------------------------------------------------
Money Market $ $ $ $
------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
Asset Manager $ $ $ $
------------------------------------------------------------------------------------------------
Contrafund $ $ $ $
------------------------------------------------------------------------------------------------
Index 500 $ $ $ $
------------------------------------------------------------------------------------------------
Investment Grade Bond $ $ $ $
------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
Managed $ $ $ $
------------------------------------------------------------------------------------------------
Small Cap $ $ $ $
------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND $ $ $ $
Royce Micro-Cap
------------------------------------------------------------------------------------------------
SAFECO RESOURCES SERIES TRUST $ $ $ $
SAFECO Equity
------------------------------------------------------------------------------------------------
SAFECO Growth $ $ $ $
------------------------------------------------------------------------------------------------
SoGEN VARIABLE FUNDS, INC. $ $ $ $
SoGen Overseas Variable
------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, $ $ $ $
INC.
Limited-Term Bond
------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, $ $ $ $
INC.
International Stock
------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST $ $ $ $
Worldwide Hard Assets
------------------------------------------------------------------------------------------------
</TABLE>
The examples provided above assume that no transfer charges or premium
taxes have been assessed. The examples also reflects the contract fee of $30 as
if it were assessed on an average
13
<PAGE> 71
contract value of $[30,000,] which translates the contract fee into a [0.10%]
charge for the purposes of the examples based on a $1,000 investment.
THE EXAMPLES DO NOT REPRESENT PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESSER THAN THOSE SHOWN. THE ASSUMED 5% ANNUAL RATE OF RETURN IS
HYPOTHETICAL. IT DOES NOT REPRESENT PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THIS ASSUMED RATE.
ABOUT IL ANNUITY AND THE SEPARATE ACCOUNT
IL ANNUITY AND INSURANCE COMPANY
IL Annuity and Insurance Company, formerly known as Sentry Investors
Life Insurance Company, is a stock life insurance company organized under the
laws of the Commonwealth of Massachusetts on December 21, 1965 and incorporated
on March 9, 1966. We changed our name to "IL Annuity and Insurance Company" on
January 17, 1995.
Effective October 31, 1994, we entered into an assumption reinsurance
agreement with Sentry Life Insurance Company ("Sentry") whereby Sentry assumed
all of our existing insurance in-force and related assets and liabilities.
On November 1, 1994, we became a wholly-owned subsidiary of the
Indianapolis Life Group of Companies, Inc. ("Indianapolis Life Group"), which
is a majority-owned subsidiary of Indianapolis Life Insurance Company.
Indianapolis Life Insurance Company is a mutual life insurance company
chartered under Indiana law in 1905 with assets as of December 31, 1998 which
approximated $_____ billion.
At the end of 1997, American United Life Insurance Company ("AUL") and
Indianapolis Life Insurance Company took preliminary steps toward an
affiliation. At that time, AUL invested $8,910,000 in Indianapolis Life Group
and on March 30, 1998 AUL invested an additional $18,090,000. As a result of
this investment and related transactions, both companies intend that
Indianapolis Life Insurance Company will retain ownership of 75% of the stock
of Indianapolis Life Group and AUL will own the remaining 25% of the
Indianapolis Life Group stock. The Agreement to Affiliate does contain
provisions which would allow AUL to invest additional amounts in Indianapolis
Life Group, and potentially to own up to 49.9% of the outstanding Indianapolis
Life Group stock. As of the date of this prospectus, we have no current
intention for AUL to make additional investments.
IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1
We established the IL Annuity and Insurance Co. Separate Account I (the
"Separate Account") as a separate account under Massachusetts insurance law on
November 1, 1994. The separate account will receive and invest net premium
payments made under the Contracts and under other variable annuity contracts we
may issue in the future.
14
<PAGE> 72
Although the assets in the separate account are our property, the
portion of the assets in the separate account equal to the reserves and other
contract liabilities of the separate account are not chargeable with the
liabilities arising out of any other business that we may conduct and that has
no specific relation to or dependence upon the separate account. The assets of
the separate account are available to cover our general liabilities only to the
extent that the separate account's assets exceed its liabilities arising under
the Contracts and any other contracts supported by the separate account. We
have the right to transfer to the general account any assets of the separate
account which are in excess of reserves and other contract liabilities. All
obligations arising under the Contracts are our general corporate obligations.
Income, gains and losses, whether or not realized, from assets allocated to the
separate account are credited to or charged against the separate account
without regard to other income, gains or losses of any other separate account
or of the Company.
The separate account is divided into variable accounts. Additional
variable accounts may be available in the future. Each variable account invests
exclusively in shares of a single corresponding portfolio. The income, gains
and losses, whether or not realized, from the assets allocated to each variable
account are credited to or charged against that variable account without regard
to income, gains or losses from any other variable account.
The separate 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 separate account, the funds or of us by
the SEC. The separate account is also subject to the laws of the Commonwealth
of Massachusetts which regulate the operations of insurance companies domiciled
in Massachusetts.
THE PORTFOLIOS
Each variable account of the separate account invests exclusively in
shares of a designated portfolio of a Fund. Shares of each portfolio are
purchased and redeemed at net asset value, without a sales charge. Each Fund
currently available under the Contract is registered with the SEC under the
1940 Ac as an open-end, management investment company.
The assets of each portfolio of each Fund are separate from the assets
of that Fund's other portfolios, and each portfolio has separate investment
objectives and policies. As a result, each portfolio operates as a separate
investment portfolio and the income or losses of one portfolio has no effect on
the investment performance of any other portfolio.
Each of the Funds is managed by an investment adviser registered with
the SEC under the Investment Advisers Act of 1940, as amended. Each investment
adviser is responsible for the selection of the investments of the portfolio.
These investments must be consistent with the investment objective, policies
and restrictions of that portfolio.
In addition, the investment objectives and policies of certain
portfolios are similar to the investment objectives and policies of other
portfolios that may be managed by the same investment adviser or manager. The
investment results of the portfolios, however, may be higher or lower than the
15
<PAGE> 73
results of such other portfolios. We make no assurance, and no representation,
that the investment results of any of the portfolios will be comparable to the
investment results of any other portfolio, even if the other portfolio has the
same investment adviser or manager.
The investment objective of each portfolio is summarized below. WE
GIVE NO ASSURANCE THAT ANY PORTFOLIO WILL ACHIEVE ITS STATED OBJECTIVES. You
can find more detailed information, including a description of risks, fees and
expenses of each portfolio in the prospectuses for the Funds which accompany
this prospectus.
CERTAIN PORTFOLIOS HAVE SIMILAR INVESTMENT OBJECTIVES AND/OR POLICIES. YOU
SHOULD READ THE PROSPECTUSES FOR THE PORTFOLIOS CAREFULLY BEFORE YOU INVEST.
<TABLE>
<CAPTION>
INVESTMENT OBJECTIVES OF THE PORTFOLIOS
- ----------------------------------------------------------------------------------------------------------------
PORTFOLIO INVESTMENT OBJECTIVE
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
THE ALGER AMERICAN MIDCAP seeks to obtain long-term capital appreciation. Except during temporary
GROWTH PORTFOLIO defensive periods, the Portfolio invests at least 65% of its total assets in
equity securities of companies that, at the time of purchase, have total
market capitalization within the range of companies included in the S&P
MidCap 400 Index, updated quarterly. The S&P MidCap 400 Index is designed to
track the performance of medium capitalization companies. As of March 31,
1998, the range of market capitalization of these companies was $210 million
to $14.3 billion.
- ----------------------------------------------------------------------------------------------------------------
THE ALGER AMERICAN SMALL seeks to obtain long-term capital appreciation. Except during temporary
CAPITALIZATION PORTFOLIO defensive periods, the Portfolio invests at least 65% of its total assets in
equity securities of companies that, at the time of purchase, have total
market capitalization within the range of companies included in the Russell
2000 Growth Index ("Russell Index") or the S&P SmallCap 600 Index updated
quarterly. Both indexes are broad indices of small capitalization stocks. As
of March 31, 1997, the range of market capitalization of the companies in
the Russell Index was $20 million to $4.25 billion; the range of
capitalization of the companies in the S&P SmallCap 600 Index at that date
was $31 million to $3.7 billion.
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks reasonable income by investing primarily in income-producing equity
EQUITY-INCOME PORTFOLIO securities.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
FIDELITY VIP FUND GROWTH seeks to achieve capital appreciation by investing in common stocks and
PORTFOLIO securities convertible into common stock of companies that the adviser
believes have above-average growth potential. The Portfolio, however, is not
restricted to any one type of security and may pursue capital appreciation
through the purchase of bonds and preferred stocks.
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND MONEY seeks to earn a high level of current income while maintaining a stable
MARKET PORTFOLIO $1.00 share price by investing in high-quality, short-term money market
securities of different types.
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks to obtain high total return with reduced risk over the long-term by
ASSET MANAGER PORTFOLIO allocating its assets among stocks, bonds, short-term and other instruments
of U.S. and foreign issuers.
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND CONTRAFUND seeks capital appreciation by investing in companies that the adviser
PORTFOLIO believes to be undervalued due to an overly pessimistic appraisal by the
public.
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND seeks to match the total return of the S&P 500 while keeping expenses low.
INDEX 500 PORTFOLIO The adviser normally invests at least 80% (65% if Portfolio assets are below
$20 million) of the Portfolio's assets in equity securities of companies
that compose the S&P 500.
- ----------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND INVESTMENT seeks high current income by investing in fixed-income obligations of all
GRADE BOND PORTFOLIO types.
- ----------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION seeks growth of capital over time through investment in a portfolio
MANAGED PORTFOLIO consisting of common stocks, bonds and cash equivalents, the percentages of
which will vary based on management's assessments of relative investment
values.
- ----------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION SMALL CAP seeks capital appreciation through investment in a diversified portfolio of
PORTFOLIO equity securities of companies with market capitalizations of under $1
billion.
- ----------------------------------------------------------------------------------------------------------------
ROYCE MICRO-CAP PORTFOLIO seeks long-term capital appreciation, primarily through investments in
common stocks and convertible securities of small and micro-cap companies.
Production of income is incidental to this objective.
- ----------------------------------------------------------------------------------------------------------------
SAFECO EQUITY PORTFOLIO seeks long-term growth of capital and reasonable current income. The Equity
Portfolio ordinarily invests principally in common stocks or securities
convertible into common stocks.
- ----------------------------------------------------------------------------------------------------------------
SAFECO GROWTH PORTFOLIO seeks growth of capital and the increased income that ordinarily follows
from such growth. The Growth Portfolio ordinarily invests a preponderance of
its assets in common stock selected for potential appreciation.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
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<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
SoGEN OVERSEAS VARIABLE seeks long-term growth of capital by investing primarily in securities of
PORTFOLIO small and medium size non-U.S. companies. It particularly seeks companies
that have growth potential, financial strength and stability, strong
management and fundamental value. The Portfolio may invest in securities
traded in mature markets (for example, Japan, Canada and the United Kingdom)
and in emerging markets (Mexico and Indonesia, for example). The Portfolio
may invest up to 20% of its total assets in debt securities, that may
include lower-rated securities, commonly referred to a "junk bonds" and
securities that are not rated. The greater risks involved in foreign
investing and investing in junk bonds should be understood and carefully
considered. See the Portfolio's Prospectus for a description of these risks.
- ----------------------------------------------------------------------------------------------------------------
T. ROWE PRICE seeks a high level of income consistent with moderate fluctuation in
LIMITED-TERM BOND PORTFOLIO principal value. The Portfolio will invest at least 65% of total assets in
short- and intermediate-term, investment-grade debt securities.
- ----------------------------------------------------------------------------------------------------------------
T. ROWE PRICE seeks long-term growth of capital through investments primarily in common
INTERNATIONAL STOCK stocks of established, non-U.S. companies.
PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------
VAN ECK seeks long-term capital appreciation by investing globally, primarily in
WORLDWIDE HARD ASSETS "Hard Asset Securities" of companies that are directly or indirectly engaged
PORTFOLIO to a significant extent in the exploration, development, production or
distribution of one or more of the following: (i) precious metals, (ii)
ferrous and non-ferrous metals, (iii) energy, (iv) forest products, (v) real
estate, and (vi) other basic non-agricultural commodities.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISERS TO THE FUNDS
THE ALGER AMERICAN FUND. Fred Alger Management, Inc. ("Alger
Management") serves as investment adviser for the MidCap Growth and Small
Capitalization Portfolios of The Alger American Fund. Fred Alger & Company,
Incorporated, an affiliate of Alger Management, will serve as the portfolios'
broker in effecting substantially all of the portfolio transactions on security
exchanges.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FIDELITY VARIABLE
INSURANCE PRODUCTS FUND II. The portfolios of the VIP Fund and the VIP Fund II
are managed by Fidelity Management & Research Company ("FMR"). On behalf of the
Money Market Portfolio, FMR has entered in a subadvisory agreement with FMR
Texas, Inc., under which FMR Texas, Inc. has primary responsibility for
providing investment management services to the portfolio. On behalf of the
Asset Manager Portfolio and the Contrafund Portfolio, FMR has entered into
subadvisory agreements with Fidelity Investment Management and Research (U.K.)
Inc. ("FMR (U.K.)") and Fidelity Management and Research (Far East) Inc. ("FMR
Far East"), under which those entities provide research and investment
recommendations with respect to companies based outside the United States. FMR
(U.K.)
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<PAGE> 76
focuses primarily on companies based in Europe, while FMR Far East focuses
primarily on companies based in Asia and the Pacific Basin.
OCC ACCUMULATION TRUST.. The OCC Trust receives investment advice
with respect to each of its portfolios from OpCap Advisors. OpCap Advisors is
a subsidiary of Oppenheimer Capital which is a subsidiary of Oppenheimer
Financial Corp.
ROYCE CAPITAL FUND. Royce & Associates, Inc. serves as the investment
adviser to the portfolio.
SAFECO RESOURCE SERIES TRUST. Each portfolio is managed by SAFECO
Asset Management Company.
SoGEN VARIABLE FUNDS, INC. Societe Generale Asset Management Corp.,
which is indirectly owned by Societe Generale, one of France's largest banks,
serves as the portfolio's investment adviser.
T. ROWE PRICE FIXED INCOME SERIES, INC. T. Rowe Price Associates,
Inc. is responsible for the selection and management of the portfolio
investments of T. Rowe Price Limited-Term Bond Portfolio and receives a single,
all-inclusive fee based on the portfolio's average daily net assets to cover
investment management and operating expenses.
T. ROWE PRICE INTERNATIONAL SERIES, INC. Rowe Price-Fleming
International, Inc. ("Price-Fleming") is responsible for the selection and
management of the portfolio's investments. Incorporated in 1979 as a joint
venture between T. Rowe Price Associates, Inc. ("T. Rowe Price") and Robert
Fleming Holdings Limited ("Fleming"), Price-Fleming receives a single,
all-inclusive fee based on the portfolio's average daily net assets to cover
investment management and operating expenses.
VAN ECK WORLDWIDE INSURANCE TRUST. Van Eck Associates Corporation
serves as investment adviser and manager to the Van Eck Worldwide Hard Assets
Portfolio pursuant to an Advisory Agreement with the Van Eck Trust.
We have entered into agreements with the investment adviser of several
of the Funds pursuant to which each such investment adviser will pay us a
servicing fee based upon an annual percentage of the average aggregate net
assets we have invested on behalf of the separate account. These agreements
reflect administrative services we have provided to the Funds. Payments of such
amounts on behalf of the Funds will not increase the fees paid by the Funds or
their shareholders.
AVAILABILITY OF THE FUNDS
We cannot guarantee that each portfolio will always be available for
investment through the Contracts, but in the unlikely event that a portfolio is
not available, we will do everything reasonably practicable to secure the
availability of a comparable portfolio.
We reserve the right, subject to applicable law, to make additions to,
deletions from, or substitutions for the shares of a portfolio that are held in
the separate account. If the shares of a
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<PAGE> 77
portfolio are no longer available for investment or if, in our judgment,
further investment in any portfolio should become inappropriate, we may redeem
the shares of that portfolio and substitute shares of another portfolio. We
will not substitute any shares without notice and prior approval of the SEC and
state insurance authorities, to the extent required by the 1940 Act or other
applicable law.
We also reserve the right in our sole discretion to establish
additional variable accounts, or eliminate or combine one or more Variable
accounts, if marketing needs, tax considerations or investment conditions
warrant. We will determine if new or substituted variable accounts will be
available to existing contract owners. Subject to obtaining any approvals or
consents required by law, the assets of one or more variable accounts may also
be transferred to any other variable account if, in our sole discretion,
marketing, tax, or investment conditions warrant. Additional information
regarding termination of participation agreements, substitutions of investments
and resolving conflicts among Funds may be found in the SAI.
THE PAY-IN PERIOD
The pay-in period begins when your first premium payment is made and
continues until you begin to receive annuity payments during the payout period.
The pay-in period will also end if you fully withdraw all of your contract
value before the payout period.
PURCHASING A CONTRACT
You may purchase a Contract with a premium payment of $1,000 or more.
The maximum first premium payment is $250,000.
To purchase a Contract, you must make an application to us either
through one of our licensed representatives who is also a registered
representative of IL Securities, Inc., or a broker-dealer having a selling
agreement with IL Securities, Inc. 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 tax code. We
will not issue you a Contract if you are older than 85 on the date of issue.
PREMIUM PAYMENTS
Premium payments must be at least $1,000. You may make premium
payments at any time until the earliest of: (a) the Annuity Start Date; (b) the
date you fully withdraw all contract value; or (c) the date you reach age 85
(age 70 1/2 for Qualified Contracts other than Roth IRAs).
In any one contract year, we will not accept premium payments that
total more than two times your first premium payment. We will not accept total
premium payments in excess of $250,000. However, we reserve the right to waive
these limitations.
Under the Automatic Premium Payment Plan, you may select an annual,
semi-annual, quarterly or monthly payment schedule under which we will
automatically deduct premium payments from a bank or credit union account or
other source. The minimum amount of such payment is $1,000.
20
<PAGE> 78
CANCELLATION -- THE 10 DAY FREE-LOOK PERIOD
You have the right to cancel the Contract for any reason within 10
days after you receive it (or within 20 days of receipt if the Contract is
replacing another annuity contract or insurance policy). In some jurisdictions,
this period may be longer than 10 days. To cancel the Contract, you must send a
written request for cancellation and the returned Contract to the Service
Center before the end of the free-look period.
The amount that we will refund to you will vary according to state
requirements. In most states, we will refund to you an amount equal to the sum
of:
(a) the difference between the premium payments you paid and the
amounts you allocated to the variable accounts and the fixed
account under the Contract; and
(b) the contract value as of the date we receive the Contract and
the written request for cancellation at the Service Center.
You bear the investment risk for premium payments allocated to the variable
accounts during the free-look period.
A few states require us to return premium payments upon cancellation. If
state law requires that premium payments be returned, the amount of the refund
will be the greater of:
(a) the premium payments you paid under the Contract; and
(b) the contract value (without the deduction of a withdrawal
charge) on the date we receive the Contract and the written
request for cancellation at our Service Center, plus any
premium taxes we deducted.
In those states where we must return premium payments, we will place the
money you allocated to a variable account into the Money Market Variable
Account for a 15-day period following the date on which we credit the initial
premium payment to your Contract. At the end of that period, we will direct the
amount in the Money Market Variable Account to the variable accounts you
selected on your application based on the allocation percentages you specified.
DESIGNATING YOUR INVESTMENT OPTIONS
When you fill out your application, you will give us instructions on how to
allocate your first net premium payment among the eighteen variable accounts
and the fixed account. The amount you direct to a particular variable account
and/or to the fixed account must equal at least 1% of the premium payment.
Once we receive your premium payment and your completed application at the
Service Center, we will issue your Contract and direct your first net premium
payment within two (2) business days to the variable accounts and/or the fixed
account in accordance with your instructions, subject to the limitations set
forth above under "Cancellation -- The 10-Day Free Look Period."
21
<PAGE> 79
If you did not give us all the information we need, we will contact you. If
we cannot complete the application within five (5) business days, we will
either send back your money immediately or obtain your permission to keep your
money until we receive all the necessary information. Once the application is
complete, we will direct your first net premium payment to the variable
accounts and/or the fixed account according to your instructions within two
business days.
We will credit any additional premium payments you make to your Contract as
of the same business day we receive them. Our business day closes when the New
York Stock Exchange closes, usually at 4 p.m. Eastern Time. If we receive your
premium payments after the close of our business day, we will calculate and
credit them the next business day. We will direct your premium payment to the
variable accounts and/or the fixed account according to your written
instructions in effect at the time we receive it. However, you may direct
individual premium payments to a specific variable account and/or to the fixed
account without changing your instructions. You may change your instructions
directing your investments at any time by sending us a written request or by
telephone authorization. Changing your instructions will not change the way
existing contract value is apportioned among the variable accounts or the fixed
account.
THE CONTRACT VALUE YOU DIRECTED TO A VARIABLE ACCOUNT WILL VARY WITH THE
INVESTMENT EXPERIENCE OF THAT VARIABLE ACCOUNT. YOU BEAR THE ENTIRE INVESTMENT
RISK FOR AMOUNTS YOU ALLOCATE TO THE VARIABLE ACCOUNTS. YOU SHOULD PERIODICALLY
REVIEW YOUR PREMIUM PAYMENT ALLOCATION INSTRUCTIONS IN LIGHT OF MARKET
CONDITIONS AND YOUR OVERALL FINANCIAL OBJECTIVES.
SEPARATE ACCOUNT VALUE
The value of your investment in the variable accounts of the separate
account will go up or down depending on the investment experience of each
portfolios in which you invest through the variable account. Partial
withdrawals, transfers and separate account charges will decrease your value in
the variable accounts. THERE IS NO GUARANTEED MINIMUM VALUE FOR ANY VARIABLE
ACCOUNT.
CALCULATING THE VALUE OF THE VARIABLE ACCOUNTS. We determine the value of
each variable account at the end of each business day. To measure the value
of each variable account, we use a unit of measure called an accumulation unit.
DETERMINING THE NUMBER OF ACCUMULATION UNITS. Any money you allocate or
transfer to a variable account will be converted into accumulation units and
will increase the number of accumulation units credited to the variable
account. We determine the number of accumulation units to be credited to the
variable account by dividing the dollar amount of the payment or transfer by
the accumulation unit value for that variable account as of the end of that
business day.
Any amount you transfer or withdraw or that we deduct for charges will be
processed by cancelling or liquidating accumulation units. We determine the
number of accumulation units to cancel by dividing the dollar amount being
removed from a variable account by the value of an accumulation unit for that
variable account as of the end of the business day during which we removed the
amount.
The number of accumulation units in any variable account will be decreased at
the end of each
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<PAGE> 80
business day by:
(a) any amounts transferred (and any applicable Transfer
Fee) from that variable account to another variable
account or to the fixed account,
(b) any amounts withdrawn during that business day,
(c) any withdrawal charge or premium tax assessed upon a
full or partial withdrawal, and
(d) the quarterly contract fee, if assessed on that
business day.
DETERMINING ACCUMULATION UNIT VALUE. On the first day of operation
for each variable account, the value of an accumulation unit for that variable
account is set at $10. We recalculate the value of an accumulation unit for
each variable account at the end of each business day. We calculate the
accumulation unit value by multiplying the value of an accumulation unit at the
end of the immediately preceding business day by the Net Investment Factor for
the current business day.
The Net Investment Factor for each variable account reflects:
- - the investment performance of the portfolio in which the variable
account invests; and
- - the separate account charges (mortality and expense risk charge and
administrative expense charges) for that business day.
The formula for computing the Net Investment Factor is in the SAI.
TRANSFERS BETWEEN INVESTMENT OPTIONS
GENERAL. Before the Annuity Start Date and subject to the restrictions
described below, you may transfer all or part of the amount in a variable
account or the fixed account to another variable account or the fixed account.
If you transfer money out of an Eligible Variable Account, you will reduce
the value of Living Benefit guarantee. IT IS IMPORTANT THAT YOU READ THE
SECTION ON "LIVING BENEFIT" BEFORE YOU MAKE A TRANSFER IF YOU HAVE SELECTED THE
LIVING BENEFIT OPTION.
Transfers to the fixed account must be at least $1,000. Before the Annuity
Start Date, you may transfer up to 20% of the fixed account value (as determined
at the beginning of the contract year) from the fixed account to one or more of
the variable accounts in any contract year. We measure a contract year from the
anniversary of the day we issued your Contract. We do not charge a Transfer Fee
for transfers from the fixed account to one or more variable accounts and such a
transfer is not considered a transfer for purposes of assessing a transfer
charge.
Transfers will be made as of the business day on which we receive your
written request or telephone authorization to transfer, provided we receive it
before the close of our business day, usually
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<PAGE> 81
4:00 p.m. Eastern Time. If we receive your request after the close of our
business day, we will make the transfer as of the next business day. There
currently is no limit on the number of transfers that you can make before the
Annuity Start Date among or between variable accounts or to the fixed account.
TELEPHONE TRANSFERS. We will make a transfer based upon instructions you
give us over the telephone, provided we have on file a currently valid
telephone transfer authorization that you have signed. If you have not
completed such an authorization on your application, you must send a telephone
transfer authorization form to our Service Center. Your authorization is valid
until you revoke it in writing or until the Service Center receives a
subsequently dated form that you have signed. You may use your telephone to
authorize a transfer from one variable account or the fixed account to another
variable account or the fixed account, to change the allocation instructions
for future investments, to change Dollar-Cost Averaging, interest sweep and
Automatic Account Balancing options and/or to request a partial withdrawal.
We will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. If we follow such procedures we will not
be liable for any losses due to unauthorized or fraudulent instructions. We may
be liable for such losses if we do not follow those reasonable procedures.
The procedures that we may follow for telephone transfers include:
- providing you with a written confirmation of all transfers made
according to telephone instructions,
- requiring a form of personal identification prior to acting on
instructions received by telephone, and
- tape recording instructions received by telephone.
We reserve the right to modify, restrict, suspend or eliminate the transfer
privileges (including the telephone transfer facility) at any time, for any
class of Contracts, for any reason. In particular, we reserve the right not to
honor transfers requested by a third party holding a power of attorney from you
where that third party requests simultaneous transfers on your behalf of two or
more Contracts.
TRANSFER FEE. We will impose a transfer fee of $25 for the thirteenth and
each subsequent transfer request you make per contract year. See below.
DOLLAR-COST AVERAGING. The Dollar-Cost Averaging program permits you to
systematically transfer (on a monthly or quarterly basis) a set dollar amount
from one or more variable accounts or the fixed account to any other variable
accounts. The fixed dollar amount will purchase more accumulation units of a
variable account 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 of units had been made at the highest value and greater than if all
purchases had been made at the lowest value. The dollar-cost averaging method
of investment reduces the risk of making purchases only when the price of
accumulation units is high. It does not assure a profit or protect against a
loss in declining markets.
You may elect to participate in the Dollar-Cost Averaging Program when you
complete your
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application, or at any other time before the Annuity Start Date,
by sending us a written request. To use the Dollar-Cost Averaging Program, you
must transfer at least $100 to each variable account. Once you elect the
program, it remains in effect for the life of the Contract until the value of
the variable account from which transfers are being made is depleted, and/or
the value of the fixed account is expended, or until you cancel the program by
written request or by telephone request if we have your telephone authorization
on file. There is no additional charge for dollar-cost averaging, and a
transfer under this program is not considered a transfer for purposes of
assessing a transfer change. We reserve the right to discontinue offering the
Dollar-Cost Averaging program at any time and for any reason.
Dollar-Cost Averaging from an Eligible Variable Account will reduce the
value of the Eligible Premium Payment on which the Living Benefit is based.
INTEREST SWEEP. Before the Annuity Start Date, you may elect to have any
interest credited to the fixed account automatically transferred on a quarterly
basis to one or more variable accounts. There is no charge for interest sweep
transfers and an interest sweep transfer is not considered a transfer for
purposes of assessing a transfer charge. Amounts transferred out of the fixed
account due to an interest sweep transfer are counted toward the 20% of fixed
account value that may be transferred out of the fixed account during any
contract year.
AUTOMATIC ACCOUNT BALANCING SERVICE. Once your money has been allocated
among the variable accounts, the performance of each variable account may cause
your allocation to shift. You may instruct us to automatically rebalance your
variable account values (on a monthly or quarterly basis) to return to the
percentages specified in your allocation instructions. You may elect to
participate in the Automatic Account Balancing when you complete your
application or at any other time before the Annuity Start Date by sending us a
written request. Your percentage allocations must be in whole percentages and
be at least 1% per allocation. You may start and stop Automatic Account
Balancing at any time by sending us a written request or by telephone request,
if we have your telephone authorization on file. There is no additional charge
for using Automatic Account Balancing, and an account balancing transfer is not
considered a transfer for purposes of assessing a transfer charge. We reserve
the right to discontinue offering the Automatic Account Balancing at any time
and for any reason.
Automatic Account Balancing from an Eligible Variable Account will reduce the
value of the Eligible Premium Payment on which the Living Benefit is based.
FEES AND CHARGES
WITHDRAWAL CHARGE
GENERAL. We do not deduct a charge for sales expenses from premium payments
at the time premium payments are paid to us. However, we will deduct any
applicable withdrawal charge if you fully or partially withdraw contract value
before the Annuity Start Date. We do not assess a withdrawal charge on
withdrawals made in the event the Contract terminates due to your death or the
death of the annuitant, or if you decide to begin to receive annuity payments
and you choose an annuity payout plan with a life contingency or an annuity
payout plan with a period certain of at least
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10 years.
The amount of the withdrawal charge you may incur depends on the withdrawal
charge option you choose at the time you purchase your Contract. ONCE YOU
CHOOSE YOUR WITHDRAWAL CHARGE OPTION, YOU CANNOT CHANGE IT. If your initial
premium payment is $100,000 or more, you may choose one of two free withdrawal
options at the time you complete your application.
WITHDRAWAL CHARGE OPTIONS. When you purchase your Contract, you must choose
between two withdrawal charge options:
1. The DATE OF ISSUE WITHDRAWAL CHARGE OPTION: This option is designed
for the owner who wishes to make additional premium payments
periodically over the life of the Contract. The charge expires
after the ninth contract year, benefiting those owners who intend
to continue to make premium payments after the ninth contract year.
2. The PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION is more suitable for
the owner who currently intends to make only a single premium
payment or several premium payments close in time to the date the
Contract is issued. This withdrawal charge option is not designed
for the owner who intends to make additional premium payments over
an extended period of time because each time you make another
premium payment, the seven-year period for paying the withdrawal
charge begins again with respect to that payment.
The withdrawal charge is separately calculated for each withdrawal you make.
For purposes of calculating the withdrawal charge, the money that has been held
the longest in the Contract will be deemed to be the first money withdrawn.
This is called the "first in, first out" method of accounting or "FIFO." In
addition, amounts subject to the withdrawal charge will be deemed to be first
from premium payments, and then from earnings. This means that we will not
deduct a withdrawal charge on withdrawals of that portion of your contract
value that exceeds the sum total of your premium payments.
IF YOU CHOOSE THE DATE OF ISSUE WITHDRAWAL CHARGE OPTION: We will impose a
withdrawal charge on all partial or full withdrawals of premium payments that
you make during the first nine contract years if the amount of the withdrawal
exceeds the free withdrawal amount. The withdrawal charge is calculated as a
percentage of the amount you withdraw based on the number of years between the
date we receive your written request for withdrawal and the date of issue. The
rate of the withdrawal charge is listed in the table below. Under this option,
no withdrawal charge is deducted from full or partial withdrawals that you make
in contract years ten and later.
----------------------------------
CHARGE AS
CONTRACT YEAR PERCENTAGE
OF PREMIUM
PAYMENTS
----------------------------------
1-6 7.0%
----------------------------------
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----------------------------------
7 6.0
----------------------------------
8 4.0
----------------------------------
9 2.0
----------------------------------
10+ 0
----------------------------------
IF YOU CHOOSE THE DATE OF PREMIUM PAYMENT WITHDRAWAL CHARGE OPTION: We
will calculate the withdrawal charge by determining the length of time between
the date we receive your written request for a withdrawal and the date you made
the premium payment being withdrawn. We will deduct a withdrawal charge if you
withdraw a premium payment that we have held for less than seven premium
payment years if it is greater than the free withdrawal amount.
---------------------------------------
PREMIUM CHARGE AS
PAYMENT YEAR PERCENTAGE
OF PREMIUM
PAYMENTS
---------------------------------------
1 7.0%
---------------------------------------
2 6.0
---------------------------------------
3 5.0
---------------------------------------
4 4.0
---------------------------------------
5 3.0
---------------------------------------
6 2.0
---------------------------------------
7 1.0
---------------------------------------
8+ 0
---------------------------------------
Any applicable withdrawal charge is deducted pro-rata from the remaining
value in the variable accounts or fixed account from which the withdrawal is
being made. If such remaining separate account value or fixed account value is
insufficient for this purpose, the withdrawal charge is deducted pro-rata from
all variable accounts and the fixed account in which the Contract is invested
based on the remaining contract value in each variable account and the fixed
account.
FREE WITHDRAWAL AMOUNT. In any contract year after the first, you may
withdraw a portion of your contract value without incurring a withdrawal
charge. This amount is called the free withdrawal amount. Withdrawals under the
Systematic Withdrawal Program are also permitted a free withdrawal amount, as
determined below, during the first contract year. If your initial premium
payment is less than $100,000, the free withdrawal amount is 10% of contract
value each year, as determined at the beginning of the contract year. If you
do not withdraw the full 10% in any contract year after the first, the
remaining amount does not roll over to the next contract year.
If your initial premium payment is $100,000 or more, the free withdrawal
amount depends on the free withdrawal option you choose at the time you
purchase your Contract. Once you choose an option, you cannot change it.
IF YOU CHOOSE THE CUMULATIVE 10% OPTION: After the first contract year, you
may withdraw up to 10% of your contract value as of the beginning of each
contract year and we will not charge you a withdrawal charge on that amount. If
you do not withdraw the full 10% in any one contract year, the
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remaining percentage may be rolled over to the next contract year, up to a
maximum of 50% of contract value after 5 years measured as of the beginning of
each contract year.
IF YOU CHOOSE THE EARNINGS OPTION: After the first contract year, you may
withdraw part or all of your earnings under the Contract at any time without
incurring a withdrawal charge. Earnings are equal to your contract value minus
premium payments, transfers and partial withdrawals.
Amounts withdrawn in excess of the free withdrawal amount will be
assessed a withdrawal charge, depending on the withdrawal charge option you
choose. Free withdrawals may be subject to the 10% federal penalty tax if made
before you reach age 59 1/2.
WAIVER OF WITHDRAWAL CHARGE. If state law permits, we will waive the
withdrawal charge if the annuitant or the annuitant's spouse is confined for a
specified period to a hospital or a long term care facility. If the annuitant
becomes terminally ill before the Annuity Start Date and if permitted by state
law, we will waive the withdrawal charge on any full withdrawal or any partial
withdrawal, provided the partial withdrawal is at least $500 and a $5,000
balance remains in the accounts after the withdrawal. We must receive your
written request to waive the charge before the Annuity Start Date. These
waivers are described in more detail in the Contract.
Under the terms of the Post-Secondary Education Rider, if you, your spouse,
your child or the annuitant is enrolled in a college, university, vocational,
technical, trade or business school, we will waive the withdrawal charge on one
withdrawal of up to 20% of contract value in each contract year before the
Annuity Start Date while the annuitant is alive, so long as this waiver is
permitted by state law. The maximum withdrawal permitted under the
Post-Secondary Education Rider, when combined with the free withdrawal amount,
is 20% of contract value per contract year. Before the withdrawal, we must
receive at our home office written proof of enrollment to our satisfaction
within one (1) year of the date of enrollment.
EMPLOYEE AND AGENT PURCHASES. If state law permits, we will waive the
withdrawal charge on any full or partial withdrawals from Contracts sold to
agents or employees of Indianapolis Life Insurance Company (or its affiliates
and subsidiaries).
CONTRACT FEE
At the end of each Contract quarter (or on the date of full withdrawal
of contract value) before the Annuity Start Date, we will deduct from the
contract value a quarterly contract fee of $7.50 as reimbursement for our
administrative expenses relating to the Contract. The fee will be deducted from
each variable account and the fixed account based on the proportion that the
value in each such variable account and the fixed account bears to the total
contract value.
We will not charge the contract fee after an annuity payout plan has
begun. Deduction of the contract fee is currently waived for all Qualified
Contracts. We also currently waive deduction of the contract fee for
Non-Qualified Contracts whose cumulative premium payments on the date the
contract fee is assessed are equal to or greater than $100,000. We reserve the
right to modify this waiver upon 30 days written notice to you.
ASSET-BASED ADMINISTRATIVE CHARGE
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We deduct a daily administrative charge as compensation for certain expenses
we incur in the administration of the Contract. We deduct the charge from your
assets of the separate account at an annual rate of 0.15%. We will continue to
assess this charge after annuitization if annuity payments are made on a
variable basis. There is no necessary relationship between the amount of this
administrative charge and the amount of expenses that may be attributable to a
particular Contract.
TRANSFER FEE
A transfer fee of $25 will be imposed for the 13th and each subsequent
transfer during a contract year. Each written request would be considered to be
one transfer, regardless of the number of variable accounts affected by the
transfer. We deduct the transfer fee from the variable account from which the
transfer is made. If a transfer is made from more than one variable account at
the same time, the transfer fee would be deducted pro-rata from the remaining
separate account value in such variable account(s). We may waive the transfer
fee.
MORTALITY AND EXPENSE RISK CHARGE
As compensation for assuming mortality and expense risks, we deduct a daily
mortality and expense risk charge from your assets of the separate account. The
charge is at a daily rate of 0.003404%. If applied on an annual basis this rate
would be 1.25% (approximately 0.90% for mortality risk and 0.35% for expense
risk). We continue to assess this charge if annuity payments are made on a
variable basis either before or after the Annuity Start Date.
The mortality risk we assume 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 annuitant is assured that longevity will not
have an adverse effect on the annuity payments received. The mortality risk
that we assume also includes a guarantee to pay a death benefit if the
annuitant dies before the Annuity Start Date. The expense risk that we assume
is the risk that the administrative fees and transfer fees (if imposed) may be
insufficient to cover actual future expenses. We may use any profits from this
charge to pay the costs of distributing the Contracts.
PORTFOLIO FEES AND CHARGES
Each portfolio deducts investment charges from the amounts you have
invested in the portfolios. These charges range from ___% to ___ %. See the
Fee Table in this Prospectus and the prospectuses for the portfolios.
PREMIUM TAXES
Various states and other governmental entities charge a premium tax on
annuity contracts issued by insurance companies. Premium tax rates currently
range up to 3.5%, depending on the state. We are responsible for paying these
taxes. If necessary, we will deduct the cost of such taxes from the value of
your Contract either:
- from premium payments as we receive them,
- from contract value upon partial or full withdrawal,
- when annuity payments begin, or
- upon payment of a death benefit.
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We may deduct premium taxes at the time we pay such taxes
OTHER TAXES
Currently, no charge is made against the separate account for any federal,
state or local taxes (other than premium taxes) that we incur or that may be
attributable to the separate account or the Contracts. We may, however, deduct
such a charge in the future, if necessary.
THE PAYOUT PERIOD
The payout period begins you will receive a steady stream of annuity
payments from the money you have accumulated under your Contract. The payout
period begins on the Annuity Start Date. You may choose to receive your annuity
payments on a fixed or variable basis, or a combination of both. If you choose
to have your payout option on a variable basis, you may keep the same variable
accounts to which your premium payments were allocated during the pay-in
period, or transfer to different variable accounts.
THE ANNUITY START DATE. If you own a Non-Qualified Contract, you may select
the Annuity Start Date on which you will begin to receive annuity payments. If
you do not specify a date, the Annuity Start Date is the later of the
annuitant's age 70 or 10 years after the date of issue. For Qualified Contracts
purchased in connection with qualified plans under tax code sections 401(a),
401(k), 403(b) and 457, the tax code requires that the Annuity Start Date must
be no later than April 1 of the calendar year following the later of the year
in which you (a) reaches age 70 1/2 or (b) retires and the payment must be
made in a specified form or manner. If you are a "5 percent owner" (as defined
in the Code), or in the case of an IRA that satisfies tax code section 408, the
Annuity Start Date must be no later than the date described in (a). Roth IRAs
under 408A of the tax code do not require distributions at any time prior to
your death.
If you have chosen the Living Benefit option at the time you purchase the
Contract and you select an Annuity Start Date that is earlier than the Living
Benefit Date (i.e., 10 years after the date of issue), you will lose your
eligibility for the Living Benefit.
We will start annuity payments to the annuitant on the Annuity Start Date
shown in your contract, unless you change the date. You may change your Annuity
Start Date if: (1) we receive your written request at the Service Center at
least 31 days before the current Annuity Start Date, and (2) the Annuity Start
Date you request is a contract anniversary or it is the date on which you fully
withdraw the surrender value.
ANNUITY PAYOUT OPTIONS. The payout option you select will affect the dollar
amount of each annuity payment you receive. You may elect, revoke, or change
your annuity payout plan at any time before the Annuity Start Date while the
annuitant is living by sending us a written request signed by you and/or your
beneficiary, as appropriate. You may choose one of the payout plans described
below or any other plan being offered by us as of the Annuity Start Date. The
payout plans we currently offer provide either variable annuity payments or
fixed annuity payments or a combination of both.
You may select to receive annuity payments on a monthly, quarterly,
semi-annual or annual
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basis. The first payment under any payout plan will be made on the
fifteenth day of the month immediately following the Annuity Start Date.
Subsequent payments shall be made on the fifteenth of the month.
If you do not select an annuity payout plan by the Annuity Start Date, we
will apply the adjusted contract value under Option 3, One Life Income with
payments guaranteed for 10 years, as described below. The adjusted contract
value will be allocated to a fixed and variable payout in the same proportion
that your interest in the fixed and variable accounts bears to the total
contract value on the Annuity Start Date.
Anytime before the Annuity Start Date, you may have the entire surrender
value paid to you as an annuity under one of the payout plans. A beneficiary
may have the death benefit paid as an annuity under one of the payout plans.
We reserve the right to pay you the adjusted contract value in a lump sum
and not as an annuity if your adjusted contract value after the Annuity Start
Date would be less than $2,500, or the amount of annuity payments would be less
than $25.
DETERMINING THE AMOUNT OF YOUR ANNUITY PAYMENT. On the Annuity Start Date,
we will use the adjusted contract value to calculate your annuity payments
under the payout plan you select, unless you choose to receive the surrender
value in a lump sum. In certain states, we must use the surrender value of your
Contract to calculate your annuity payments under the payout plan you choose,
rather than the adjusted contract value.
The adjusted contract value is :
- the contract value on the Annuity Start Date; MINUS
- the quarterly contract fee; MINUS
- any applicable premium taxes not yet deducted; and
- for an installment income annuity payout plan with a payout
period of less than 10 years, MINUS any applicable withdrawal
charge.
For Qualified Contracts, the amount of any outstanding loan is also
deducted; distributions must satisfy certain requirements specified in the tax
code.
We do not assess a withdrawal charge if you choose an annuity payout plan
with a life contingency or an installment payout plan with a period certain of
at least 10 years.
FIXED ANNUITY PAYMENTS
Fixed annuity payments are periodic payments that we make to the annuitant.
The amount of the fixed annuity payment is fixed and guaranteed by us.
The amount of each payment depends only on:
- the form and duration of the payout plan you choose,
- the age of the annuitant,
- the sex of the annuitant (if applicable),
- the amount of your adjusted contract value and
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- the applicable annuity purchase rates in the Contract.
The annuity purchase rates in the Contract are based on a minimum guaranteed
interest rate of 3.0%. We may, in our sole discretion, make annuity payments in
an amount based on a higher interest rate.
VARIABLE ANNUITY PAYMENTS
Variable annuity payout plans provide the annuitant with periodic payments
that increase or decrease with the annuity unit values of the Variable Accounts
in which you are invested. Your contract contains annuity tables which
demonstrate how the initial annuity payment rate is derived. This rate is
different for each payout plan, and varies by age and sex of the annuitant.
The contract permits you to choose an assumed interest rate of 3.0%, 4.0% or
5.0% annually. If the net investment performance of the variable accounts you
invest in is greater than this assumed interest rate, your payments will
increase. If the performance falls below this assumed interest rate, your
payments will decline. Therefore, if you choose a 5.0% assumed interest rate,
you assume more risk that your annuity payment may decline than if you choose a
3.0% assumed interest rate. The selected Portfolio's performance must grow at a
rate at least equal to the assumed interest rate (plus the mortality and
expense risk charge and the administrative expense charge) in order to avoid a
decrease in variable annuity payments. This means that each month a
portfolio's annualized investment return must be at least 4.4%, 5.4% or 6.5% in
order for payments with a 3.0%, 4.0% or 5.0% assumed interest rate to remain
level. For further details on variable annuity payments, see the SAI.
ANNUITY UNIT VALUE. On the Annuity Start Date, we will use your adjusted
contract value to purchase annuity units at that day's annuity unit value for
each variable account in which you have value. The number of annuity units we
credit will remain fixed unless you transfer units among variable accounts. The
value of each annuity unit will vary each business day to reflect the
investment experience of the underlying portfolio, reduced by the mortality and
expense risk charge and the administrative expense charge, and adjusted by an
interest factor to neutralize the assumed interest rate.
TRANSFERS. After the Annuity Start Date, an annuitant may change the
variable account(s) in which the annuity payout plan is invested once per
contract year by sending us a written request. No charge is assessed for this
transfer. We will make the transfer by exchanging annuity units of one variable
account for another variable account on an equivalent dollar value basis. See
the SAI for examples of annuity unit value calculations and variable annuity
payment calculations.
DESCRIPTION OF ANNUITY PAYOUT OPTIONS
OPTION 1 -- INSTALLMENT INCOME FOR A FIXED PERIOD. Under this option, we
will make equal monthly annuity payments for a fixed number of years between 1
and 30 years. The amount of the payment is not guaranteed if a variable payout
plan is selected. If a fixed payout plan is selected, the payments for each
$1,000 of contract value will not be less than those shown in the Fixed Period
Table in section 13 of the Contract. In the event of the payee's death, a
successor payee
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may receive the remaining payments or may elect to receive the present value of
the remaining payments in a lump sum. If there is no successor payee, the
present value of the remaining payments will be paid to the estate of the last
surviving payee.
OPTION 2 -- INSTALLMENT INCOME IN A FIXED AMOUNT. Under this option, we
will make equal monthly payments of $5.00 or more for each $1,000 of contract
value used to purchase the option until the full amount is paid out. 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 in a lump sum. If
there is no successor payee, the present value of the remaining payments will
be paid to the estate of the last surviving payee.
OPTION 3 -- ONE LIFE INCOME. Under this option, we will make an annuity
payment each month so long as the payee is alive,* or for a guaranteed 10 or 20
year period. If when the payee dies, we have made annuity payments for less
than the selected guaranteed period, we will continue to make annuity payments
to the successor payee for the rest of the guaranteed period. The amount of
each payment is not guaranteed if a variable payout plan is selected. If a
fixed payout plan is selected, the payment for each $1,000 of contract value
used to purchase the option will not be less than that shown in the One Life
Table in section 12 of the Contract. Payments guaranteed for 10 or 20 years
certain may be commuted. Payments guaranteed only for the life of the payee may
not be commuted.
OPTION 4 -- JOINT AND SURVIVOR LIFE INCOME. Under this option, we will make
annuity payments each month so long as two payees are alive, or if one payee
dies to the surviving payee.* If one payee dies before the due date of the
first payment, the surviving payee will receive payments under Option 3 -- One
Life Income with payments guaranteed for 10 years. The payments may not be
commuted.
- ---------------
* IT IS POSSIBLE UNDER THIS OPTION TO RECEIVE ONLY ONE ANNUITY PAYMENT IF THE
PAYEE DIES (OR PAYEES DIE) BEFORE THE DUE DATE OF THE SECOND PAYMENT OR TO
RECEIVE ONLY TWO ANNUITY PAYMENTS IF THE PAYEE DIES (OR PAYEES DIE) BEFORE THE
DUE DATE OF THE THIRD PAYMENT, AND SO ON.
The amount of each payment will be determined from the tables in the
Contract that apply to the particular option using the annuitant's age (and if
applicable, sex). Age will be determined from the last birthday at the due date
of the first payment.
ACCESS TO YOUR MONEY
FULL WITHDRAWALS. At any time before the Annuity Start Date, you may
withdraw fully from the Contract for its surrender value.
The surrender value is equal to :
- the contract value; minus
- any applicable withdrawal charges; MINUS
- any premium taxes not previously deducted; and MINUS
- the contract fee unless waived.
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For Qualified Contracts, any outstanding loan balance is also deducted.
The surrender value will be determined as of the business day that we
receive your written request requesting full withdrawal and your Contract at
our Service Center. The surrender value will be paid in a lump sum unless you
request payment under a payout plan. A full withdrawal may have adverse
federal income tax consequences, including a penalty tax.
PARTIAL WITHDRAWALS. At any time before the Annuity Start Date, you may
send a written request to us to withdraw part of your contract value. You must
withdraw at least $250.
We will withdraw the amount you request from the contract value as of the
business day on which we receive your written request for the partial
withdrawal. We will then reduce the amount remaining in the Contract by any
applicable withdrawal charge. Your contract value after a partial withdrawal
must be at least $1,000. If your contract value after a partial withdrawal is
less than $1,000, we reserve the right to pay you the surrender value in a lump
sum.
You may specify how much you wish to withdraw from each variable account
and/or the fixed account. If you do not specify, or if you do not have
sufficient assets in the variable accounts or fixed account you specified to
comply with your request, we will make the partial withdrawal on a pro rata
basis from the fixed account and those variable accounts in which you are
invested. We will base the pro rata reduction on the ratio that the value in
each variable account and the fixed account has to the entire contract value
before the partial withdrawal.
If you withdraw money from an Eligible Variable Account, you will reduce the
value of the Eligible Premium Payment on which your Living Benefit is based. IT
IS IMPORTANT THAT YOU READ THE SECTION ON "LIVING BENEFIT" BEFORE YOU MAKE A
WITHDRAWAL IF YOU HAVE SELECTED THE LIVING BENEFIT OPTION.
INCOME TAXES, TAX PENALTIES AND CERTAIN RESTRICTIONS MAY APPLY TO ANY
WITHDRAWAL YOU MAKE.
SYSTEMATIC WITHDRAWAL PROGRAM. The Systematic Withdrawal Program provides
an automatic monthly or quarterly payment to you, the owner, from the amounts
you have accumulated in the variable accounts and/or the fixed account. The
minimum amount you may withdraw is $100. The maximum amount that may be
transferred and withdrawn out of the fixed account in any contract year under
all circumstances (Dollar-Cost Averaging, systematic withdrawals and partial
withdrawals) is 20% of the fixed account value as determined at the beginning
of the contract year. To use the program, you must maintain a $1,000 balance in
your Contract. You may elect to participate in the Systematic Withdrawal
Program at any time before the Annuity Start Date by sending a written request
to our Service Center. Once you elect the program, it remains in effect unless
the balance in your Contract drops below $1,000. You may cancel the program at
any time by sending us a written request or by calling us by telephone if we
have your telephone authorization on file.
We will assess a withdrawal charge on these withdrawals, unless the amount
you withdraw under the Systematic Withdrawal Program qualifies as a free
withdrawal amount or unless withdrawal charges no longer apply to the amounts
withdrawn. Withdrawals under the Systematic
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Withdrawal Program are permitted a free withdrawal amount during the first
contract year. We do not deduct any other charges for this program.
All systematic withdrawals will be paid to you on the same day each month,
provided that day is a business day. If it is not, then payment will be made on
the next business day. Systematic withdrawals may be taxable, subject to
withholding, and subject to a 10% penalty tax. We reserve the right to
discontinue offering the Systematic Withdrawal Program at any time and for any
reason.
Systematic withdrawals from an Eligible Variable Account will reduce the
value of the Eligible Premium Payment on which the Living Benefit is based.
FULL AND PARTIAL WITHDRAWAL RESTRICTIONS. Your right to make full and
partial withdrawals is subject to any restrictions imposed by applicable law or
employee benefit plan.
RESTRICTIONS ON DISTRIBUTIONS FROM CERTAIN TYPES OF CONTRACTS. There are
certain restrictions on full and partial withdrawals from Contracts used as
funding vehicles for tax code section 403(b) retirement programs. section
403(b)(11) of the tax code restricts the distribution under section 403(b)
annuity contracts of:
(1) elective contributions made in years beginning after December 31, 1988;
(2) earnings on those contributions; and
(3) 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.
CONTRACT LOANS
If your Contract is issued to you in connection with retirement programs
meeting the requirements of section 403(b) of the tax code, other than those
programs subject to Title I of the Employee Retirement Income Security Act of
1974, you may borrow from us using your Contract as collateral. Loans such as
these are subject to the provisions of any applicable retirement program and to
the tax code. You should, therefore, consult your tax and retirement plan
advisers before taking a contract loan.
At any time prior to the year you reaches age 70 1/2, you may borrow the
lesser of
(1) the maximum loan amount permitted under the tax code, and
(2) 90% of the surrender value of your Contract less any existing loan
amount, determined as of the date of the loan.
Loans in excess of the maximum amount permitted under the Code will be
treated as a taxable distribution rather than a loan. The minimum loan amount is
$1,000. We will only make contract loans after approving your written
application. You must obtain the written consent of all assignees
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and irrevocable beneficiaries before we will give a loan.
When a loan is made, we will transfer an amount equal to the amount borrowed
from separate account value or fixed account value to the loan account. The
loan account is part of our general account, and contract value in the loan
account does not participate in the investment experience of any variable
account or fixed account. You must indicate in the loan application from which
variable accounts or fixed account, and in what amounts, contract value is to
be transferred to the loan account. In the absence of any such instructions
from you, the transfer(s) are made pro-rata on a last-in, first out ("LIFO")
basis from all variable accounts having separate account value and from the
fixed account. Loans may be repaid by you at any time before the Annuity Start
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 variable account(s)
or fixed account as designated by you or according to your current premium
payment allocation instructions.
We charge interest on contract loans at an effective annual rate of 6.0%. We
pay interest on the contract value in the loan account at rates we determine
from time to time but never less than an effective annual rate of 3.0%.
Consequently, the net cost of a loan is the difference between 6.0% and the
rate being paid from time to time on the contract value in the loan account. We
may declare from time to time higher current interest rates. Different current
interest rates may be applied to the loan account than the rest of the fixed
account. If not repaid, loans will automatically reduce the amount of any death
benefit, the amount payable upon a partial or full withdrawal of contract value
and the amount applied on the Annuity Start Date to provide annuity payments.
If at any time, the loan amount of a Contract exceeds the surrender value,
the Contract will be in default. In this event, we will send you a written
notice of default stating the amount of loan repayment needed to reinstate the
Contract, and you will have 60 days, from the day the notice is mailed, to pay
the stated amount. If we do not receive the required loan repayment within 60
days, we will terminate the Contract without value. In addition, in order to
comply with the requirements of the tax code, loans must be repaid in
substantially equal installments, at least quarterly, over a period of no
longer than five years (which can be longer for certain home loans). 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. Additionally, the treatment of the Contract under
section 403(b) of the tax code may be adversely affected.
Any loan amount outstanding at the time of your death or the death of the
annuitant is deducted from any death benefit paid. In addition, a contract
loan, whether or not repaid, will have a permanent effect on the contract value
because the investment experience of the separate account and the interest
rates applicable to the fixed account do not apply to the portion of contract
value transferred to the loan account. The longer the loan remains outstanding,
the greater this effect is likely to be.
DEATH BENEFITS
DEATH BENEFITS BEFORE THE ANNUITY START DATE
DEATH BENEFIT. If the annuitant dies before the Annuity Start Date, the
beneficiary will receive a
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death benefit. If you do not choose the enhanced death benefit option, the
death benefit will be equal to the greater of:
(1) the sum of all premium payments made under the
Contract, LESS partial withdrawals, as of the date we
receive due proof of the deceased's death and payment
instructions; or
(2) the contract value as of the date we receive due
proof of the deceased's death and payment
instructions.
In determining the enhanced death benefit, we will also subtract any applicable
premium taxes not previously deducted.
ENHANCED DEATH BENEFIT. If you elect the three year stepped-up enhanced
death benefit option at the time of purchase, the minimum enhanced death
benefit payable upon the death of the annuitant before the Annuity Start Date
will be reset every third year on the Death Benefit Anniversary if the contract
value on such Death Benefit Anniversary is greater than the contract value on
the previous Death Benefit Anniversary. The enhanced death benefit will equal
the greater of:
(1) the contract value as of the date we receive due proof of the
deceased's death and payment instructions; or
(2) the highest contract value as of any Death Benefit Anniversary
preceding the date the enhanced death benefit is determined,
plus any premium payments, and minus any withdrawals and
charges, incurred between such Death Benefit Anniversary and
the date the enhanced death benefit is determined.
This value is initially set on the first Death Benefit Anniversary and equals
the greater of: (a) the sum of premium payments, MINUS partial withdrawals; or
(b) contract value, on that date. This value will be reset on every future
Death Benefit Anniversary (that is, every third contract anniversary) to equal
contract value on that date only if contract value on that Death Benefit
Anniversary is greater than the enhanced death benefit value on any previous
Death Benefit Anniversary. Once reset, this value will never decrease unless
partial withdrawals are made.
In determining the enhanced death benefit, we will also subtract any applicable
premium taxes not previously deducted.
AGE LIMITATION UNDER EITHER DEATH BENEFIT OPTION. If the annuitant dies at
or after age 75 (or ten years after the date of issue, whichever is later) but
before the Annuity Start Date, the death benefit will equal contract value,
LESS any applicable premium taxes not yet deducted, as of the date we receive
due proof of death and payment instructions.
LOANS. If the Contract is a Qualified Contract, we will also deduct any
outstanding loan amount on the date the death benefit is paid from the death
benefit.
DISTRIBUTION UPON THE OWNER'S DEATH. If you own the Contract with another
person, and one of you dies before the Annuity Start Date, the survivor becomes
the sole beneficiary regardless of
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your designation. If there is no surviving owner, your named beneficiary will
become the beneficiary upon your death. (You may name primary and contingent
beneficiaries.) If you have named two or more primary beneficiaries, they will
share equally in the death benefit (described below) unless you have specified
otherwise. If there are no living primary beneficiaries at the time of your
death, payments will be made to those contingent beneficiaries who are living
when payment of the death benefit is due. If all the beneficiaries have
predeceased you, we will pay the death benefit to your estate. If you or a
joint owner who is the annuitant dies before the Annuity Start Date, then the
provisions relating to the death of an annuitant (described below) will apply.
If you are not the annuitant and you die before the annuitant and before the
Annuity Start Date, then the following options are available to your
beneficiary:
(1) If the beneficiary is the spouse of the deceased owner,
the spouse may continue the Contract as the new owner.
(2) If the beneficiary is not the spouse of the deceased owner:
(a) the beneficiary may elect to receive the contract
value, LESS any premium taxes not yet deducted, in a
single sum within 5 years of the deceased owner's
death; or
(b) such beneficiary may elect to receive the contract
value paid out under one of the approved payout
plans, provided that distributions begin within one
year of the deceased owner's death and the
distribution period under the payout plan is for the
life of, or for a period not exceeding the life
expectancy of, the beneficiary.
If the beneficiary does not elect one of the above options, we will pay the
contract value, LESS any premium taxes not yet deducted, within five years from
the date of the deceased owner's death.
Under any of the distribution options in this section, "Distribution Upon
the Owner's Death," the beneficiary may exercise all ownership rights and
privileges from the date of the deceased owner's death until the date that the
contract value is paid. Similar rules apply to Qualified Contracts. The above
distribution requirements will apply only upon the death of the first joint
owner.
DISTRIBUTION UPON THE DEATH OF THE ANNUITANT. If the annuitant (including
an owner who is the annuitant) dies before the Annuity Start Date, we will pay
the death benefit, described above in "Death Benefits Before the Annuity Start
Date", in a lump sum to your named beneficiaries within five years after the
date of the annuitant's death. If you have named two or more primary
beneficiaries, they will share equally in the death benefit unless you have
specified otherwise. If there are no living primary beneficiaries at the time
of the annuitant's death, payments will be made to those contingent
beneficiaries who are living when payment of the death benefit is due. If all
the beneficiaries have predeceased the annuitant, we will pay the death benefit
to you, if living, or the annuitant's estate. In lieu of a lump sum payment,
the beneficiary may elect, within 60 days of the date we receive due proof of
the annuitant's death, to apply the death benefit to a payout plan.
If you are also the annuitant and you die, the provisions described
immediately above apply, except that the beneficiary may only apply the death
benefit payment to a payout plan if:
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- payments under the option begin within one (1) year of the
annuitant's death; and
- payments under the option are payable over the beneficiary's life
or over a period not greater than the beneficiary's life
expectancy.
DEATH OF PAYEE AFTER THE ANNUITY START DATE
If the payee dies after the Annuity Start Date, any joint payee becomes the
sole payee. If there is no joint payee, the successor payee becomes the sole
payee. If there is no successor payee, the remaining benefits are paid to the
estate of the last surviving payee. The death of the payee after the Annuity
Start Date will have the effect stated in the payout plan pursuant to which
annuity payments are being made. If any owner dies on or after the Annuity
Start Date, any payments that remain must be made at least as rapidly as under
the payout plan in effect on the date of the your death.
THE LIVING BENEFIT
If you elect the Living Benefit option and if you do not choose to receive
annuity payments until you have owned the Contract for at least 10 years, we
will calculate the Living Benefit for each Eligible Variable Account on the
Living Benefit Date. The Living Benefit will be credited to an Eligible
Variable Account if the value of the Eligible Variable Account on the Living
Benefit Date is less than the current value of the Eligible Premium Payment for
that Eligible Variable Account.
An Eligible Premium Payment is that portion of your first premium payment
that you allocated to a particular Eligible Variable Account on the date of
issue. It will be reduced by a percentage of all withdrawals and transfers you
make out of that Eligible Variable Account.
The Living Benefit that we will credit to a particular Eligible Variable
Account on the Living Benefit Date is:
(a) the value of the Eligible Premium Payment on the date of issue for
that particular Eligible Variable Account; MINUS
(b) a percentage of all withdrawals and transfers from that Eligible
Variable Account; MINUS
(c) the value of that Eligible Variable Account on the Living Benefit Date.
The Living Benefit Date is 10 years after the date of issue.
If the Contract is owned by persons who are spouses at the time one joint
owner dies, the Living Benefit Date will remain the same date. If the Contract
is owned by joint owners who are not spouses and one of the joint owners dies
before the Living Benefit Date, the original Living Benefit Date remains in
effect provided no distributions have occurred as a result of the owner's
death. Currently, all variable accounts are Eligible Variable Accounts.
You will not receive the Living Benefit if you choose an Annuity Start Date
that is earlier than the Living Benefit Date.
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A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN ELIGIBLE
VARIABLE ACCOUNT WILL REDUCE THE VALUE OF ELIGIBLE PREMIUM PAYMENT FOR THE
ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR WITHDRAWAL
REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT. EXAMPLES #3 AND 4 BELOW
ILLUSTRATE HOW THIS FEATURE OF THE LIVING BENEFIT WORKS.
For purposes of calculating the value of an Eligible Variable Account, we
deem all transfers and withdrawals to be first a withdrawal of premium
payments, then of earnings. Transfers out of an Eligible Variable Account
include transfers resulting from Dollar Cost Averaging or Automatic Account
Balancing. Withdrawals out of an Eligible Variable Account include withdrawals
resulting from the systematic withdrawal payments.
The following examples illustrate how the Living Benefit works:
EXAMPLE #1:
Suppose you buy a Contract with a single premium payment of $50,000 and
immediately allocates the $50,000 to an Eligible Variable Account. You do not
withdraw or transfer any amounts from the Eligible Variable Account. As of the
Living Benefit Date (which is ten years later), $50,000 is the current value of
the Eligible Premium Payment on the Living Benefit Date.
We will calculate the Living Benefit for the Eligible Variable Account by
comparing the current value of the Eligible Premium Payment in the Eligible
Variable Account on the Living Benefit Date ($50,000) to the value of the
Eligible Variable Account on the Living Benefit Date. In this example, if the
value of the Eligible Variable Account is less than $50,000 (the current value
of the Eligible Premium Payment) on the Living Benefit Date, we will
automatically credit the difference to contract value.
EXAMPLE #2:
Assume the same facts as in Example #1, except that you specify an Annuity
Start Date of the sixth contract anniversary and begin to receive payments
under one of the payout options available under the Contract. On the Living
Benefit Date, we will not calculate the Living Benefit and will not credit a
Living Benefit to contract value. By selecting an Annuity Start Date (the 6th
contract anniversary) that is earlier than the Living Benefit Date (10 years
from the date of issue), you forfeited all eligibility for the Living Benefit.
EXAMPLE #3:
Assume the same facts as in Example #1, except that you transfer $40,000
from the Eligible Variable Account in the eighth contract year. At that time,
the total value of the Eligible Variable Account is $100,000. The transfer of
$40,000 reduced the value of the Eligible Variable Account by 40%
($40,000/$100,000 = .40). No additional transfers or withdrawals are made prior
to the Living Benefit Date. On the Living Benefit Date, the initial value of
the Eligible Premium Payment ($50,000) is reduced by 40% to take into account
the transfer in the eighth contract year ($50,000 X .40 = $20,000), leaving
$30,000 ($50,000 -- $20,000 = $30,000). If on the Living Benefit Date
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the value of the Eligible Variable Account is less than $30,000, we will
automatically credit the difference to contract value.
EXAMPLE #4:
Assume the same facts as in Example #1, except that in the fourth contract
year you deposit (or transfer) an additional $50,000 premium payment into the
Eligible Variable Account. In the eighth contract year when the value of the
Eligible Variable Account is $150,000, the Owner withdraws $40,000. The
withdrawal reduced the value of the Eligible Variable Account by 26.667%
($40,000/$150,000 = .26667). No additional transfers or withdrawals are made
before the Living Benefit Date. On the Living Benefit Date, the initial value
of the Eligible Premium Payment is $50,000. (The second Premium Payment of
$50,000 does not qualify as an Eligible Premium Payment because it was made
after the date of issue.) This Eligible Premium Payment is then reduced by
26.667% to take into account the transfer in the eighth contract year ($50,000
X .26667 = $13,333.33), leaving $36,666.67 ($50,000 -- $13,333.33 =
$36,666.67). If on the Living Benefit Date the value of the Eligible Variable
Account is less than $36,666.67, we will automatically credit the difference to
yourcontract value.
EXAMPLE #5:
Spousal Joint Owners: If the Contract is owned by joint owners who are
spouses at the time one of the joint owners dies, the surviving spouse may
continue the Contract. The Living Benefit Date will remain unchanged as 10
years from the date of issue. On that date, we will calculate the Living
Benefit for each Eligible Variable Account with value.
EXAMPLE #6:
If the Contract is owned by joint owners who are not spouses and one of the
joint owners dies, the Living Benefit will be calculated on the original Living
Benefit Date, provided the survivor has not received any distributions as a
result of the owner's death.
We will continue to pay a Living Benefit on an Eligible Premium Payment
allocated to an Eligible Variable Account if:
(a) the portfolio underlying an Eligible Variable Account changes its
investment objective;
(b) we determine that an investment in the portfolio underlying an
Eligible Variable Account is no longer appropriate in light of the
purposes of the separate account; or
(c) shares of a portfolio underlying an Eligible Variable Account are no
longer available for investment by the separate account and weare
forced to redeem all shares of the portfolio held by the Eligible
Variable Account.
THE FIXED ACCOUNT
You may allocate some or all of your net premium Payments and transfer
some or all of your contract value to the fixed account. The fixed account
offers a guarantee of principal, after deductions for fees and expenses. We
also guarantee that you will earn interst at a rate of a least 3% per year on
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amounts in the fixed account. The fixed account is part of our general account.
Our general account supports our insurance and annuity obligations. Because the
fixed account is part of the general account, we assume the risk of investment
gain or loss on this amount. All assets in the general account are subject to
our general liabilities from business operations. The fixed account may not be
available in all states.
The fixed account is not registered with the SEC under the Securities
Act of 1933. Neither the fixed account nor our general account have been
registered as an investment company under the 1940 Act. Therefore, neither our
general account, the fixed account, nor any interests therein are generally
subject to regulation under the 1933 Act or the 1940 Act. The disclosures
relating to the fixed account which are included in this prospectus are for
your information and have not been reviewed by the SEC. However, such
disclosures may be subject to certain generally applicable provisions of
federal securities laws relating to the accuracy and completeness of statements
made in prospectuses.
FIXED ACCOUNT VALUE
The fixed account value is equal to:
(1) net premium payments allocated to the fixed account,
PLUS
(2) amounts transferred to the fixed account, PLUS
(3) interest credited to the fixed account, MINUS
(4) any partial withdrawals or transfers from the fixed
account, and MINUS
(5) any withdrawal charges, contract fees or premium
taxes deducted from the fixed account.
We intend to credit the fixed account with interest at current rates in
excess of the minimum guaranteed rate of 3%, but we are not obligated to do so.
We have no specific formula for determining current interest rates.
The fixed account value will not share in the investment performance of the
company's general account. Because we, in our sole discretion, anticipate
changing the current interest rate from time to time, different allocations you
make to the fixed account will be credited with different current interest
rates.
The interest rate we credit to the money you place in the fixed account will
apply to the end of the calendar year in which we receive the amount. At the
end of the calendar year, we will determine a new current interest rate on such
amount and accrued interest thereon (which may be a different current interest
rate from the current interest rate on new allocations to the fixed account on
that date). We will guarantee the rate of interest we declare on such amount
and accrued interest for the following calendar year. We will determine, in our
sole discretion, any interest to be credited on amounts in the fixed account in
excess of the minimum guaranteed effective rate of 3% per year. You therefore
assume the risk that interest credited to amounts in the fixed account may not
exceed the minimum 3% guaranteed rate.
For purposes of making withdrawals, transfers or deductions of fees and
charges from the fixed account, we will consider such withdrawals to have come
from the last money into the contract, that
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is, on a last-in, first-out ("LIFO") basis.
We reserve the right to change the method of crediting interest from time to
time, provided that such changes do not reduce the guaranteed rate of interest
below 3% per year or shorten the period for which the interest rate applies to
less than one calendar year (except for the year in which such amount is
received or transferred).
FIXED ACCOUNT TRANSFERS
GENERAL. Transfers to the fixed account must be at least $1,000. A transfer
charge of $25 may be imposed for the thirteenth and each subsequent request you
make to transfer contract value from one or more variable accounts to the fixed
account (or to one or more Variable Accounts) during a single contract year
before the Annuity Start Date.
Before the Annuity Start Date, you may transfer up to 20% of the fixed
account value (as determined at the beginning of the contract year) from the
fixed account to one or more of the variable accounts in any contract year. No
fee is charged for transfers from the fixed account to one or more variable
accounts and such a transfer is not considered a transfer for purposes of
assessing a transfer charge.
DOLLAR-COST AVERAGING. You may elect to participate in the Dollar-Cost
Averaging Program at the time of your application, or at any time thereafter
before the Annuity Start Date by sending us a written request. The Dollar-Cost
Averaging Program permits you to systematically transfer (on a monthly or
quarterly basis) a set dollar amount from the fixed account or one or more
variable accounts to any other variable accounts. The minimum amount that may
be transferred under the Dollar-Cost Averaging Program is $100 to each variable
account. The maximum amount that may be transferred and withdrawn out of the
fixed account in any contract year under all circumstances (Dollar-Cost
Averaging, systematic withdrawals and partial withdrawals) is 20% of the fixed
account value as determined at the beginning of the contract year. Once
elected, dollar-cost averaging from the fixed account remains in effect for the
life of the Contract until the value of the fixed account is depleted or until
you cancel your participation by written request or by telephone if we have
your telephone authorization on file. There is no additional charge for
dollar-cost averaging, and a transfer under this program is not considered a
transfer for purposes of assessing a transfer change. We reserve the right to
discontinue offering the dollar-cost averaging program at any time and for any
reason.
PAYMENT DEFERRAL
We have the right to defer payment of any full or partial withdrawal or
transfer from the fixed account for up to six months from the date we receive
your written request for such a withdrawal or transfer at our Service Center.
If we do not give you a payment within 30 days after we receive all necessary
documentation, or such shorter period required by a particular state, we will
credit interest at 3%, or such higher rate as is required for a particular
state, to the amount to be paid from the date we received the documentation.
INVESTMENT PERFORMANCE OF THE VARIABLE ACCOUNTS
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From time to time, we may advertise or include in sales literature yields,
effective yields and total returns for the variable accounts. THESE FIGURES ARE
BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT FUTURE PERFORMANCE.
We also may, from time to time, advertise or include in sales literature
variable account performance relative to certain performance rankings and
indices compiled by independent organizations. More detailed information as to
the calculation of performance, as well as comparisons with unmanaged market
indices, appears in the SAI.
Performance data for the variable accounts is based on the investment
performance of the corresponding portfolio of a Fund and reflects the deduction
of some or all fees and charges currently assessed under the contract.. (See
the accompanying prospectuses for the Funds.)
The "yield" of the Money Market Variable Account refers to the annualized
income generated by an investment in the variable account 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 variable account is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The yield of a variable account (other than the Money Market Variable
Account) refers to the annualized income generated by an investment in the
variable account over a specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by the investment during that
30-day or one-month period is generated each period over a 12-month period and
is shown as a percentage of the investment.
Yield quotations do not reflect the withdrawal charge.
The "total return" of a variable account refers to return quotations
assuming an investment under a Contract has been held in the variable account
for various periods of time. When a variable account or portfolio has been in
operation for one, five, and ten years, respectively, the total return for
these periods will be provided.
The average annual total return quotations represent the average annual
compounded rates of return that would equate an initial investment of $1,000
under a 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 variable account from the beginning date of
the measuring period to the end of that period. This standardized version of
average annual total return reflects all historical investment results, less
all charges and deductions applied against the variable account (including any
withdrawal charge that would apply if you 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 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 withdrawal charge. In addition, we may from time to time
disclose
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average annual total return in non-standard formats and cumulative total return
for Contracts funded by the variable accounts.
We may also disclose yield and total returns for the portfolios, including
such disclosures for periods before the date the variable account commenced
operations. Sales literature or advertisements may quote adjusted yields and
total returns for the portfolios since their inception reduced by some or all
of the fees and charges under the Contract. Such adjusted historic portfolio
performance may include data that precedes the inception dates of the variable
accounts. This data is designed to show the performance that could have
resulted if the Contract had been in existence during that time.
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 SAI.
In advertising and sales literature (including illustrations), the
performance of each variable account 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 variable account.
Lipper Analytical Services, Inc. ("Lipper"), CDA Investment Technologies
("CDA"), 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 rankings compare only variable
annuity issuers. The performance analyses prepared by Lipper, CDA, VARDS and
Morningstar rank or illustrate 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
variable account 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 the expense
of operating or managing an investment portfolio. Other independent ranking
services and indices may also be used as a source of performance comparison.
We may also report other information including the effect of systematic
withdrawals, systematic investments and tax-deferred compounding on a variable
account's investment returns, or returns in general. We may illustrate this
information by using tables, graphs, or charts. All income and capital gains
derived from variable account investments are reinvested and can lead to
substantial long-term accumulation of assets, provided that the variable
account investment experience is positive.
VOTING RIGHTS
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We are the legal owner of the portfolio shares held in the variable
accounts. However, when a portfolio is required to solicit the votes of its
shareholders through the use of proxies, we believe that current law requires
us to solicit you and other contract owners as to how we should vote the
portfolio shares held in the variable accounts. If we determine that we no
longer are required to solicit your votes, we may vote the shares in our own
right.
When we solicit your vote, the number of votes you have will be calculated
separately for each variable account in which you have an investment. The
number of your votes is based on the net asset value per share of the portfolio
in which the variable account invests. It may include fractional shares. Before
the Annuity Start Date, you hold a voting interest in each variable account to
which the contract value is allocated. After the Annuity Start Date, the
annuitant has a voting interest in each variable account from which variable
annuity payments are made. If you have a voting interest in a variable account,
you will receive proxy materials and reports relating to any meeting of
shareholders of the portfolio in which that variable account invests.
If we do not receive timely voting instructions for portfolio shares or if
we own the shares, we will vote those shares in proportion to the voting
instructions we receive. Instructions we receive to abstain on any item will
reduce the total number of votes being cast on a matter. For further details as
to how we determine the number of your votes, see the SAI.
FEDERAL TAX MATTERS
The following discussion is general in nature and is not intended as tax
advice. Each person concerned should consult a competent tax advisor. No
attempt is made to consider any applicable state tax or other tax laws.
We believe that our Contracts will qualify as annuity contracts for federal
income tax purposes and the following discussion assumes that they will so
qualify. Further information on the tax status of the Contract can be found in
the SAI under the heading "Tax Status of the Contracts."
When you invest in an annuity contract, you usually do not pay taxes on your
investment gains until you withdraw the money -- generally for retirement
purposes. In this way, annuity contracts have been recognized by the tax
authorities as a legitimate means of deferring tax on investment income.
We believe that if you are a natural person you will not be taxed on
increases in the contract value of your Contract until a distribution occurs or
until annuity payments begin. (The agreement to assign or pledge any portion
of a Contract's accumulation value and, in the case of a Qualified Contract
described below, any portion of an interest in the qualified plan, generally
will be treated as a distribution.) When annuity payments begin, you will be
taxed only on the investment gains you have earned and not on the payments you
made to purchase the Contract. Generally, withdrawals from your annuity should
only be made once the annuitant reaches age 59-1/2, dies or is disabled,
otherwise a tax penalty of ten percent of the amount treated as income could be
applied against any amounts included in income, in addition to the tax
otherwise imposed on such amount.
If you invest in a variable annuity as part of a pension plan or
employer-sponsored retirement program, your Contract is called a Qualified
Contract. If your annuity is independent of any formal
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retirement or pension plan, it is called a Non-Qualified Contract.
TAXATION OF NON-QUALIFIED CONTRACTS
NON-NATURAL PERSON. If a non-natural person owns a non-qualified annuity
contract, the owner generally must include in income any increase in the excess
of the accumulation value over the investment in the contract (generally, the
premiums or other consideration paid for the contract) during the taxable year.
There are some exceptions to this rule and a prospective owner that is not a
natural person should discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by natural
persons.
WITHDRAWALS. When a withdrawal from a Non-Qualified Contract occurs, the
amount received will be treated as ordinary income subject to tax up to an
amount equal to the excess (if any) of the accumulation value immediately
before the distribution over the Owner's investment in the contract (generally,
the premiums or other consideration paid for the Contract, reduced by any
amount previously distributed from the Contract that was not subject to tax) at
that time. In the case of a surrender under a Non-Qualified Contract, the
amount received generally will be taxable only to the extent it exceeds the
Owner's investment in the contract.
PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution from a
Non-Qualified Contract, there may be imposed a federal tax penalty equal to ten
percent of the amount treated as income. In general, however, there is no
penalty on distributions:
- made on or after the taxpayer reaches age 59 1/2
- made on or after the death of an Owner;
- attributable to the taxpayer's becoming disabled; or
- made as part of a series of substantially equal periodic
payments for the life (or life expectancy) of the taxpayer.
Other exceptions may apply under certain circumstances and special rules may
apply in connection with the exceptions enumerated above. You should consult a
tax adviser with regard to exceptions from the penalty tax.
ANNUITY PAYMENTS. Although tax consequences may vary depending on the
payout option elected under an annuity contract, a portion of each annuity
payment is generally not taxed and the remainder is taxed as ordinary income.
The non-taxable portion of an annuity payment is generally determined in a
manner that is designed to allow you to recover your investment in the contract
ratably on a tax-free basis over the expected stream of annuity payments, as
determined when annuity payments start. Once your investment in the contract
has been fully recovered, however, the full amount of each annuity payment is
subject to tax as ordinary income.
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a
Contract because of your death or the death of the annuitant. Generally, such
amounts are includible in the income of the
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recipient as follows: (i) if distributed in a lump sum, they are taxed in the
same manner as a surrender of the Contract, or (ii) if distributed under a
payout option, they are taxed in the same way as annuity payments.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT. A transfer or assignment
of ownership of a Contract, the designation of an annuitant, the selection of
certain Annuity Start Dates, or the exchange of a Contract may result in
certain tax consequences to you that are not discussed herein. An Owner
contemplating any such transfer, assignment or exchange, should consult a tax
advisor as to the tax consequences.
WITHHOLDING. Annuity distributions are generally subject to withholding for
the recipient's federal income tax liability. Recipients can generally elect,
however, not to have tax withheld from distributions.
MULTIPLE CONTRACTS. All annuity contracts that are issued by us (or our
affiliates) to the same Owner during any calendar year are treated as one
annuity contract for purposes of determining the amount includible in such
Owner's income when a taxable distribution occurs.
TAXATION OF QUALIFIED CONTRACTS
The tax rules that apply to Qualified Contracts vary according to the type
of retirement plan and the terms and conditions of the plan. Your rights under
a Qualified Contract may be subject to the terms of the retirement plan itself,
regardless of the terms of the Qualified Contract. Adverse tax consequences
may result if you do not ensure that contributions, distributions and other
transactions with respect to the Contract comply with the law.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs), as defined in Sections 219 and 408 of
the Internal Revenue Code (Code), permit individuals to make annual
contributions of up to the lesser of $2,000 or 100% of adjusted gross income.
The contributions may be deductible in whole or in part, depending on the
individual's income. Distributions from certain pension plans may be rolled
over into an IRA on a tax-deferred basis without regard to these limits.
So-called Simple IRAs under section 408(p) of the Code, and Roth IRAs under
section 408A, may also be used in connection with variable annuity contracts.
Simple IRAs allow employees to defer a percentage of annual compensation up to
$6,000 to a retirement plan, provided the sponsoring employer makes matching or
non-elective contributions. The penalty for a premature distribution from a
SIMPLE IRA that occurs within the first two years after the employee begins to
participate in the plan is 25%, rather than the usual 10%. Contributions to
Roth IRAs are not tax-deductible, and contributions must be made in cash, or as
a rollover or transfer from another Roth IRA or IRA. A rollover or conversion
of an IRA to a Roth IRA may be subject to tax. Distributions from Roth IRAs
are generally not taxed. In addition to the 10% penalty which generally
applies to distributions made before age 59 1/2, a 10% penalty will be imposed
for any distribution made from a Roth IRA during the five taxable years
starting after you first contribute to any Roth IRA.
CORPORATE PENSION AND PROFIT-SHARING PLANS under section 401(a) of the Code
allow corporate employers to establish various types of retirement plans for
employees, and self-employed individuals to establish qualified plans for
themselves and their employees.
Adverse tax consequences to the retirement plan, the participant or both may
result if the Contract is transferred to any individual as a means to provide
benefit payments, unless the plan complies with all the
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requirements applicable to such benefits prior to transferring the Contract.
TAX-SHELTERED ANNUITIES under section 403(b) of the Code permit public
schools and other eligible employers to purchase annuity contracts and mutual
fund shares through custodial accounts on behalf of employees. Generally,
these purchase payments are excluded for tax purposes from employee gross
incomes. However, these payments may be subject to Social Security taxes.
Distributions of salary reduction contributions and earnings (other than
your salary reduction accumulation as of December 31, 1988) are not allowed
prior to age 59 1/2, separation from service, death or disability. Salary
reduction contributions may also be distributed upon hardship, but would
generally be subject to penalties.
OTHER TAX ISSUES. You should note that the Contract includes a death benefit
that in some cases may exceed the greater of the Premium Payments or the
contract value. The death benefit could be viewed as an incidental benefit,
the amount of which is limited in any 401(a) or 403(b) plan. Because the death
benefit may exceed this limitation, employers using the Contract in connection
with corporate pension and profit-sharing plans, or tax-sheltered annuities,
should consult their tax adviser.
Qualified Contracts (other than Roth IRAs) have minimum distribution rules
that govern the timing and amount of distributions. You should refer to your
retirement plan, adoption agreement, or consult a tax advisor for more
information about these distribution rules.
OUR INCOME TAXES
At the present time, we make no charge for any federal, state or local taxes
(other than the charge for state and local premium taxes) that we incur that
may be attributable to the investment divisions (that is, the variable
accounts) of the separate account or to the Contracts. We do have the right in
the future to make additional charges for any such tax or other economic burden
resulting from the application of the tax laws that we determine is
attributable to the investment divisions of the separate account or the
Contracts.
Under current laws in several states, we may incur state and local taxes (in
addition to premium taxes). These taxes are not now significant and we are not
currently charging for them. If they increase, we may deduct charges for such
taxes.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always
the possibility that the tax treatment of the Contracts could change by
legislation or otherwise. Consult a tax adviser with respect to legislative
developments and their effect on the Contract.
We have the right to modify the Contract in response to legislative changes
that could otherwise diminish the favorable tax treatment that annuity contract
owners currently receive. We make no guarantee regarding the tax status of any
contact and do not intend the above discussion as tax advice.
OTHER INFORMATION
49
<PAGE> 107
HOLIDAYS
In addition to federal holidays, we are closed on the following days: the
Friday after Thanksgiving, the day before Christmas when Christmas falls on
Tuesday through Saturday, the day after Christmas when Christmas falls on
Sunday or Monday, and the day after New Year's Day when it falls on a Sunday,
the Monday after New Year's Day when New Year's Day falls on a Saturday, and
the day before or after Independence Day when it falls on Saturday or Sunday.
PAYMENTS
We will usually pay you any full or partial withdrawal, death benefit
payment, or for Qualified Contracts only, payment of your loan proceeds, within
seven days after we receive all the required information. The required
information includes your written request, any information or documentation we
reasonably need to process your request, and, in the case of a death benefit,
receipt and filing of due proof of death.
However, we may be required to suspend or postpone payments during any
period when:
- the New York Stock Exchange is closed, other than customary
weekend and holiday closings;
- trading on the New York Stock Exchange is restricted as
determined by the SEC;
- the SEC determines that an emergency exists that would make
the disposal of securities held in the separate account or the
determination of the value of the separate account's net
assets not reasonably practicable; or
- the SEC permits, by order, the suspension or postpone of
payments for your protection.
If a recent check or draft has been submitted, we have the right to delay
payment until we have assured ourselves that the check or draft has been
honored.
We have the right to defer payment for a full or partial withdrawal or
transfer from the fixed account for up to six months from the date we receive
your written request. If we do not make a payment within 30 days after we
receive the documentation we need to complete the transaction (or a shorter
period if required by a particular state), we will credit interest to the
amount to be paid from the date we received the necessary documentation at a
rate of 3% (or such higher rate required for a particular state).
MODIFICATION
Upon notice to you, we may modify the Contract to:
- permit the Contract or the separate account to comply with any
applicable law or regulation issued by a government agency; or
- assure continued qualification of the Contract under
the tax code or other federal or state laws relating
to retirement annuities or variable annuity
contracts; or
- reflect a change in the operation of the separate account; or
- provide additional investment options.
In the event of most such modifications, we will make appropriate
endorsement to the Contract.
50
<PAGE> 108
DISTRIBUTION OF THE CONTRACTS
IL Securities, Inc. ("IL Securities"), P.O. Box 1230, 2960 North Meridian
Street, Indianapolis, Indiana 46208, acts as the distributor for the Contracts.
IL Securities is an affiliate of Indianapolis Life Insurance Company.
Sales commissions will be paid to broker-dealers who sell the Contracts.
Broker-dealers will be paid commissions of up to 7.2% of premium payments.
Other commissions of up to 1.25% may also be paid. We may also pay up to 1.25%
of premium payments to IL Securities to compensate it for certain distribution
expenses. These broker-dealers are expected to compensate sales representatives
in varying amounts from these commissions. In addition, we may pay other
distribution expenses such as production incentive bonuses, agent's insurance
and pension benefits, and agency expense allowances. These distribution
expenses do not result in any additional charges against the Contracts other
than those described under "Fees and Charges."
LEGAL PROCEEDINGS
We and our affiliates, like other life insurance companies, are involved in
lawsuits, including class action lawsuits. In some class action and other
lawsuits involving other 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, we believe that at the present
time there are no pending or threatened lawsuits that are reasonably likely to
have a material adverse impact on the variable account or us.
REPORTS TO OWNERS
We will mail a report to you at least annually at your last known address of
record. The report will state the contract value (including the contract value
in each variable account and the fixed account) of the Contract, premium
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 your Contract may be made by writing to us at our
Service Center.
YEAR 2000 MATTERS
Like all financial services providers, we utilize systems that may be
affected by Year 2000 transition issues. We also rely on service providers,
including the portfolios and the administrator, that may be affected by Year
2000 issues. We have developed, and are in the process of implementing, a Year
2000 transition plan. In addition, we are in the process of confirming that the
portfolios and their service providers are also engaged in similar transition
plans. The resources that are being devoted to this effort are substantial. It
is difficult to predict with precision whether the amount of resources
ultimately devoted, or the outcome of these efforts, will have any negative
impact on the our operations. However, as of the date of this prospectus, it is
not anticipated that owners will experience negative effects on their
investment, or on the services provided in connection, as a result of Year 2000
transition implementation. We currently anticipate that its systems will be
Year 2000 compliant in a timely manner, but there can be
51
<PAGE> 109
no assurance that we will be successful, or that interaction with other service
providers will not impair services at that time.
FINANCIAL STATEMENTS
IL Annuity and Insurance Company, formerly known as Sentry Investors Life
Insurance Company, became a wholly-owned subsidiary of the Indianapolis Life
Group of Companies, Inc. on November 1, 1994. Just before that date, we entered
into an assumption reinsurance agreement with Sentry Life Insurance Company
("Sentry") under which Sentry assumed all of the insurance in-force and related
assets and liabilities from us. The effect of the reinsurance agreement was to
transfer all of the insurance related assets and liabilities to Sentry, leaving
only bonds, cash and state insurance department licenses to be acquired by the
Indianapolis Life Group of Companies, Inc. We did not issue any business
through December 31, 1994.
The audited statement of net assets of IL Annuity and Insurance Co. Separate
Account 1 as of December 31, 1997 and the related statement of operations for
the year then ended and statements of changes in net assets for the two years
then ended, as well as the Report of the Independent Auditors, are included in
the Statement of Additional Information ("SAI"). Our audited balance sheets as
of December 31, 1997 and 1996, and the related statements of income,
shareholder's equity, and cash flows for each of the three years in the period
ended December 31, 1997, as well as the Report of the Independent Auditors, are
contained in the SAI. Our financial statements should be considered only as
bearing on our ability to meet our obligations under the Contracts. They should
not be considered as bearing on the investment performance of the assets held
in the separate account.
52
<PAGE> 110
TABLE OF CONTENTS OF THE
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
Page
<S> <C>
Additional Contract Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incontestability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Incorrect Age or Sex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Nonparticipation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Tax Status of the Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 3
Calculation of Variable Account and Adjusted Historic Portfolio Performance Data . . . 3
Money Market Variable Account Yields . . . . . . . . . . . . . . . . . . . . . 3
Other Variable Account Yields . . . . . . . . . . . . . . . . . . . . . . . . 5
Average Annual Total Returns for the Variable Accounts . . . . . . . . . . . . 6
Non-Standard Variable Account Total Returns . . . . . . . . . . . . . . . . . 7
Effect of the Contract Fee on Performance Data . . . . . . . . . . . . . . . . 8
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Variable Account Performance Figures . . . . . . . . . . . . . . . . . . . . . 10
Adjusted Historical Portfolio Performance Figures . . . . . . . . . . . . . . 15
Net Investment Factor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Variable Annuity Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Assumed Investment Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Amount of Variable Annuity Payments . . . . . . . . . . . . . . . . . . . . . 23
Annuity Unit Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Addition, Deletion or Substitution of Investments . . . . . . . . . . . . . . . . . . . 25
Resolving Material Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . 26
Termination of Participation Agreements . . . . . . . . . . . . . . . . . . . . . . . . 26
The Alger American Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Fidelity Variable Insurance Products Fund and Fund II . . . . . . . . . . . . 27
OCC Accumulation Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Royce Capital Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SAFECO Resource Series Trust. . . . . . . . . . . . . . . . . . . . . . . . . 29
SoGen Variable Funds, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
T. Rowe Price Fixed Income Series, Inc. . . . . . . . . . . . . . . . . . . . 31
T. Rowe Price International Series, Inc. . . . . . . . . . . . . . . . . . . . 31
Van Eck Worldwide Insurance Trust . . . . . . . . . . . . . . . . . . . . . . 31
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Safekeeping of Account Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Distribution of the Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
53
<PAGE> 111
APPENDIX A
CONDENSED FINANCIAL INFORMATION
The following condensed financial information shows accumulation unit
values for each Variable Account for each year since the Variable Account
started operation. Accumulation unit value is the unit we use to calculate the
value of your interest in a Variable Account. Accumulation unit value does not
reflect the deduction of certain charges that we subtract from your Contract
Value. The data is obtained from the audited financial statement of the
Separate Account that can be found in the SAI.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Alger American Fund: MidCap Growth Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $10.812 $12.263 294,506
- ---------------------------------------------------------------------------------------------------------------
1996 $9.786 $10.812 109,955
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $9.786 2,764
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Alger American Fund: Small Capitalization Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $9.955 $10.936 372,229
- ---------------------------------------------------------------------------------------------------------------
1996 $9.675 $9.955 181,361
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $9.675 1,709
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Equity-Income Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $11.958 $15.114 781,937
- ---------------------------------------------------------------------------------------------------------------
1996 $10.616 $11.958 195,400
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.616 3,789
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
54
<PAGE> 112
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Growth Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $10.868 $13.240 462,381
- ---------------------------------------------------------------------------------------------------------------
1996 $9.604 $10.868 164,945
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $9.604 2,199
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Money Market Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $10.456 $10.888 486,050
- ---------------------------------------------------------------------------------------------------------------
1996 $10.00 $10.456 179,504
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $0 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Asset Manager Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $11.817 $14.066 212,897
- ---------------------------------------------------------------------------------------------------------------
1996 $8.224 $11.817 61,512
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $8.224 255
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
55
<PAGE> 113
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Contrafund Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $12.105 $14.824 638,524
- ---------------------------------------------------------------------------------------------------------------
1996 $10.091 $12.105 203,860
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.091 5,731
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Fidelity VIP Fund: Index 500 Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $12,734 $16.672 826,178
- ---------------------------------------------------------------------------------------------------------------
1996 $10.514 $12.734 193,803
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.514 3,538
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund: Investment Grade Bond Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $10.422 $11.214 274,009
- ---------------------------------------------------------------------------------------------------------------
1996 $10.247 $10.422 57,476
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.247 1,668
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust: Managed Variable Account*
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 114
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 $12.567 $15.160 672,203
- ---------------------------------------------------------------------------------------------------------------
1996 $10.380 $12.567 133,102
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.380 161
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
OCC Accumulation Trust: Small Cap Variable Account*
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $12.148 $14.649 162,435
- ---------------------------------------------------------------------------------------------------------------
1996 $10.388 $12.148 40,024
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.388 1,182
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Royce Capital Fund: Royce Micro-Cap Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997*** $10.000 $10.920 69,105
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SAFECO Resource Series Trust: SAFECO Equity Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997*** $10.000 $10.495 104,775
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SAFECO Resource Series Trust: SAFECO Growth Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997*** $10.000 $11.092 122,625
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
57
<PAGE> 115
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
SoGen Variable Funds, Inc.: SoGen Overseas Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997*** $10.000 $9.322 56,588
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
T. Rowe Price Fixed Income Series, Inc.: Limited-Term Bond Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $9.946 $10.767 136,902
- ---------------------------------------------------------------------------------------------------------------
1996 $10.042 $9.946 27,325
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.042 1,485
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
T. Rowe Price International Series, Inc.: International Stock Variable Account
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $11.780 $11.979 368,187
- ---------------------------------------------------------------------------------------------------------------
1996 $10.487 $11.780 122,831
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.487 2,530
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust: Worldwide Hard Assets Variable Account**
- ---------------------------------------------------------------------------------------------------------------
Accumulation unit value Accumulation unit value Number of accumulation
at the beginning of the at the end of the year units outstanding at the
year end of the year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1998 $ $
- ---------------------------------------------------------------------------------------------------------------
1997 $12.356 $11.983 166,188
- ---------------------------------------------------------------------------------------------------------------
1996 $10.621 $12.356 29,990
- ---------------------------------------------------------------------------------------------------------------
1995 $10.00 $10.621 58
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 116
- -------------------
* Prior to May 1, 1996, OCC Accumulation Trust was called Quest for
Value Accumulation Trust.
** Prior to May 1, 1997, Van Eck Worldwide Hard Assets Variable Account
was called Van Eck Gold and Natural Resources.
*** Period from September 1, 1997 to December 31, 1997.
59
<PAGE> 117
STATEMENT OF ADDITIONAL INFORMATION
for the
VISIONARY AND VISIONARY CHOICE
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
Issued Through
IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT 1
Offered by
IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208
--------------------
This Statement of Additional Information expands upon subjects discussed
in the current Prospectus for each of the Visionary and Visionary Choice
flexible premium deferred variable annuity contracts (each, the "Contract")
offered by IL Annuity and Insurance Company ("WE", "US", "OUR").
You may obtain a copy of the Prospectus for the Visionary Contract dated
May 1, 1999 by calling 1-800-388-1331 or by writing to the Annuity Service
Center: IL Annuity and Insurance Company, P.O. Box 290764, Wethersfield, CT
06129.
You may obtain a copy of the Prospectus for the Visionary Choice
Contract dated May 1, 1999 by calling 1-888-232-6486 or by writing to the
Annuity Service Center: IL Annuity and Insurance Company, c/o USA
Administration Services, Inc., P.O. Box 29163, Overland Park, KS 66201.
This Statement incorporates terms used in the current Prospectus for
each Contract.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectuses for your Contract and the Funds.
The date of this Statement of Additional Information is May 1, 1999.
<PAGE> 118
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL CONTRACT PROVISIONS..............................................................2
THE CONTRACT....................................................................2
INCONTESTABILITY................................................................2
Incorrect Age or Sex............................................................2
NONPARTICIPATION................................................................3
OPTIONS 3
TAX STATUS OF THE CONTRACTS.....................................................3
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA............3
Money Market Variable Account Yields............................................3
Other Variable Account Yields...................................................5
Average Annual Total Returns for the Variable Accounts..........................6
Non-Standard Variable Account Total Returns.....................................7
Effect of the Contract Fee on Performance Data..................................8
Other Information...............................................................9
Variable Account Performance Figures...........................................10
Adjusted Historical Portfolio Performance Figures..............................15
NET INVESTMENT FACTOR......................................................................22
VARIABLE ANNUITY PAYMENTS..................................................................22
Assumed Investment Rate........................................................23
Amount of Variable Annuity Payments............................................23
Annuity Unit Value.............................................................24
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS..........................................25
Resolving Material Conflicts...................................................26
TERMINATION OF PARTICIPATION AGREEMENTS....................................................26
The Alger American Fund........................................................26
Fidelity Variable Insurance Products Fund and Fund II..........................27
OCC Accumulation Trust.........................................................28
Royce Capital Fund.............................................................28
SAFECO Resource Series Trust...................................................29
SoGen Variable Funds, Inc......................................................30
T. Rowe Price Fixed Income Series, Inc.........................................31
T. Rowe Price International Series, Inc........................................31
Van Eck Worldwide Insurance Trust..............................................31
VOTING RIGHTS..............................................................................32
SAFEKEEPING OF ACCOUNT ASSETS..............................................................33
DISTRIBUTION OF THE CONTRACTS..............................................................33
LEGAL MATTERS..............................................................................34
EXPERTS....................................................................................34
OTHER INFORMATION..........................................................................34
FINANCIAL STATEMENTS.......................................................................34
</TABLE>
- 1 -
<PAGE> 119
ADDITIONAL CONTRACT PROVISIONS
THE CONTRACT
The entire contract is the Contract, the signed application, the data
page, the endorsements, options and all other attached papers. The statements
made in the application are deemed representations and not warranties. We will
not use any statement in defense of a claim or to void the Contract unless the
application contains it.
Any change in the Contract or waiver of its provisions must be in writing
and signed by our President, a Vice President, Secretary or Assistant
Secretary. No other person -- no agent or Registered Representative -- has
authority to change or waive any provision of this Contract.
Upon notice to you, we may modify the Contract if necessary to:
- permit the Contract or the Separate Account to comply with any
applicable law or regulation that a governmental agency issues;
or
- assure continued qualification of the Contract under the
Internal Revenue Code or other federal or state laws relating to
retirement annuities or variable annuity contracts; or
- effect a change in the operation of the Separate Account or to
provide additional investment options.
In the event of such modifications, we will make the appropriate
endorsement to the Contract.
INCONTESTABILITY
We will not contest the Contract from the Date of Issue.
INCORRECT AGE OR SEX
We may require proof of age, sex, and right to payments before making
any life annuity payments. If the age or sex (if applicable) of the annuitant
has been stated incorrectly, then we will determine the Annuity Start Date and
the amount of the annuity payments by using the correct age and sex. If a
misstatement of age or sex results in annuity payments that are too large, then
we will charge the overpayments with compound interest against subsequent
payments. If we have made payments that are too small, then we will pay the
underpayments with compound interest upon receipt of notice of the
underpayments. We will pay adjustments for overpayments or underpayments with
interest at the rate then in use to determine the rate of payments.
- 2 -
<PAGE> 120
NONPARTICIPATION
The Contract does not participate in our surplus earnings or profits.
OPTIONS
Except in the limited circumstances described below, we will issue four
options automatically upon the issuance of each Contract. These options provide
for the waiver of the Withdrawal Charge in case of extended hospitalization,
long term care, terminal illness, or the post secondary education of certain
family members or the Annuitant, as provided in the option. There is no
additional charge for the issuance of the options, which are available only at
the issuance of the Contract. All options may not be available in all states.
TAX STATUS OF THE CONTRACTS
Tax law imposes several requirements that variable annuities must
satisfy in order to receive the tax treatment normally accorded to annuity
contracts.
DIVERSIFICATION REQUIREMENTS. THE CODE REQUIRES THAT THE INVESTMENTS
OF EACH INVESTMENT DIVISION OF THE SEPARATE ACCOUNT UNDERLYING THE CONTRACTS BE
"ADEQUATELY DIVERSIFIED" IN ORDER FOR THE CONTRACTS TO BE TREATED AS ANNUITY
CONTRACTS FOR FEDERAL INCOME TAX PURPOSES. IT IS INTENDED THAT EACH INVESTMENT
DIVISION, THROUGH THE FUND IN WHICH IT INVESTS, WILL SATISFY THESE
DIVERSIFICATION REQUIREMENTS.
OWNER CONTROL. IN CERTAIN CIRCUMSTANCES, OWNERS OF VARIABLE ANNUITY
CONTRACTS HAVE BEEN CONSIDERED FOR FEDERAL INCOME TAX PURPOSES TO BE THE OWNERS
OF THE ASSETS OF THE SEPARATE ACCOUNT SUPPORTING THEIR CONTRACTS DUE TO THEIR
ABILITY TO EXERCISE INVESTMENT CONTROL OVER THOSE ASSETS. WHEN THIS IS THE CASE,
THE CONTRACT OWNERS HAVE BEEN CURRENTLY TAXED ON INCOME AND GAINS ATTRIBUTABLE
TO THE VARIABLE ACCOUNT ASSETS. THERE IS LITTLE GUIDANCE IN THIS AREA, AND SOME
FEATURES OF OUR CONTRACTS, SUCH AS THE FLEXIBILITY OF AN OWNER TO ALLOCATE
PREMIUM PAYMENTS AND TRANSFER AMOUNTS AMONG THE INVESTMENT DIVISIONS OF THE
SEPARATE ACCOUNT, HAVE NOT BEEN EXPLICITLY ADDRESSED IN PUBLISHED RULINGS. WHILE
WE BELIEVE THAT THE CONTRACTS DO NOT GIVE OWNERS INVESTMENT CONTROL OVER
SEPARATE ACCOUNT ASSETS, WE RESERVE THE RIGHT TO MODIFY THE CONTRACTS AS
NECESSARY TO PREVENT AN OWNER FROM BEING TREATED AS THE OWNER OF THE SEPARATE
ACCOUNT ASSETS SUPPORTING THE CONTRACT.
REQUIRED DISTRIBUTIONS. IN ORDER TO BE TREATED AS AN ANNUITY
CONTRACT FOR FEDERAL INCOME TAX PURPOSES, SECTION 72(s) OF THE INTERNAL REVENUE
CODE REQUIRES ANY NON-QUALIFIED CONTRACT TO CONTAIN CERTAIN PROVISIONS
SPECIFYING HOW YOUR INTEREST IN THE CONTRACT WILL BE DISTRIBUTED IN THE EVENT OF
THE DEATH OF A HOLDER OF THE CONTRACT. THE NON-QUALIFIED CONTRACTS CONTAIN
PROVISIONS THAT ARE INTENDED TO COMPLY WITH THESE CODE REQUIREMENTS, ALTHOUGH NO
REGULATIONS INTERPRETING THESE REQUIREMENTS HAVE YET BEEN ISSUED. WE INTEND TO
REVIEW SUCH PROVISIONS AND MODIFY THEM IF NECESSARY TO ASSURE THAT
- 3 -
<PAGE> 121
THEY COMPLY WITH THE APPLICABLE REQUIREMENTS WHEN SUCH REQUIREMENTS ARE
CLARIFIED BY REGULATION OR OTHERWISE.
OTHER RULES MAY APPLY TO QUALIFIED CONTRACTS.
CALCULATION OF VARIABLE ACCOUNT AND ADJUSTED HISTORIC PORTFOLIO PERFORMANCE
DATA
We may advertise and disclose historic performance data for the Variable
Accounts, including yields, standard annual total returns, and nonstandard
measures of performance of the Variable Accounts. Such performance data will be
computed, or accompanied by performance data computed, in accordance with the
SEC defined standards.
MONEY MARKET VARIABLE ACCOUNT YIELDS
Advertisements and sales literature may quote the current annualized
yield of the Money Market Variable Account for a seven-day period in a manner
that does not take into consideration any realized or unrealized gains or
losses, or income other than investment income, on shares of the Money Market
Portfolio.
We compute this current annualized yield by determining the net change
(not including any realized gains and losses on the sale of securities,
unrealized appreciation and depreciation, and income other than investment
income) at the end of the seven-day period in the value of a hypothetical
Variable Account under a Contract having a balance of one unit of the Money
Market Variable Account at the beginning of the period. We divide that net
change in Variable Account value by the value of the hypothetical Variable
Account at the beginning of the period to determine the base period return.
Then we annualize this quotient on a 365-day basis. The net change in account
value reflects (i) net income from the Money Market Portfolio in which the
hypothetical Variable Account invests; and (ii) charges and deductions imposed
under the Contract that are attributable to the hypothetical Variable Account.
These charges and deductions include the per unit charges for the
annualized Contract Fee, the mortality and expense risk charge and the
asset-based administration charge. For purposes of calculating current yields
for a Contract, we use an average per unit Contract Fee based on the $30
annualized Contract Fee that we deduct in four equal payments at the end of
each Contract Quarter.
We calculate the current yield by the following formula:
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
- 4 -
<PAGE> 122
NCS = the net change in the value of the Money Market Portfolio (not
including any realized gains or losses on the sale of securities,
unrealized appreciation and depreciation, and income other than
investment income) for the seven-day period attributable to a
hypothetical Variable Account having a balance of one Variable
Account unit.
ES = per unit charges deducted from the hypothetical Variable
Account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
We may also disclose the effective yield of the Money Market Variable
Account for the same seven-day period, determined on a compounded basis. We
calculate the effective yield by compounding the unannualized base period
return by adding one to the base return, raising the sum to a power equal to 365
divided by 7, and subtracting one from the result.
365/7
Effective Yield = (1 + ((NCS-ES)/UV)) - 1
Where:
NCS = the net change in the value of the Money Market Portfolio (not
including any realized gains or losses on the sale of securities,
unrealized appreciation and depreciation, and income other than
investment income) for the seven-day period attributable to a
hypothetical Variable Account having a balance of one Variable
Account unit.
ES = per unit charges deducted from the hypothetical Variable
Account for the seven-day period.
UV = the unit value for the first day of the seven-day period.
The Money Market Variable Account's yield is lower than the Money
Market Portfolio's yield because of the charges and deductions that the
Contract imposes.
The current and effective yields on amounts held in the Money Market
Variable Account 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 Variable Account's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the Money Market Portfolio, the types and quality of
securities held by the Money Market Portfolio and that Portfolio's operating
- 5 -
<PAGE> 123
expenses. We may also present yields on amounts held in the Money Market
Variable Account for periods other than a seven-day period.
Yield calculations do not take into account the Withdrawal Charge that
we assess on certain withdrawals of Contract Value. The amount of the
Withdrawal Charge depends on the Withdrawal Charge Option and the Free
Withdrawal Option that you choose at the time of purchase. See "Fees and
Charges" in the prospectus for further description of these options. No
Withdrawal Charge applies to Contract Value in excess of aggregate Premium
Payments.
Based on the method of calculation described above, for the seven-day
period ended December 31, 1998, the current yield and the effective yield for
the Money Market Variable Account were as follows:
Current yield: ___%
Effective yield: ___%
OTHER VARIABLE ACCOUNT YIELDS
Sales literature or advertisements may quote the current annualized yield
of one or more of the Variable Accounts (except the Money Market Variable
Account) under the Contract for 30-day or one-month periods. The annualized
yield of a Variable Account refers to income that the Variable Account
generates during a 30-day or one-month period and is assumed to be generated
during each period over a 12-month period.
We compute the annualized 30-day yield by:
1. Subtracting the Variable Account expenses for the period
from the net investment income of the portfolio
attributable to the Variable Account units;
2. Dividing 1. by the maximum offering price per unit on the
last day of the period;
3. Multiplying 2. by the daily average number of units
outstanding for the period;
4. compounding that yield for a six-month period; and
5. multiplying the result in 4. by 2.
Expenses of the Variable Account include the annualized Contract Fee,
the asset-based administration charge and the mortality and expense risk
charge. The yield calculation assumes that we deduct a Contract Fee of $30 per
year per Contract at the end of each Contract Year. For purposes of calculating
the 30-day or one-month yield, we use an average Contract Fee based on the
average Contract Value in the Variable Account to determine the amount of the
charge attributable to the Variable Account for the 30-day or one-month period.
We calculate the 30-day or one-month yield by the following formula:
6
Yield = 2 X (((NI - ES)/(U X UV)) + 1) - 1)
- 6 -
<PAGE> 124
Where:
NI = net income of the portfolio for the 30-day or one-month
period attributable to the Variable Account's units.
ES = charges deducted from the Variable Account for the 30-day or
one-month period.
U = the average number of units outstanding.
UV = the unit value at the close (highest) of the last day in the
30-day or one-month period.
The yield for the Variable Account is lower than the yield for the
corresponding portfolio because of the charges and deductions that the Contract
imposes.
The yield on the amounts held in the Variable Accounts 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. The
types and quality of securities that a portfolio holds and its operating
expenses affect the corresponding Variable Account's actual yield.
Yield calculations do not take into account the Withdrawal Charge that
we assess on certain withdrawals of Contract Value. The amount of the
Withdrawal Charge depends on the Withdrawal Charge Option and the Free
Withdrawal Option that you choose at the time of purchase. See "Fees and
Charges" in the prospectus for further description of these options.
AVERAGE ANNUAL TOTAL RETURNS FOR THE VARIABLE ACCOUNTS
Sales literature or advertisements may quote average annual total returns
for one or more of the Variable Accounts for various periods of time. If we
advertise total return for the Money Market Variable Account, then those
advertisements and sales literature will include a statement that yield more
closely reflects current earnings than total return.
When a Variable Account has been in operation for 1, 5, and 10 years,
respectively, we will provide the average annual total return for these periods.
We may also disclose average annual total returns for other periods of time.
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. Each period's ending date for which we provide total
return quotations will be for the most recent calendar quarter-end practicable,
considering the type of the communication and the media through which it is
communicated.
- 7 -
<PAGE> 125
We calculate the standard average annual total returns using Variable
Account unit values that we calculate on each valuation day based on the
performance of the Variable Account's underlying portfolio, the deductions for
the mortality and expense risk charge, the deductions for the asset-based
administration charge and the annualized Contract Fee. The calculation assumes
that we deduct a Contract Fee of $7.50 per quarter per Contract at the end of
each Contract quarter. For purposes of calculating average annual total return,
we use an average per-dollar per-day Contract Fee attributable to the
hypothetical Variable Account for the period. The calculation also assumes
total withdrawal of the Contract at the end of the period for the return
quotation and will take into account the Withdrawal Charge applicable to the
Contract that we assess on certain withdrawals of Contract Value.
We calculate the standard total return by the following formula:
(1/N)
TR = ((ERV/P) ) - 1
Where:
TR = the average annual total return net of Variable Account
recurring charges.
ERV = the ending redeemable value (net of any applicable
Withdrawal Charge) of the hypothetical Variable Account at
the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
Non-Standard Variable Account Total Returns
Sales literature or advertisements may quote average annual total
returns for the Variable Accounts that do not reflect any Withdrawal Charges.
We calculate such nonstandard total returns in exactly the same way as the
average annual total returns described above, except that we replace the ending
redeemable value of the hypothetical Variable Account for the period with an
ending value for the period that does not take into account any Withdrawal
Charges.
We may disclose cumulative total returns in conjunction with the
standard formats described above. We calculate the cumulative total returns
using the following formula:
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of Variable Account recurring
charges for the period.
- 8 -
<PAGE> 126
ERV = The ending redeemable value of the hypothetical investment at
the end of the period.
P = A hypothetical single payment of $1,000.
ADJUSTED HISTORIC PORTFOLIO PERFORMANCE DATA
Sales literature or advertisements may quote adjusted yields and total
returns for the portfolios since their inception reduced by some or all of the
fees and charges under the Contract. Such adjusted historic Portfolio
performance may include data that precedes the inception dates of the Variable
Accounts. This data is designed to show the performance that would have resulted
if the Contract had been in existence during that time.
We will disclose nonstandard performance data only if we disclose the
standard performance data for the required periods.
EFFECT OF THE CONTRACT FEE ON PERFORMANCE DATA
The Contract provides for the deduction of a $7.50 Contract Fee at the
end of each Contract Quarter from the Fixed and Variable Accounts. We base it
on the proportion that the value of each such Account bears to the total
Contract Value. For purposes of reflecting the Contract Fee in yield and total
return quotations, we convert the Contract Fee into a per-dollar per-day charge
based on the average Contract Value in the Separate Account of all Contracts on
the last day of the period for which quotations are provided. Then, we adjust
the per-dollar per-day average charge to reflect the basis upon which we
calculate the particular quotation.
OTHER INFORMATION
The following is a partial list of those publications that the Funds'
advertising shareholder materials may cite as containing articles describing
investment results or other data relative to one or more of the Variable
Accounts. They may cite other publications.
Broker World Financial World
Across the Board Advertising Age
American Banker Barron's
Best's Review Business Insurance
Business Month Business Week
Changing Times Consumer Reports
Economist Financial Planning
Forbes Fortune
Inc. Institutional Investor
Insurance Forum Insurance Sales
- 9 -
<PAGE> 127
Insurance Week Journal of Accountancy
Journal of the American Society of
CLU & ChFC Journal of Commerce
Life Insurance Selling Life Association News
MarketFacts Manager's Magazine
National Underwriter Money
Morningstar, Inc. Nation's Business
New Choices (formerly 50 Plus) New York Times
Pension World Pensions & Investments
Rough Notes Round the Table
U.S. Banker VARDs
Wall Street Journal Working Woman
HISTORIC PERFORMANCE DATA
GENERAL LIMITATIONS
The figures below represent the past performance of the Variable Accounts
and are not indicative of future performance. The figures may reflect the waiver
of advisory fees and reimbursement of other expenses.
The Funds have provided the Portfolios' performance data. We derive the
Variable Account performance data from the data that the Funds provide. None
of the Funds are affiliated with IL Annuity. In preparing the tables below, IL
Annuity relied on the Funds' data. While IL Annuity has no reason to doubt
the accuracy of the figures provided by the Funds, IL Annuity has not verified
those figures.
VARIABLE ACCOUNT PERFORMANCE FIGURES
The following charts show the historical performance data for the
Variable Accounts since each Variable Account's commencement of operations.
These figures are not an indication of future performance of the Variable
Accounts. Some of the figures reflect the waiver of advisory fees and
reimbursement of other expenses for part or all of the periods indicated.
Standard average annual total returns for periods since the inception of
each Variable Account are as follows. These figures include: the daily
deduction of a mortality and expenses charge at an annual rate of 1.25%; the
daily deduction of an administrative expenses charge at an annual rate of 0.15%;
the quarterly deduction of an administration charge of $7.50 adjusted for
average account size; and the contingent deferred sales load of 7%.
- 10 -
<PAGE> 128
<TABLE>
<CAPTION>
===========================================================================================================================
For the period
from
beginning of
Variable Account For the 1-year FOR THE 3-YEAR Variable Account
(Date Variable Account period ended PERIOD ENDED operations to
operations began) 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------------
MidCap Growth (11/6/95)
Small Capitalization (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------------
Equity Income (11/6/95)
Growth (11/6/95)
Money Market (11/6/95)*
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95)
Contrafund (11/6/95)
Index 500 (11/6/95)
Investment Grade Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Managed (11/6/95)
Small Cap (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Equity (9/1/97) N/A
Growth (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------------
SoGen Overseas (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
International Stock (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (11/6/95)
===========================================================================================================================
</TABLE>
* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.
- 11 -
<PAGE> 129
Nonstandard average annual total returns for periods since the inception
of each Variable Account are as follows. These figures include: the daily
deduction of a mortality and expenses charge at an annual rate of 1.25%; and
the daily deduction of an administrative expenses charge at an annual rate of
0.15%.
These figures do not reflect the quarterly deduction of an administration
charge and the contingent deferred sales load which, if deducted, would reduce
performance. Nonstandard performance data will only be disclosed if standard
performance data for the required periods is also disclosed.
<TABLE>
<CAPTION>
===========================================================================================================================
For the period
from
beginning of
Variable Account For the 1-year FOR THE 3-YEAR Variable Account
(Date Variable Account period ended PERIOD ENDED operations to
operations began) 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------------
MidCap Growth (11/6/95)
Small Capitalization (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------------
Equity Income (11/6/95)
Growth (11/6/95)
Money Market (11/6/95)*
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95)
Contrafund (11/6/95)
Index 500 (11/6/95)
Investment Grade Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Managed (11/6/95)
Small Cap (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Equity (9/1/97) N/A
Growth (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------------
SoGen Overseas (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 12 -
<PAGE> 130
<TABLE>
<CAPTION>
===========================================================================================================================
For the period
from
beginning of
Variable Account For the 1-year FOR THE 3-YEAR Variable Account
(Date Variable Account period ended PERIOD ENDED operations to
operations began) 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
International Stock (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (11/6/95)
===========================================================================================================================
</TABLE>
* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.
Standard cumulative total returns for periods since the inception of each
Variable Account are as follows. These figures include: the daily deduction of
a mortality and expenses charge at an annual rate of 1.25%; the daily deduction
of an annual administrative expenses charge at an annual rate of 0.15%; the
quarterly deduction of an administration charge of $7.50 adjusted for average
account size; and the contingent deferred sales load of 7%.
<TABLE>
<CAPTION>
===========================================================================================================================
For the period
from
beginning of
Variable Account For the 1-year FOR THE 3-YEAR Variable Account
(Date Variable Account period ended PERIOD ENDED operations to
operations began) 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------------
MidCap Growth (11/6/95)
Small Capitalization (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------------
Equity Income (11/6/95)
Growth (11/6/95)
Money Market (11/6/95)*
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95)
Contrafund (11/6/95)
Index 500 (11/6/95)
Investment Grade Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- 13 -
<PAGE> 131
<TABLE>
<CAPTION>
===========================================================================================================================
For the period
from
beginning of
Variable Account For the 1-year FOR THE 3-YEAR Variable Account
(Date Variable Account period ended PERIOD ENDED operations to
operations began) 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Managed (11/6/95)
Small Cap (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Equity (9/1/97) N/A
Growth (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------------
SoGen Overseas (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
International Stock (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (11/6/95)
===========================================================================================================================
</TABLE>
* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.
Nonstandard cumulative total returns for each Variable Account for the
periods since the inception of each Variable Account are as follows. These
figures include: the daily deduction of a mortality and expenses charge at an
annual rate of 1.25%; and the daily deduction of the annual administrative
expenses charge at an annual rate of 0.15%.
These figures do not reflect the quarterly deduction of an administration
charge and the contingent deferred sales load which, if deducted, would reduce
performance. Nonstandard performance data will only be disclosed if standard
performance data for the required periods is also disclosed.
- 14 -
<PAGE> 132
<TABLE>
<CAPTION>
===========================================================================================================================
For the period
from
beginning of
Variable Account For the 1-year FOR THE 3-YEAR Variable Account
(Date Variable Account period ended PERIOD ENDED operations to
operations began) 12/31/98 12/31/98 12/31/98
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------------
MidCap Growth (11/6/95)
Small Capitalization (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------------
Equity Income (11/6/95)
Growth (11/6/95)
Money Market (11/6/95)*
- ---------------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------------
Asset Manager (11/6/95)
Contrafund (11/6/95)
Index 500 (11/6/95)
Investment Grade Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Managed (11/6/95)
Small Cap (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Equity (9/1/97) N/A
Growth (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------------
SoGen Overseas (9/1/97) N/A
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------------
International Stock (11/6/95)
- ---------------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (11/6/95)
===========================================================================================================================
</TABLE>
* Yield more closely reflects current earnings of the Money Market Variable
Account than its total return.
- 15 -
<PAGE> 133
ADJUSTED HISTORICAL PORTFOLIO PERFORMANCE FIGURES
The charts below show "adjusted" historical performance data for the
Portfolios, including for periods prior to the inception of the Variable
Accounts, based on the performance of each Portfolio since its inception date,
with a level of charges equal to those currently assessed under the Contracts.
THESE FIGURES ARE NOT AN INDICATION OF THE FUTURE PERFORMANCE OF THE VARIABLE
ACCOUNTS. Some of the figures reflect the waiver of advisory fees and
reimbursement of other expenses for part or all of the periods indicated.
Adjusted historical standard average annual total returns for periods
since the inception of each Portfolio are as follows. These figures include:
the daily deduction of the mortality and expenses charges at an annual rate of
1.25% (except that, prior to the inception of the corresponding Variable
Account, deductions are monthly); the daily deduction of the annual
administrative expenses charge at an annual rate of 0.15% (except that, prior
to the inception of the corresponding Variable Account, deductions are
monthly); the quarterly deduction of the administration charge of $7.50
adjusted for average account size; and the deduction of the applicable
contingent deferred sales load for the Visionary contract and the Date of Issue
Withdrawal Charge Option under the Visionary Choice contract.
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio operations began) 1-year 3-year 5 -year 10-year from beginning
period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------
MidCap Growth (5/3/93)
Small Capitalization (9/20/88) N/A
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------
Equity Income (10/9/86)
Growth (10/9/86)
Money Market (4/2/82)*
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------
Asset Manager (9/6/89) N/A
Contrafund (1/3/95) N/A N/A
Index 500 (8/27/92) N/A
Investment Grade Bond (12/5/88)
- ---------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed (8/31/88)
Small Cap (8/31/88)
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- 16 -
<PAGE> 134
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio operations began) 1-year 3-year 5 -year 10-year from beginning
period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Royce Micro-Cap (12/27/96) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86)
Growth (12/31/92) N/A
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
SoGen Overseas (2/3/97) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (8/31/89) N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield more closely reflects current earnings of the Money Market
Portfolio than its total return.
Adjusted historical nonstandard average annual total returns for periods
since the inception of each Portfolio are as follows. These figures include:
the daily deduction of the mortality and expenses charge at an annual rate of
1.25% (except that, prior to the inception of the corresponding Variable
Account, deductions are monthly); and the daily deduction of the annual
administrative expenses charge at the annual rate of 0.15% (except that, prior
to the inception of the corresponding Variable Account, deductions are
monthly).
These figures do not reflect the quarterly deduction of the
administration charge and any applicable contingent deferred sales load which,
if deducted, would reduce performance.
- 17 -
<PAGE> 135
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio 1-year 3-year 5-year 10-year from beginning
operations began) period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------
MidCap Growth (5/3/93) N/A
Small Capitalization (9/20/88)
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------
Equity Income (10/9/86)
Growth (10/9/86)
Money Market (4/2/82)*
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------
Asset Manager (9/6/89) N/A
Contrafund (1/3/95) N/A N/A
Index 500 (8/27/92) N/A
Investment Grade Bond (12/5/88)
- ---------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed (8/31/88)
Small Cap (8/31/88)
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86)
Growth (12/31/92) N/A
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
SoGen Overseas (2/3/97) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (8/31/89) N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- 18 -
<PAGE> 136
* Yield more closely reflects current earnings of the Money Market Portfolio
than its total return.
Adjusted historical standard cumulative total returns for periods since
the inception of each Portfolio are as follows. These figures include: the
daily deduction of the mortality and expenses charge at an annual rate of 1.25%
(except that, prior to the inception of the corresponding Variable Account,
deductions are monthly); the daily deduction of the annual administrative
expenses charge at an annual rate of 0.15% (except that, prior to the inception
of the corresponding Variable Account, deductions are monthly); the quarterly
deduction of an administration charge of $7.50 adjusted for average account
size; and the applicable contingent deferred sales load for the Visionary
contract and for the Date of Issue Withdrawal Charge Option under the Visionary
Choice contract.
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio 1-year 3-year 5 -year 10-year from beginning
operations began) period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------
MidCap Growth (5/3/93) N/A
Small Capitalization (9/20/88)
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------
Equity Income (10/9/86)
Growth (10/9/86)
Money Market (4/2/82)*
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------
Asset Manager (9/6/89) N/A
Contrafund (1/3/95) N/A N/A
Index 500 (8/27/92) N/A
Investment Grade Bond (12/5/88)
- ---------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed (8/31/88)
Small Cap (8/31/88)
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86)
Growth (12/31/92) N/A
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- 19 -
<PAGE> 137
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio 1-year 3-year 5-year 10-year from beginning
operations began) period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SoGen Overseas (2/3/97) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE FIXED INCOME SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T. ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (8/31/89) N/A
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Yield more closely reflects current earnings of the Money Market Portfolio
than its total return.
Adjusted historical nonstandard cumulative total returns for periods
since the inception of each Portfolio are as follows. These figures include:
the daily deduction of the mortality and expenses charges at an annual rate of
1.25% (except that, prior to the inception of the corresponding Variable
Account, deductions are monthly); and the daily deduction of the
administrative expenses charge at an annual rate of 0.15% (except that, prior to
the inception of the corresponding Variable Account, deductions are monthly).
These figures do not reflect the quarterly deduction of the
administration charge and the applicable contingent deferred sales load which,
if deducted, would reduce performance. Nonstandard performance data will only be
disclosed if standard performance data for the required periods is also
disclosed.
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio 1-year 3-year 5 -year 10-year from beginning
operations began) period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALGER AMERICAN FUND
- ---------------------------------------------------------------------------------------------------------------------
MidCap Growth (5/3/93) N/A
Small Capitalization (9/20/88)
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
- 20 -
<PAGE> 138
<TABLE>
<CAPTION>
=====================================================================================================================
Portfolio For the For the For the For the For the period
(Date Portfolio 1-year 3-year 5 -year 10-year from beginning
operations began) period period period period of Portfolio
ended ended ended ended operations
12/31/98 12/31/98 12/31/98 12/31/98 to 12/31/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equity Income (10/9/86)
Growth (10/9/86)
Money Market (4/2/82)*
- ---------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND II
- ---------------------------------------------------------------------------------------------------------------------
Asset Manager (9/6/89) N/A
Contrafund (1/3/95) N/A N/A
Index 500 (8/27/92) N/A
Investment Grade Bond (12/5/88)
- ---------------------------------------------------------------------------------------------------------------------
OCC ACCUMULATION TRUST
- ---------------------------------------------------------------------------------------------------------------------
Managed (8/31/88)
Small Cap (8/31/88)
- ---------------------------------------------------------------------------------------------------------------------
ROYCE CAPITAL FUND
- ---------------------------------------------------------------------------------------------------------------------
Royce Micro-Cap (12/27/96) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
SAFECO RESOURCE SERIES TRUST
- ---------------------------------------------------------------------------------------------------------------------
Equity (11/6/86)
Growth (12/31/92) N/A
- ---------------------------------------------------------------------------------------------------------------------
SOGEN VARIABLE FUNDS, INC.
- ---------------------------------------------------------------------------------------------------------------------
SoGen Overseas (2/3/97) N/A N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T.ROWE PRICE FIXED INCOME SERIES, INC
- ---------------------------------------------------------------------------------------------------------------------
Limited-Term Bond (5/13/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
T.ROWE PRICE INTERNATIONAL SERIES, INC.
- ---------------------------------------------------------------------------------------------------------------------
International Stock (3/31/94) N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE INSURANCE TRUST
- ---------------------------------------------------------------------------------------------------------------------
Worldwide Hard Assets (3/31/89) N/A
=====================================================================================================================
</TABLE>
*Yield more closely reflects current earnings of the Money Market Portfolio than
its total return.
NET INVESTMENT FACTOR
The Net Investment Factor is an index that measures the investment
performance of a Variable Account from one Business Day to the next. Each
Variable Account has its own Net
- 21 -
<PAGE> 139
Investment Factor, which may be greater or less than one. The Net Investment
Factor for each Variable Account equals 1 plus the fraction obtained by dividing
(a) by (b) where:
(a) is the net result of:
1. the investment income, dividends, and capital gains,
realized or unrealized, credited at the end of the current
Business Day; plus
2. the amount credited or released from reserves for taxes
attributed to the operation of the Variable Account; minus
3. the capital losses, realized or unrealized, charged at the
end of the current Business Day, minus
4. any amount charged for taxes or any amount set aside during
the Business Day as a reserve for taxes attributable to the
operation or maintenance of the Variable Account; minus
5. the amount charged for mortality and expense risk on that
Business Day; minus
6. the amount charged for administration on that Business Day;
and
(b) is the value of the assets in the Variable Account at the end of
the preceding Business Day, adjusted for allocations and transfers
to and withdrawals and transfers from the Variable Account
occurring during that preceding Business Day.
VARIABLE ANNUITY PAYMENTS
We determine the dollar amount of the first variable annuity payment
in the same manner as that of a fixed annuity payment. Therefore, for any
particular amount applied to a variable payout plan, the dollar amount of the
first variable annuity payment and the first fixed annuity payment (assuming the
fixed payment is based on the minimum guaranteed 3.0% interest rate) will be the
same. Later variable annuity payments, however, will vary to reflect the net
investment performance of the Variable Account(s) that you or the Annuitant
select.
Annuity units measure the net investment performance of a Variable
Account for purposes of determining the amount of variable annuity payments. On
the Annuity Start Date, we use the adjusted Contract Value for each Variable
Account to purchase annuity units at the annuity unit value for that Variable
Account. The number of annuity units in each Variable Account then remains fixed
unless an exchange of annuity units is made as described below. Each Variable
Account has a separate annuity unit value that changes each
- 22 -
<PAGE> 140
Business Day in substantially the same way as does the value of an accumulation
unit of a Variable Account.
We determine the dollar value of each variable annuity payment after
the first by multiplying the number of annuity units of a particular Variable
Account by the annuity unit value for that Variable Account on the Business Day
immediately preceding the date of each payment. If the net investment return of
the Variable Account for a payment period equals the pro-rated portion of the
3.0% annual assumed investment rate, then the variable annuity payment for that
Variable Account for that period will equal the payment for the prior period. If
the net investment return exceeds an annualized rate of 3.0% for a payment
period, then the payment for that period will be greater than the payment for
the prior period. Similarly, if the return for a period falls short of an
annualized rate of 3.0%, then the payment for that period will be less than the
payment for the prior period.
ASSUMED INVESTMENT RATE
The discussion concerning the amount of variable annuity payments which
follows this section is based on an assumed investment rate of 3.0% per year.
Under the Contract, the you may choose an assumed interest rate of 3.0%, 4.0%
or 5.0% at the time you select a variable payout plan. We use the assumed
investment rate 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 Separate Account or any Variable Account.
AMOUNT OF VARIABLE ANNUITY PAYMENTS
The amount of the first variable annuity payment to a payee will depend
on the amount (i.e., the adjusted Contract Value, the Surrender Value, the death
benefit) applied to effect the variable annuity payment as of the Annuity Start
Date, the annuity payout plan option selected, and the Annuitant's age and sex
(if applicable). The Contracts contain tables indicating the dollar amount of
the first annuity payment under each annuity payment option for each $1,000
applied at various ages. These tables are based upon the 1983 Table A
(promulgated by the Society of Actuaries) and an assumed investment rate of 3.0%
per year.
The portion of the first monthly variable annuity payment derived from a
Variable Account is divided by the annuity unit value for that Variable Account
(calculated as of the date of the first monthly payment). The number of such
units remain fixed during the annuity period, assuming that the Annuitant makes
no exchanges of annuity units for annuity units of another Variable Account or
to provide a fixed annuity payment.
In any subsequent month, for any Contract, we determine the dollar amount
of the variable annuity payment derived from each Variable Account by
multiplying the number of annuity units of that Variable Account attributable
to that Contract by the value of such
- 23 -
<PAGE> 141
annuity unit at the end of the valuation period immediately preceding the date
of such payment.
The annuity unit value will increase or decrease from one payment to the
next in proportion to the net investment return of the Variable Account (s)
supporting the variable annuity payments, less an adjustment to neutralize the
3.0% assumed investment rate referred to above. Therefore, the dollar amount of
variable annuity payments after the first will vary with the amount by which the
net investment return of the appropriate Variable Accounts is greater or less
than 3.0% per year. For example, for a Contract using only one Variable Account
to generate variable annuity payments, if that Variable Account has a cumulative
net investment return of 5% over a one year period, the first annuity payment in
the next year will be approximately 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, then the first annuity payment in the next year will be approximately 2
percentage points less than the payment on the same date in the preceding year.
(See also "Variable Annuity Payments" in the Prospectus.)
ANNUITY UNIT VALUE
We calculate the value of an annuity unit at the same time that we
calculate the value of an accumulation unit and we base it on the same values
for fund shares and other assets and liabilities. (See "Separate Account Value"
in the Prospectus.) The annuity unit value for each Variable Account's first
valuation period was set at $100. We calculate the annuity unit value for a
Variable Account for each subsequent valuation period by dividing (1) by (2),
then multiplying this quotient by (3) and then multiplying the result by (4),
where:
(1) is the accumulation unit value for the current valuation period;
(2) is the accumulation unit value for the immediately preceding
valuation period;
(3) is the annuity unit value for the immediately preceding valuation
period; and
(4) is a special factor designed to compensate for the assumed
investment rate of 3.0% built into the table used to compute the
first variable annuity payment.
The following illustrations show, by use of hypothetical examples, the
method of determining the annuity unit value and the amount of several variable
annuity payments based on one Variable Account.
<TABLE>
<S> <C> <C>
ILLUSTRATION OF CALCULATION OF ANNUITY UNIT VALUE
1. Accumulation unit value for current
valuation period..............................................................................$11.15
2. Accumulation unit value for immediately preceding valuation period...............................$11.10
3. Annuity unit value for immediately preceding
valuation period.............................................................................$105.00
4. Factor to compensate for the assumed
investment rate of 3.0%.........................................................................9975
</TABLE>
- 24 -
<PAGE> 142
<TABLE>
<S> <C> <C>
5. Annuity unit value of current valuation
period ((1) / (2)) x (3) x (4).............................................................$105.2093
ILLUSTRATION OF VARIABLE ANNUITY PAYMENTS
1. Number of accumulation units at Annuity Start Date...............................................10,000
2. Accumulation unit value .......................................................................$11.1500
3. Adjusted Contract Value (1)x(2)................................................................$111,500
4. First monthly annuity payment per $1,000
of adj. Contract Value.........................................................................$5.89
5. First monthly annuity payment (3)x(4) / 1,000 ..................................................$656.74
6. Annuity unit value............................................................................$105.2093
7. Number of annuity units (5)/(6)..................................................................6.2422
8. Assume annuity unit value for second month equal to...........................................$105.3000
9. Second monthly annuity payment (7)x(8)..........................................................$657.30
10. Assume annuity unit value for third month equal to............................................$104.9000
11. Third monthly annuity payment (7)x(10)..........................................................$654.81
</TABLE>
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
In the event of any such substitution or change, we may (by appropriate
endorsement, if necessary) change the Contract to reflect the substitution or
change. If we consider it to be in the best interest of Owners and Annuitants,
and subject to any approvals that may be required under applicable law, the
Separate Account may be operated as a management investment company under the
1940 Act, it may be deregistered under that Act if registration is no longer
required, it may be combined with other of our separate accounts, or the assets
may be transferred to another separate account. In addition, we may, when
permitted by law, restrict or eliminate any voting rights you have under the
Contracts.
We will continue to pay a Living Benefit under the Visionary Choice
Contract and a Maturity Benefit under the Visionary Contract on Premium
Payments allocated to an Eligible Variable Account if: the portfolio underlying
an Eligible Variable Account changes its investment objective; we determine
that an investment in the portfolio underlying an Eligible Variable Account is
no longer appropriate in light of the purposes of the Separate Account; or
shares of a portfolio underlying an Eligible Variable Account are no longer
available for investment by the Separate Account and we are forced to redeem
all shares of the portfolio held by the Eligible Variable Account. (See the
Prospectus for your Contract.)
RESOLVING MATERIAL CONFLICTS
The Funds currently sell shares to registered separate accounts of
insurance companies other than IL Annuity to support other variable annuity
contracts and variable life insurance contracts. In addition, our other
separate accounts and separate accounts of other
- 25 -
<PAGE> 143
affiliated life insurance companies may purchase some of the Funds to support
other variable annuity or variable life insurance contracts. Moreover, qualified
retirement plans may purchase shares of some of the Funds. As a result, there
is a possibility that an irreconcilable material conflict may arise between
your interests in owning a Contract whose Contract Value is allocated to the
Separate Account and of persons owning Contracts whose Contract Values are
allocated to one or more other separate accounts investing in any one of the
Funds. There is also the possibility that a material conflict may arise between
the interests of Contract Owners generally, or certain classes of Contract
Owners, and participating qualified retirement plans or participants in such
retirement plans.
We currently do not foresee any disadvantages to you that would arise
from the sale of Fund shares to support variable life insurance contracts or
variable annuity contracts of other companies or to qualified retirement plans.
However, each management of the Funds will monitor events related to their Fund
in order to identify any material irreconcilable conflicts that might possibly
arise as a result of such Fund offering its shares to support both variable
life insurance contracts and variable annuity contracts, or support the
variable life insurance contracts and/or variable annuity contracts issued by
various unaffiliated insurance companies.
In addition, the management of the Funds will monitor the Funds in order
to identify any material irreconcilable conflicts that might possibly arise as
a result of the sale of its shares to qualified retirement plans, if
applicable. In the event of such a conflict, the management of the appropriate
Fund would determine what action, if any, should be taken in response to the
conflict. In addition, if we believe that the response of the Funds to any such
conflict does not sufficiently protect you, then we will take our own
appropriate action, including withdrawing the Separate Account's investment in
such Funds, as appropriate. (See the individual Fund prospectuses for greater
detail.)
TERMINATION OF PARTICIPATION AGREEMENTS
The participation agreements pursuant to which the Funds sell their
shares to the Variable Account contain varying provisions regarding termination.
The following summarizes those provisions:
THE ALGER AMERICAN FUND. This agreement provides for termination:
- - on six months' advance written notice by any party;
- - at IL Annuity's option if shares of any Portfolio are not reasonably
available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or
federal law;
- - at IL Annuity's option if any portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue
Code (the "Code");
- - at IL Annuity's option if any portfolio fails to meet certain
diversification requirements of the Code;
- 26 -
<PAGE> 144
- - at the option of the Fund or Fred Alger & Company, Inc. (the
"Distributor"), upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition
or prospects or is the subject of material adverse publicity;
- - by IL Annuity upon a determination that either the Fund or the
Distributor has suffered a material adverse change in its business,
operations, financial condition or prospects or is the subject of
material adverse publicity;
- - by the Fund or the Distributor if the Contracts cease to qualify as
annuity contracts or endowment contracts under the Code or if the
Contracts are not registered, issued or sold in accordance with state
and/or federal law; or
- - on 180 days written notice upon a determination by any party that a
material irreconcilable conflict exists.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND AND FUND II. These agreements
provide for termination:
- - on six months' advance written notice by any party;
- - at IL Annuity's option if shares of any portfolio are not reasonably
available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or
federal law;
- - at IL Annuity's option if any portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Code;
- - at IL Annuity's option if any portfolio fails to meet certain
diversification requirements of the Code;
- - at the option of the Fund or Fidelity Distributors Corporation (the
"Underwriter") upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition
or prospects or is the subject of material adverse publicity;
- - by IL Annuity upon a determination that either the Fund or the
Underwriter has suffered a material adverse change in its business,
operations, financial condition or prospects or is the subject of
material adverse publicity; or
- - by the Fund or the Underwriter if IL Annuity provides written notice of
its intent to use another investment company as a funding vehicle for the
Contracts.
OCC ACCUMULATION TRUST. This agreement provides for termination:
- - on six months' advance written notice by any party;
- - at IL Annuity's option if shares of any portfolio are not reasonably
available to meet the requirements of the Contracts;
- - at IL Annuity's option if any portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Code;
- - at IL Annuity's option if any portfolio fails to meet certain
diversification requirements of the Code;
- 27 -
<PAGE> 145
- - at the option of the Fund upon a determination that IL Annuity has
suffered a material adverse change in its business, operations, financial
condition or prospects or is the subject of material adverse publicity;
- - by IL Annuity upon a determination that the Fund has suffered a material
adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity;
- - by the Fund or IL Annuity if IL Annuity receives necessary regulatory
approvals to substitute shares of another investment company as a funding
vehicle for the Contracts;
- - by the Fund upon institution of certain proceedings against IL Annuity;
- - at IL Annuity's option upon institution of certain administrative
proceedings against the Fund or the Underwriter;
- - by the Fund or IL Annuity upon a determination that certain
irreconcilable conflicts exist; or
- - at the option of the Fund or IL Annuity, upon the other party's material
breach of any provision in the Participation Agreement.
ROYCE CAPITAL FUND. This agreement provides for termination:
- - at the option of IL Annuity or the Royce Trust (the "Trust") upon 180
days' notice;
- - at the option of IL Annuity, if the Trust shares are not reasonably
available to meet the requirements of the Contracts;
- - at the option of IL Annuity, upon the institution of certain formal
proceedings against the Trust by the SEC, the National Association of
Securities Dealers, Inc. ("NASD"), or any other regulatory body;
- - at the option of the Advisor of the Trust or the Trust, upon the
institution of certain formal proceedings against IL Annuity by the SEC,
the NASD or any other regulatory body;
- - in the event the Trust's shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law precludes
the use of such shares as the underlying investment medium of Contracts;
- - at the option of the Adviser of the Trust or the Trust, if the Contracts
cease to qualify as annuity contracts or life insurance contracts, as
applicable, under the Code;
- - at the option of IL Annuity, upon the Trust's unremedied breach of any
material provision of this agreement;
- - at the option of the Adviser of the Trust or the Trust, upon IL Annuity's
unremedied breach of any material provision of this agreement;
- - at the option of the Adviser of the Trust or the Trust, if the Contracts
are not registered, issued or sold in accordance with applicable federal
and/or state law;
- - in the event this agreement is assigned without the prior written consent
of IL Annuity and the Trust.
SAFECO RESOURCE SERIES TRUST. This agreement shall terminate as to the sale and
issuance of new Contracts:
- 28 -
<PAGE> 146
- - at the option of either IL Annuity or the SAFECO Trust ("Trust"), upon
180 days' advance written notice to the other;
- - at the option of IL Annuity, upon ten days' advance written notice to the
Trust if shares of the portfolios are not available for any reason to
meet the requirements of the Contracts as determined by IL Annuity;
- - at the option of IL Annuity, upon the institution of certain formal
proceedings against the Trust or Adviser by the SEC, NASD, or any other
regulatory body;
- - at the option of the Trust, upon the institution of certain formal
proceedings against IL Annuity or the principal underwriter for the
Contracts by the SEC, the NASD or any other regulatory body;
- - in the event the Trust's shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law precludes
the use of such shares as the underlying investment medium of Contracts;
- - upon the receipt of any necessary regulatory approvals, or the requisite
vote of Contract owners having an interest in the portfolios, to
substitute for shares of the portfolios the shares of another
investment company in accordance with the terms of the applicable
Contracts;
- - at the option of the Trust, if the Contracts cease to qualify as annuity
contracts or life insurance contracts, as applicable, under the Code;
- - at the option of IL Annuity, upon the Trust's unremedied breach of any
material provision of this agreement;
- - at the option of the Trust, upon IL Annuity's unremedied breach of any
material provision of this agreement;
- - at the option of the Trust, if the Contracts are not registered, issued
or sold in accordance with applicable federal and/or state law;
- - in the event this agreement is assigned without the prior written consent
of IL Annuity, the Trust or Adviser.
SOGEN VARIABLE FUNDS, INC. This agreement shall continue in full force and
effect until the first to occur of:
- - termination by any party, for any reason with respect to the portfolio,
by 120 days advance written notice delivered to the other parties; or
- - termination by IL Annuity by written notice to the SoGen Fund and its
Underwriter based upon IL Annuity's determination that the portfolio's
shares are not reasonably available to meet the requirements of the
Contracts; or
- - termination by IL Annuity by written notice to the SoGen Fund and its
Underwriter in the event the portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or federal law or
such law precludes the use of such shares as the underlying investment
media of the Contracts; or
- - termination by the SoGen Fund or its Underwriter in the event that
certain formal administrative proceedings are instituted against IL
Annuity by the NASD, the SEC, the Insurance Commissioner or like official
of any state or any other regulatory body; or
- 29 -
<PAGE> 147
- - termination by IL Annuity in the event that certain formal administrative
proceedings are instituted against the SoGen Fund or Underwriter by the
NASD, the SEC, or any state securities or insurance department or any
other regulatory body; or
- - termination by IL Annuity by written notice to the SoGen Fund and its
Underwriter in the event that the portfolio ceases to qualify as a
Regulated Investment Company under Subchapter M or fails to comply with
the Section 817(h) diversification requirements of the Code; or
- - termination by the SoGen Fund or its Underwriter by written notice to IL
Annuity in the event that the Contracts fail to meet certain
qualifications; or
- - termination by either the SoGen Fund or its Underwriter by written notice
to IL Annuity if either one or both of the SoGen Fund or its Underwriter
respectively, shall determine, in their sole judgment exercised in good
faith, that IL Annuity has suffered a material adverse change in its
business, operations, financial condition, or prospects since the date of
the Participation Agreement or is the subject of material adverse
publicity; or
- - termination by IL Annuity by written notice to the SoGen Fund and its
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that the SoGen Fund, its Adviser, or its
Underwriter has suffered a material adverse change in its business,
operations, financial condition or prospects since the date of this
agreement or is the subject of material adverse publicity; or
- - termination by IL Annuity upon any substitution of the shares of another
investment company or series thereof for shares of the portfolio in
accordance with the terms of the Contracts; or
- - termination by any party in the event that the SoGen Fund's Board of
Directors determines that a material irreconcilable conflict exists.
T. ROWE PRICE FIXED INCOME SERIES, INC. AND T. ROWE PRICE INTERNATIONAL SERIES,
INC. These agreements provide for termination:
- - on six months' advance written notice by any party;
- - at IL Annuity's option if shares of any portfolio are not reasonably
available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or
federal law;
- - at IL Annuity's option if any portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Code;
- - at IL Annuity's option if any portfolio fails to meet certain
diversification requirements of the Code;
- - at the option of the Fund or T. Rowe Price Investment Services, Inc. (the
"Underwriter") upon a determination that IL Annuity has suffered a
material adverse change in its business, operations, financial condition
or prospects or is the subject of material adverse publicity;
- - by IL Annuity upon a determination that either the Fund or the
Underwriter has suffered a material adverse change in its business,
operations, financial condition or prospects or is the subject of
material adverse publicity;
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<PAGE> 148
- - by the Fund or the Underwriter if IL Annuity provides written notice of
its intent to use another investment company as a funding vehicle for the
Contracts;
- - by the Fund or the Underwriter upon institution of certain proceedings
against IL Annuity; or
- - at IL Annuity's option upon institution of certain administrative
proceedings against the Fund or the Underwriter.
VAN ECK WORLDWIDE INSURANCE TRUST. This agreement provides for termination:
- - on six months' advance written notice by any party;
- - at IL Annuity's option if shares of any portfolio are not reasonably
available to meet the requirements of the Contracts or are not
registered, issued or sold in accordance with applicable state and/or
federal law;
- - at IL Annuity's option if any portfolio ceases to be qualified as a
Regulated Investment Company under Subchapter M of the Code;
- - at IL Annuity's option if any portfolio fails to meet certain
diversification requirements of the Code;
- - at the option of the Trust or Van Eck Associates Corporation (the
"Adviser") upon a determination that IL Annuity has suffered a material
adverse change in its business, operations, financial condition or
prospects or is the subject of material adverse publicity;
- - by IL Annuity upon a determination that either the Trust or the Adviser
has suffered a material adverse change in its business, operations,
financial condition or prospects or is the subject of material adverse
publicity;
- - by IL Annuity, the Adviser or the Trust, upon institution of certain
proceedings against the broker-dealers marketing the Contracts, the
Adviser or the Trust;
- - upon a decision by IL Annuity to substitute the Trust's shares with the
shares of another investment company; or
- - upon assignment of the Agreement.
VOTING RIGHTS
We determine the number of votes you may cast by dividing your Contract
Value in a Variable Account by the net asset value per share of the Portfolio
in which that Variable Account invests. For each Annuitant, we determine the
number of votes attributable to a Variable Account by dividing the liability
for future variable annuity payments to be paid from that Variable Account by
the net asset value per share of the portfolio in which that Variable Account
invests. We calculate this liability for future payments on the basis of the
mortality assumptions. We use your selected assumed investment rate in
determining the number of annuity units of that Variable Account credited to
the Annuitant's Contract and annuity unit value of that Variable Account on the
date that we determine the number of votes. As we make variable annuity
payments to the Annuitant, the liability for future payments decreases as does
the number of votes.
- 31 -
<PAGE> 149
We determine the number of votes available to you or an Annuitant as of
the date coincident with the date that the Fund establishes for determining
shareholders eligible to vote at the relevant meeting of the portfolio's
shareholders. We will solicit voting instructions by written communication
prior to such meeting in accordance with the Fund's established procedures.
TAX STATUS OF THE CONTRACTS
Tax law imposes several requirements that variable annuities must
satisfy in order to receive the tax treatment normally accorded to annuity
contracts.
DIVERSIFICATION REQUIREMENTS. THE CODE REQUIRES THAT THE INVESTMENTS OF
EACH INVESTMENT DIVISION OF THE SEPARATE ACCOUNT UNDERLYING THE CONTRACTS BE
"ADEQUATELY DIVERSIFIED" IN ORDER FOR THE CONTRACTS TO BE TREATED AS ANNUITY
CONTRACTS FOR FEDERAL INCOME TAX PURPOSES. IT IS INTENDED THAT EACH INVESTMENT
DIVISION, THROUGH THE FUND IN WHICH IT INVESTS, WILL SATISFY THESE
DIVERSIFICATION REQUIREMENTS.
OWNER CONTROL. IN CERTAIN CIRCUMSTANCES, OWNERS OF VARIABLE ANNUITY
CONTRACTS HAVE BEEN CONSIDERED FOR FEDERAL INCOME TAX PURPOSES TO BE THE OWNERS
OF THE ASSETS OF THE SEPARATE ACCOUNT SUPPORTING THEIR CONTRACTS DUE TO THEIR
ABILITY TO EXERCISE INVESTMENT CONTROL OVER THOSE ASSETS. WHEN THIS IS THE CASE,
THE CONTRACT OWNERS HAVE BEEN CURRENTLY TAXED ON INCOME AND GAINS ATTRIBUTABLE
TO THE VARIABLE ACCOUNT ASSETS. THERE IS LITTLE GUIDANCE IN THIS AREA, AND SOME
FEATURES OF OUR CONTRACTS, SUCH AS THE FLEXIBILITY OF AN OWNER TO ALLOCATE
PREMIUM PAYMENTS AND TRANSFER AMOUNTS AMONG THE INVESTMENT DIVISIONS OF THE
SEPARATE ACCOUNT, HAVE NOT BEEN EXPLICITLY ADDRESSED IN PUBLISHED RULINGS. WHILE
WE BELIEVE THAT THE CONTRACTS DO NOT GIVE OWNERS INVESTMENT CONTROL OVER
SEPARATE ACCOUNT ASSETS, WE RESERVE THE RIGHT TO MODIFY THE CONTRACTS AS
NECESSARY TO PREVENT AN OWNER FROM BEING TREATED AS THE OWNER OF THE SEPARATE
ACCOUNT ASSETS SUPPORTING THE CONTRACT.
REQUIRED DISTRIBUTIONS. IN ORDER TO BE TREATED AS AN ANNUITY CONTRACT FOR
FEDERAL INCOME TAX PURPOSES, SECTION 72(s) OF THE INTERNAL REVENUE CODE REQUIRES
ANY NON-QUALIFIED CONTRACT TO CONTAIN CERTAIN PROVISIONS SPECIFYING HOW YOUR
INTEREST IN THE CONTRACT WILL BE DISTRIBUTED IN THE EVENT OF THE DEATH OF A
HOLDER OF THE CONTRACT. THE NON-QUALIFIED CONTRACTS CONTAIN PROVISIONS THAT ARE
INTENDED TO COMPLY WITH THESE CODE REQUIREMENTS, ALTHOUGH NO REGULATIONS
INTERPRETING THESE REQUIREMENTS HAVE YET BEEN ISSUED. WE INTEND TO REVIEW SUCH
PROVISIONS AND MODIFY THEM IF NECESSARY TO ASSURE THAT THEY COMPLY WITH THE
APPLICABLE REQUIREMENTS WHEN SUCH REQUIREMENTS ARE CLARIFIED BY REGULATION OR
OTHERWISE.
OTHER RULES MAY APPLY TO QUALIFIED CONTRACTS.
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<PAGE> 150
SAFEKEEPING OF ACCOUNT ASSETS
We hold the title to the assets of the Separate Account. The assets are
kept physically segregated and held separate and apart from our General Account
assets and from the assets in any other separate account. We maintain records
of all purchases and redemptions of portfolio shares held by each of the
Variable Accounts.
An insurance company blanket bond covers our officers and employees.
Travelers Casualty and Surety Company of America to Indianapolis Life Insurance
Company and its various subsidiaries issue the bond. Our bond is in the amount
of twenty million dollars. The bond insures against dishonest and fraudulent
acts of officers and employees.
DISTRIBUTION OF THE CONTRACTS
IL Securities, Inc, P.O. Box 1230, 2960 North Meridian Street,
Indianapolis, Indiana 46208, acts as a distributor for the Contracts. IL
Securities, Inc. is wholly-owned by the Indianapolis Life Group of Companies,
Inc., which, in turn, is wholly-owned by Indianapolis Life Insurance Company. IL
Securities, Inc. 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.
We offer the Contracts to the public on a continuous basis. We
anticipate continuing to offer the Contracts, but we reserve the right to
discontinue the offering. Agents who sell the Contracts are licensed by
applicable state insurance authorities to sell the Contracts and are registered
representatives of IL Securities, Inc. or broker-dealers having selling
agreements with IL Securities, Inc. or broker-dealers having selling agreements
with such broker-dealers.
We may pay a sales commissions to broker-dealers up to an amount equal
to 7.2% of the Premium Payments paid under a Contract. We may also pay
asset-based trailer commissions of up to 1.25%. We may pay up to 1.25% of
Premium Payments to IL Securities to compensate it for certain distribution
expenses. We expect the broker-dealers to compensate sales representatives in
varying amounts from these commissions. We may pay other distribution expenses
such as production incentive bonuses, an agent's insurance and pension
benefits, and agency expense allowances. These distribution expenses do not
result in any additional charges against the Contracts other than those
described in the prospectus under "Fees and Charges." IL Securities, Inc.
received and retained $______ in underwriting commissions during fiscal year
1998, $637,722.49 in fiscal year 1997, and $195,937.53 in fiscal year 1996.
LEGAL MATTERS
Janis B. Funk, Counsel Company, has passed upon all matters relating to
Massachusetts law pertaining to the Contracts, including the validity of the
Contracts and the
- 33 -
<PAGE> 151
Company's authority to issue the Contracts. Sutherland Asbill & Brendan LLP of
Washington, D.C. has provided advice on certain matters relating to the federal
securities laws.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the balance sheets
of IL Annuity and Insurance Company as of December 31, 1998, 1997 and 1996 and
the related statements of income, shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1998 and the statement of
net assets of IL Annuity and Insurance Co. Separate Account 1 as of December
31, 1998, and the related statement of operations for the year then ended, and
statements of changes in net assets for each of the years in the period then
ended, appearing in this Statement of Additional Information and Registration
Statement. These are set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
OTHER INFORMATION
We have filed a registration statement with the SEC under the Securities
Act of 1933, as amended, with respect to the Contracts discussed in this
Statement of Additional Information. The Statement of Additional Information
does not include all of the information set forth in the registration
statement, amendments and exhibits. 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, you should refer to the instruments filed with the SEC.
FINANCIAL STATEMENTS
- 34 -
<PAGE> 152
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<S> <C> <C> <C>
(a) FINANCIAL STATEMENTS
All required financial statements are included in Part B of
this Registration Statement.
(b) EXHIBITS
(1) Certified resolution of the Board of Directors of IL Annuity
and Insurance Company (the "Company") authorizing
establishment of IL Annuity and Insurance Co. Separate
Account 1 (the "Separate Account").3/
(2) Not applicable.
(3)(a) Form of Distribution Agreement among the Company, the
Separate Account and IL Securities, Inc. ("IL
Securities").3/
(b) Form of Sales Agreement among the Company, IL Securities,
Inc. and a broker-dealer.3/
(4)(a) (i) Form of Contract for the Visionary Flexible Premium Deferred
Variable Annuity.4/
(ii) Form of Contract for the Visionary Choice Flexible Premium
Deferred Variable Annuity.1/
(b) Form of Qualified Plan Endorsement, IRA Endorsement,
Endorsement for Qualified 403(b) Annuity, Unisex Rider,
Additional Waiver of Withdrawal Charge Rider -
Hospitalization, Additional Waiver of Withdrawal Charge
Rider - Terminal Illness, Additional Waiver of Withdrawal
Charge Rider - Long Term Care, Additional Waiver of
Withdrawal Charge Rider - Post Secondary Education.4/
(c) Form of Roth IRA Endorsement.3/
(4)(d) Endorsement to contract dated May 1997.4/
(5)(a) Form of Application for the Visionary Flexible Premium
Deferred Variable Annuity.4/
(b) Form of Application for the Visionary Choice Flexible
Premium Deferred Variable Annuity.1/
(6)(a) Articles of Incorporation of IL Annuity and Insurance
Company.4/
(b) By-Laws of IL Annuity and Insurance Company.4/
(7) Not Applicable.
(8)(a) Form of Participation Agreement between Fidelity Variable
Insurance Products Fund and IL Annuity and Insurance
Company.3/
(b) Form of Participation Agreement between Fidelity Variable
Insurance Products Fund II and IL Annuity and Insurance
Company.3/
(c) Form of Participation Agreement between Van Eck Investment
Trust and IL Annuity and Insurance Company.3/
(d) Form of Participation Agreement between T. Rowe Price
International Series, Inc. and IL Annuity and Insurance
Company.3/
(e) Form of Participation Agreement between T. Rowe Price Fixed
Income Series, Inc. and IL Annuity and Insurance Company.3/
</TABLE>
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<TABLE>
<S> <C> <C> <C>
(f) Form of Participation Agreement between Quest for Value
Accumulation Trust and IL Annuity and Insurance Company.3/
(g) Form of Participation Agreement between The Alger American
Fund and IL Annuity and Insurance Company.3/
(h) Form of Services Agreement between Financial Administration
Services, Inc. and IL Annuity and Insurance Company.4/
(i) Participation Agreement between Royce Capital Fund and IL
Annuity and Insurance Company. 2/
(j) Participation Agreement among SAFECO Resource Series Trust,
SAFECO Asset Management Company, and IL Annuity and
Insurance Company. 2/
(k) Participation Agreement among SoGen Variable Funds, Inc.,
Societe Generale Securities Corporation, and IL Annuity and
Insurance Company.2/
(l) Form of Services Agreement between USA Administration
Services, Inc. and IL Annuity and Insurance Company. 2/
(9) Opinion and Consent of Janis B. Funk, Esq.5/
(10) (a) Consent of Sutherland Asbill & Brennan LLP.5/
(b) Consent of Ernst & Young LLP. 5/
(11) No financial statements will be omitted from Item 23.
(12) Not applicable.
(13) Schedule of Performance Computations. 2/
(14) Not applicable.
(15) Powers of Attorney. 3/
</TABLE>
- ------------------------
1/ Incorporated herein by reference to registrant's Post-Effective Amendment No.
2 to this Form N-4 Registration Statement filed with the SEC via EDGARLINK on
October 23, 1996 (File No. 33-89028).
2/ Incorporated herein by reference to registrant's Post-Effective Amendment No.
5 to this Form N-4 Registration Statement filed with the SEC via EDGARLINK on
August 8, 1997 (File No. 33-89028).
3/ Incorporated herein by reference to registrant's Post-Effective Amendment No.
6 to this Form N-4 Registration Statement filed with the SEC via EDGARLINK on
April 30, 1998 (File No. 33-89028).
4/ Filed herewith.
5/ To be filed by subsequent amendment.
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ITEM 25. DIRECTORS AND OFFICERS OF IL ANNUITY AND INSURANCE COMPANY
<TABLE>
<CAPTION>
Name and Principal Business Address* Position and Office with Depositor
- ------------------------------------ -----------------------------------
<S> <C>
Larry R. Prible Chairman of the Board and Director
Gregory J. Carney President, Chief Executive Officer and
Director
Lisa Foxworthy-Parker Secretary
John J. Fahrenbach Director
Larry A. Halbach Director
Garrett P. Ryan Director
Stephen J. Shorrock** Director
Karla K. Vest Director
Richard G. Darragh Controller
Gene E. Trueblood Treasurer
Rebecca Rissen Assistant Secretary
</TABLE>
* Unless otherwise indicated, the principal business address is 2960 North
Meridian Street, Indianapolis, Indiana 46208.
** Principal business address is 65 Froehlich Farm Blvd., Woodbury, NY
11797-9847.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
<TABLE>
<CAPTION>
Percent of Voting
Name Jurisdiction Securities Owned Principal Business
- ---- ------------ ---------------- ------------------
<S> <C> <C> <C>
Indianapolis Life Indiana Mutual Company Life & Health
Insurance Company* Insurance
("Indianapolis Life")
American United Life Indiana Mutual Company Life & Health
Insurance Company Insurance
("American United")
The Indianapolis Life Group Indiana Indianapolis Life (71.43%) Holding Company
of Companies, Inc. American United (28.41%)
("The Indianapolis Group")
IL Securities, Inc.* Indiana All voting securities Broker/Dealer
owned by The
Indianapolis Group
IL Term Insurance Indiana All voting securities Life & Health
Company* owned by The Insurance
Indianapolis Group
Bankers Life Insurance New York All voting securities Life & Health
Company of New York* owned by Insurance
Indianapolis Life
Western Security Life Arizona All voting securities Life & Health
Insurance Company* owned by Indianapolis Insurance
Life
</TABLE>
* Files Separate Financial Statements.
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ITEM 27. NUMBER OF CONTRACTOWNERS
As of December 31, 1998 there were a total of _____Visionary Contracts in
force -- ____ non-qualified and _____ qualified and a total of _____ Visionary
Choice Contracts in force -- ___ non-qualified and ___ qualified.
ITEM 28. INDEMNIFICATION
The By-Laws of IL Annuity and Insurance Company provide, in Article X, as
follows:
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Any director or officer or his legal representative shall be indemnified by
the Company against reasonable expenses including the cost of any
settlement and counsel fees paid or incurred in connection with any action,
suit or proceeding to which any such director or officer or his legal
representative may be made a party by reason of his being or having been
such director or officer, provided it shall not be determined by a final
determination thereof on the merits that such director or officer was in
any substantial way derelict in the performance of his duties, or provided
that such action, suit or proceeding shall be settled without a final
determination on the merits and it shall be determined that such officer or
director had not in any substantial way been derelict in the performance of
his duties as charged therein, such determination to be made by a majority
of the members of the Board of Directors who were not parties to such
action, suit or proceedings, though less than a quorum, or by any one or
more disinterested persons to whom the question may be referred by the
Board of Directors. The foregoing right of indemnification shall not be
exclusive of any other rights to which any director or officer may be
entitled as a matter of law or which may be lawfully granted to him.
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.
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<PAGE> 156
ITEM 29. PRINCIPAL UNDERWRITER
(a) IL Securities, Inc. is the registrant's principal underwriter.
(b) Officers and Directors of IL Securities, and their addresses, are as
follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* With the Underwriter with Registrant
- ------------------ --------------------- ---------------------
<S> <C> <C>
Larry R. Prible Chairman of the Board Chairman of the Board
Gregory J. Carney President, Chief Executive President, Chief Executive
Officer and Director Officer and Director
Lisa Foxworthy-Parker Secretary and Director Secretary
William L. Boyd Director Director
John J. Fahrenbach Director Director
Garrett P. Ryan Director Director
Joe C. Lowe Vice-President None
Gene E. Trueblood Treasurer Treasurer
</TABLE>
* All of the persons listed above have as their principal business address: P.O.
Box 1230, 2960 North Meridian Street, Indianapolis, Indiana 46208.
<TABLE>
<CAPTION>
(c)(1) (2) (3) (4) (5)
Name of Net Underwriting
Principal Discounts and Compensation on Brokerage
Underwriter Commissions Redemption Commissions Compensation
- ------------ ---------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
IL Securities, $
Inc. ----------
</TABLE>
Commissions are paid by the Company directly to agents who are registered
representatives of the principal underwriter, or to broker-dealers that have
entered into a selling agreement with the principal underwriter, or
broker-dealers having selling agreements with such broker-dealers with respect
to the sales of the Visionary and Visionary Choice Contracts.
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<PAGE> 157
ITEM 30. LOCATION OF 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 IL Annuity and Insurance Company at its home office and, with
regard to the Visionary Contract, at the offices of Financial Administrative
Services, Inc., 1290 Silas Deane Highway, Wethersfield, CT 06109-4303, and with
regard to the Visionary Choice Contract, at the offices of USA Administration
Services, Inc., P.O. Box 29163, Overland Park, KS 66201.
ITEM 31. MANAGEMENT SERVICES
All management contracts are discussed in Part A or Part B of this
registration statement.
ITEM 32. UNDERTAKINGS AND REPRESENTATIONS
(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure
that the audited financial statements in the registration statement
are never more than 16 months old for as long as purchase payments
under the contracts offered herein are being accepted.
(b) The registrant undertakes that it will include either (1) as part of
any application to purchase a contract offered by the prospectus, a
space that an applicant can check to request a statement of additional
information, or (2) a post card or similar written communication
affixed to or included in the prospectus that the applicant can remove
and send to IL Annuity and Insurance 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 hereby 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 the Company.
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<PAGE> 158
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, IL Annuity and Insurance Co. Separate Account 1, certifies
that it has caused this Post-Effective Amendment No. 7 to its registration
statement to be signed on its behalf, in the City of Indianapolis, and the State
of Indiana, on this 26th day of February, 1999.
IL ANNUITY AND INSURANCE CO.
SEPARATE ACCOUNT 1 (Registrant)
Attest: /s/ Janis B. Funk By: /s/ Gregory J. Carney
------------------- ------------------------
Janis B. Funk Gregory J. Carney
President
By: IL ANNUITY AND INSURANCE
COMPANY (Depositor)
Attest: /s/ Janis B. Funk By: /s/ Gregory J. Carney
------------------- -------------------------
Janis B. Funk Gregory J. Carney
President
As required by the Securities Act of 1933, this registration statement has
been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- --------------------------- Chairman of the Board and February 26, 1999
Larry R. Prible Director
*
- --------------------------- President, Chief Executive February 26, 1999
Gregory J. Carney Officer and Director
*
- --------------------------- Treasurer February 26, 1999
Gene E. Trueblood (Principal Financial Officer)
*
- --------------------------- Controller February 26, 1999
Richard G. Darragh (Chief Accounting Officer)
</TABLE>
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<PAGE> 159
<TABLE>
<S> <C> <C>
- ---------------------------* Director February 26, 1999
John J. Fahrenbach
- ---------------------------* Director February 26, 1999
Larry A. Halbach
- ---------------------------* Director February 26, 1999
Garrett P. Ryan
- ---------------------------* Director February 26, 1999
Stephen J. Shorrock
- ---------------------------* Director February 26, 1999
Karla K. Vest
/s/ Janis B. Funk On February 26 , 1999, as Attorney-in-Fact pursuant
- ---------------------------
* By Janis B. Funk to powers of attorney filed herewith.
</TABLE>
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<PAGE> 160
EXHIBIT INDEX
Exhibit 4(a)(i) Form of Contract for Visionary Flexible Premium Deferred
Variable Annuity
Exhibit 4(b) Form of Qualified Plan Endorsement, IRA Endorsement,
Endorsement for Qualified 403(b) Annuity, Unisex Rider,
Additional Waiver of Withdrawal Charge Rider- Hospitalization,
Additional Waiver of Withdrawal Charge Rider- Terminal Illness,
Additional Waiver of Withdrawal Charge Rider- Long Term Care,
Additional Waiver of Withdrawal Charge Rider- Post Secondary
Education
Exhibit 4(d) Endorsement to Contract dated May 1997
Exhibit 5(a) Form of Application for the Visionary Flexible Premium Deferred
Variable Annuity
Exhibit 6(a) Articles of Incorporation of IL Annuity and Insurance Company
Exhibit 6(b) By-Laws of IL Annuity and Insurance Company
Exhibit 8(h) Form of Services Agreement between Financial Administration
Services, Inc. and IL Annuity and Insurance Company
<PAGE> 1
EXHIBIT 4(a)(i)
[Logo for IL Annuity and Insurance Company 2960 North Meridian Street
Indianapolis, Indiana 46208 A Member of the Indianapolis Life Group of
Companies]
READ YOUR CONTRACT CAREFULLY
RIGHT TO EXAMINE YOUR CONTRACT. You may return this Contract to us for any
reason within 10 days after You receive it (20 days if this Contract is
replacing another annuity contract or insurance policy). You may return the
Contract by mailing it to us at the address of the Annuity Service Office shown
on Page 3. Your Written Request for cancellation must accompany the Contract.
If returned, we will pay to You an amount equal to the sum of (i) the
difference between the premiums paid and the amounts allocated to any Account
under the Contract and (ii) the Contract Value on the date of cancellation. You
bear the investment risk only during the period prior to the Company's receipt
of the request for cancellation.
THIS CONTRACT is a legal contract between the Owner and the IL Annuity and
Insurance Company.
WE AGREE to provide the benefits and rights set out on this page and the pages
that follow which are part of the Contract. They are provided as consideration
for the application and the payment of premium for the Contract.
THE CONTRACT, the attached application, and any amendments, riders or
endorsements make up the entire contract. The Contract does not take effect
until we have received the initial premium.
VALUES AND PAYMENTS, WHEN BASED ON INVESTMENT RESULTS OF THE SEPARATE ACCOUNT,
ARE VARIABLE AND ARE NOT GUARANTEED AS TO A FIXED DOLLAR AMOUNT. THE VARIABLE
PROVISIONS ARE DESCRIBED IN SECTION 6.
Signed for us on the Date of Issue at the Home Office of the Company at 2960
North Meridian Street, Indianapolis, Indiana 46208.
/s/ Margaret M. McKinney /s/ Gregory J. Carney
Secretary President
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
FLEXIBLE PREMIUM
INCOME PAYABLE AT MATURITY
DEATH BENEFIT PAYABLE IN THE EVENT OF THE
ANNUITANT'S DEATH PRIOR TO MATURITY
VA-95 1
<PAGE> 2
SECTION 1 - GUIDE TO CONTRACT PROVISIONS
<TABLE>
<CAPTION>
SECTION PAGE
<C> <S> <C>
1 GUIDE TO CONTRACT PROVISIONS 2
2 CONTRACT SPECIFICATIONS 3
3 DEFINITIONS 4
4 PREMIUMS 6
5 CONTRACT VALUE 6
6 SEPARATE ACCOUNT PROVISIONS 8
7 WITHDRAWAL PROVISIONS 9
8 OWNERSHIP PROVISIONS 11
9 DEATH BENEFITS PROVISIONS 12
10 PAYOUT PLAN PROVISIONS 13
11 MATURITY BENEFIT PROVISIONS 14
12 GENERAL PROVISIONS 15
13 TABLES 17
</TABLE>
The Application and Any Additional Forms Will Follow Section 13
VA-95 Page 2
<PAGE> 3
SECTION 2 - SPECIFICATIONS
<TABLE>
<S> <C>
CONTRACT NUMBER [VA00001] [William P. Ryker] ANNUITANT
DATE OF ISSUE [May 31, 1995] [June 1, 2020] COMMENCEMENT
DATE
AGE AT ISSUE [40]
INITIAL PREMIUM [$10,000]
PREMIUMS MAY BE CONTINUED TO THE
ANNUITY COMMENCE DATE
PREMIUM TAX CHARGE [state variable]%
CONTRACT FEE $7.50 PER CONTRACT QUARTER
MORTALITY AND 1.25% PER ANNUM OF THE AVERAGE DAILY
EXPENSE RISK CHARGE VARIABLE ACCOUNT VALUE
ADMINISTRATIVE .15% PER ANNUM OF THE AVERAGE DAILY
CHARGE VARIABLE ACCOUNT VALUE
VARIABLE ACCOUNT FIRST 12 REQUESTS PER CONTRACT YEAR - $0
TRANSFER FEE 13 OR MORE PER CONTRACT YEAR - $25.00
EACH TRANSFER
FIXED ACCOUNT MINIMUM INTEREST RATE 3.0%
WITHDRAWAL CHARGE IF YOU WITHDRAWAL ALL OR PART OF THE CONTRACT VALUE,
WITHDRAWAL CHARGES MAY APPLY. SEE PAGE 9.
ANNUITY SERVICE OFFICE IL ANNUITY AND INSURANCE COMPANY
ANNUITY SERVICE OFFICE
P.O. BOX 364
HADDAM, CT 06438
1-800-388-1331
</TABLE>
VA-95 Page 3
<PAGE> 4
<TABLE>
<S> <C>
PREMIUM ALLOCATIONS THE INITIAL PREMIUM WILL BE ALLOCATED AS SPECIFIED IN
YOUR APPLICATION. THE SAME ALLOCATIONS WILL BE MADE
FOR EACH SUBSEQUENT PAYMENT UNLESS YOU CHANGE THE
ALLOCATIONS BY WRITTEN REQUEST OR, AT THE TIME OF A
PREMIUM PAYMENT, YOU INSTRUCT US TO ALLOCATE THAT
PAYMENT DIFFERENTLY.
SEPARATE ACCOUNT IL ANNUITY AND INSURANCE CO. SEPARATE ACCOUNT I
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO FUND IN WHICH VARIABLE
VARIABLE ACCOUNT OPTIONS ACCOUNT INVESTS:
- ------------------------ -----------------------------------------------
<S> <C>
ASSET MANAGER* FIDELITY ASSET MANAGER
CONTRAFUND* FIDELITY CONTRAFUND PORTFOLIO
EQUITY INCOME* FIDELITY EQUITY INCOME FUND
GOLD AND NATURAL RESOURCE VAN ECK GOLD AND NATURAL RESOURCE
FUND
GROWTH* FIDELITY GROWTH FUND
INDEX 500* FIDELITY INDEX 500 FUND
INTERNATIONAL STOCK * T. ROWE PRICE INTERNATIONAL STOCK
FUND
INVESTMENT GRADE BOND* FIDELITY INVESTMENT GRADE BOND FUND
LIMITED TERM BOND* T. ROWE PRICE LIMITED TERM BOND FUND
MANAGED* QUEST FOR VALUE MANAGED PORTFOLIO
MIDCAP GROWTH* ALGER AMERICAN MIDCAP GROWTH
PORTFOLIO
MONEY MARKET* FIDELITY MONEY MARKET FUND
SMALL CAPITALIZATION* ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
SMALL CAP* QUEST FOR VALUE SMALL CAP PORTFOLIO
WORLDWIDE BALANCED* VAN ECK WORLDWIDE BALANCED FUND
</TABLE>
*ELIGIBLE VARIABLE ACCOUNTS. PREMIUMS ALLOCATED TO AND HELD IN ONE OR MORE OF
THESE ELIGIBLE VARIABLE ACCOUNTS UNTIL THE MATURITY BENEFIT DATE AND FOR A
MINIMUM OF 10 YEARS OR MORE ARE ELIGIBLE FOR THE MATURITY BENEFIT. SEE PAGE
13.
VA-95 Page 4
<PAGE> 5
SECTION 3 - DEFINITIONS
ACCOUNT - Any of the Variable Accounts or the Fixed Account.
ACCUMULATION UNIT - An accounting measure used to calculate the value of a
Variable Account before annuity payments begin.
AGE - Age last birthday unless otherwise specified.
ANNUAL FREE WITHDRAWAL AMOUNT - The amount of Contract Value that can be
withdrawn in any Contract Year without a withdrawal charge.
ANNUITANT - The natural person (or persons) whose life (or lives) determine the
annuity payment benefits payable under the Contract. The maximum number of
joint annuitants is two and the provisions referring to the death of an
annuitant mean the death of the last surviving annuitant. The Annuitant may not
be changed.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are to begin.
You may specify an Annuity Commencement Date. If You do not, the Annuity
Commencement Date is the later of the Annuitant's age 70 or 10 years after the
date of issue. If this contract is a Qualified Contract, the Annuity
Commencement Date is age 70 1/2.
ANNUITY SERVICE OFFICE - The office which provides service for this contract.
The mailing address is PO Box 364, Haddam, Connecticut, 06438. If the address
changes we will notify you.
ANNUITY UNIT - An accounting unit of measure used to calculate the amount of
annuity payments under a variable annuity option.
BENEFICIARY - The person(s) named by the Owner to receive the death benefit if
the Annuitant dies before the Annuity Commencement Date.
CONTRACT FEE - An amount which is deducted from the Contract Value at the end
of each contract quarter or on the date of full surrender, if earlier.
CONTINGENT OWNER - The person (or persons) who will own the Contract following
the Owner's death (or the death of the last surviving Joint Owner).
CONTRACT PERIODS AND ANNIVERSARIES - Contract Years, contract months and
contract quarters are measured from the Date of Issue . Each contract month
begins on the same day in each calendar month as the Date of Issue. If the end
of a premium period or a Contract Year is indicated by an age, it ends on the
contract anniversary immediately following the birthday on which the Annuitant
reaches that age.
VA-95 Page 5
<PAGE> 6
CONTRACT VALUE - The dollar value as of any valuation date of all amounts
accumulated under this Contract. It is the sum of the Separate Account Value
and the Fixed Account Value.
CONTRACT YEAR - A twelve month period beginning on the Date of Issue or on a
Contract Anniversary.
DATE OF ISSUE - The date (shown in Section 2 - Contract Specifications) on
which the first Contract Year begins.
DOLLAR COST AVERAGING - Owner initiated systematic transfers from one or more
Variable Accounts to any other available Variable Account.
ELIGIBLE VARIABLE ACCOUNT - Premiums allocated to an Eligible Variable Account
until the Maturity Benefit Date and for a minimum of ten years are eligible for
the Maturity Benefit. Eligible Variable Accounts are those Variable Accounts
which invest in Funds which, in turn, invest primarily in stocks, equity
securities, bonds or money market instruments.
FIXED ACCOUNT - Part of the Company's General Account to which all or a portion
of the Contract Value may be allocated.
FIXED ACCOUNT CURRENT RATE - The applicable interest rate contained in a
schedule of rates established by the Company from time to time.
FIXED ACCOUNT VALUE - The value of the Contract in the Fixed Account prior to
the Annuity Commencement Date.
FUND - Any open-end management investment company (or investment portfolio
thereof) or unit investment trust in which a Variable Account invests. The
current Funds are shown on Page 3A of this Contract.
GENERAL ACCOUNT - All assets of the Company other than those allocated to
separate accounts.
MATURITY BENEFIT - On the Maturity Benefit Date, the Maturity Benefit is: (a)
the premium payments which were allocated to an Eligible Variable Account which
have remained continuously for a minimum of ten years in that Eligible Variable
Account, minus (b) the value of that Eligible Variable Account. Eligible
Variable Accounts are those which are allocated to Funds which invest primarily
in stocks, equity securities, bonds or money market instruments.
MATURITY BENEFIT DATE - The later of the Annuitant's age 70 or 10 years after
the date of issue.
NET PREMIUM PAYMENT - The premium payment minus any applicable premium tax.
OWNER - The person(s) who own(s) the Contract. "JOINT OWNERS" are two natural
persons who own the Contract equally with the right of survivorship.
VA-95 Page 6
<PAGE> 7
PAYEE - The person(s) who receive annuity payments. A "SUCCESSOR PAYEE"
receives any guaranteed annuity payments after the death of the Payee.
PAYOUT PLAN - An arrangement under which annuity payments are made under this
Contract.
PREMIUM TAX - The amount of tax, if any, charged by federal, state or municipal
entity on premium payments or Contract Values.
QUALIFIED CONTRACT - A Contract that is issued in connection with retirement
plans that qualify for special federal income tax treatment under Sections 401,
403(b) or 408 of the Internal Revenue Code.
SEC - The U.S. Securities and Exchange Commission.
SEPARATE ACCOUNT - A separate investment account of the Company designated on
Page 3A. The Separate Account is divided into Variable Accounts, each of which
invests in shares of one of the Funds.
SEPARATE ACCOUNT VALUE - The value of the Contract in the Separate Account
prior to the Annuity Commencement Date.
SURRENDER VALUE - The Contract Value minus (1 ) any applicable withdrawal
charges; (2) any premium taxes not previously deducted; and (3) the Contract
fee.
VALUATION DATE - Each day the New York Stock Exchange is open, except for any
day that the Variable Account's corresponding Fund does not value its shares.
VARIABLE ACCOUNTS - The subdivisions of the Separate Account which are used to
determine how the Owner's Account is allocated between the Funds. The assets of
the Variable Account are invested in a corresponding Portfolio of a designated
Fund.
WE, US, OUR AND COMPANY - IL Annuity and Insurance Company.
WRITTEN REQUEST - A Written Request or notice in a form satisfactory to the
Company which is signed by the owner and received at the Annuity Service
Office.
YOU, YOUR - The Owner or Joint Owners.
SECTION 4 - PREMIUMS
PREMIUMS
The initial premium is payable on or before delivery of this Contract. Any
premiums after the initial premium are payable at our Annuity Service Office.
All premiums are payable in U.S. Dollars. The initial premium is shown on Page
3. The minimum premium is $1,000. We retain
VA-95 Page 7
<PAGE> 8
the right not to accept additional premiums in any one year which exceed two
times the initial premium and not to accept total premiums in excess of
$250,000.
You may continue premium payments until the earliest of:
a) the Annuity Commencement Date
b) full withdrawal of the Contract Value
c) the date You attain age 85 (age 70-1/2, if this is a Qualified
Contract)
ALLOCATION OF PREMIUMS
This Contract allows You to allocate Net Premium Payments to any Variable
Account of the Separate Account and the Fixed Account subject to any minimum
allocation amounts established by the Company. If allocations are made in
percentages, whole percentages must be used. The initial premium will be
allocated as specified in your application. The same allocations will be made
for each subsequent payment unless You change the allocations by Written
Request or, at the time of a premium payment, You instruct us to allocate that
payment differently.
You may have up to 10 different Accounts at any time.
SECTION 5 - CONTRACT VALUE
CONTRACT VALUE
The Contract Value at any time is the sum of the Fixed Account Value and the
Separate Account Value.
Unless You indicate otherwise, amounts withdrawn from the Contract Value by You
and charges described in this Contract will be deducted from the Fixed Account
and the Variable Accounts based on the proportion that the values of the Fixed
Account and the Variable Accounts bear to the Contract Value.
All values and benefits are equal to or more than those required by law. The
official responsible for supervising insurance in the state where the Contract
is delivered has a detailed summary of the method we use to determine values.
FIXED ACCOUNT VALUE
The Fixed Account Value is equal to:
(1) the net premium payments allocated to the Fixed Account, PLUS
(2) amounts transferred to the Fixed Account, PLUS
(3) interest credited to the Fixed Account, MINUS
(4) any partial withdrawals or transfers from the Fixed Account,
MINUS
(5) any withdrawal charges, Contract fees or premium taxes
deducted from the Fixed Account.
VA-95 Page 8
<PAGE> 9
The Company will credit interest to the Fixed Account. The minimum Fixed
Account interest rate is the rate shown on Page 3, compounded annually. The
Company, at its discretion, may credit interest rates greater than the minimum
Fixed Account interest rate.
SEPARATE ACCOUNT VALUE
The Separate Account Value is equal to the sum of the values in all the
Variable Accounts of the Separate Account, each of which is, prior to the
Annuity Commencement Date, equal to:
(1) net premium payments allocated to that Variable Account, PLUS
(2) any amount transferred to that Variable Account, PLUS
(3) any interest income, dividends, capital gains, realized or
unrealized, in that Variable Account, MINUS
(4) any partial withdrawals or transfers of amounts from that
Variable Account (including any applicable transfer charges),
MINUS
(5) any withdrawal charges, Contract Fees or premium taxes
deducted from that Variable Account, MINUS
(6) realized or unrealized net capital losses in that Variable
Account.
CONTRACT FEE
We charge a fee for establishing and maintaining our records for this Contract.
The charge is $7.50 per quarter and is deducted from the Contract Value at the
end of each three month period measured from the Date of Issue or, if earlier,
on the date of a full withdrawal. This charge does not apply after a payout
plan has begun.
PREMIUM TAX CHARGES
A charge will be made by us against the Contract Value of this Contract at the
time any premium taxes not previously deducted are payable.
TRANSFERS OF CONTRACT VALUES
While this Contract is in force prior to the Annuity Commencement Date, You may
transfer, by Written Request, Contract Values from one or more of the Variable
Accounts to another one or more of the Variable Accounts or to the Fixed
Account. You may make 12 such transfer requests per Contract Year without
charge. A charge of $25.00 will be imposed for each transfer request in excess
of 12. The transfer fee, if any, will be deducted from the Variable Account(s)
from which the transfer is made. If a transfer is made from more than one
Variable Account at the same time, the transfer fee will be deducted pro-rata
from the remaining Separate Account Values in such Variable Accounts. We
reserve the right to waive the transfer fee.
While this Contract is in force prior to the Annuity Commencement Date, You may
transfer up to 20% of the Fixed Account Value from the Fixed Account to one or
more of the Variable Accounts in any Contract Year. There is no charge for
transfers from the Fixed Account to one or more of the Variable Accounts.
Amounts transferred under the Interest Sweep Provision are included in the
maximum amount which can be transferred from the Fixed Account in any Contract
Year.
VA-95 Page 9
<PAGE> 10
After annuity payments have begun, You may exchange annuity units from one or
more of the Variable Accounts for annuity units of one or more of the Variable
Accounts once each Contract Year. There is no charge for this exchange.
If you transfer Contract Value from an Eligible Variable Account, you will no
longer be eligible for the Maturity Benefit that applied to that amount.
The transfer privileges may be suspended or modified by us at any time.
Amounts deducted from the Fixed Account for charges, withdrawals and transfers
to the Variable Accounts, for the purpose of crediting interest are accounted
for on a last in, first out basis. Amounts deducted from the Variable Accounts
for charges, withdrawals and transfers to the Fixed Account or among the
Variable Accounts, for the purpose of determining the Maturity Benefit are
accounted for on a last in, first out basis.
DOLLAR COST AVERAGING
Before the Annuity Commencement Date, You may elect to have an amount You
specify automatically transferred from one Variable Account to one or more
other Variable Accounts. Dollar Cost Averaging transfers will be made
quarterly. The amount transferred must be at least $100. There is no charge for
dollar cost averaging transfers.
INTEREST SWEEP
Before the Annuity Commencement Date, You may elect to have any interest
credited to the Fixed Account automatically transferred to one or more Variable
Accounts at the beginning of each calendar quarter. There is no charge for
interest sweep transfers.
AUTOMATIC ACCOUNT BALANCING
Before the Annuity Commencement Date, You may elect automatic account
balancing. If You select this option, on the first Valuation Day of a calendar
quarter, we will automatically balance your variable accounts to match your
premium allocation percentages. There is no charge for automatic account
balancing.
SECTION 6 - SEPARATE ACCOUNT PROVISIONS
SEPARATE ACCOUNT
Variable benefit payments under the Contract are provided through the Separate
Account. The Separate Account is registered with the SEC as a unit investment
trust under the Investment Company Act of 1940. The portion of the assets of
the Separate Account equal to the reserves and other Contract liabilities of
the Separate Account are not chargeable with the liabilities arising out of any
other business that we may conduct and which has no specific relation to or
dependence upon the Separate Account. We have the right to transfer to our
general account any assets of the Separate Account which are in excess of such
reserves and other liabilities. The Company established the Separate Account to
support the operations of this Contract and other variable Contracts the
Company may offer.
VA-95 Page 10
<PAGE> 11
VARIABLE ACCOUNTS
The assets of the Separate Account are divided into subdivisions called
Variable Accounts that are listed on Page 3A of this Contract and in the
current prospectus You received. Each Variable Account invests exclusively in
shares of a corresponding Portfolio of a Fund listed on Page 3A of this
Contract. The income, gains and losses, whether or not realized, from assets
allocated to each Variable Account shall be credited to or charged against such
Variable Account without regard to other income, pains, or losses of any other
Variable Account. Any amounts of income, dividends and gains distributed from
the shares of a Fund are re-invested in additional shares of that Fund at its
net asset value.
The Separate Account supporting benefits of this Contract and the reserves
supporting variable annuity payments under this Contract provided by the
Separate Account depend on the investment performance of the Funds in which
your selected Variable Accounts are invested. We do not guarantee the
investment performance of the Funds. You bear the investment risk related to
Separate Account Value and variable annuity payments supported by the Variable
Accounts.
You may have up to 10 different Accounts at any one time.
ACCUMULATION UNITS
Net premium payments may be allocated among and amounts may be transferred to
the Variable Accounts. Net premium payments or transferred amounts are
converted into accumulation units of the Variable Account to which the payment
is allocated or the transfer is made. The number of accumulation units of each
Variable Account is determined by dividing the dollar value of a net premium
payment allocated to a Variable Account by the value of one accumulation unit
for the Variable Account for the valuation period during which we received the
payment. The number of accumulation units so determined will not be affected by
any subsequent change in the value of such accumulation unit.
ACCUMULATION UNIT VALUE
The accumulation unit value for each Variable Account will vary to reflect the
investment experience of the applicable Fund. The accumulation unit value for a
Variable Account will be determined on each valuation day by multiplying the
accumulation unit value of the Variable Account on the preceding valuation day
by the net investment factor for that Variable Account for the next following
valuation period then ended. The value of the Variable Account on each
valuation day is then determined by multiplying the number of accumulation
units in that Variable Account by the accumulation unit value on that valuation
day.
VALUE OF ANY VARIABLE ACCOUNT
Allocation of net premiums and transfers to a Variable Account will increase
the number of accumulation units of that Variable Account. Partial withdrawals
and transfers from a Variable Account will result in cancellation of
accumulation units of that Variable Account as will a full withdrawal, death of
any owner, the Annuity Commencement Date and the deduction of a Contract fee
and any applicable premium taxes. Accumulation units are canceled as of the end
of
VA-95 Page 11
<PAGE> 12
the Valuation Period in which the Company receives a Written Request or notice
regarding the event.
NET INVESTMENT FACTOR
The net investment factor is an index applied to measure the investment
performance of a Variable Account from one valuation period to the next. The
net investment factor may be greater or less than one; therefore, the value of
an accumulation unit may increase or decrease from day to day.
The net investment factor for each Variable Account is equal to the net asset
value per share of the corresponding Fund at the end of the valuation period
(plus the per share amount of any unpaid dividends or capital gains by the
Fund) divided by the net asset value per share of the corresponding Fund at the
beginning of the valuation period and subtracting from that amount the
mortality and expense risk charge and the administration charge shown on Page
3.
ANNUITY UNIT VALUE
The value of an annuity unit for each Variable Account will vary to reflect the
investment experience of the applicable Fund. The value of an annuity unit for
a Variable Account will be determined on each valuation day by multiplying the
annuity unit value of the Variable Account on the preceding valuation day by
the product of (a) the net investment factor for that Variable Account for the
day for which the annuity value is being calculated and (b) an interest factor
to neutralize the assumed interest rate.
You may choose an assumed interest rate of 3%, 4%, or 5% at the time a variable
payout plan is selected.
SECTION 7 - WITHDRAWAL PROVISIONS
PARTIAL WITHDRAWALS
You may request, in writing, to withdraw part of the Contract Value in amounts
not less than $250. Your request must be received before the Annuity
Commencement Date. If the Contract Value is reduced to below $1,000 by a
partial withdrawal, the Company reserves the right to pay the Surrender Value
to the Owner in a lump sum. Such payment will terminate the Contract and all
obligations under the Contract.
You specify the Variable Account(s) or Fixed Account from which the partial
withdrawal is made. If You do not specify from which accounts the withdrawal is
to be made or the amount in the designated account is inadequate to comply with
your request, we will make the withdrawal pro-rata from each Variable Account
and the Fixed Account based on the proportion that your Variable Account Values
and the Fixed Account Value bear to the Contract Value prior to the withdrawal.
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<PAGE> 13
We will pay You the amount You request in connection with a partial withdrawal
by canceling Accumulation Units from the appropriate Variable Accounts and/or
reducing the value of the Fixed Account.
ANNUAL FREE WITHDRAWAL AMOUNT
The annual free withdrawal amount is equal to 10% of the Contract Value at the
beginning of the Contract Year. For the purpose of determining the annual free
withdrawal amount and any withdrawal charge, amounts withdrawn will be deemed
to be from premiums. There will be a withdrawal charge on partial withdrawals
in excess of the annual free withdrawal amount.
FULL WITHDRAWAL OF CONTRACT VALUE
You may cancel this Contract by Written Request and receive the Surrender Value
at any time before the Annuity Commencement Date. The Surrender Value will be
the Contract Value, as of the end of the Valuation Period in which the Company
receives your Written Request in our Annuity Service Office, less any
withdrawal charge, Contract fee and premium taxes not previously deducted.
WITHDRAWAL CHARGES
Subject to the annual free withdrawal amount, full or partial withdrawals of
Contract Values may be subject to a contingent deferred sales charge known as
the Withdrawal Charge. Withdrawal Charges are determined by the number of years
from the Date of Issue.
Amounts subject to the Withdrawal Charge will be deemed to be first from
premium payments then from earnings.
Any applicable Withdrawal Charge will be deducted from the remaining value in
the Variable Account(s) or Fixed Account from which the withdrawal is being
made. If such remaining Variable Account Value(s) or Fixed Account Value is
insufficient for this purpose, the Withdrawal Charge will be deducted pro-rata
from all Variable Account(s) and the Fixed Account based on the remaining
Contract Value in each Variable Account and the Fixed Account.
The charge is a percentage of the amount withdrawn (not to exceed the aggregate
amount of premium payments made) and equals:
<TABLE>
<CAPTION>
Length of Time from
Date of Issue
(number of full years elapsed) Charge
<S> <C>
0-6 7%
7 6%
8 4%
9 2%
10 0%
</TABLE>
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No Withdrawal Charge will be assessed in the event the Contract terminates due
to the death of the Annuitant or Owner or if Contract Values are applied to a
life annuity or an annuity with a payment period of at least 10 years.
PAYMENT ON WITHDRAWAL
Payment on any request for withdrawal, or for the Death Benefit, will be made
as soon as possible and, with respect to the Contract Values in the Variable
Accounts, no later than seven days after the Written Request is received by the
Company. However, such payment may be postponed for any period:
1) when the New York Stock Exchange is closed; or
2) when trading on the New York Stock Exchange is restricted; or
3) when an emergency exists as a result of which (a) disposal of
securities held in the Variable Accounts is not reasonably
practicable or (b) it is not reasonably practicable to fairly
determine the value of the net assets of the Variable Account;
or
4) during any other period when the U.S. Securities and Exchange
Commission, by order, so permits for the protection of
security holders.
Rules and regulations of the U.S. Securities and Exchange Commission will
govern as to whether the conditions set forth in 2, 3 and 4 exist.
For payments or transfers from the Fixed Account, we may defer payment for up
to 6 months from the date we receive your written request. We will pay interest
of at least 3% per annum on the amount withdrawn if the payment is deferred
more than 30 days after receipt of documentation necessary to complete the
transaction.
SECTION 8 - OWNERSHIP PROVISIONS
CONTRACT OWNER
The Annuitant is the Owner unless otherwise stated in the application or unless
changed under the Transfer of Ownership Provision. The Owner is entitled to
all Contract rights and benefits while the Annuitant is alive, without the
consent of any other person.
JOINT OWNER
The Contract may be owned by two persons as Joint Owners, with rights of
survivorship. In this case, the Joint Owner most consent to any withdrawals or
changes to the Contract or beneficiary.
CONTINGENT OWNER
If You as Owner are not the Annuitant, You may name a Contingent Owner to take
over as Owner if You die before the Annuitant. The naming of a Contingent Owner
will not take effect until we record it at the Annuity Service Office. We are
not responsible for the tax consequences resulting from a change of ownership.
VA-95 Page 14
<PAGE> 15
TRANSFER OF OWNERSHIP
You may transfer the ownership of this Contract on forms provided by us. The
completed forms must be recorded by us at our Annuity Service Office. The
transfer will be effective as of the date the transfer form is signed. We may
require the return of the Contract for endorsement. The transfer is subject to
any payment made or other action taken by us before we received your Written
Request. You may also name a Contingent Owner in the same manner.
QUALIFIED PLANS
If and while this Contract is part of a tax-qualified retirement plan under the
U.S. Internal Revenue Code, You may not change the owner or assign the Contract
or make withdrawals unless permitted by the plan.
BENEFICIARY
The designation of a Beneficiary in the application shall remain in effect
until You change it. You may name a Beneficiary and change any named
Beneficiary during the lifetime of the Annuitant by Written Request
satisfactory to us. The change will take effect on the date the Written Request
is signed. A change will not apply to any payment we make or any other action
we take before the Written Request is received in our Annuity Service Office.
ASSIGNMENT
You may assign the Contract in writing. The assignment will not bind us until
we have received a copy. Your rights and those of any Beneficiary or Contingent
Owner will be subject to the assignment. We are not responsible for the
validity or tax consequences of the assignment.
SECTION 9 - DEATH BENEFIT PROVISIONS
DEATH OF OWNER
If the Contract is owned by Joint Owners and one of them dies, the surviving
Owner will become the sole new Owner. If the Contract is owned by one person
and a Contingent Owner is named, the Contingent Owner will become the new Owner
if the sole Owner dies. If there is no Joint or Contingent Owner at the time of
the Owner's death, the estate of the Owner will become the new Owner.
If an Owner who is not also the Annuitant dies before the Annuitant and before
the Annuity Commencement Date, the Contract Value will be paid to the new Owner
within 5 years of the deceased Owner's death. Such new Owner may elect to
receive periodic payments to begin within one year (1 ) of the deceased Owner's
death. These payments must be in the form of a life annuity or an annuity for a
period not exceeding the new Owner's life expectancy. However, if the new Owner
is the surviving spouse of the deceased Owner, the Contract may continue. The
surviving spouse may exercise all rights of ownership under the Contract.
If an Owner or Joint Owner who is the Annuitant dies before the Annuity
Commencement Date, the Death of the Annuitant Provisions will apply.
VA-95 Page 15
<PAGE> 16
If an Owner dies on or after the Annuity Commencement Date, any payments that
remain must be made at least as rapidly as under the payout plan in effect on
the date of the Owner's death.
DEATH OF ANNUITANT
If the Annuitant dies before the Annuity Commencement Date, the Beneficiary
will be paid a death benefit. The death benefit is equal to the greater of (a)
the Contract Value as of the date satisfactory proof of death and payment
instructions are received by the Company and (b) the premium payments minus any
prior withdrawals. Any death benefit will be paid to the Beneficiary either in
one sum or in the form of an annuity if the Beneficiary should so elect within
60 days of the Annuitant's death. The annuity must be in the form of a life
annuity or an annuity for a period not exceeding the Beneficiary's life
expectancy. However, if the Annuitant is an Owner and the surviving spouse is
the sole beneficiary, the surviving spouse may elect to continue the Contract
becoming the new Owner and Annuitant.
PROOF OF DEATH
Proof of death satisfactory to the Company consists of a certified copy of the
death record or a certified copy of a court decree reciting a finding of death
or any other proof satisfactory to the Company.
REQUIRED DISTRIBUTIONS
An Owner or Beneficiary who is required to begin to receive payments in the
form of a life annuity or annuity for a period certain not exceeding the
recipient's life expectancy may choose a payout plan.
PRIORITY OF BENEFICIARIES
You may designate the Beneficiaries as primary or contingent to indicate the
order in which they take. If You name two or more Beneficiaries of the same
class they will share equally unless You state how they are to share. If You
identify a relative as a Beneficiary, we will interpret that to mean a relative
of the Annuitant unless You state the relationship is to another person.
Any death benefit will be paid to the primary beneficiaries who are living when
payments are due. If there are no living primary beneficiaries, payments will
be made to those contingent beneficiaries who are living when payment is due.
If all the beneficiaries have predeceased the Annuitant, the death benefit will
be paid to the Owner, if living, or the Annuitant's estate.
Any beneficiary who dies within 10 days of the Annuitant's death will not be
entitled to any benefits payable on the Annuitant's death unless that
beneficiary is living when we receive due proof of the Annuitant's death.
SECTION 10 - PAYOUT PLAN PROVISIONS
ANNUITY COMMENCEMENT DATE
VA-95 Page 16
<PAGE> 17
We will start annuity payments to the Annuitant on the Annuity Commencement
Date shown on Page 3 unless You request a change in the Annuity Commencement
Date. You can change the Annuity Commencement Date to any Contract anniversary
or to any date on which You withdraw the Contract Value. Your Written Request
must be received in our Annuity Service Office at least 31 days prior to the
existing Annuity Commencement Date. Annuity payments must commence no later
than the Annuitant's 85th birthday.
If you change the Annuity Commencement Date to a date earlier than the Maturity
Benefit Date, you will no longer be eligible for the Maturity Benefit.
PAYOUT PLANS
You may apply the Contract Value, less any applicable surrender charges, under
any of the following payout plans or any other plan then being offered by the
Company. Payout Plans may be fixed or variable or a combination of both.
You may request quarterly, semi-annual, or annual annuity payments instead of
monthly payments.
1) Installment Income Plans
(A) Fixed Period - Paid in monthly payments for the number of
years You select from 1 to 30 years. The amount of the
payment is not guaranteed if a variable payout is selected. If
a fixed payout is selected, the payments for each $1,000
applied will not be less than those shown in the Fixed Period
Table in Section 13. Payments may be commuted.
(B) Fixed Amount - Paid in equal monthly installments of
$5.00 or more for each $1,000 applied. The number of payments
is not guaranteed if a variable payout is selected. If a fixed
payout is selected, payments will be made until the full
amount applied with compound interest at not less than 3% is
used up. Payments may be commuted.
2) Life Income Plans
(A) One Life - Paid monthly during the lifetime of the Payee.
We will guarantee payments for either 10 or 20 years and for
as long as the Payee lives. The amount of the payment is not
guaranteed if a variable payout is selected. If a fixed
payout is selected, the payments for each $1,000 applied will
not be less than those shown in the One Life Table. The amount
paid is based on the Payee's sex and age on the date of the
first annuity payment. Payments guaranteed for 10 or 20 years
may be commuted. Payments guaranteed only for the life of the
Payee may not be commuted.
(B) Joint and Survivor - paid in monthly payments jointly to
two Payees and after one dies to the surviving Payee. The
amount paid is based on the Payees' sex and age on the date of
the first payment. If either one dies before the due date of
the
VA-95 Page 17
<PAGE> 18
first payment, we will pay the survivor under the Life Income
Plan A with payments guaranteed for 10 years. Payments may
not be commuted.
VARIABLE PAYOUT
A variable payout plan is a payout plan with payments increasing or decreasing
in amount in accordance with the annuity unit values of one or more of the
Variable Account(s) (as described in the Separate Account Provisions). After
the first monthly payment for a variable payout has been determined in
accordance with the provisions of this Contract, a number of annuity units is
determined by dividing that first monthly payment by the appropriate Variable
Account annuity unit value on the Annuity Commencement Date.
Once variable payments begin, the number of annuity units remains fixed with
respect to a Variable Account. If the Contract Owner elects by Written Request
to exchange annuity units of one Variable Account for those of another Variable
Account, the number will change effective with that election but will remain
fixed in number following such election. The method of calculating the annuity
unit value is described under the Separate Account Provisions.
The dollar amount of the second and subsequent variable payments is not
predetermined and may increase or decrease from period to period. The actual
amount of each variable payment after the first is determined by multiplying
the number of annuity units by the annuity unit values described in the
Separate Account Provisions.
FIXED PAYOUT
We guarantee interest under all fixed payout plans at a minimum rate of 3% a
year. We may increase the interest rate above the minimum. Monthly payments on
Life Income Plans will be based on the interest rate in effect on the due date
of the first payment.
CHOOSING A PAYOUT PLAN
You may choose or change a payout plan any time before the Annuity Commencement
Date. The choice must be in writing and in a form satisfactory to us. The
minimum amount which may be applied under a payout plan is $2,500. Any choice
involving more than one payout plan must have our approval.
If You do not elect a payout plan by the Annuity Commencement Date, we will
apply the Contract Value, less any applicable surrender charges, under Life
Income Plan A with payments guaranteed for 10 years. The Contract Value will be
allocated to a fixed and variable payout in the same proportion that Your
interest in the Fixed and Variable Accounts bears to the total Contract Value.
When a Payee who is entitled to a payment in one sum chooses a payout plan, the
rights of all other Beneficiaries end. Any amount payable when a Payee dies
will be paid in one sum to the Payee's estate unless the Payee has named a
Successor Payee.
Each payment must be at least $25. We may change the number of payments we make
in a year so that each payment is at least $25.
VA-95 Page 18
<PAGE> 19
DATE OF PAYMENT
The first payment under any payout plan will be made on the fifteenth day of
the month immediately following your selection of a plan. Subsequent payments
shall be made on the fifteenth day of each subsequent month in accordance with
the manner of payment selected.
SECTION 11 - MATURITY BENEFIT
MATURITY BENEFIT
On the Maturity Benefit Date, we will pay the Maturity Benefit if the value of
an Eligible Variable Account is less than the sum of the premium payments which
were allocated to that Eligible Variable Account and which have remained
continuously for a minimum of ten years in that Eligible Variable Account.
The Maturity Benefit is equal to:
a) the premium payments which were allocated to that Eligible
Variable Account which have remained continuously for a minimum of ten
years in that Eligible Variable Account, minus
b) the value of that Eligible Variable Account on the Maturity
Benefit Date.
Eligible Variable Accounts are those which are invested in Funds which invest
primarily in stocks, equity securities, bonds or money market instruments.
These Funds are identified on Page 3A. The Maturity Benefit Date is the later
of the Annuitant's age 70 or 10 years after the date of issue.
SECTION 12 - GENERAL PROVISIONS
CHANGE IN THE OPERATION OF THE SEPARATE ACCOUNT
If required, approval of or change of any investment policy will be filed with
the Insurance Department of the State of Massachusetts and the state where this
Contract is delivered.
When permitted by law, we may create new separate accounts; combine separate
accounts, including the Separate Account; add new Variable Accounts to or
remove existing Variable Accounts from the Separate Account or combine Variable
Accounts; make new Variable Accounts or other Variable Accounts available to
such classes of Contracts as we may determine; add new Funds or remove existing
Funds; if shares of a Fund are no longer available for investment or if we
determine that investment in a Fund is no longer appropriate in light of the
purposes of the Separate Account, substitute a different Fund for any existing
Fund; de-register the Separate Account under the Investment Company Act of 1940
in the event registration is no longer required; operate the Separate Account
as a management investment company under the Investment Company Act of 1940 or
as any other form permitted by law; and make any changes to the Separate
Account or its operations as may be required by the Investment Company Act of
1940 or other applicable law or regulations.
VA-95 Page 19
<PAGE> 20
If shares of the Fund underlying an Eligible Variable Account are no longer
available for investment by the Separate Account such that the Company is
forced to redeem all shares of the Fund, the Company will not pay a Maturity
Benefit on premium payments allocated to such Eligible Variable Account. The
Company will pay a Maturity Benefit on premium payments allocated to an
Eligible Variable Account if: (a) the Fund underlying an Eligible Variable
Account changes its investment objective; or (b) the Company determines that an
investment in a Fund underlying an Eligible Variable Account is no longer
appropriate in light of the purposes of the Separate Account.
CREDITOR'S CLAIMS
All payments under the Contract will be exempt from the claims of creditors and
legal process to the extent permitted by law. No payment will be transferred,
assigned or withdrawn before it becomes payable unless we agree.
INCONTESTABILITY
The Contract will be incontestable from the Date of Issue.
INCORRECT AGE OR SEX
If the Annuitant's age or sex has been misstated, the amount of the annuity
payable by the Company shall be that provided by that portion of the amounts
allocated to effect such annuity on the basis of the corrected information
without changing the date of the first payments of such annuity. Any
overpayment we make will be charged with compound interest against subsequent
payments. Any amounts we owe as a result of under-payment will be paid with
compound interest upon receipt of notice of the underpayment. The rate will be
the rate we use to determine the number or amount of the payments.
MODIFICATION OF CONTRACT
Any change in the Contract or waiver of its provisions must be in writing and
signed by our President, a Vice President, our Secretary or Assistant
Secretary. No other person can change or waive any of its provisions.
Upon notice to You, the Company may modify the Contract if necessary to permit
the Contract or the Separate Account to comply with any applicable law or
regulation issued by a government agency or if necessary to assure continued
qualification of the contract under the Internal Revenue code or other federal
or state laws relating to retirement annuities or variable annuities contracts;
or if necessary to effect a change in the operation of the Separate Account; or
if the modification provides additional investment options.
In the event of such modifications, the Company will make the appropriate
endorsement to the Contract.
NON-PARTICIPATING
This Contract does not participate in surplus earnings.
VA-95 Page 20
<PAGE> 21
PROOF OF FACTS
We may ask any person claiming the right to payments for proof satisfactory to
us of such person's age, sex and right to payment. Any payments we make
relying on that proof discharge us from any obligation to make that payment to
another person.
REPORTS TO THE OWNER
We will provide You with a report showing the Contract Values at least once
each year. We will also provide You an annual report of the Separate Account
and any other notice or report required by law to be delivered to Owners. All
reports and notices will be sent to your last known address.
SUBMISSION OF CONTRACT
We may ask You to relinquish the Contract or send it to us for endorsement
before we make any payment. Failure to have You surrender the Contract or note
payment on it does not indicate that we have not made payment.
VOTING PRIVILEGES
So long as Federal law requires, we will give You certain voting privileges. As
Contract Owner, if You have voting privileges, we will send a notice to You
telling You the time and place of a shareholder meeting. The notice will also
explain the matter to be voted upon and how many votes You get.
The amount of the payment is not guaranteed if a variable payout is selected.
If a fixed payout is selected, the payments for each $1,000 applied will not be
less than those shown in the Fixed Period Table in Section 13.
VA-95 Page 21
<PAGE> 22
SECTION 13 - TABLES
FIXED PERIOD MINIMUM INCOME TABLE*
Monthly Payments for each $1,000 applied
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NUMBER MONTHLY NUMBER MONTHLY NUMBER MONTHLY
OF INSTALL- OF INSTALL- OF INSTALL-
YEARS MENTS YEARS MENTS YEARS MENTS
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 84.47 11 8.86 21 5.32
2 42.86 12 8.24 22 5.15
3 28.99 13 7.71 23 4.99
4 22.06 14 7.26 24 4.84
5 17.91 15 6.87 25 4.71
6 15.14 16 6.53 26 4.59
7 13.16 17 6.23 27 4.47
8 11.68 18 5.96 28 4.37
9 10.53 19 5.73 29 4.27
10 9.61 20 5.51 30 4.18
- -------------------------------------------------------------------------------------
</TABLE>
*Values are based on compound interest at 3.0% a year.
Other rates are available on request.
VA-95 Page 22
<PAGE> 23
ONE LIFE MINIMUM INCOME TABLE*
Monthly Payments for each $1,000 applied
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Age of Life Only Income Life 10 Years Certain Life 20 Years Certain
Payee ---------------------------------------------------------------------------------------
Last Male Female Male Female Male Female
Birthday
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
50 4.17 3.82 4.13 3.81 4.01 3.76
51 4.24 3.88 4.20 3.87 4.07 3.81
52 4.32 3.95 4.27 3.93 4.13 3.86
53 4.40 4.01 4.35 3.99 4.19 3.92
54 4.49 4.08 4.43 4.06 4.25 3.97
55 4.58 4.15 4.51 4.13 4.31 4.03
56 4.67 4.23 4.60 4.20 4.37 4.09
57 4.78 4.31 4.70 4.28 4.44 4.15
58 4.88 4.40 4.80 4.36 4.50 4.22
59 5.00 4.49 4.90 4.44 4.57 4.29
60 5.12 4.59 5.01 4.54 4.63 4.35
61 5.26 4.69 5.13 4.63 4.70 4.42
62 5.40 4.80 5.25 4.73 4.77 4.49
63 5.55 4.92 5.37 4.84 4.83 4.57
64 5.71 5.04 5.51 4.95 4.89 4.64
65 5.89 5.18 5.65 5.07 4.95 4.71
66 6.07 5.32 5.79 5.20 5.01 4.78
67 6.27 5.47 5.94 5.33 5.07 4.85
68 6.48 5.64 6.10 5.48 5.12 4.92
69 6.71 5.82 6.26 5.62 5.17 4.99
70 6.95 6.01 6.42 5.78 5.22 5.05
71 7.20 6.22 6.59 5.94 5.26 5.11
72 7.47 6.44 6.76 6.11 5.30 5.17
73 7.76 6.68 6.93 6.29 5.33 5.22
74 8.07 6.94 7.11 6.48 5.36 5.27
75 8.41 7.23 7.29 6.67 5.39 5.31
76 8.76 7.53 7.46 6.86 5.42 5.35
77 9.15 7.86 7.64 7.06 5.44 5.38
78 9.56 8.22 7.81 7.26 5.45 5.40
79 9.99 8.60 7.98 7.46 5.47 5.43
80 10.46 9.02 8.14 7.66 5.48 5.45
81 10.96 9.47 8.29 7.85 5.49 5.46
82 11.49 9.96 8.44 8.04 5.49 5.48
83 12.05 10.49 8.58 8.22 5.50 5.49
84 12.65 11.06 8.71 8.39 5.50 5.49
85 13.29 11.67 8.83 8.55 5.51 5.50
86 13.97 12.34 8.95 8.69 5.51 5.50
87 14.69 13.05 9.05 8.83 5.51 5.51
88 15.46 13.82 9.14 8.95 5.51 5.51
89 16.27 14.62 9.22 9.05 5.51 5.51
90 17.14 15.47 9.30 9.15 5.51 5.51
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
*Values are based on compound interest at 3.0% a year.
Other rates are available on request.
VA-95 Page 23
<PAGE> 24
JOINT & SURVIVOR WITH 10 YEAR CERTAIN TABLE*
Monthly Payments for each $1,000 applied
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Number of Years Younger Same Number of Years Older
Age
Female: 7 6 5 4 3 2 1 1 2 3
- ------------------------------------------------------------------------------------------------
Male Age:
================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
50 3.36 3.38 3.41 3.44 3.46 3.49 3.52 3.55 3.57 3.60 3.63
51 3.39 3.42 3.45 3.48 3.51 3.53 3.56 3.59 3.62 3.65 3.68
52 3.43 3.46 3.49 3.52 3.55 3.58 3.61 3.64 3.67 3.70 3.73
53 3.47 3.50 3.53 3.56 3.60 3.63 3.66 3.69 3.72 3.75 3.79
54 3.51 3.55 3.58 3.61 3.64 3.68 3.71 3.74 3.78 3.81 3.84
55 3.56 3.59 3.63 3.66 3.70 3.73 3.77 3.80 3.84 3.87 3.91
56 3.60 3.64 3.68 3.71 3.75 3.79 3.82 3.86 3.90 3.94 3.97
57 3.65 3.69 3.73 3.77 3.81 3.84 3.88 3.92 3.96 4.00 4.04
58 3.70 3.74 3.78 3.82 3.87 3.91 3.95 3.99 4.03 4.07 4.12
59 3.76 3.80 3.84 3.89 3.93 3.97 4.02 4.06 4.11 4.15 4.19
60 3.82 3.86 3.90 3.95 4.00 4.04 4.09 4.14 4.18 4.23 4.28
61 3.88 3.92 3.97 4.02 4.07 4.12 4.17 4.22 4.27 4.32 4.37
62 3.94 3.99 4.04 4.09 4.14 4.19 4.25 4.30 4.35 4.41 4.46
63 4.01 4.06 4.11 4.17 4.22 4.28 4.33 4.39 4.45 4.50 4.56
64 4.08 4.13 4.19 4.25 4.31 4.37 4.43 4.49 4.55 4.60 4.66
65 4.15 4.21 4.27 4.33 4.40 4.46 4.52 4.59 4.65 4.71 4.78
66 4.23 4.30 4.36 4.43 4.49 4.56 4.63 4.69 4.76 4.83 4.90
67 4.32 4.39 4.45 4.52 4.59 4.66 4.74 4.81 4.88 4.95 5.02
68 4.41 4.48 4.55 4.63 4.70 4.78 4.85 4.93 5.01 5.08 5.16
69 4.50 4.58 4.66 4.74 4.81 4.90 4.98 5.06 5.14 5.22 5.30
70 4.61 4.69 4.77 4.85 4.94 5.02 5.11 5.19 5.28 5.37 5.45
71 4.71 4.80 4.89 4.97 5.06 5.16 5.25 5.34 5.43 5.52 5.61
72 4.83 4.92 5.01 5.11 5.20 5.30 5.40 5.49 5.59 5.69 5.78
73 4.95 5.04 5.14 5.24 5.35 5.45 5.55 5.66 5.76 5.86 5.96
74 5.08 5.18 5.28 5.39 5.50 5.61 5.72 5.83 5.93 6.04 6.14
75 5.21 5.32 5.43 5.55 5.66 5.78 5.89 6.01 6.12 6.23 6.34
- ------------------------------------------------------------------------------------------------
</TABLE>
*VALUES ARE BASED ON COMPOUND INTEREST AT 3.0% A YEAR.
OTHER RATES NOT SHOWN WILL BE PROVIDED ON REQUEST.
VA-95 Page 24
<PAGE> 25
IL ANNUITY AND INSURANCE COMPANY
2960 North Meridian Street
Indianapolis, Indiana 46208
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
NON-PARTICIPATING
FLEXIBLE PREMIUM
INCOME PAYABLE AT MATURITY
DEATH BENEFIT PAYABLE IN THE EVENT OF THE ANNUITANT'S DEATH PRIOR TO MATURITY
For service or information about your policy, contact the ANNUITY SERVICE
OFFICE, P.O. BOX 364, HADDAM, CT, 06438, 1-800-388-1331 or contact your agent.
<PAGE> 1
EXHIBIT 4(b)
IL ANNUITY AND INSURANCE COMPANY
ENDORSEMENT FOR QUALIFIED 403(b) ANNUITY
This Endorsement is issued as part of the Annuity Contract to which it is
attached for Federal Tax purposes pursuant to the provision of Section 403(b)
of the Internal Revenue Code of 1986, as amended. The conditions and provisions
of this Annuity Contract apply except as amended herein:
Distribution Restrictions Purchase payments and earnings thereon received on
or after January 1, 1989, subject to Section 403(b) of the Internal Revenue Code
cannot be distributed prior to the Contract Owner reaching age 59-1/2 unless
such distribution is a result of such Contract Owner's:
(a) financial hardship (contributions only may be distributed);
(b) separation from service;
(c) death; or
(d) disability.
Distributions for Contract Owner's financial hardship or separation from
service may be subject to an additional penalty tax as a premature
distribution.
Ownership In no event shall any person other than the Contract Owner be named
as the Annuitant under the Contract and the entire interest of the Contract
Owner in the Contract shall be nonforfeitable.
When issued with this Endorsement, the Contract is not transferable. The
rights, title and interest in the Contract and in the Contract Owner's Account
thereunder may not be transferred nor may such rights, title and interest be
assigned or pledged to anyone other than the Company.
When issued with this Endorsement, the Contract is established for the
exclusive benefit of the Contract Owner and the Contract Owner's beneficiaries.
Required Distributions The portion of a Contract Owner's Account comprised of
purchase payments and interest after December 31, 1986, (hereinafter referred to
as "Post 1986 Interest") must be distributed or commence to be distributed on
the Annuity Commencement Date. The Annuity Commencement Date (ACD) shall not be
later than the first day of April following the calendar year in which the
Contract Owner attains age 70-1/2. On that date, annuity payments must commence
in equal or substantially equal amounts of Annuity Units which do not extend:
(a) Beyond the life of the Contract Owner or the lives of the Contract Owner
and the Contract Owner's designated beneficiary, or
(b) Over a guaranteed payment period greater than the life expectancy of the
Contract Owner
403B-95
<PAGE> 2
or the joint and last survivor life expectancy of the Contract Owner and the
Contract Owner's designated beneficiary.
If the Contract Owner's Account is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with the ACD and each
year thereafter) must be at least an amount equal to the quotient obtained by
dividing the Contract Owner's Post-1986 Interest by the life expectancy of the
Contract Owner and the Contract Owner's designated beneficiary. Annuity
payments distributed during the life of the Contract Owner must also comply
with the minimum distribution incidental benefit requirement by substituting
the Contract Owner's Account value for the Post-1986 Interest in the preceding
sentence.
For calendar years beginning after December 31, 1988, the amount to be
distributed each year, beginning with the first calendar year for which
distributions are required and then for each succeeding calendar year, shall
not be less than the quotient obtained by dividing the Contract Owner's
Post-1986 Interest by the lesser of (1) the applicable life expectancy or (2)
if the Contract Owner's spouse is not the designated beneficiary, the
applicable divisor determined from the table set forth in Q&A-4 of section
1.401 (a)(9)-2 of the Proposed Income Tax Regulations. Distributions are the
death of the Contract Owner shall be calculated using the applicable life
expectancy as the relevant divisor without regard to proposed regulations
section 1.401 (a)(9)-2.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of section 1.72-9 of the Income Tax Regulations. Unless otherwise
elected by the Contract Owner by the time distributions are required to begin,
life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Contract Owner and shall apply to all subsequent years.
The life expectancy of a non-spouse beneficiary may not be recalculated,
instead life expectancy will be calculated using the attained age of such
beneficiary during the calendar year in which distributions are required to
begin pursuant to this section, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each calendar year
which has elapsed since the calendar year life expectancy was first calculated.
Distributions under an annuity under this Contract shall be made in accordance
with the requirements of section 401 (a)(9) of the Code and the regulations
thereunder.
Death of Owner If the Contract Owner dies before the entire Account is
distributed, the following distribution provisions shall apply:
(a) If the Contract Owner dies after the ACD, the remaining portion of such
Contract Owner's Account will continue to be distributed at least as rapidly as
under the method of distribution being used prior to the Contract Owners death.
(b) If the Contract Owner dies before the ACD, the Contract Owner's Account
will be distributed in accordance with one of the following provisions:
403B-95 Page 2
<PAGE> 3
(1) The entire interest of the Contract Owner's Account will be
distributed within five (5) years after the date of the Contract Owners
death
(2) If the Contract Owner's Account is payable to a beneficiary
designated by the Contract Owner and the Contract Owner has not elected
(1) above, then the entire Contract Owner's Account will be distributed in
substantially equal installments over the life or over a period certain
not greater than the life expectancy of the designated beneficiary
commencing on or before December 31 of the calendar year immediately
following the calendar year in which the owner died. The designated
beneficiary may elect at any time to receive greater payments.
(3) If the designated beneficiary is the Contract Owner's surviving
spouse, the spouse may elect to receive equal or substantially equal
payments over the life or life expectancy of the surviving spouse
commencing at any date prior to the life or life expectancy of the
surviving spouse commencing at any date prior to the later of (1) December
31 of the calendar year immediately following the calendar year in which
the Contract Owner died and (2) December 31 of the calendar year in which
the Contract Owner would have attained age 70-1/2. Such election must be
made no later than the earlier of December 31 of the calendar year
containing the fifth anniversary of the Contract Owner's death or the date
distributions are required to begin pursuant to the preceding sentence.
The surviving spouse may accelerate these payments at any time, i.e.,
increase the frequency or amount of such payments.
(c) Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. For purposes
of distributions beginning after the Annuitant's death, unless otherwise
elected by the surviving spouse by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the surviving spouse and shall apply to all subsequent years.
In the case of any other designated beneficiary, life expectancies shall be
calculated using the attained age of such beneficiary during the calendar year
in which distributions are required to begin pursuant to this section, and
payments for subsequent years shall be calculated based on such life expectancy
reduced by one for each calendar year which has elapsed since the calendar year
life expectancy was first calculated.
(d) For purposes of this requirement, any amount paid to a child of the
Contract Owner will be treated as if it had been paid to the surviving spouse
if the remainder of the interest becomes payable to the surviving spouse when
the child reaches the age of majority.
Direct Rollovers The Owner or the Owner's surviving spouse as beneficiary or
the Owner's former spouse as alternate payee under a qualified domestic
relations order within the meaning of Code section 414(q), as applicable (the
"Distributee"), may elect, at the time and in the manner we prescribe, to have
any portion of an eligible rollover distribution with respect to the
Distributee's interest in the Contract paid directly by the Company as a direct
rollover to an individual retirement account
403B-95 Page 3
<PAGE> 4
described in Code section 408(a), an individual retirement account described in
Code section 408(b) or (except in the case of a surviving spouse as
beneficiary) another annuity described in Code section 403(b) specified by the
Distributee that accepts direct rollovers. An eligible rollover distribution is
any distribution of all or any portion of the balance to the credit of the
distributee, other than (a) any distribution that is one of series of
substantially equal periodic payments not less frequently than annually) made
for the life or life expectancy of the Distributee or for the joint lives or
life expectancies of the Distributee and his or her beneficiary or for a
specified period of ten year or more, (b) any distribution to the extent it is
a required minimum distribution under Code section 403(b)(10) and (c) the
portion of any distribution that is not included in gross income. This
provision shall be interpreted in accordance with Code section 403 (b)(10) and
the regulations thereunder.
Loan Provisions Unless this Contract is part of a plan subject to Title I of
the Employee Retirement Income Security Act of 1974, you may borrow part of the
Surrender Value if you request a loan prior to the ACD. You may borrow up to
the lesser of (i) $50,000, reduced by the excess (if any) of the highest
outstanding loan balance during the one year period ending on the day before
the loan is made or the outstanding loan balance on the day the loan is made
(ii) the greater of 50% of the Surrender Value or $10,000 or (iii) 90% of the
Surrender Value less any outstanding loans. The minimum loan amount is $1,000.
You must file a written loan application which must be approved by the Company.
When a loan is made, an amount equal to the loan will be withdrawn from the
Accounts and transferred to the loan account. The loan account is part of a
Fixed Account to be used as collateral for any contract loan. If no Account is
specified in your loan application, the loan will be withdrawn pro rata from
all Variable Accounts having Separate Account Value and from the Fixed Account.
Amounts transferred to the loan account do not participate in the investment
experience of the Accounts from which they were withdrawn.
This Contract will be the sole security for the loan. We reserve the right to
limit the number of loans you may make in a contract year.
At each contract anniversary, we will compare the amount of the outstanding
loan to the amount in the loan account. We will also make this comparison any
time you repay all or part of the loan. At each such time, if the amount of
the outstanding loan (plus unpaid interest) exceeds the amount in the loan
account, we will withdraw the difference from the Accounts and transfer it to
the loan account. If the amount in the loan account exceeds the amount of the
outstanding loan, we will withdraw the difference from the loan account and
transfer it to the Accounts in accordance with your current Premium payment
Allocation. However, we reserve the right to require transfer to the Fixed
Account if the amount was transferred from the Fixed Account to establish the
loan.
Interest on any loan will be at an effective annual contract loan rate of 6% in
arrears.
Amounts in the loan account will earn interest at a minimum guaranteed
effective annual interest rate of 3% per year. We may declare from time to time
higher current interest rates. Different
403B-95 Page 4
<PAGE> 5
current interest rates may be applied to the loan account than the Fixed
Account.
Principal and interest must be paid in substantially level quarterly payments
for a 5-year period or if the loan is used to acquire your principal residence
for a 10 year period, but not beyond the year in which you attain age 70-1/2.
You are allowed a 31-day grace from the installment due date. If a quarterly
installment is not received within the 31 day grace period, a deemed
distribution of the entire amount of the outstanding principal, interest due,
and any applicable charges under this Contract, including any withdrawal
charge, will be made. This deemed distribution may be subject to income and
penalty tax under the Code and may adversely affect the treatment of the
Contract under Section 403(b).
If not repaid, loans will automatically reduce the amount of any Death Benefit
Proceeds, the amount payable upon a partial or full withdrawal of the Contract
and the amount applied on the Annuity Commencement Date to provide annuity
payments.
If the Contract loan at any time exceeds the Surrender Value of the Contract,
we will mail a notice to your last known address. If the excess amount is not
paid to us within 60 days after mailing of the notice, this Contract will
terminate without value.
General Provisions Any refund of premiums (other than those attributable to
excess contributions) will be applied, before the close of the calendar year
following the year of refund, toward the payment of future premiums or the
purchase of additional benefits.
The language of this Endorsement supersedes and controls any conflicting
language in the remainder of the Contract to which the Endorsement is attached.
The Company retains the right to further amend the Contract at any time without
the consent of the Contract Owner as necessary to conform with changes in the
Internal Revenue Code and regulation or rulings related thereto.
This Contract shall be subject to and interpreted in conformity with the
provisions, terms and conditions of the tax sheltered annuity plan documents of
which this Contract is a part, if any, and the terms and condition of section
403(b) of the Code, and with the terms and condition of section 403(b) of the
code without limitation, the Employee Retirement Income Security Act of 1974,
as amended, if applicable, as determined by the plan administrator or other
designated plan fiduciary, or if none, by you. We shall be under no obligation
either (a) to determine whether any contribution, distribution, loan or
transfer under the Contract complies with the provisions terms and conditions
of such plan, applicable law or this Endorsement, or (b) to administer such
plan including, without limitation, any provision required by the Retirement
Equity Act of 1984.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
403B-95 Page 5
<PAGE> 6
IL ANNUITY AND INSURANCE COMPANY
ENDORSEMENT FOR INDIVIDUAL RETIREMENT ANNUITY
This endorsement applies only if the application states this Contract is an
Individual Retirement Annuity (IRA).
This Contract is issued as an Individual Retirement Annuity under Section
408(b) of the Internal Revenue Code. To qualify, your Contract must meet the
following requirements:
1. You may not change ownership of this Contract at any time.
2. Your entire interest in the Contract is nonforfeitable. It is established
for the exclusive benefit of you or your beneficiaries.
3. Your Contract is not transferable and may not be used as security for a
loan.
4. You must be the Annuitant and no joint owner or contingent owner is
permitted.
5. You must begin taking distributions no later than April 1 of the calendar
year following the calendar year in which you attain age 70-1/2 over (a) your
life or the lives of you and your designated beneficiary or (b) a period
certain not extending beyond your life expectancy, or the joint and last
survivor expectancy of you and your designated beneficiary. You must receive
additional minimum distributions by December 31 for each year after the
calendar year you attain age 70-1/2. Payments must be made in periodic payments
at intervals of no longer than one year. In addition, payments must be either
non-increasing or they may increase only as provided in Q&A F-3 of Section
1.401 (a)(9)- 1 of the Proposed Income Tax Regulations.
All distributions made under the Contract shall be in accordance with the
requirements of Section 401 (a)(9) of the Code, including the incidental death
benefit requirements of Section 401 (a)(9)(G) of the Code, and the regulations
thereunder, including the minimum distribution incidental benefit requirement
of Section 1.401 (a)(9)-2 of the Proposed Income Tax Regulations.
If you do not elect otherwise by written request, we will begin making payments
up to four months before April 1 of the calendar year following the year in
which you attain age 70-1/2 under a partial withdrawal option that complies
with the minimum distribution regulations adopted pursuant to Section 408(b)(3)
of the Internal Revenue Code. You may elect that we pay you the Surrender Value
no later than April 1 of the calendar year following the year in which you
attain age 70-1/2 that the Surrender Value be applied by that date to an
annuity option that complies with the regulations referenced above.
In addition to meeting the distribution requirements referenced above, payments
under a partial withdrawal option or an annuity option must also comply with
the minimum distribution incidental benefit (MDIB) requirements applicable to
IRAs. The amount to be distributed each
IRA-95
<PAGE> 7
year beginning with the first calendar year for which distributions are
required and then for each succeeding calendar year shall not be less than the
quotient obtained by dividing the owner's benefit by the lesser of (1) the
applicable life expectancy, or (2) if your spouse is not the designated
beneficiary, the applicable divisor determined from the table set forth in
Q&A-4 of Section 1.401 (a)(9)-2 of the Proposed Income Tax Regulations.
Distributions after your death shall be calculated using the applicable life
expectancy as the relevant divisor without regard to Section 1.401 (a)(9)-2 of
the Proposed Income Tax Regulations. This MDIB rule may increase the amount of
your payments. If we are required to make a distribution to you at year end
because payments made to you during the calendar year are insufficient to meet
MDIB requirements for this Contract, we will waive any withdrawal charge that
might otherwise be applicable.
You may satisfy the minimum distribution requirements applicable to two or more
IRAs by receiving a distribution from one IRA equal to the amounts required to
satisfy the minimum distribution requirement for all your IRAs, as described in
more detail in IRS Notice 88-38, 1988 1-C.B.524.
Life expectancy is computed by use of the expected return multiples in Tables V
and VI of Section 1.72-9 of the Income Tax Regulations. Unless otherwise
elected by you by the time distributions are required to begin, life expectancy
shall be recalculated annually. Such election shall be irrevocable and shall
apply to all subsequent years. The life expectancy of a non-spouse beneficiary
may not be recalculated. Instead, life expectancy will be calculated using the
attained age of such beneficiary during the calendar year in which you attain
age 70- 1/2 and payments for subsequent years shall be calculated on such life
expectancy reduced by one for each calendar year which has elapsed since the
calendar year life expectancy was first calculated.
6. In the event of your death, your entire interest in this Contract must be
distributed in conformity with the regulations described below and the
contract's provisions relating to the death of the Annuitant/Owner are changed
to the extent necessary to conform with those regulations.
If you die before the entire interest is distributed, the following
distribution provision shall apply:
a. If you die after distribution of your interest has commenced, the
remaining portion of such interest will continue to be distributed at
least as rapidly as under the method of distribution being used prior to
your death.
b. If you die before distribution of interest commences, your entire
interest will be distributed in accordance with one of the following four
provisions:
(1) Your entire interest will be paid by December 31 of the calendar
year containing the fifth anniversary of your death, or
(2) If your interest is payable to a beneficiary designated by you
and you have not elected (1) above, then your entire interest will be
distributed over the life or
IRA-95 Page 2
<PAGE> 8
over a period certain not greater than the life expectancy of the
designated beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year of your death.
A designated beneficiary may elect at any time to receive greater
payments, or
(3) If your designated beneficiary is your surviving spouse, your
spouse may elect to receive equal or substantially equal payments
over the life or life expectancy of the surviving spouse commencing
at any date prior to the later of (i) December 31 of the calendar
year immediately following the calendar year of your death, and (ii)
December 31 of the calendar year in which you would have attained age
70-1/2. Such election must be made no later than the earlier of
December 31 of the calendar year containing the fifth anniversary of
your death or the date distributions are required to begin pursuant
to the preceding sentence. The surviving spouse may accelerate these
payments at any time, i.e., increase the frequency or amount of such
payments, or
(4) If your designated beneficiary is your surviving spouse, your
spouse may treat the annuity as his or her own individual retirement
arrangement. This election will be deemed to have been made if your
surviving spouse makes a regular IRA contribution to the annuity,
makes a rollover to or from such annuity, or fails to elect any of
the above three provisions.
Life expectancy is computed by use of the expected return multiples and Tables
V and VI of Section 1.72-9 of the income tax regulations. For purposes of
distributions beginning after your death unless otherwise elected by your
surviving spouse by the time distributions are required to begin, life
expectancy shall be recalculated annually. Such election shall be irrevocable
by the surviving spouse and shall apply to all subsequent years. In the case of
any other beneficiary, life expectancy shall be calculated using the attained
age of such beneficiary during the calendar year in which distributions are
required to begin pursuant to this section, and payments for any subsequent
calendar year shall be calculated based on such life expectancy reduced by one
for each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
Distributions under paragraph 6 are considered to have begun if distributions
are made on account of your attaining your required beginning date or, if prior
to the required beginning date, distributions irrevocably commence over a
period permitted and in an annuity form acceptable under Section 1.401(a)(9) of
the Regulations.
7. Except in the case of a rollover contribution (as permitted by Sections
402(c), 403(a)(4), 403(b)(8) of 408(d)(3), or a contribution made in accordance
with the terms of a Simplified Employee Pension (SEP) as described in Section
408(k) no contributions will be accepted unless they are in cash and the total
contributions under Sections 219(b) and 408(o) shall not exceed $2,000 for any
taxable year. Any refund of premiums (other than those attributable to excess
contributions) will be applied, before the close of the calendar year following
the year of refund, toward the payment of future premiums or the purchase of
additional benefits.
8. You will have the sole responsibility for determining that contributions,
transfers and
IRA-95 Page 3
<PAGE> 9
distributions under this Contract comply with the Code and this Endorsement.
The Company retains the right to further amend the Contract at any time without
the consent of the Contract Owner as necessary to conform with changes in the
Internal Revenue Code and regulation or rulings related thereto.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95 Page 4
<PAGE> 10
IL ANNUITY AND INSURANCE COMPANY
QUALIFIED PLAN ENDORSEMENT
This rider is part of and amends the Flexible Premium Deferred Annuity Contract
(Contract) to which it is attached. This Contract is issued to or purchased by
a trustee of a pension or profit-sharing plan intended to qualify under section
401 (a) of the Internal Revenue Code of 1986, as amended (the "Code"). The
following provisions apply and replace any contrary Contract Provisions.
1. Except as allowed by the qualified pension or profit- sharing plan of
which this Contract is a part, the Contract may not be transferred,
sold, assigned, discounted or pledged, either as collateral for a
loan or as security for the performance of an obligation or for any
other purpose, to any person other than us.
2. This Contract shall be subject to the provisions, terms and
conditions of the qualified pension or profit- sharing plan of which
the Contract is a part. Any payment, distribution or transfer under
this Contract shall comply with the provisions, terms, and conditions
of such plan as determined by the plan administrator, trustee or
other designated plan fiduciary. We shall be under no obligation
either (a) to determine whether any such payments, distribution or
transfer complies with the provisions, terms and conditions of such
plan or with applicable laws, or (b) to administer such plan,
including without limitation, any provisions required by the
Retirement Equity Act of 1984.
3. Notwithstanding any provisions to the contrary in this Contract or
the qualified pension or profit sharing plan of which this Contract
is a part, we reserve the right to amend or modify this Contract or
Rider to the extent necessary to comply with any law, regulation,
ruling or other requirement deemed by the Company to be necessary to
establish or maintain the qualified status of such pension or
profit-sharing plan.
Except as otherwise set forth above, this Endorsement is subject to the
exclusions, definitions and provisions of the Contract.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95
<PAGE> 11
IL ANNUITY AND INSURANCE COMPANY
ADDITIONAL WAIVER OF WITHDRAWAL CHARGES RIDER-LONG TERM CARE
This rider is attached to and made a part of the Contract. The terms of the
Contract apply to the rider except to the extent they are in conflict with its
terms.
BENEFIT
In addition to those situations set forth in the Contract, the withdrawal
charge will not apply if the Annuitant or the Annuitant's spouse is confined to
a Long Term Care Facility and has been so confined for at least 90 consecutive
days.
DEFINITIONS
"Confined" means confined as an inpatient. To be covered, confinement must
commence while this Contract is in force and be required by sickness or injury.
Such confinement must have been upon the recommendation of a physician.
"Injury" means accidental bodily injury which is sustained while this Contract
is in force.
"Sickness" means sickness or disease which first manifests itself while this
Contract is in force.
"Inpatient" means a person who is confined in a Long Term Care Facility as a
resident patient and for whom a charge of at least one days' room and board is
made by the Long Term Care Facility.
"Physician" means a duly licensed physician. It does not include the Annuitant
or Annuitant's spouse, or the child, parent, brother or sister of either the
Annuitant or the Annuitant's spouse.
"Long Term Care Facility" means a state licensed Skilled Nursing Facility or
Intermediate Care Facility. Long Term Care Facility does not mean: a Hospital;
a place that primarily treats drug addicts or alcoholics; a home for the aged
or mentally ill, a community living center; or a place that primarily provides
domiciliary, residency or retirement care; or a place owned or operated by a
member of the Annuitant's immediate family.
"Skilled Nursing Facility" means a facility which: is operated as a Skilled
Nursing Facility according to the law of the jurisdiction in which it is
located; provides skilled nursing care under the supervision of a physician;
provides continuous 24 hours a day nursing service by or under the supervision
of a registered graduate professional nurse (R.N.); and maintains a daily
medical record of each patient.
"Intermediate Care Facility" means a facility which: is operated as an
Intermediate Care Facility according to the law of the jurisdiction in which it
is located; provides continuous 24 hours a day nursing service by or under the
supervision of a registered graduate professional nurse (R.N.) or a licensed
practical nurse (L.P.N.); and maintains a daily medical record of each patient.
IRA-95
<PAGE> 12
Neither "registered graduate professional nurse" nor "licensed practical nurse"
includes the Annuitant or the Annuitant's spouse' or the child, parent, brother
or sister of either the Annuitant or the Annuitant's spouse.
NOTICE AND PROOF OF CLAIM
Written notice and proof of confinement for 90 consecutive days in a Long Term
Care Facility must be received at our Home Office prior to our waiver of
withdrawal charges because of confinement.
TERMINATION
This rider will end if the Contract terminated or is surrendered for its cash
value.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95 Page 2
<PAGE> 13
IL ANNUITY AND INSURANCE COMPANY
ADDITIONAL WAIVER OF WITHDRAWAL CHARGES RIDER
POST SECONDARY EDUCATION
This endorsement is attached to and is part of this annuity contract. Unless
changed by this endorsement, all provisions, exclusions, and limitations of
this Contract remain the same and apply to this endorsement. The effective date
of this endorsement is the date of issue.
BENEFITS
If You, your spouse, your child or Annuitant is enrolled in a college,
university, vocational, technical, trade, or business school, You may, subject
to the provisions of this endorsement, withdraw up to 20% of the Contract Value
each Contract Year prior to the Annuity Commencement Date and while the
Annuitant is alive. No withdrawal charges will apply. You may make one
Withdrawal per Contract Year under this Endorsement. Withdrawals may not be
repaid.
The maximum combined withdrawal you may make under this endorsement, and the
Annual Free Withdrawal Amount provision is 20% of the Contract Value.
DEFINITIONS
CHILD means your natural or adopted child and a step-child who resides in your
household. It does not include a grandchild.
PROOF OF ENROLLMENT
You must provide us written proof of enrollment on a form provided by us. The
form must be completed by You and the college, university, vocational,
technical, trade, or business school. The form must be received by us in our
Home Office, during your lifetime and within one (1) year of the date of
enrollment, before benefits under this endorsement are payable.
TERMINATION
This endorsement terminates upon termination of the Contract.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95
<PAGE> 14
IL ANNUITY AND INSURANCE COMPANY
ADDITIONAL WAIVER OF WITHDRAWAL CHARGES
RIDER - TERMINAL ILLNESS
This endorsement is attached to and is part of this annuity contract. Unless
changed by this endorsement, all provisions, exclusions, and limitations of
this Contract remain the same and apply to this endorsement. The effective date
of this endorsement is the date of issue.
BENEFITS
If the annuitant develops a Terminal Illness, you may, subject to the
provisions of this endorsement, withdraw a portion or the entire balance of the
Contract Value prior to the Annuity Commencement Date and while the Annuitant
is alive. No withdrawal charges will apply. The minimum partial withdrawal you
can make is $500.00. The maximum partial withdrawal you can make is the
Contract Value balance less $5,000. Withdrawals may not be repaid.
DEFINITIONS
"Physician" is a person currently licensed to practice medicine in the state in
which the Annuitant resides or has been treated. "Physician" does not include:
(1) the Annuitant or Owner; (2) a person who lives with the Annuitant or Owner;
(3) a person who is related to the Annuitant or Owner by blood or marriage.
"Terminal Illness" is a non-correctable medical condition that: (1) with
reasonable medical certainty, will result in the death of the Annuitant in less
than one (1) year from the date of completion of the application for terminal
illness benefits; and (2) was first diagnosed after the effective date of this
endorsement.
PROOF OF TERMINAL ILLNESS
You must provide us written proof of terminal illness on a form provided by us.
The form must be completed by you and your physician and received by us in our
Home Office, during your lifetime, before benefits under this endorsement are
payable. We may request additional medical information. We may also, at our
expense, have you examined by a physician of our choice before benefits under
this endorsement are payable.
TERMINATION
This endorsement terminates upon termination of the Contract.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95
<PAGE> 15
IL ANNUITY AND INSURANCE COMPANY
ADDITIONAL WAIVER OF WITHDRAWAL CHARGES
RIDER - HOSPITALIZATION
This rider is attached to and made a part of the Contract. The terms of the
Contract apply to the rider except to the extent they are in conflict with its
terms.
BENEFIT
In addition to those situations set forth in the Contract, the withdrawal
charge will not apply if the Annuitant or the Annuitant's spouse is confined to
a Hospital and has been so confined for at least 30 consecutive days.
DEFINITIONS
"Confined" means confined as an inpatient. To be covered, confinement must
commence while this Contract is in force and be required by sickness or injury.
Such confinement must have been upon the recommendation of a physician.
"Injury" means accidental bodily injury which is sustained while this Contract
is in force.
"Sickness" means sickness or disease which first manifests itself while this
Contract is in force.
"Inpatient" means a person who is confined in a Hospital as a resident patient
and for whom a charge of at least one day's room and board is made by the
Hospital.
"Physician" means a duly licensed physician. It does not include the Annuitant
or the Annuitant's spouse, or the child, parent, brother or sister of either
the Annuitant or the Annuitant's spouse.
"Hospital" means a facility which is state licensed and operated as a hospital
according to the law of the jurisdiction in which it is located; operates
primarily for the care and treatment of sick or injured persons as inpatients;
provides continuous 24 hours a day nursing service by or under the supervision
of a registered graduate professional nurse (R.N.); is supervised by a staff of
physicians; and has medical, diagnostic and major surgical facilities or has
access to such facilities on a pre- arranged basis.
Neither "registered graduate professional nurse" nor "licensed practical nurse"
includes the Annuitant or the Annuitant's spouse, or the child, parent, brother
or sister of either the Annuitant or the Annuitant's spouse.
NOTICE AND PROOF OF CLAIM
Written notice and proof of confinement for 30 consecutive days in a Hospital
must be received at our Home Office prior to our waiver of withdrawal charges
because of the confinement.
IRA-95
<PAGE> 16
TERMINATION
This rider will end if the Contract terminates or is surrendered for its cash
value.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95 Page 2
<PAGE> 17
IL ANNUITY AND INSURANCE COMPANY
UNISEX RIDER
This rider is issued as part of the Contract to which it is attached. The Date
of issue and the Contract Date applicable to this rider is the same as that of
the Contract. Except where this rider provides otherwise, it is subject to all
conditions and limitations of such Contract.
The Misstatement of Age and Sex provision of this Contract is amended by the
substitution of the following:
MISSTATEMENT OF AGE
If the age of the Annuitant has been misstated, the amount of the annuity
payable by the Company shall be that provided by the number of Accumulation
Units allocated to affect such annuity on the basis of the corrected
information without changing the date of the first payment of such annuity.
Any under-payment by the Company shall be made up immediately and any
over-payment shall be charged against future amounts becoming payable.
IL ANNUITY AND INSURANCE COMPANY
/S/ LISA P. FOXWORTHY-PARKER
--------------------------------
SECRETARY
IRA-95
<PAGE> 1
EXHIBIT 4(d)
ENDORSEMENT
FORM VA-95 OR VA-95 IN - Variable Annuity Policy
This policy is hereby modified as follows:
PAGE 3A, VARIABLE ACCOUNT OPTIONS/PORTFOLIO FUND:
Under Variable Account Options, "GOLD AND NATURAL RESOURCE" is changed to
"WORLDWIDE HARD ASSETS".
Under Portfolio Fund In Which Variable Account Invests, "VAN ECK GOLD AND
NATURAL RESOURCE FUND" is changed to "VAN ECK WORLDWIDE HARD ASSETS FUND".
PAGE 4, DEFINITIONS:
The definition of "Contingent Owner" is deleted in its entirety.
PAGE 5, DEFINITIONS:
The definition of "Eligible Variable Account" is deleted in its entirety and
replaced with the following.
"Eligible Variable Account - Currently all Variable Accounts except the Van Eck
Worldwide Hard Assets Fund. (See "Maturity Benefit.")"
The definition of "Eligible Premium Payment" is added to the list of
definitions following "Dollar Cost Averaging".
"Eligible Premium Payment - That part of a Premium Payment that the Owner
initially allocated to a particular Eligible Variable Account at the time of
payment, provided payment was made at least ten (10) years prior to the
Maturity Benefit Date. (See "Maturity Benefit.")"
The definition of Maturity Benefit is deleted in its entirety and replaced with
the following.
"MATURITY BENEFIT - If the Contract is in the accumulation phase on the
Maturity Benefit Date, the Maturity Benefit for a particular Eligible Variable
Account is equal to:
(a) the sum of the Eligible Premium Payments for that particular Eligible
Variable Account; minus
(b) a percentage of any transfer or withdrawal from that Eligible
Variable Account; and minus
(c) the value of that Eligible Variable Account on the Maturity Benefit
Date. (See "Maturity Benefit. ")"
PAGE 6, PREMIUMS:
The Allocation of Premiums provision is modified to delete the following
sentence. "You may have up to 10 different accounts at any time."
E-VA-95 5/97
<PAGE> 2
PAGE 7, TRANSFERS OF CONTRACT VALUES:
The first sentence of the second paragraph in the provision is deleted in its
entirety and replaced with the following.
"While this Contract is in force prior to the Annuity Commencement Date, You
may transfer up to 20% of the Fixed Account Value as determined at the
beginning of the Contract Year from the Fixed Account to one or more of the
Variable Accounts in any Contract Year. "
PAGE 8, TRANSFERS OF CONTRACT VALUES PROVISION:
The fourth paragraph of the provision is deleted in its entirety and replaced
with the following.
"If the Owner transfers Contract Value from an Eligible Variable Account, the
transfer will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. "
PAGE 8, DOLLAR COST AVERAGING PROVISION:
The provision is deleted in its entirety and replaced with the following.
"Before the Annuity Commencement Date, You may elect to have an amount You
specify automatically transferred from one or more Variable Accounts or the
Fixed Account to any other Variable Accounts. Dollar Cost Averaging transfers
will be made on a monthly or quarterly basis. The amount transferred must be at
least $100. There is no charge for Dollar Cost Averaging transfers. Dollar Cost
Averaging from an Eligible Variable Account will reduce the amount of the
Eligible Premium Payments on which the Maturity Benefit is based. (See
"Maturity Benefit.")
PAGE 8, AUTOMATIC ACCOUNT BALANCING PROVISION:
The provision is deleted in its entirety and replaced with the following.
"Before the Annuity Commencement Date, You may elect Automatic Account
Balancing. If You select this option, on the first Valuation Day of a calendar
month or quarter, We will automatically balance Your Contract Value to match
Your premium allocation percentages. There is no charge for Automatic Account
Balancing. Automatic Account Balancing from an Eligible Variable Account will
reduce the amount of the Eligible Premium Payments on which the Maturity
Benefit is based. (See "Maturity Benefit.")"
PAGE 10, PARTIAL WITHDRAWALS PROVISION:
The following sentence is added following the third paragraph of the existing
provision.
"If the Owner withdraws Contract Value from an Eligible Variable Account, the
withdrawal will reduce the amount of the Eligible Premium Payments on which the
Maturity Benefit is based. (See "Maturity Benefit. ")"
PAGE 10, ANNUAL FREE WITHDRAWAL AMOUNT PROVISION:
The first sentence of the provision is deleted in its entirety and replaced
with the following.
"The Annual Free Withdrawal Amount is equal to 10% of the Contract Value at the
beginning of the Contract Year, and is not available until after the first
Contract Year." The following sentence is added as the second sentence of the
provision. "Withdrawals under the Systematic
E-VA-95 5/97 Page 2
<PAGE> 3
Withdrawal Program are also permitted a Free Withdrawal Amount, as determined
below, during the first Contract Year."
PAGE 10, SECTION 7 - WITHDRAWAL PROVISIONS:
The following provision, "Systematic Withdrawal Program", will be added
following the provision "Full Withdrawal of Contract Value".
"SYSTEMATIC WITHDRAWAL PROGRAM. The Systematic Withdrawal Program provides an
automatic monthly or quarterly payment to You, the Owner, from the amounts you
have accumulated in the Variable Accounts and/or the Fixed Account. The minimum
amount You may withdraw is $100. To use the program, You must maintain a $1,000
balance in your Contract. You may elect to participate in the Systematic
Withdrawal Program at any time before the Annuity Commencement Date by sending
a Written Request to the Annuity Service Center of IL Annuity (We or Us). Once
You elect the program, it remains in effect unless the balance in Your Contract
drops below $1,000. You may cancel the program at any time by sending Us a
Written Request or by calling Us by telephone if We have Your telephone
authorization form on file.
We will assess a Withdrawal Charge on each withdrawal made during the first
nine Contract Years, unless the amount You withdraw under the Systematic
Withdrawal Program qualifies as a Free Withdrawal Amount. (See "Withdrawal
Charge -- Free Withdrawal Amount.") Withdrawals under the Systematic Withdrawal
Program are permitted an Annual Free Withdrawal Amount during the first
Contract Year. We do not deduct any other charges for this program.
All Systematic Withdrawals will be paid to You on the same day each month,
provided that day is a Valuation Day. If it is not, then payment will be made
on the next Valuation Day. Systematic withdrawals may be taxable, subject to
withholding, and subject to a 10% penalty tax. We reserve the right to
discontinue offering the Systematic Withdrawal Program at any time and for any
reason."
PAGE 11, SECTION 8 - OWNERSHIP PROVISIONS:
The third provision under Ownership Provisions, "Contingent Owner", is deleted
in its entirety.
PAGE 11, TRANSFER OF OWNERSHIP PROVISION:
The sixth sentence of the provision, "You may also name a Contingent Owner in
the same manner", is deleted in its entirety.
PAGE 12, ASSIGNMENT PROVISION:
The third sentence of the provision is deleted in its entirety and replaced
with the following.
"Your rights and those of any Beneficiary will be subject to the assignment."
PAGE 12, SECTION 9 - DEATH BENEFIT PROVISIONS:
Section 9 - "Death Provisions" is deleted in its entirety and replaced with the
following.
"SECTION 9 - DEATH BENEFIT PROVISIONS
E-VA-95 5/97 Page 3
<PAGE> 4
DISTRIBUTION UPON THE DEATH OF THE OWNER
If You own the Contract with another person, and one of You dies before the
Annuity Commencement Date, the survivor becomes the sole Beneficiary regardless
of Your designation. If there is no surviving Owner, Your named Beneficiary
will become the Beneficiary upon Your death. (You may name primary and
contingent beneficiaries.) If You have named two or more primary Beneficiaries,
they will share equally in the death benefit (described below) unless You have
specified otherwise. If there are no living primary Beneficiaries at the time
of Your death, payments will be made to those contingent Beneficiaries who are
living when payment of the death benefit is due. If all the Beneficiaries have
predeceased You, We will pay the death benefit to Your estate. If You or a
Joint Owner who is the Annuitant dies before the Annuity Commencement Date,
then the provisions relating to the death of an Annuitant (described below)
will govern.
If You are not the Annuitant and You die before the Annuitant and before the
Annuity Commencement Date, then the following options are available to Your
Beneficiary:
(1) If such Beneficiary is the spouse of the deceased Owner, the spouse
may continue the Contract as the new Owner.
(2) If such Beneficiary is not the spouse of the deceased Owner:
(a) such Beneficiary may elect to receive the Contract Value, LESS
any premium taxes not yet deducted, in a single sum within 5
years of the deceased Owner's death; or
(b) such Beneficiary may elect to receive the Contract Value paid
out under one of the approved payout plans, provided that
distributions begin within one year of the deceased Owner's
death and the distribution period under the payout plan is for
the life of, or for a period not exceeding the life expectancy
of, the Beneficiary.
If such Beneficiary does not elect one of the above options, We will pay
the Contract Value, LESS any premium taxes not yet deducted, within five
years from the date of the deceased owner's death.
Under any of the distribution options in this section, "Distribution Upon the
Death of the Owner," the Beneficiary may exercise all ownership rights and
privileges from the date of the deceased Owner's death until the date that the
Contract Value is paid. Similar rules apply to Qualified Contracts. The above
distribution requirements will apply only upon the death of the first Joint
Owner.
DISTRIBUTION UPON THE DEATH OF THE ANNUITANT
If the Annuitant (including an Owner who is the Annuitant) dies before the
Annuity
E-VA-95 5/97 Page 4
<PAGE> 5
Commencement Date, We will pay the Death Benefit described below in "Death
Benefits Before the Annuity Commencement Date" in a lump sum to Your named
Beneficiary(ies) within five years after the date of the Annuitant's death.
(You may name primary and contingent beneficiaries.) If You have named two or
more primary Beneficiaries, they will share equally in the Death Benefit unless
You have specified otherwise. If there are no living primary Beneficiaries at
the time of the Annuitant's death, payments will be made to those contingent
Beneficiaries who are living when payment of the Death Benefit is due. If all
the Beneficiaries have predeceased the Annuitant, We will pay the Death Benefit
to You, if living, or the Annuitant's estate. In lieu of a lump sum payment,
the Beneficiary may elect, within 60 days of the date We receive due proof of
the Annuitant's death, to apply the Death Benefit to a payout plan. (See
"Payout Plan Provisions.")
If You are also the Annuitant and You die, the provisions described immediately
above apply, except that the Beneficiary may only apply the Death Benefit
payment to a payout plan if:
(1) payments under the option begin within one (1) year of the
Annuitant's death; and
(2) payments under the option are payable over the Beneficiary's life or
over a period not greater than the Beneficiary's life expectancy.
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
If the Annuitant dies before the Annuity Commencement Date, the Beneficiary
will receive a Death Benefit. The Death Benefit will be equal to the greater
of:
(1) the sum of all Premium Payments made under the Contract, less partial
withdrawals as of the date We receive due proof of the deceased's
death and payment instructions; or
(2) the Contract Value as of the date We receive due proof of the
deceased's death and payment instructions;
less any applicable premium taxes not previously deducted.
LOANS
If the Contract is a Qualified Contract, any outstanding loan amount on the
date the Death Benefit is paid will also be deducted from the Death Benefit.
PROOF OF DEATH
Proof of death satisfactory to the Company consists of the death record or a
certified copy of a court decree reciting a finding of death or any other proof
satisfactory to the Company.
E-VA-95 5/97 Page 5
<PAGE> 6
REQUIRED DISTRIBUTIONS
An Owner or Beneficiary who is required to begin to receive payments in the
form of a life annuity or annuity for a period certain not exceeding the
recipient's life expectancy may choose a payout plan.
BENEFICIARIES
You may designate the Beneficiaries as primary or contingent to indicate the
order in which they take. If You name two or more Beneficiaries of the same
class they will share equally unless You state how they are to share. If You
identify a relative as a Beneficiary, We will interpret that to mean a relative
of the Annuitant unless You state the relationship is to another person.
Any Beneficiary who dies within 10 days of the Annuitant's or Owner's death
will not be entitled to any benefits unless that Beneficiary is living when We
receive due proof of the Annuitant's or Owner's death.
DEATH OF PAYEE AFTER THE ANNUITY COMMENCEMENT DATE
If the Payee dies after the Annuity Commencement Date, any Joint Payee becomes
the sole Payee. If there is no Joint Payee, the Successor Payee becomes the
sole Payee. If there is no Successor Payee, the remaining benefits are paid to
the estate of the last surviving Payee. The death of the Payee after the
Annuity Commencement Date will have the effect stated in the payout plan
pursuant to which annuity payments are being made. If any Owner dies on or
after the Annuity Commencement Date, any payments that remain must be made at
least as rapidly as under the payout plan in effect on the date of Your death."
PAGE 13, PAYOUT PLAN PROVISIONS:
The last sentence of the first paragraph of the "Annuity Commencement Date"
provision, "Annuity payments must commence no later than the annuitant's 85th
birthday", is deleted in its entirety.
PAGE 14, SECTION 11 - MATURITY BENEFIT:
The "Maturity Benefit" Section is deleted in its entirety and replaced with the
following.
"MATURITY BENEFIT
If the Contract is in the accumulation phase on the Maturity Benefit Date, IL
Annuity will calculate the Maturity Benefit for each Eligible Variable Account
in which the Owner has value. The Maturity Benefit will be credited to the
Contract Value of an Eligible Variable Account only if the value of the
Eligible Variable Account on the Maturity Benefit Date is less than: (a) the
sum of the Eligible Premium Payments for such Eligible Variable Account, MINUS
(b) a percentage of all prior withdrawals and transfers from the Eligible
Variable Account.
E-VA-95 5/97 Page 6
<PAGE> 7
Eligible Premium Payments are those Premium Payments that initially were
allocated to a particular Eligible Variable Account at the time of payment,
provided the payment was made at least ten (10) years prior to the Maturity
Benefit Date.
The Maturity Benefit to be credited to each Eligible Variable Account on the
Maturity Benefit Date is equal to: (a) the sum of the Eligible Premium
Payments for that particular Eligible Variable Account; MINUS (b) a percentage
of all prior withdrawals and transfers from that Eligible Variable Account;
MINUS (c) the value of that Eligible Variable Account on the Maturity Benefit
Date.
The Maturity Benefit Date is the later of the Annuitant's age 70 and 10 years
after the Date of Issue. If the Contract is owned by Joint Owners who are
spouses at the time one Joint Owner dies, the Maturity Benefit Date will become
the date the surviving spouse attains age 70. If the Contract is owned by Joint
Owners who are not spouses and one of the Joint Owners dies before the Maturity
Benefit Date, the Maturity Benefit is not available to the sole surviving
Owner. Eligible Variable Accounts are those Variable Accounts shown on the
specifications page of the Contract which invest in Funds which, in turn,
invest primarily in stocks, equity securities, bonds or money market
instruments. Currently, all Variable Accounts, except the Van Eck Worldwide
Hard Assets Fund, are Eligible Variable Accounts.
The Maturity Benefit will not be credited to Contract Value if the Owner
chooses an Annuity Commencement Date that is earlier than the Maturity Benefit
Date.
A TRANSFER OR A PARTIAL WITHDRAWAL OF PREMIUM PAYMENTS OUT OF AN ELIGIBLE
VARIABLE ACCOUNT WILL REDUCE THE AMOUNT OF ELIGIBLE PREMIUM PAYMENTS HELD IN
THE ELIGIBLE VARIABLE ACCOUNT IN THE SAME PROPORTION AS THE TRANSFER OR
WITHDRAWAL REDUCED THE VALUE OF THE ELIGIBLE VARIABLE ACCOUNT.
For purposes of calculating the value of an Eligible Variable Account, the
Company deems all transfers and withdrawals to be first a withdrawal of Premium
Payments, then of earnings. Transfers out of an Eligible Variable Account
include transfers resulting from Dollar Cost Averaging or Automatic Account
Balancing; withdrawals out of an Eligible Variable Account include withdrawals
resulting from the Systematic Withdrawal Program. "
PAGE 15, SECTION 12 - GENERAL PROVISIONS, CHANGE IN THE OPERATION OF THE
SEPARATE ACCOUNT PROVISION:
The third paragraph of the provision is deleted in its entirety and is replaced
with the following.
"The Company will continue to pay a Maturity Benefit on Premium Payments
allocated to an Eligible Variable Account if:
(a) the Portfolio underlying an Eligible Variable Account changes its
investment objective,
(b) the Company determines that an investment in the Portfolio underlying
an Eligible Variable Account is no longer appropriate in light of the
purposes of the
E-VA-95 5/97 Page 7
<PAGE> 8
Separate Account; or
(c) shares of a Portfolio underlying an Eligible Variable Account are no
longer available for investment by the Separate Account and IL
Annuity is forced to redeem all shares of the Portfolio held by the
Eligible Variable Account."
PAGE 16, VOTING PRIVILEGES PROVISION:
The second paragraph of the provision is deleted in its entirety.
E-VA-95 5/97 Page 8
<PAGE> 9
Added to this policy as of May 29, 1997, at the Home Office in Indianapolis,
Indiana.
IL ANNUITY AND INSURANCE COMPANY
/S/ MARGARET M. MCKINNEY
--------------------------------
SECRETARY
E-VA-95 5/97 Page 9
<PAGE> 1
APPLICATION TO IL ANNUITY AND INSURANCE COMPANY
A member of the Indianapolis Life Group of Companies
(Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance containing any materially false
information or conceals for the purpose of misleading, information concerning
any fact material thereto commits a fraudulent insurance act, which is a
crime.)
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------------------------
CWA: POLICY #
- -------------------------------------------------------------------------------------------------------------------
A. ANNUITANT
- -------------------------------------------------------------------------------------------------------------------
Last Name First Name Middle or Initial
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Residence Address City State Zip County
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Billing Address (If Different) City State Zip County
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Issue Age Sex Birth Date Birth State Soc. Sec. or Tax No. Phone Number
- -------------------------------------------------------------------------------------------------------------------
/ /
- -------------------------------------------------------------------------------------------------------------------
B. ANNUITY
- -------------------------------------------------------------------------------------------------------------------
Plan Amount Annuity Start Date Annuity Start Age
- -------------------------------------------------------------------------------------------------------------------
/ /
- -------------------------------------------------------------------------------------------------------------------
Is the annuity applied for intended to replace or change another annuity or life insurance policy?
NO [ ] YES [ ] Company Name Policy #
-------------------------------------- ----------------
If required, replacement forms must accompany this application.
[ ] Non-Qualified - DO NOT COMPLETE PART C. [ ] Qualified - COMPLETE ENTIRE APPLICATION.
[ ] Single Premium Immediate Annuity: [ ] Life Only [ ] Life Yrs. Certain
------
[ ] Joint Survivor [ ]
----------------------------
===================================================================================================================
C. QUALIFIED RETIREMENT PLANS
- -------------------------------------------------------------------------------------------------------------------
PENSION PLAN: [ ] Corporate [ ] HR-10
TYPE: [ ] Defined Benefit [ ] Target Benefit [ ] Money Purchase
[ ] Simplified Employee Pension [ ] Profit Sharing [ ] 401(K)
Exact Name of Plan Plan Effective Date
- -------------------------------------------------------------------------------------------------------------------
/ /
- -------------------------------------------------------------------------------------------------------------------
Trustee
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Plan Mailing Address City State Zip County
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
INDIVIDUAL PLAN: [ ] Tax Sheltered [ ] Individual Retirement Annuity [ ] Other
-----------------------
Annuity (403b) [ ] IRA Rollover
[ ] IRA Transfer
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
====================================================================================================================
D. BILLING
- --------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PAYOR (If other than Annuitant)
-------------------------------------------------------------------------------
PREMIUMS PAYABLE: [ ] Single Premium [ ] Annual [ ] Semi-Annual
Premium ----------------- [ ] Quarterly [ ] Monthly
Amount -----------------
BILLING FORM: [ ] Check-O-Matic [ ] Premium Notice [ ] List Bill
====================================================================================================================
E. OWNER/BENEFICIARY
- --------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------
OWNER (If other than Annuitant
---------------------------------------------------------------------------------
Address City State Zip County
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Soc. Sec. or Tax. No Relationship to Annuitant
- --------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------
CONTINGENT OWNER (Optional)
---------------------------------------------------------------------------
Soc. Sec. or Tax. No Relationship to Annuitant
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
PRIMARY BENEFICIARY FOR DEATH BENEFIT OR SURVIVOR ANNUITANT
(Print full name, date of birth, relationship and date of trust if applicable.)
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
CONTINGENT BENEFICIARY
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
====================================================================================================================
F. PREMIUM ALLOCATION (must equal 100%)
- --------------------------------------------------------------------------------------------------------------------
IL ANNUITY AND INSURANCE COMPANY FIDELITY FAMILY OF FUNDS QUEST FOR VALUE FAMILY OF FUNDS
Fixed Account Asset Manager Portfolio Managed Portfolio
- ----- ---- ----
Contrafund Portfolio Small Cap Portfolio
---- ----
ALGER AMERICAN FAMILY OF FUNDS Index 500 Portfolio
----
Midcap Growth Portfolio Investment Grade Bond Portfolio T. ROWE PRICE FAMILY OF FUNDS
- ----- ----
Small Capitalization Portfolio Equity-Income Portfolio Limited-Term Bond Portfolio
- ----- ---- ----
Growth Portfolio International Stock Portfolio
---- ----
Money Market Portfolio
----
VAN ECK WORLDWIDE FAMILY OF FUNDS
Gold and Natural Resources Portfolio
----
Worldwide Balanced Portfolio
----
====================================================================================================================
G. DOLLAR COST AVERAGING (VARIABLE ONLY)
- --------------------------------------------------------------------------------------------------------------------
[ ] Transfer from: beginning on (Date may not be the 29th, 30th or 31st) to:
--------------------- ---------------
Account Amount
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
====================================================================================================================
H. AUTOMATIC ACCOUNT BALANCING (VARIABLE ONLY)
- --------------------------------------------------------------------------------------------------------------------
[ ] YES [ ] NO
Allocations are based on the current premium allocation
====================================================================================================================
I. INTEREST SWEEP FROM FIXED ACCOUNT (VARIABLE ONLY)
- --------------------------------------------------------------------------------------------------------------------
[ ] Please Transfer interest earned in my Fixed Account to:
Account Percentage
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
--------------------------- ----------------------------
====================================================================================================================
J. TELEPHONE TRANSFER AUTHORIZATION
- --------------------------------------------------------------------------------------------------------------------
[ ] I (we) authorize and direct IL Annuity and Insurance Company to accept telephone instructions from me (us) to make
transfers from subaccount to subaccount, change the allocation of future investments, change interest sweep, automatic
account balancing, or dollar cost averaging options and/or request partial withdrawals. This authorization is subject
to the terms and provisions in the contract and prospectus. IL Annuity will not be held liable for any loss,
liability, cost or expense for acting on the telephone instructions. IL Annuity's liability for erroneous transfers,
unless clearly contrary to instructions received, will be limited to the correction of the allocations on a current
basis. For partial surrenders, IL Annuity's sole responsibility is to send a check to the Owner's address or wire the
proceeds to the Owner's account at a commercial Bank or to the Owner's account at a member firm of a national
securities exchange.
====================================================================================================================
K. ACKNOWLEDGMENT
- --------------------------------------------------------------------------------------------------------------------
By signing below, the owner understands that:
A. The annuity value may increase or decrease depending on the contract's investment results;
B. The minimum cash value of the variable accounts is not guaranteed;
C. This annuity is a long term commitment to meet insurance and financial goal; and I acknowledge receipt of the most
recent prospectus;
D. The variable annuity applied for is not unsuitable for my insurance investment objectives, financial situation and
needs.
NOTICE: The Owner agrees that to the best of his/her knowledge and belief, all statements and answers in this
application are complete and true. It is further agreed that these statements and answers will become a part of any
contract to be issued. No representative is authorized to modify this agreement or waive any of IL Annuity's rights or
requirements. If IL Annuity makes a change in the space designated "Do not write in this space" in order to correct
any apparent errors or omissions, it will be approved by acceptance of this contract; however any material changes must
be accepted in writing by the Owner.
I have read and understand the Acknowledgement and Notice. [ ] Please send Statements of Additional Information.
====================================================================================================================
L. SIGNATURES
- --------------------------------------------------------------------------------------------------------------------
Dated at this day of
------------------------------------------ ---------------- ----------------------------
(X)
---------------------------------------------- ---------------------------------------------
Signature of Proposed Annuitant Signature of Contingent Owner (If applicable)
(X)
---------------------------------------------- ---------------------------------------------
Signature of Owner (If other than annuitant) Signature of Registered Rep/Agent
(X)
---------------------------------------------- ---------------------------------------------
Printed Name of Broker Dealer Printed Name of Registered Rep/Agent
(X)
---------------------------------------------- ---------------------------------------------
Signature of Registered Principal Registered Rep/Agent Code
</TABLE>
<PAGE> 4
REGISTERED REPRESENTATIVE/AGENT CERTIFICATION
By signing above the Registered Representative/Agent certifies that:
a. The questions contained in this application were asked of the Owner and
the answers duly recorded, that this application is complete and true to
the best of my knowledge and belief; and
b. I am NASD registered representative and am state licensed for variable
annuity contracts where this application is written and delivered; and
c. To the best of my knowledge and belief, the annuity applied for [ ] does
[ ] does not involve replacement of life insurance or annuities. If
replacement is involved, submit Replacement Statement(s) if required.
- ------------------------------------------------------------------------------
DO NOT WRITE IN THIS SPACE
- ------------------------------------------------------------------------------
REGULAR MAIL
IL Annuity and Insurance Company
P. O. Box 5768
Boston, MA 02206
OVERNIGHT MAIL
State Street Bank
c/o IL Annuity and Insurance Company
Attn. Linda Burns A3W
1776 Heritage Drive
North Quincy, MA 02171
[LOGO]
<PAGE> 1
<TABLE>
<S> <C> <C>
- ------------ EXHIBIT 6 (a)
EXAMINER
THE COMMONWEALTH OF MASSACHUSETTS
OFFICE OF THE MASSACHUSETTS SECRETARY OF STATE
MICHAEL J. CONNOLLY, Secretary
ONE ASHBURTON PLACE, BOSTON, MASSACHUSETTS 02108
ARTICLES OF AMENDMENT FEDERAL IDENTIFICATION
GENERAL LAWS, CHAPTER 175, SECTION 50B NO. 35-1935680
000106812
WE, Gregory J. Carney, President and Margaret M. McKinney,
Secretary of Sentry Investors Life Insurance Company located at 3
Carlisle Road, Westford, Massachusetts 01886 do hereby certify
that these ARTICLES OF AMENDMENT affecting Articles NUMBERED: 1 of
the Articles of Organization were duly adopted at a meeting held
- ---------- on Nov. 1, 1994, by vote of:
NAME
APPROVED
100% of all common shares outstanding,
-------- ----------
Type, class & series, (if any)
_________ shares of _____________ out of__________shares outstanding, and
Type, class & series, (if any)
_________ shares of _____________ out of__________shares outstanding.
Type, class & series, (if any)
1. That the name by which the Corporation shall be known is
"IL Annuity and Insurance Company".
C [ ] 1. For amendments adopted pursuant to Chapter 156B, Section 70.
P [ ] 2. For amendments adopted pursuant to Chapter 156B, Section 71.
M [ ]
R.A. [ ] Note: If the space provided under any Amendment or item on this
form is insufficient, additions shall be set forth on separate
8-1/2 x 11 sheets of paper leaving a left-hand margin of at least
1 inch for binding. Additions to more than one Amendment may be
- ---------- continued on a single sheet so long as each Amendment requiring
P.C. each such addition is clearly indicated.
</TABLE>
<PAGE> 2
To CHANGE the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
<TABLE>
<CAPTION>
========================================== =========================================================
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
========================================== =========================================================
<S> <C> <C> <C> <C>
COMMON: COMMON:
- ------------------------------------------ ---------------------------------------------------------
- ------------------------------------------ ---------------------------------------------------------
========================================== =========================================================
PREFERRED: PREFERRED:
- ------------------------------------------ ---------------------------------------------------------
- ------------------------------------------ ---------------------------------------------------------
========================================== =========================================================
</TABLE>
CHANGE the total authorized to:
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
<TABLE>
<CAPTION>
========================================== ========================================================
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
========================================== ========================================================
<S> <C> <C> <C> <C>
COMMON: COMMON:
- ------------------------------------------ --------------------------------------------------------
- ------------------------------------------ --------------------------------------------------------
========================================== ========================================================
PREFERRED: PREFERRED:
- ------------------------------------------ --------------------------------------------------------
- ------------------------------------------ --------------------------------------------------------
========================================== ========================================================
</TABLE>
<PAGE> 3
I hereby certify that upon examination of the within Articles of Amendment duly
submitted to me, it appears that said Articles conform to the requirements of
Law and are hereby approved.
/s/ Linda Ruthardt
- --------------------------------------------
Commissioner of Insurance
The foregoing amendment will become effective when these articles of amendment
are filed in accordance with Chapter 156B, Section 6 of The General Laws unless
these articles specify, in accordance with the vote adopting the amendment, a
later effective date not more than thirty days after such filing, in which event
the amendment will become effective on such later date. LATER EFFECTIVE DATE:
______________________________________________________________________________
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereunto signed
our names this 1st day of November, in the year 1994.
/s/ Gregory J. Carney President
- ---------------------------------------------------------------------
/s/ Margaret M. McKinney Secretary
- ----------------------------------------------------------------------
<TABLE>
<S> <C>
/s/ Gregory J. Carney /s/ Margaret M. McKinney
- -------------------------------------------- -------------------------------------------
Gregory J. Carney - President & Director Margaret M. McKinney - Secretary & Director
/s/ Larry R. Pribble /s/ John J. Fahrenback
- -------------------------------------------- -------------------------------------------
Larry R. Prible - Chairman of the Board John J. Fahrenback - Director
</TABLE>
<PAGE> 4
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
GENERAL LAWS, CHAPTER 156B, SECTION 72
===============================================================================
I hereby approve the within articles of amendment and, the filing fee in
the amount of $100.00 having been paid, said articles are deemed to have been
filed with me this 17th day of January, 1995.
/s/ Michael J. Connolly
--------------------------------------------
MICHAEL J. CONNOLLY
SECRETARY OF STATE
A TRUE COPY ATTEST
WILLIAM FRANCIS GALVIN
SECRETARY OF THE COMMONWEALTH
DATE - 1/18/95 CLERK -
------
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF ARTICLES OF AMENDMENT TO BE SENT
TO: Margaret M. McKinney
P.O. Box 1230
Indianapolis, IN 46206
Telephone: 317-927-6540
<PAGE> 5
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
Corporations Division
One Ashburton Place, Boston, MA 02108-1512
CERTIFICATE OF CHANGE OF PRINCIPAL OFFICE
General Laws, Chapter 175, Section 34
A TRUE COPY ATTEST
Federal Identification
Number
35-1935680
WILLIAM FRANCIS GALVIN 00016822
SECRETARY OF THE COMMONWEALTH
DATE - 1/18/95 CLERK - ______ I, Margaret M. McKinney , Secretary of IL
Annuity and Insurance Company , having its principal office at 3 Carlisle Road,
Westford, Massachusetts 01886 do hereby certify that pursuant of General Laws,
Chapter 175, Section 34 the directors of said corporation have changed the
principal office of the corporation to 84 State Street, Boston, Massachusetts
02109 .
SUBSCRIBED THIS 24TH DAY OF JANUARY, 1995 UNDER PENALTIES OF PERJURY.
Linda Ruthardt SIGNATURE /s/ Margaret M. McKinney
Commissioner of Insurance ------------------------------
Secretary
I certify that it appears upon examination of this certificate, that Section 34
of the Chapter 175 of the General Laws has been complied with, and I approve
said certificate on January 27, 1995.
<PAGE> 6
WRITTEN CONSENT OF THE BOARD OF DIRECTORS
OF
IL ANNUITY AND INSURANCE COMPANY
IN LIEU OF A MEETING
RESOLUTION AUTHORIZING INCREASE IN CAPITAL
The undersigned constituting the Directors of IL Annuity and Insurance Company,
a Massachusetts corporation, ("the Company") hereby adopt the following
resolution by written consent and authorize the actions described therein to be
taken by the Company upon the filing of this written consent in the Minute Books
of the Company.
BE IT RESOLVED, By the Board of Directors of IL ANNUITY AND INSURANCE COMPANY,
pursuant to a special meeting of the Shareholder authorizing an amendment to the
Article of Incorporation, hereby authorize the Secretary of the Company to file
an amendment to the Articles of Incorporation, to wit:
The par value of the authorized shares shall be increased from One
Hundred Fifty Dollars ($150) to Two Hundred Fifty Dollars ($250) and the
amount of capital shall be increased to Two Million Five Hundred Thousand
Dollars ($2,500,000).
This written consent shall take effect on December 21, 1995.
<TABLE>
<S> <C>
/s/ Larry R. Prible /s/ Gregory J. Carney
- ---------------------------------- ----------------------------------
Larry R. Prible Gregory J. Carney
/s/ Margaret M. McKinney /s/ William L. Boyd
- ---------------------------------- ----------------------------------
Margaret M. McKinney William L. Boyd
/s/ John J. Fahrenbach /s/ Garrett P. Ryan
- ---------------------------------- ----------------------------------
John J. Fahrenbach Garrett P. Ryan
</TABLE>
<PAGE> 7
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the
principal office of the corporation in Massachusetts is:
84 State Street, Boston, MA 02109
b. The name, residential address and post office address of each director
and officer of the corporation is as follows:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
President: Gregory J. Carney 8705 Sturgeon Bay Lane P.O. Box 7149
Indpls, Indiana Indpls. IN
Treasurer: Gene E. Trueblood 6570 Forrest Commons P.O. Box 7149
Blvd., Indpls Indpls. IN
Clerk: Margaret M. McKinney 6828 Bloomfield Drive P.O. Box 7149
Indpls. IN Indpls. IN
Directors: Larry R. Prible 12443 Pebblepointe Pass P.O. Box 1230
Carmel, IN Indpls. IN
William L. Boyd 8126 Halyard Way P.O. Box 1230
Indpls, IN Indpls. IN
Gregory J. Carney 8705 Sturgeon Bay Lane P.O. Box 7149
Indpls, Indiana Indpls. IN
John J. Fahrenbach 5405 N. 150 P.O. Box 1230
West Lebanon, IN Indpls. IN
Margaret M. McKinney 6828 Bloomfield Drive P.O. Box 1230
Indpls, IN Indpls. IN
Garrett P. Ryan 1441 E. 151st St. P.O. Box 1230
Carmel, IN Indpls. IN
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of: December
d. The name and business address of the resident agent, if any, of the
corporation is:
<PAGE> 8
Prentice-Hall Corporation System
84 State Street, Boston, MA 02109
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
SIGNED UNDER THE PENALTIES OF PERJURY, this 28th day of December, 1995.
/s/ Gregory J. Carney , *President
- -----------------------------------------------------------
/s/ Margaret M. McKinney , *Clerk
- -----------------------------------------------------------
*Delete the inapplicable words. **If there are no amendments, state 'None'.
<PAGE> 9
525310
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156b, SECTION 74)
===============================================================================
I hereby approve the within Restated Articles of Organization and, the
filing fee in the amount of $300.00 having been paid, said articles are deemed
to have been filed with me this 26th day of January, 1996.
Effective Date:
- ----------------------------------------------------------
/s/ William Francis Galvin
----------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
RECEIVED
Jan 2 1996
Company Licensing
I hereby certify that upon examination of the restated Articles of Incorporation
duly submitted to me, it appears that said Articles conform to the requirements
of law and are hereby approved.
/s/ Linda Ruthardt
------------------------------------
Commissioner of Insurance
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT
TO: IL Annuity and Insurance Company
2960 North Meridian Street
P.O. Box 7149
Indianapolis, IN 46207-7149
Telephone: 317-927-6541
FEDERAL IDENTIFICATION
NO. 35-1935680
<PAGE> 10
<TABLE>
<CAPTION>
<S> <C>
- ---------- THE COMMONWEALTH OF MASSACHUSETTS
Examiner WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
WE, Gregory J. Carney, President and Margaret M. McKinney,
Secretary of IL Annuity and Insurance Company located at 2690
North Meridian Street, P.O. Box 7941, Indianapolis, Indiana
46207-7941 do hereby certify that these Restatement of the
Articles of Organization were duly adopted at a meeting held on
December 21, 1995, by vote of the directors/or:
10,000 shares of common out of 10,000 shares outstanding,
-------- -------- --------
Type, class & series, (if any)
- ---------- __________ shares of _____________ out of__________shares outstanding, and
Name Type, class & series, (if any)
Approved
__________ shares of _____________ out of__________shares outstanding,
Type, class & series, (if any)
**being at least a majority of each type, class or series
outstanding and entitled to vote thereon:/**being at least
two-thirds of each type, class or series outstanding and entitled
to vote thereon and of each type, class or series of stock whose
rights are adversely affected thereby:
ARTICLE I
The name of the corporation is:
IL Annuity and Insurance Company
ARTICLE II
C [ ] The purpose of the corporation is to engage in the following
P [ ] business activities:
M [ ]
R.A. [ ] To make contracts for the payment of variable annuities and any
and all other kinds of insurance business that the corporation
now or hereafter be authorized by law to transact on the stock
plan.
*Delete the inapplicable words. **Delete the inapplicable clause.
Note: If the space provided under any article or item on this form
is insufficient, additions shall be set forth on separate 8 1/2x11
sheets of paper with a left margin of at least 1 inch. Additions
to more than one article may be made on a single sheet so long as
each article requiring each addition is clearly indicated.
- ----------
P.C.
</TABLE>
<PAGE> 11
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------------
TYPE NUMBER OF TYPE NUMBER OF SHARES PAR VALUE
SHARES
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common: Common: 10,000 $250.00
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
**If there are no provisions state "None".
Note: The preceding six (6) articles are considered to be permanent and may ONLY
be changed by filing appropriate Articles of Amendment.
<PAGE> 1
EXHIBIT 6(b)
Bylaws amended 8/85; Name
change1/95 via Articles of Org. Amendment.
BYLAWS
IL ANNUITY AND INSURANCE COMPANY
(FORMERLY SENTRY INVESTORS LIFE INSURANCE COMPANY)
ARTICLE I
STOCKHOLDERS
SECTION 1 QUALIFICATIONS OF STOCKHOLDERS
A natural person, corporation, association, partnership or trust may be a
stockholder. A corporation, association, partnership or trust, if a
stockholder, may authorize in writing any person to vote and act in its
behalf at any meeting of the stockholders. Until the Company shall have
received written notice to the contrary from a corporation, association,
partnership or trust, or until some other person shall have been authorized
in writing to represent the corporation, association, partnership or trust
and the Company shall have received written notice thereof, the Company may
conclusively assume that any officer of such corporation or association, or
member of such partnership, or trustee of such trust, is the duly authorized
representative of such corporation, association, partnership or trust and
entitled to vote and act on its behalf at any meeting of the stockholders
Stock held by an administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver, or assignee for creditors may be voted by him, either
in person or by proxy, without a transfer of such stock to his name provided
that proof of his authority is duly filed with the Company.
A stockholder whose stock is pledged shall be entitled to vote such stock
until the stock has been transferred into the name of the pledgee on the
books of the Company.
SECTION 2 ANNUAL MEETINGS OF THE STOCKHOLDERS
The regular annual meeting of the stockholders shall be held on the third
Wednesday of April of each year at 11:00 A.M. At such meeting, the member
stockholders shall elect Directors and transact such other business as shall
lawfully come before them.
SECTION 3 SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders shall be held at such place and at such
time as shall be specified in the notice thereof. Special meetings shall be
called by the Secretary. The Secretary shall not call a special meeting
unless requested to do as herein provided. Whenever the
<PAGE> 2
President, or a majority of the Board of Directors or the Executive
Committee, or the holders of at least 10% of the outstanding shares shall
make a request with the Secretary stating the time, place and purpose of such
meeting, the Secretary shall call such special meeting to be held at the time
and place so requested.
SECTION 4 NOTICE OF MEETINGS OF STOCKHOLDERS
Written notice stating the place, day and hour of the meeting and in case of
a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Secretary to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his address as it appears
on the stock transfer books of the Company, with postage thereon prepaid.
Meetings of stockholders shall be held at the Company's Home Office in
Concord, Massachusetts or, to the extent permitted by the Articles of
Organization, elsewhere in the United States.
SECTION 5 QUORUM
A quorum shall be required for the transaction of business at any meeting of
the stockholders. A majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum. At any adjourned meeting at
which a quorum is present any business may be transacted which might have
been transacted at the meeting if it had been held at the time as originally
fixed therefor.
SECTION 6 VOTING AT MEETINGS OF STOCKHOLDERS
Each stockholder shall be entitled to as many votes as he shall own full
shares of stock in the Company and may vote the same in person or by proxy at
each annual or special meeting of the stockholders, provided, however, that
no stockholder shall be entitled to vote at any such meeting by proxy unless
such proxy be in writing, signed by the stockholder or by his duly authorized
attorney-in-fact, and filed with the Secretary of the Company no later than
at the opening of such meeting, but no proxy shall be valid after six months
from the date of such filing thereof with the Secretary, and the date of
filing as endorsed thereon by the Secretary shall be conclusive.
If deemed advisable by the Board of Directors with respect to any particular
meeting of the stockholders, the Secretary shall mail, or cause to be mailed,
to each stockholder, a form of written proxy for use at such meeting, which
form of proxy shall name as proxy a Committee designated by the Board of
Directors and shall contain a blank space in which the stockholder may
designate some other person or persons as proxy in place of such Proxy
Committee. Where a proxy is to two or more, it may be voted by any one or
more of the proxies so named, if present, and if the proxies so named
disagree, then the vote shall be recorded as indicated by the majority of the
proxies so present and voting, and if no majority can agree, then no vote
shall be
-2-
<PAGE> 3
cast by such proxy. All proxies shall be checked and verified by the
Secretary, who shall certify to the proxies on file with him at the opening
of each annual or special meeting of the stockholders of this Company, and
such certificate shall be conclusively deemed to be correct unless some
stockholder shall file specific objections to some one or more, in which
event the objection shall be disposed of by the stockholders present at such
meeting in person and by the stockholders represented at such meeting by
uncontested proxy in such manner as they may there agree upon.
SECTION 7 ACTION BY CONSENT
Any action required or permitted to be taken by stockholders may be taken
without a meeting if all stockholders entitled to vote on the matter consent
in writing to the action and such written consents are filed with the records
of the meetings of stockholders. Such consents shall be treated for all
purposes as a vote at a meeting.
ARTICLE II
DIRECTORS
SECTION 1 NUMBER OF DIRECTORS
The number of Directors which shall constitute the whole Board shall be not
less than five nor more than twenty-one. Within said limits, the number of
Directors shall be determined, from time to time, by resolution of the
Directors or the stockholders.
SECTION 2 ELECTION OF DIRECTORS
Each Director in office as of February 18, 1980, shall hold office until the
expiration of the term for which he was elected or until his prior death,
resignation or removal. Each Director elected or reelected after such date
shall hold office until the next annual meeting of stockholders and until his
successor shall have been elected and qualified or until his prior death,
resignation or removal. Any vacancy in the Board of Directors, unless
otherwise provided by law, may be filled by the affirmative vote of a
majority of the Directors then in office, and such person shall serve until
the next annual meeting of stockholders or until his prior death, resignation
or removal.
SECTION 3 POWERS OF DIRECTORS
The Board of Directors shall direct the management of the business and
affairs of the Company. They shall provide a suitable Home Office for the
Company, and may provide such other offices as they may deem necessary. They
shall fix the compensation of Directors, members of the Executive Committee
and of any other Committee established by the Board, and of all general
officers of the Company, and shall fix or determine the manner of fixing the
compensation of associate officers, legal counsel, representatives and
employees of the Company. They shall,
-3-
<PAGE> 4
pursuant to the Articles of Organization, determine the kind and nature of
hazards against which policyholders may be insured. They shall direct the
investment of the reserve and surplus funds of the Company. They may grant
such powers and assign such duties to Committees of the Board, to other
Committees created by them, or to the officers of the Company as the Board
may from time to time deem advisable. They may make rates for insurance or
authorize any Committee of the Board or other Committee appointed by them or
any officer or officers of the Company or any other person or persons, to
determine the rates of insurance or the manner or method by which such rates
shall be established. They may reinsure risks or classes or risks and may
authorize any Committee of the Board or other Committee created by them or
any officer or officers of the Company or any other person or persons, to
reinsure risks or classes of risks and to enter into contracts in respect
thereto. They may classify risks by kind, type or line of insurance or
subdivision thereof, by the degree of hazard assumed or by any standard they
may determine is fair and reasonable and may assign the risks into groups,
divisions or classes. In addition to the duties and powers enumerated in
these By-Laws, the Board of Directors shall have and may exercise all powers
and duties necessary or incident to their office, except such as by law or
the Articles of Organization are conferred upon or reserved to the
stockholders.
SECTION 4 MEETINGS OF DIRECTORS
Regular meetings of the Board of Directors shall be held at such times and
places as the Board of Directors may from time to time determine. Special
meetings of the Board of Directors shall be called whenever the Chairman of
the Board, the President, a Vice President or any two Directors shall so
request. At least forty-eight hours notice shall be given of such special
meetings and such notice may be given in any manner whatsoever; and every
Director shall for all purposes be deemed to have been duly notified of a
meeting if he shall be present at such meeting or shall in writing waive
notice thereof either before or after the meeting.
SECTION 5 ACTION BY CONSENT
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if all of the directors consent to
the action in writing and such consents are filed with the records of the
meetings of the Board of Directors. Such consents shall be treated for all
purposes as a vote at a meeting.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1 ELECTION AND APPOINTMENT
The Board of Directors may elect an Executive Committee to be composed of
three or more members of the Board of Directors. Members of the Executive
Committee shall serve for the term of one year and until their successors are
chosen and qualified.
-4-
<PAGE> 5
SECTION 2 POWERS
In addition to the powers expressly conferred by these By-Laws, the Executive
Committee shall have and exercise such powers and shall perform such duties
as may be specified from time to time by resolution of the Board of Directors.
SECTION 3 MEETINGS
A Chairman shall be chosen by the members to preside at meeting. Regular
meetings of the Executive Committee shall be held at such times and places as
the Committee may determine. Special meetings of the Executive Committee
shall be called whenever any member of the Committee shall so request.
Reasonable notice shall be given of such special meetings, but the action of
a majority of the Executive Committee at any meeting shall be valid,
notwithstanding any want of or defect in any such notice.
ARTICLE IV
FINANCE COMMITTEE
SECTION 1 ELECTION AND APPOINTMENT
The Board of Directors may elect a Finance Committee to be composed of three
or more members of the Board of Directors. Members of the Finance Committee
shall serve for the term of one year and until their successors are elected
and qualified.
SECTION 2 POWERS
The Finance Committee shall have control of the assets of the Company. It
shall have charge of investing, managing, collecting, selling and otherwise
disposing of the same, and the designation of depositories for the Company's
funds. It shall have power to appoint one or more loan agents and to fix
their salaries. It may, from time to time, borrow money for the use and
benefit of the Company in such amount and on such terms as it shall in each
case determine by resolution, and may authorize and direct designated
officials to evidence such loans by the promissory note of the Company and to
pledge as security for the payment thereof the assets and property specified
in such resolution. To carry out these ends, it may do all such acts and
things as it may deem necessary and proper.
SECTION 3 MEETINGS
A Chairman shall be chosen by the members to preside at meetings. Regular
meetings of the Finance Committee shall be held on such day or days of each
week as the Committee shall elect. Special meetings of the Finance Committee
shall be called whenever any member of the Committee shall so request.
Reasonable notice shall be given of such special meetings, but the
-5-
<PAGE> 6
action of a majority of the Finance Committee at any meeting shall be valid,
notwithstanding any want of or defect in any such notice.
SECTION 4 REPORTS
The Finance Committee shall keep a record of its transactions, which record
shall be available for inspection at any regular or special meeting of the
Executive Committee or Board of Directors.
ARTICLE V
OTHER COMMITTEES
SECTION 1 COMMITTEES OF THE BOARD
The Board of Directors by resolution may at any time elect or may authorize
the Chairman of the Board of Directors or the President to appoint three or
more Directors, one of whom shall be the chief executive officer, to
constitute a Committee of the Board, and may confer such powers and impose
such duties upon any such Committee as the Board may deem advisable. The
chief executive officer shall preside at all meetings of any such Committee
except that in the absence of the chief executive officer from a meeting, a
Chairman may be chosen by the remaining members of the Committee to preside
thereat. Any such Committee shall make reports at such times and in such
form and manner as the Board may require. Members of any such Committee
shall serve at the pleasure of the Board of Directors, but in no event for a
term longer than one year and until their respective successors are chosen
and qualified. Pending the filling of any vacancy in such Committee the
remaining members of the Committee shall exercise its functions.
SECTION 2 OTHER COMMITTEES
The Board of Directors may by resolution provide for such Committees, not
elsewhere herein provided for, as it may deem advisable and select the
members thereof or provide for their selection. Any person serving upon any
such Committee shall be a stockholder or a policyholder of the Company and
may be a director, officer or employee thereof. Each such Committee shall
have such powers and perform such duties as the Board of Directors may from
time to time prescribe, except as otherwise provided by law.
ARTICLE VI
QUORUM OF DIRECTORS AND COMMITTEES
A quorum for the transaction of business at any meeting of the Board of
Directors or at any meeting of any Committee shall consist of a majority of
the Directors or members of such Committee, as the case may be, provided that
at least four Directors shall be necessary to
-6-
<PAGE> 7
constitute a quorum of the Board of Directors. Less than a quorum may
adjourn a meeting from time to time until a quorum shall be present.
ARTICLE VII
OFFICERS
SECTION 1 GENERAL OFFICERS
The general officers of the Company shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary, and a Treasurer, and
such other officers specifically designated as general officers by the Board
of Directors.
SECTION 2 ELECTION
The officers of the Company shall comprise the general officers and such
other officers (hereinafter referred to as associate officers) as may be from
time to time deemed necessary by the Board of Directors or the Executive
Committee. At the first meeting of the Board of Directors held after the
completion of each annual meeting of the stockholders, the Board shall elect
a Chairman of the Board of Directors, who shall be a Director, the President,
one or more Vice Presidents, a Secretary and a Treasurer and such other
general officers as may be designated by the Board of Directors, all of whom
shall hold office for one year and until their respective successors are
elected and qualified, or until their prior death, resignation or removal.
Any two or more of such offices may be held by the same person insofar as
permitted by law. The Board of Directors may elect additional officers at
any time, and such additional officers shall hold office until the first
meeting of the Board which is held after the next annual meeting of the
stockholders.
The Board of Directors or the Executive Committee may elect one or more
Assistant Secretaries, Assistant Treasurers, and other associate officers or
they may authorize the chief executive officer to appoint such Assistant
Secretaries, Assistant Treasurers and other associate officers. Any
Assistant Secretary or Assistant Treasurer or other associate officer shall
hold office for one year or until his successor is chosen and qualified. The
Board of Directors or the Executive Committee or the chief executive officer
may at any time remove any Assistant Secretary or Assistant Treasurer or
other associate officer so elected or appointed.
SECTION 3 CHAIRMAN OF THE BOARD OF DIRECTORS
The Chairman of the Board, if elected, shall preside at all meetings of the
stockholders of the Company and of the Board of Directors. In the absence of
the Chairman of the Board, or if no Chairman of the Board has been elected,
the President shall preside at all meetings of the stockholders of the
Company and of the Board of Directors. In the absence of the Chairman of the
Board and the President from any meeting of the stockholders of the Company
or meeting of the Board of Directors, a Vice President shall preside.
-7-
<PAGE> 8
SECTION 4 PRESIDENT
The President shall be vice chairman of the Board of Directors, and shall
preside at meetings in the absence of the Chairman of the Board.
SECTION 5 ADDITIONAL DUTIES - CHAIRMAN OF THE BOARD - PRESIDENT
The Chairman of the Board and the President shall exercise such other powers
and perform such other duties as shall be incident to their respective
offices or as may be required by the Board of Directors, the Executive
Committee or the Finance Committee.
SECTION 6 CHIEF EXECUTIVE OFFICER
The chief executive officer of the Company shall be designated from time to
time by the Board of Directors or Executive Committee from among the general
officers, and the powers and duties of the chief executive officer shall
appertain and belong to the office of the designee while such designation is
in effect. If such designation is made by the Executive Committee, it shall
not extend beyond the next succeeding meeting of the Board of Directors. In
the absence of such designation, the President shall be the chief executive
officer and the powers and duties of the chief executive officer shall
appertain and belong to the office of the President.
Under the advice and director of the Board of Directors, the Executive
Committee and the Finance Committee the chief executive officer shall have
general charge and oversight of the Company's business and affairs and shall
discharge all other duties imposed upon him by law, by these By-Laws, and by
the Board of Directors, the Executive Committee or the Finance Committee. He
shall have custody of the fidelity bonds of the general officers and
associate officers. His signature or the signature of the President or one
of the Vice Presidents authorized by the Board of Directors, the Executive
Committee or the chief executive officer (together with the signature of the
Secretary or an Assistant Secretary) shall be affixed to all policies.
SECTION 7 OTHER GENERAL OFFICERS
Each general officer of the Company, except the Chairman of the Board and the
President, in addition to his powers and duties specified by these By-Laws,
shall also exercise such powers and perform such duties as are usually
incident to his office and such as shall be assigned to or required of him,
from time to time, by the Board of Directors, the Executive Committee, the
Finance Committee or the chief executive officer.
SECTION 8 ASSOCIATE OFFICERS
Any Assistant Secretary, Assistant Treasurer or other associate officer
elected by the Board of Directors or Executive Committee or appointed by the
chief executive officer shall have such
-8-
<PAGE> 9
powers and discharge such duties as may be from time to time conferred or
imposed upon him by the Board of Directors, the Executive Committee or the
chief executive officer.
SECTION 9 SECRETARY OF BOARD OF DIRECTORS OR COMMITTEES
The Board of Directors, Executive Committee, Finance Committee, or any other
Committee established by the Board of Directors may select any person to act
as Secretary thereof, record and keep the minutes of the proceedings of the
Board of Directors or of such Committee and attend to the giving of all
notices in respect thereto.
ARTICLE VIII
RESIGNATIONS AND VACANCIES
Any Director, member of the Executive Committee, Finance Committee or other
Committee established by or pursuant to action of the Board of Directors, or
any officer may resign by giving written notice to the Board of Directors or
the Executive Committee or the chief executive officer or the Secretary, and
upon the acceptance of his resignation by the Board of Directors or by the
Executive Committee his office shall be vacant. Vacancies in the Executive
Committee or the Finance Committee, however occurring, shall be filled by the
Board of Directors. Vacancies in any other Committee established by or
pursuant to action of the Board of Directors, however occurring, shall be
filled by the Board of Directors. Vacancies in any general office, however
occurring, shall be filled by the Board of Directors and in any associate
office, by the Board of Directors, the Executive Committee or the chief
executive officer. The person chosen to fill any vacancy shall hold office
for the unexpired balance of the term for which his predecessor was chosen,
except as otherwise provided by law or by these By-Laws, but the continuing
Directors, members of the Executive Committee, Finance Committee or other
Committee established by or pursuant to action of the Board of Directors may
act notwithstanding any vacancy in the Board or Committee. All acts done by
the Board of Directors, Executive Committee, Finance Committee or other
Committee established by or pursuant to action of the Board of Directors or
by any Director or member of any such Committee shall be as valid as if such
Director or member of such Committee had been duly chosen and qualified,
notwithstanding any defect in his election, appointment or qualification.
The President shall have all the powers and shall discharge all of the duties
of the Chairman of the Board during his absence or inability or incapacity to
act or while the office of Chairman of the Board is vacant. Any Vice
President designated by the Board of Directors shall have all of the powers
and shall discharge all the duties of the President during his absence or
inability or incapacity to act or while the office of President is vacant.
In the case of any other officer, the Board of Directors, the Executive
Committee or the Chief executive officer may appoint a person to act in his
place during his absence, or inability or incapacity to act or while such
office is vacant and may grant to such Person the full powers and duties of
such officer or any portions thereof.
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<PAGE> 10
ARTICLE IX
CAPITAL STOCK
SECTION 1 CERTIFICATES OF STOCK
Each stockholder shall be entitled to a certificate in the form approved by
the Board of Directors stating the number, class, and designation of series,
if any, of the shares held by the stockholder. Such certificates shall be
signed by the President or a Vice President and by the Treasurer or an
Assistant Treasurer.
SECTION 2 TRANSFER
Shares of stock shall be transferred of record on the books of the Company
only upon the surrender to the Company of the certificate therefor properly
endorsed for transfer (or accompanied by a written assignment and power of
attorney properly executed for transfer), and only upon compliance with
provisions, if any, respecting restrictions on transfer contained in the
Articles of Organization, these By-Laws or any agreement to which the Company
is a party. The Company may require proof of the genuineness of the
signature and the capacity of the party presenting the certificate for
transfer.
SECTION 3 SETTING RECORD DATE AND CLOSING TRANSFER RECORDS
The Board of Directors may fix in advance a time not more than sixty days
before (i) the date of any meeting of the stockholders or (ii) the date for
the payment of any dividend or the making of any distribution to stockholders
or (iii) the last day on which the consent or dissent of stockholders may be
effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of, and to vote at such meeting or
any adjournment thereof, or the right to receive such dividend or
distribution, or the right to give such consent or dissent. If a record date
is fixed by the Board of Directors, only stockholders of record on such date
shall have such rights notwithstanding any transfer of stock on the records
of the Company after such date. Without fixing such record date, the Board
of Directors may close the transfer records of the Company for all or any
part of such sixty-day period.
If no record date is fixed and the transfer books are not closed, then the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of
business on the date on which the Board of Directors acts with respect
thereto.
SECTION 4 ISSUE OF STOCK
The Board of Directors may, from time to time, issue any of the authorized
capital stock of the Company for cash, property, services or expenses, or as
a stock dividend, and on any terms
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<PAGE> 11
permitted by law and the articles of organization. No stock shall be issued
unless the cash, so far as due, or the property, services or expenses for
which it was authorized to be issued, has been actually received or incurred
by, or conveyed or rendered to, the Company, or is in its possession as
surplus.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Any director or officer or his legal representative shall be indemnified by
the Company against reasonable expenses including the cost of any settlement
and counsel fees paid or incurred in connection with any action, suit or
proceeding to which any such director or officer or his legal representative
may be made a party by reason of his being or having been such director or
officer, provided it shall not be determined by a final determination thereof
on the merits that such director of officer was in any substantial way
derelict in the performance of his duties, or provided that such action, suit
or proceedings shall be settled without a final determination on the merits
and it shall be determined that such officer or director had not in any
substantial way been derelict in the performance of his duties as charged
therein, such determination to be made by a majority of the members of the
Board of Directors who were not parties to such action, suit or proceedings,
though less than a quorum, or by any one or more disinterested persons to
whom the question may be referred by the Board of Directors. The foregoing
right of indemnification shall not be exclusive of any other rights to which
any director or officer may be entitled as a matter of law or which may be
lawfully granted to him.
ARTICLE XI
EMERGENCY BY-LAWS
If, as a result of an emergency caused by an attack on the United States or
by a nuclear, atomic or other disaster, a quorum of the Board of Directors
cannot be convened, the directors who are convened, though less than a quorum
or though only a single director, shall constitute an Emergency Executive
Committee. The Emergency Executive Committee shall have all the powers of
the Board of Directors to conduct the business and shall have the power to
fill any vacancies in the Board, which shall resume its powers as soon as a
quorum can be convened. The directors so appointed shall serve until there
is an election of directors by the stockholders at a duly convened meeting.
If no directors are available to attend a Board of Directors meeting after
such emergency the available senior officer with the longest term of service
with the Company shall be authorized to conduct the business of the Company
until a meeting of the directors or stockholders can be convened.
If it shall be impractical or impossible to give notice of a Board of
Directors meeting in the manner prescribed by these By-Laws, the person
calling such meeting may give notice thereof by making such reasonable
efforts as circumstances may permit to notify the directors. Failure of any
director to receive actual notice of a meeting shall not affect the power of
the directors present at such meeting to exercise the powers prescribed in
this Article.
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<PAGE> 12
The foregoing shall not be deemed to preclude the taking of any action by any
director, officer or employee of the Company during an emergency which is
otherwise authorized by law and which such director, officer or employee may
deem necessary or desirable in the interest of the affairs of the Company.
ARTICLE XII
AMENDMENT OF BY-LAWS
The stockholders may amend these By-Laws by vote of a majority in interest of
the capital stock entitled to vote, represented at a meeting at which a
quorum is present. These By-Laws may also be amended by the Directors to the
extent permitted by law.
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<PAGE> 13
Bylaws
amended 8/85; Name
change 9/84 via Articles of Org. Amendment.
BYLAWS
SENTRY INVESTORS LIFE INSURANCE COMPANY
(FORMERLY PATRIOT GENERAL LIFE INSURANCE COMPANY)
ARTICLE I
STOCKHOLDER
SECTION 1 QUALIFICATIONS OF STOCKHOLDERS
A natural person, corporation, association, partnership or trust may be a
stockholder. A corporation, association, partnership or trust, if a
stockholder, may authorize in writing any person to vote and act in its
behalf at any meeting of the stockholders. Until the Company shall have
received written notice to the contrary from a corporation, association,
partnership or trust, or until some other person shall have been authorized
in writing to represent the corporation, association, partnership or trust
and the Company shall have received written notice thereof, the Company may
conclusively assume that any officer of such corporation or association, or
member of such partnership, or trustee of such trust, is the duly authorized
representative of such corporation, association, partnership or trust and
entitled to vote and act on its behalf at any meeting of the stockholders.
Stock held by an administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver, or assignee for creditors may be voted by him, either
in person or by proxy, without a transfer of such stock to his name provided
that proof of his authority is duly filed with the Company.
A stockholder whose stock is pledged shall be entitled to vote such stock
until the stock has been transferred into the name of the pledgee on the
books of the Company.
SECTION 2 ANNUAL MEETINGS OF THE STOCKHOLDERS
The regular annual meeting of the stockholders shall be held on the third
Wednesday of April of each year at 11:00 A.M. At such meeting, the member
stockholders shall elect Directors and transact such other business as shall
lawfully come before them.
SECTION 3 SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders shall be held at such place and at such
time as shall be specified in the notice thereof. Special meetings shall be
called by the Secretary. The Secretary shall not call a special meeting
unless requested to do as herein provided. Whenever the
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<PAGE> 14
President, or a majority of the Board of Directors or the Executive
Committee, or the holders of at least 10% of the outstanding shares shall
make a request with the Secretary stating the time, place and purpose of such
meeting, the Secretary shall call such special meeting to be held at the time
and place so requested.
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<PAGE> 15
Bylaws
amended 8/85; Name
change 9/84 via Articles of Org. Amendment.
BYLAWS
SENTRY INVESTORS LIFE INSURANCE COMPANY
(FORMERLY PATRIOT GENERAL LIFE INSURANCE COMPANY)
ARTICLE I
STOCKHOLDERS
SECTION 1 QUALIFICATIONS OF STOCKHOLDERS
A natural person, corporation, association, partnership or trust may be a
stockholder. A corporation, association, partnership or trust, if a
stockholder, may authorize in writing any person to vote and act in its
behalf at any meeting of the stockholders. Until the Company shall have
received written notice to the contrary from a corporation, association,
partnership or trust, or until some other person shall have been authorized
in writing to represent the corporation, association, partnership or trust
and the Company shall have received written notice thereof, the Company may
conclusively assume that any officer of such corporation or association, or
member of such partnership, or trustee of such trust, is the duly authorized
representative of such corporation, association, partnership or trust and
entitled to vote and act on its behalf at any meeting of the stockholders.
Stock held by an administrator, executor, guardian, conservator, trustee in
bankruptcy, receiver, or assignee for creditors may be voted by him, either
in person or by proxy, without a transfer of such stock to his name provided
that proof of his authority is duly filed with the Company.
A stockholder whose stock is pledged shall be entitled to vote such stock
until the stock has been transferred into the name of the pledgee on the
books of the Company.
SECTION 2 ANNUAL MEETINGS OF THE STOCKHOLDERS
The regular annual meeting of the stockholders shall be held on the third
Wednesday of April of each year at 11:00 A.M. At such meeting, the member
stockholders shall elect Directors and transact such other business as shall
lawfully come before them.
SECTION 3 SPECIAL MEETINGS OF STOCKHOLDERS
Special meetings of the stockholders shall be held at such place and at such
time as shall be specified in the notice thereof. Special meetings shall be
called by the Secretary. The Secretary shall not call a special meeting
unless requested to do as herein provided. Whenever the President, or a
majority of the Board of Directors or the Executive Committee, or the holders
of
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<PAGE> 16
at least 10% of the outstanding shares shall make a request with the
Secretary stating the time, place and purpose of such meeting, the Secretary
shall call such special meeting to be held at the time and place so requested.
SECTION 4 NOTICE OF MEETINGS OF STOCKHOLDERS
Written notice stating the place, day and hour of the meeting and in case of
a special meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than 10 nor more than 50 days before the date of
the meeting, either personally or by mail, by or at the direction of the
Secretary to each stockholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the stockholder at his address as it appears
on the stock transfer books of the Company, with postage thereon prepaid.
Meetings of stockholders shall be held at the Company's Home Office in
Concord, Massachusetts or, to the extent permitted by the Articles of
Organization, elsewhere in the United States.
SECTION 5 QUORUM
A quorum shall be required for the transaction of business at any meeting of
the stockholders. A majority of the shares entitled to vote, represented in
person or by proxy, shall constitute a quorum. At any adjourned meeting at
which a quorum is present any business may be transacted which might have
been transacted at the meeting if it had been held at the time as originally
fixed therefor.
SECTION 6 VOTING AT MEETINGS OF STOCKHOLDERS
Each stockholder shall be entitled to as many votes as he shall own full
shares of stock in the Company and may vote the same in person or by proxy at
each annual or special meeting of the stockholders, provided, however, that
no stockholder shall be entitled to vote at any such meeting by proxy unless
such proxy be in writing, signed by the stockholder or by his duly authorized
attorney-in-fact, and filed with the Secretary of the Company no later than
at the opening of such meeting, but no proxy shall be valid after six months
from the date of such filing thereof with the Secretary, and the date of
filing as endorsed thereon by the Secretary shall be conclusive.
If deemed advisable by the Board of Directors with respect to any particular
meeting of the stockholders, the Secretary shall mail, or cause to be mailed,
to each stockholder, a form of written proxy for use at such meeting, which
form of proxy shall name as proxy a Committee designated by the Board of
Directors and shall contain a blank space in which the stockholder may
designate some other person or persons as proxy in place of such Proxy
Committee. Where a proxy is to two or more, it may be voted by any one or
more of the proxies so named, if present, and if the proxies so named
disagree, then the vote shall be recorded as indicated by the majority of the
proxies so present and voting, and if no majority can agree, then no vote
shall be cast by such proxy. All proxies shall be checked and verified by
the Secretary, who shall certify
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<PAGE> 17
to the proxies on file with him at the opening of each annual or special
meeting of the stockholders of this Company, and such certificate shall be
conclusively deemed to be correct unless some stockholder shall file specific
objections to some one or more, in which event the objection shall be
disposed of by the stockholders present at such meeting in person and by the
stockholders represented at such meeting by uncontested proxy in such manner
as they may there agree upon.
SECTION 7 ACTION BY CONSENT
Any action required or permitted to be taken by stockholders may be taken
without a meeting if all stockholders entitled to vote on the matter consent
in writing to the action and such written consents are filed with the records
of the meetings of stockholders. Such consents shall be treated for all
purposes as a vote at a meeting.
ARTICLE II
DIRECTORS
SECTION 1 NUMBER OF DIRECTORS
The number of Directors which shall constitute the whole Board shall be not
less than five nor more than twenty-one. Within said limits, the number of
Directors shall be determined, from time to time, by resolution of the
Directors or the stockholders.
SECTION 2 ELECTION OF DIRECTORS
Each Director in office as of February 18, 1980, shall hold office until the
expiration of the term for which he was elected or until his prior death,
resignation or removal. Each Director elected or reelected after such date
shall hold office until the next annual meeting of stockholders and until his
successor shall have been elected and qualified or until his prior death,
resignation or removal. Any vacancy in the Board of Directors, unless
otherwise provided by law, may be filled by the affirmative vote of a
majority of the Directors then in office, and such person shall serve until
the next annual meeting of stockholders or until his prior death, resignation
or removal.
SECTION 3 POWERS OF DIRECTORS
The Board of Directors shall direct the management of the business and
affairs of the Company. They shall provide a suitable Home Office for the
Company, and may provide such other offices as they may deem necessary. They
shall fix the compensation of Directors, members of the Executive Committee
and of any other Committee established by the Board, and of all general
officers of the Company, and shall fix or determine the manner of fixing the
compensation of associate officers, legal counsel, representatives and
employees of the Company. They shall, pursuant to the Articles of
Organization, determine the kind and nature of hazards against which
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<PAGE> 18
policyholders may be insured. They shall direct the investment of the
reserve and surplus funds of the Company. They may grant such powers and
assign such duties to Committees of the Board, to other Committees created by
them, or to the officers of the Company as the Board may from time to time
deem advisable. They may make rates for insurance or authorize any Committee
of the Board or other Committee appointed by them or any officer or officers
of the Company or any other person or persons, to determine the rates of
insurance or the manner or method by which such rates shall be established.
They may reinsure risks or classes or risks and may authorize any Committee
of the Board or other Committee created by them or any officer or officers of
the Company or any other person or persons, to reinsure risks or classes of
risks and to enter into contracts in respect thereto. They may classify
risks by kind, type or line of insurance or subdivision thereof, by the
degree of hazard assumed or by any standard they may determine is fair and
reasonable and may assign the risks into groups, divisions or classes. In
addition to the duties and powers enumerated in these By-Laws, the Board of
Directors shall have and may exercise all powers and duties necessary or
incident to their office, except such as by law or the Articles of
Organization are conferred upon or reserved to the stockholders.
SECTION 4 MEETINGS OF DIRECTORS
Regular meetings of the Board of Directors shall be held at such times and
places as the Board of Directors may from time to time determine. Special
meetings of the Board of Directors shall be called whenever the Chairman of
the Board, the President, a Vice President or any two Directors shall so
request. At least forty-eight hours notice shall be given of such special
meetings and such notice may be given in any manner whatsoever; and every
Director shall for all purposes be deemed to have been duly notified of a
meeting if he shall be present at such meeting or shall in writing waive
notice thereof either before or after the meeting.
SECTION 5 ACTION BY CONSENT
Any action required or permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if all of the directors consent to
the action in writing and such consents are filed with the records of the
meetings of the Board of Directors. Such consents shall be treated for all
purposes as a vote at a meeting.
ARTICLE III
EXECUTIVE COMMITTEE
SECTION 1 ELECTION AND APPOINTMENT
The Board of Directors may elect an Executive Committee to be composed of
three or more members of the Board of Directors. Members of the Executive
Committee shall serve for the term of one year and until their successors are
chosen and qualified.
SECTION 2 POWERS
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<PAGE> 19
In addition to the powers expressly conferred by these By-Laws, the Executive
Committee shall have and exercise such powers and shall perform such duties
as may be specified from time to time by resolution of the Board of Directors.
SECTION 3 MEETINGS
A Chairman shall be chosen by the members to preside at meeting. Regular
meetings of the Executive Committee shall be held at such times and places as
the Committee may determine. Special meetings of the Executive Committee
shall be called whenever any member of the Committee shall so request.
Reasonable notice shall be given of such special meetings, but the action of
a majority of the Executive Committee at any meeting shall be valid,
notwithstanding any want of or defect in any such notice.
ARTICLE IV
FINANCE COMMITTEE
SECTION 1 ELECTION AND APPOINTMENT
The Board of Directors may elect a Finance Committee to be composed of three
or more members of the Board of Directors. Members of the Finance Committee
shall serve for the term of one year and until their successors are elected
and qualified.
SECTION 2 POWERS
The Finance Committee shall have control of the assets of the Company. It
shall have charge of investing, managing, collecting, selling and otherwise
disposing of the same, and the designation of depositories for the Company's
funds. It shall have power to appoint one or more loan agents and to fix
their salaries. It may, from time to time, borrow money for the use and
benefit of the Company in such amount and on such terms as it shall in each
case determine by resolution, and may authorize and direct designated
officials to evidence such loans by the promissory note of the Company and to
pledge as security for the payment thereof the assets and property specified
in such resolution. To carry out these ends, it may do all such acts and
things as it may deem necessary and proper.
SECTION 3 MEETINGS
A Chairman shall be chosen by the members to preside at meetings. Regular
meetings of the Finance Committee shall be held on such day or days of each
week as the Committee shall elect. Special meetings of the Finance Committee
shall be called whenever any member of the Committee shall so request.
Reasonable notice shall be given of such special meetings, but the action of
a majority of the Finance Committee at any meeting shall be valid,
notwithstanding any want of or defect in any such notice.
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<PAGE> 20
SECTION 4 REPORTS
The Finance Committee shall keep a record of its transactions, which record
shall be available for inspection at any regular or special meeting of the
Executive Committee or Board of Directors.
ARTICLE V
OTHER COMMITTEES
SECTION 1 COMMITTEES OF THE BOARD
The Board of Directors by resolution may at any time elect or may authorize
the Chairman of the Board of Directors or the President to appoint three or
more Directors, one of whom shall be the chief executive officer, to
constitute a Committee of the Board, and may confer such powers and impose
such duties upon any such Committee as the Board may deem advisable. The
chief executive officer shall preside at all meetings of any such Committee
except that in the absence of the chief executive officer from a meeting, a
Chairman may be chosen by the remaining members of the Committee to preside
thereat. Any such Committee shall make reports at such times and in such
form and manner as the Board may require. Members of any such Committee
shall serve at the pleasure of the Board of Directors, but in no event for a
term longer than one year and until their respective successors are chosen
and qualified. Pending the filling of any vacancy in such Committee the
remaining members of the Committee shall exercise its functions.
SECTION 2 OTHER COMMITTEES
The Board of Directors may by resolution provide for such Committees, not
elsewhere herein provided for, as it may deem advisable and select the
members thereof or provide for their selection. Any person serving upon any
such Committee shall be a stockholder or a policyholder of the Company and
may be a director, officer or employee thereof. Each such Committee shall
have such powers and perform such duties as the Board of Directors may from
time to time prescribe, except as otherwise provided by law.
ARTICLE VI
QUORUM OF DIRECTORS AND COMMITTEES
A quorum for the transaction of business at any meeting of the Board of
Directors or at any meeting of any Committee shall consist of a majority of
the Directors or members of such Committee, as the case may be, provided that
at least four Directors shall be necessary to constitute a quorum of the
Board of Directors. Less than a quorum may adjourn a meeting from time to
time until a quorum shall be present.
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<PAGE> 21
ARTICLE VII
OFFICERS
SECTION 1 GENERAL OFFICERS
The general officers of the Company shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary, and a Treasurer, and
such other officers specifically designated as general officers by the Board
of Directors.
SECTION 2 ELECTION
The officers of the Company shall comprise the general officers and such
other officers (hereinafter referred to as associate officers) as may be from
time to time deemed necessary by the Board of Directors or the Executive
Committee. At the first meeting of the Board of Directors held after the
completion of each annual meeting of the stockholders, the Board shall elect
a Chairman of the Board of Directors, who shall be a Director, the President,
one or more Vice Presidents, a Secretary and a Treasurer and such other
general officers as may be designated by the Board of Directors, all of whom
shall hold office for one year and until their respective successors are
elected and qualified, or until their prior death, resignation or removal.
Any two or more of such offices may be held by the same person insofar as
permitted by law. The Board of Directors may elect additional officers at
any time, and such additional officers shall hold office until the first
meeting of the Board which is held after the next annual meeting of the
stockholders.
The Board of Directors or the Executive Committee may elect one or more
Assistant Secretaries, Assistant Treasurers, and other associate officers or
they may authorize the chief executive officer to appoint such Assistant
Secretaries, Assistant Treasurers and other associate officers. Any
Assistant Secretary or Assistant Treasurer or other associate officer shall
hold office for one year or until his successor is chosen and qualified. The
Board of Directors or the Executive Committee or the chief executive officer
may at any time remove any Assistant Secretary or Assistant Treasurer or
other associate officer so elected or appointed.
SECTION 3 CHAIRMAN OF THE BOARD OF DIRECTORS
The Chairman of the Board, if elected, shall preside at all meetings of the
stockholders of the Company and of the Board of Directors. In the absence of
the Chairman of the Board, or if no Chairman of the Board has been elected,
the President shall preside at all meetings of the stockholders of the
Company and of the Board of Directors. In the absence of the Chairman of the
Board and the President from any meeting of the stockholders of the Company
or meeting of the Board of Directors, a Vice President shall preside.
SECTION 4 PRESIDENT
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<PAGE> 22
The President shall be vice chairman of the Board of Directors, and shall
Preside at meetings in the absence of the Chairman of the Board.
SECTION 5 ADDITIONAL DUTIES - CHAIRMAN OF THE BOARD - PRESIDENT
The Chairman of the Board and the President shall exercise such other powers
and perform such other duties as shall be incident to their respective
offices or as may be required by the Board of Directors, the Executive
Committee or the Finance Committee.
SECTION 6 CHIEF EXECUTIVE OFFICER
The chief executive officer of the Company shall be designated from time to
time by the Board of Directors or Executive Committee from among the general
officers, and the powers and duties of the chief executive officer shall
appertain and belong to the office of the designee while such designation is
in effect. If such designation is made by the Executive Committee, it shall
not extend beyond the next succeeding meeting of the Board of Directors. In
the absence of such designation, the President shall be the chief executive
officer and the powers and duties of the chief executive officer shall
appertain and belong to the office of the President.
Under the advice and director of the Board of Directors, the Executive
Committee and the Finance Committee the chief executive officer shall have
general charge and oversight of the Company's business and affairs and shall
discharge all other duties imposed upon him by law, by these By-Laws, and by
the Board of Directors, the Executive Committee or the Finance Committee. He
shall have custody of the fidelity bonds of the general officers and
associate officers. His signature or the signature of the President or one
of the Vice Presidents authorized by the Board of Directors, the Executive
Committee or the chief executive officer (together with the signature of the
Secretary or an Assistant Secretary) shall be affixed to all policies.
SECTION 7 OTHER GENERAL OFFICERS
Each general officer of the Company, except the Chairman of the Board and the
President, in addition to his powers and duties specified by these By-Laws,
shall also exercise such powers and perform such duties as are usually
incident to his office and such as shall be assigned to or required of him,
from time to time, by the Board of Directors, the Executive Committee, the
Finance Committee or the chief executive officer.
SECTION 8 ASSOCIATE OFFICERS
Any Assistant Secretary, Assistant Treasurer or other associate officer
elected by the Board of Directors or Executive Committee or appointed by the
chief executive officer shall have such powers and discharge such duties as
may be from time to time conferred or imposed upon him by the Board of
Directors, the Executive Committee or the chief executive officer.
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<PAGE> 23
SECTION 9 SECRETARY OF BOARD OF DIRECTORS OR COMMITTEES
The Board of Directors, Executive Committee, Finance Committee, or any other
Committee established by the Board of Directors may select any person to act
as Secretary thereof, record and keep the minutes of the proceedings of the
Board of Directors or of such Committee and attend to the giving of all
notices in respect thereto.
ARTICLE VIII
RESIGNATIONS AND VACANCIES
Any Director, member of the Executive Committee, Finance Committee or other
Committee established by or pursuant to action of the Board of Directors, or
any officer may resign by giving written notice to the Board of Directors or
the Executive Committee or the chief executive officer or the Secretary, and
upon the acceptance of his resignation by the Board of Directors or by the
Executive Committee his office shall be vacant. Vacancies in the Executive
Committee or the Finance Committee, however occurring, shall be filled by the
Board of Directors. Vacancies in any other Committee established by or
pursuant to action of the Board of Directors, however occurring, shall be
filled by the Board of Directors. Vacancies in any general office, however
occurring, shall be filled by the Board of Directors and in any associate
office, by the Board of Directors, the Executive Committee or the chief
executive officer. The person chosen to fill any vacancy shall hold office
for the unexpired balance of the term for which his predecessor was chosen,
except as otherwise provided by law or by these By-Laws, but the continuing
Directors, members of the Executive Committee, Finance Committee or other
Committee established by or pursuant to action of the Board of Directors may
act notwithstanding any vacancy in the Board or Committee. All acts done by
the Board of Directors, Executive Committee, Finance Committee or other
Committee established by or pursuant to action of the Board of Directors or
by any Director or member of any such Committee shall be as valid as if such
Director or member of such Committee had been duly chosen and qualified,
notwithstanding any defect in his election, appointment or qualification.
The President shall have all the powers and shall discharge all of the duties
of the Chairman of the Board during his absence or inability or incapacity to
act or while the office of Chairman of the Board is vacant. Any Vice
President designated by the Board of Directors shall have all of the powers
and shall discharge all the duties of the President during his absence or
inability or incapacity to act or while the office of President is vacant.
In the case of any other officer, the Board of Directors, the Executive
Committee or the Chief executive officer may appoint a person to act in his
place during his absence, or inability or incapacity to act or while such
office is vacant and may grant to such person the full powers and duties of
such officer or any portions thereof.
ARTICLE IX
CAPITAL STOCK
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<PAGE> 24
SECTION 1 CERTIFICATES OF STOCK
Each stockholder shall be entitled to a certificate in the form approved by
the Board of Directors stating the number, class, and designation of series,
if any, of the shares held by the stockholder. Such certificates shall be
signed by the President or the Vice President and by the Treasurer or an
Assistant Treasurer.
SECTION 2 TRANSFER
Shares of stock shall be transferred of record on the books of the Company
only upon the surrender to the Company of the certificate therefor properly
endorsed for transfer (or accompanied by a written assignment and power of
attorney properly executed for transfer), and only upon compliance with
provisions, if any, respecting restrictions on transfer contained in the
Articles of Organization, these By-Laws or any agreement to which the Company
is a party. The Company may require proof of the genuineness of the
signature and the capacity of the party presenting the certificate for
transfer.
SECTION 3 SETTING RECORD DATE AND CLOSING TRANSFER RECORDS
The Board of Directors may fix in advance a time not more than sixty days
before (i) the date of any meeting of the stockholders or (ii) the date for
the payment of any dividend or the making of any distribution to stockholders
or (iii) the last day on which the consent or dissent of stockholders may be
effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of, and to vote at such meeting or
any adjournment thereof, or the right to receive such dividend or
distribution, or the right to give such consent or dissent. If a record date
is fixed by the Board of Directors, only stockholders of record on such date
shall have such rights notwithstanding any transfer of stock on the records
of the Company after such date. Without fixing such record date, the Board
of Directors may close the transfer records of the Company for all or any
part of such sixty-day period.
If no record date is fixed and the transfer books are not closed, then the
record date for determining stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, and the record date for
determining stockholders for any other purpose shall be at the close of
business on the date on which the Board of Directors acts with respect
thereto.
SECTION 4 ISSUE OF STOCK
The Board of Directors may, from time to time, issue any of the authorized
capital stock of the Company for cash, property, services or expenses, or as
a stock dividend, and on any terms permitted by law and the articles of
organization. No stock shall be issued unless the cash, so far as due, or
the property, services or expenses for which it was authorized to be issued,
has been
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<PAGE> 25
actually received or incurred by, or conveyed or rendered to, the Company, or
is in its possession as surplus.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Any director or officer or his legal representative shall be indemnified by
the Company against reasonable expenses including the cost of any settlement
and counsel fees paid or incurred in connection with any action, suit or
proceeding to which any such director or officer or his legal representative
may be made a party by reason of his being or having been such director or
officer, provided it shall not be determined by a final determination thereof
on the merits that such director of officer was in any substantial way
derelict in the performance of his duties, or provided that such action, suit
or proceedings shall be settled without a final determination on the merits
and it shall be determined that such officer or director had not in any
substantial way been derelict in the performance of his duties as charged
therein, such determination to be made by a majority of the members of the
Board of Directors who were not parties to such action, suit or proceedings,
though less than a quorum, or by any one or more disinterested persons to
whom the question may be referred by the Board of Directors. The foregoing
right of indemnification shall not be exclusive of any other rights to which
any director or officer may be entitled as a matter of law or which may be
lawfully granted to him.
ARTICLE XI
EMERGENCY BY-LAWS
If, as a result of an emergency caused by an attack on the United States or
by a nuclear, atomic or other disaster, a quorum of the Board of Directors
cannot be convened, the directors who are convened, though less than a quorum
or though only a single director, shall constitute an Emergency Executive
Committee. The Emergency Executive Committee shall have all the powers of
the Board of Directors to conduct the business and shall have the power to
fill any vacancies in the Board, which shall resume its powers as soon as a
quorum can be convened. The directors so appointed shall serve until there
is an election of directors by the stockholders at a duly convened meeting.
If no directors are available to attend a Board of Directors meeting after
such emergency the available senior officer with the longest term of service
with the Company shall be authorized to conduct the business of the Company
until a meeting of the directors or stockholders can be convened.
If it shall be impractical or impossible to give notice of a Board of
Directors meeting in the manner prescribed by these By-Laws, the person
calling such meeting may give notice thereof by making such reasonable
efforts as circumstances may permit to notify the directors. Failure of any
director to receive actual notice of a meeting shall not affect the power of
the directors present at such meeting to exercise the powers prescribed in
this Article.
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<PAGE> 26
The foregoing shall not be deemed to preclude the taking of any action by any
director, officer or employee of the Company during an emergency which is
otherwise authorized by law and which such director, officer or employee may
deem necessary or desirable in the interest of the affairs of the Company.
ARTICLE XII
AMENDMENT OF BY-LAWS
The stockholders may amend these By-Laws by vote of a majority in interest of
the capital stock entitled to vote, represented at a meeting at which a
quorum is present. These By-Laws may also be amended by the Directors to the
extent permitted by law.
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<PAGE> 1
EXHIBIT 8(h)
SERVICES AGREEMENT
THIS AGREEMENT, made as of the first day of November, 1995, (the
"Effective Date") by and between IL Annuity and Insurance Company (the
"Customer"), having its principal office and place of business at 2960 North
Meridian Street, Indianapolis 46208, and Financial Administration Services,
Inc. ("FAS") having its principal office and place of business at 95 Bridge
Street, Haddam, Connecticut 06438.
WHEREAS, Customer is in the business of issuing variable annuity products which
are funded through investments in a Separate Account and a Fixed Account. The
Separate Account invests in shares of several investment companies; and
WHEREAS, Customer desires to appoint FAS as Recordkeeping Service Agent for
Customer's variable annuity products described hereinafter in Exhibit A ("the
Policies"): and
WHEREAS, FAS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:
SECTION 1
TERMS OF APPOINTMENT
1.01 Subject to the provisions set forth in this Agreement, Customer hereby
appoints FAS as Recordkeeping Service Agent for the Policies. The
Policies are described in Exhibit A and encompass the sample
Policy(ies) attached thereto.
1.02 FAS hereby accepts such appointment and agrees that, on or after the
Effective Date, it will act as Customer's Recordkeeping Service Agent
for the Policies.
1.03 FAS agrees to provide the necessary facilities, equipment, systems and
personnel to perform its duties and obligations hereunder in
accordance with the standards set forth in Exhibit G. Provided,
however, FAS shall administer the Policies within any applicable laws,
regulations, guidelines and time constraints established by federal or
state regulatory authorities. Such facilities being referred to
hereinafter as the "FAS Facilities" and such systems being referred to
hereinafter as the "FAS System."
1.04 FAS agrees that it will perform, at the direction of Customer, those
Recordkeeping Service Agent Functions set forth in Exhibit B attached.
<PAGE> 2
1.05 FAS agrees to use its best efforts to modify its systems and
procedures to comply with any applicable federal or state statute, law
or regulation pertaining to the administration and servicing of the
Policies under this Agreement, within a reasonable time of receiving
notice of enactment of such a statute, law or regulation. Any such
modifications will be made at FAS's expense.
SECTION 2
TERM
2.01 Subject to earlier termination as hereinafter provided, this Agreement
shall remain in full force and effect for a period of three (3) years
from the Effective Date (the initial term of the Agreement) and shall
continue in force and effect from year to year thereafter until
terminated as herein provided, each such additional year being an
additional term of this Agreement.
2.02 In the event that this Agreement is terminated, FAS agrees that, in
order to assist in providing uninterrupted service to Customer, FAS
shall offer reasonable assistance to Customer in converting the
records of Customer from the FAS System to whatever service or system
is selected by Customer. Customer shall reimburse FAS for such
assistance at its standard rates and fees in effect at that time.
SECTION 3
FEES AND EXPENSES
3.01 At the beginning of each month, FAS shall provide Customer a detailed
statement of fees and charges incurred by Customer during the
preceding month. Customer shall remit payment to FAS within thirty
(30) days after receipt of the statement or authorize FAS to deduct
such fees and only such fees from the Customer's bank account, as
described in Section 8.05 of this Agreement.
3.02 Customer shall also reimburse FAS for all out of pocket expense
reasonably incurred by FAS in the performance of this Agreement. FAS
hereby agrees that the expenses referred to in this Section shall be
only those charges directly incurred by FAS as set forth in Exhibit C
and such other expenses as may be authorized by Customer.
3.03 During the initial term of this Agreement, the fees and charges will
not exceed the amounts set out in Exhibit C attached hereto and made a
part hereof. For each additional term of this Agreement, FAS shall be
entitled to receive such fees and charges as shall be agreed upon in
writing by the parties prior to commencement of each term.
3.04 In no event will any fee under Section 3.03 above exceed the like fee
charged during the previous term by more than ten (10%), unless the
quantity or nature of the related service changes.
<PAGE> 3
3.05 Payment terms hereunder are net thirty (30 ) days with interest at one
(1) percent per month (but in no event more than the highest interest
rate allowable by law) assessed on all amount owing more than thirty
(30) days.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF FAS
FAS represents and warrants to Customer as follows:
4.01 It is a corporation duly organized and existing in good standing under
the laws of the State of Connecticut.
4.02 It is empowered under applicable laws and by its charter and bylaws to
enter into and perform the services contemplated in this Agreement.
4.03 All requisite corporate proceedings have been taken to authorize it to
enter into and perform the services contemplated in this Agreement.
4.04 It has, and will continue to have and maintain the necessary
facilities, equipment, and personnel to perform its duties and
obligations under this Agreement.
4.05 FAS is licensed or has applied for a license as a third party
administrator in each state in which FAS performs services on behalf
of Customer pursuant to the terms of this Agreement if such is
required under applicable laws, rules regulations or bulletins of that
state. FAS will provide evidence of its license to Customer upon
request.
4.06 To the best of FAS's knowledge, neither FAS nor any person employed in
any material connection with respect to the services provided pursuant
to this Agreement:
(a) within the last ten (10) years has been convicted of any
felony or misdemeanor arising out of conduct involving
embezzlement, fraud, fraudulent conversion or misappropriation
of funds or securities; or
(b) within the last ten (10) years has been found by any state
regulatory authority to have violated or has acknowledged
violation of any provision of any state insurance law
involving fraud, deceit or knowing misrepresentation; or
(c) within the last ten (10) years has been found by any federal
or state regulatory authorities to have violated or
acknowledged violation of any provision of federal or state
securities laws involving fraud, deceit or knowing
misrepresentation.
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<PAGE> 4
4.07 FAS owns or licenses the software which will be used to perform its
duties and obligations under this Agreement. FAS warrants that it has
full rights to use such software for these purposes.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF CUSTOMER
Customer represents and warrants to FAS as follows:
5.01 It is a corporation organized and existing in good standing under the
laws of the State of Massachusetts.
5.02 It is empowered under the applicable laws and regulations and by its
articles of incorporation and bylaws to enter into and perform this
Agreement.
5.03 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
5.04 All of the Policies and other forms provided to FAS by Customer have
been approved by all regulatory authorities whose approval is needed.
All of the Prospectuses have been declared effective by the United
States Securities and Exchange Commission. All such Prospectuses,
Policies and other forms are and shall remain in compliance with all
applicable federal, state and local laws and regulations.
5.05 Customer has complied with and will continue to comply in all material
respects with all applicable laws and it has and will continue to make
all required filings with regulatory authorities in connection with
the offer, sale or administration of the Policies.
5.06 Those persons identified on Exhibit D, as amended from time to time,
are authorized to act for Customer with respect to matters involving
this Agreement and FAS shall be entitled to rely on their
instructions.
SECTION 6
LIABILITY
6.01 Notwithstanding any other provision of this Agreement, Customer bears
the ultimate responsibility and authority for services to policy
owners and governmental regulatory bodies with respect to the sales or
marketing of the Policies. Customer shall indemnify and hold FAS
harmless from and against material liabilities, losses and damages
incurred, expenses reasonably incurred (including fees of expert
witnesses and advisors) and judgements, settlements and court costs
(all of the foregoing being referred to collectively as "Damages and
Claims") arising out of or attributable to:
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<PAGE> 5
(a) Any action taken by FAS in good faith pursuant to this
Agreement;
(b) The refusal or failure of Customer to comply with the terms of
this Agreement, or any situations which arise out of the
negligence or misconduct of Customer or the breach of any
warranty of Customer hereunder;
(c) the reliance of FAS on or use of information, rate books, cash
value and reserve factors, data records and documents received
by FAS from Customer; and
(d) the reliance of FAS on, or the implementation of, any
instructions or requests made by any person listed on Exhibit
D, as amended from time to time in writing by Customer.
6.02 Subject to Section 6.01, FAS shall be responsible to Customer in the
event that FAS fails to perform any of the services provided for
hereunder. FAS shall indemnify and hold Customer harmless from and
against, material Damages and Claims, as defined in Section 6.01 and
in Section 6.03, arising out of or attributable to:
(a) Any action taken by Customer in good faith pursuant to this
Agreement;
(b) The refusal or failure of FAS to comply with the terms of this
Agreement, or any situations which arise out of the negligence
or misconduct of FAS or the breach of any warranty of FAS
hereunder; and
(c) The reliance of Customer on or use of information, data
records and documents received by Customer from FAS.
6.03 Indemnification provided under Section 6.01 and 6.02 shall be limited
to individual claims of $1,000 or more, with an aggregate limit equal
to 50# of the Service Fees paid to FAS under this Agreement and be
limited in duration to the statute of limitations applicable to said
individual claim(s).
6.04 If a third party claims that the FAS System infringes its patent,
copyright, or trade secret, or any similar intellectual property
right, FAS will defend Customer against that claim at FAS's expense
and pay all damages that a court finally awards, provided that
Customer promptly notifies FAS in writing of the claim, and allows FAS
to control, and cooperates with FAS in, the defense or any related
settlement negotiations. If such a claim is made or appears possible,
Customer agrees to permit FAS to enable Customer to continue to use
the System, or to modify or replace it.
6.05 In the event FAS is unable to perform its obligations under this
Agreement because of strikes, equipment or transmission failure or
damage or other causes beyond its control, FAS will not be liable for
any resulting Damages and Claims. Provided, however, FAS will use its
best efforts to assist Customer in obtaining an alternate source or
sources of services.
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<PAGE> 6
6.06 At any time FAS may apply written instructions from a person
identified in Exhibit D with respect to any matter arising in
connection with this Agreement. FAS shall not be liable for, and
shall be indemnified by Customer against any action taken or omitted
by FAS in good faith reliance on such instructions.
6.07 Customer shall immediately provide FAS with written notice of any
change of authority of persons identified in Exhibit D and of any
additions or deletions to such list of authorized persons.
6.08 In the event a malfunction of the FAS System causes an error or
mistake in any record, report, data, information or output under the
terms of this Agreement, FAS shall at its own expense correct and
reprocess such records; provided the Customer, promptly upon discovery
of such error or mistake, notifies FAS in writing of each error or
mistake.
SECTION 7
COVENANTS
7.01 FAS shall establish and maintain facilities and procedures for the
safekeeping of policy forms, check forms, facsimile signature
imprinting devices, if any, and all other documents, reports, books,
files and other materials relative to this Agreement.
7.02 FAS shall maintain, at its principal administrative office, in
accordance with prudent standards of insurance recordkeeping, for the
duration of this Agreement and for 6 years thereafter, adequate books
and records of all transactions between FAS and the Customer. FAS
shall maintain records of all transactions with the policyowners for
the duration of the policy and for 6 years thereafter.
7.03 Customer and its duly authorized independent auditors have the right
under this Agreement to perform on-site audits of records and accounts
directly pertaining to the Contracts serviced by FAS hereunder at the
FAS Facilities in accordance with reasonable procedures and at
reasonable frequencies. Customer and its independent auditors shall
have full access, during ordinary business hours, to all documents,
records, reports, books, file and other materials relative to the
Agreement and maintained by FAS, subject to reasonable security
concerns of FAS. FAS shall allow access to all books and records
maintained by FAS for the Customer to any regulatory authority, such
as the NASD, the SEC or commissioners of insurance, for the purpose of
examination, audit and inspection of the business administered by FAS
pursuant to this Agreement.
7.04 It is expressly understood and agreed that all documents, reports,
records, books, files and other materials relative to this Agreement
shall be the sole property of Customer and that such property shall be
held by FAS as agent, during the effective term of the Agreement.
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<PAGE> 7
7.05 FAS shall maintain appropriate back-up computer files (on a daily
basis stored in an off-site location) to permit file recovery in the
event of destruction of normal processing files. Customer may review
the procedures in effect upon demand.
7.06 Customer shall, in a timely fashion, provide FAS with all information
necessary for the timely and proper administration of the Policies,
including but not limited to policy forms, lists of all states of
license, agents and representatives authorized to sell Customer's
policies; cash value and reserve factors; data records; actuarial
support; and mortality rates.
7.07 All information furnished by Customer or by policy owners to FAS
hereunder, including but not limited to, the identity and the address
of policy owners, is confidential and FAS shall not disclose any such
information, directly or indirectly, to any third party except: (a) to
the extent that FAS is required by law to make such a disclosure; (b)
to the extent necessarily resulting from provisions by any of its
affiliates of services required by FAS in order to perform its
obligations under this Agreement; and (c) to the extent proper
authorization for disclosure is received from the policy owner and
Customer.
7.08 Customer acknowledges that FAS and certain other persons have
proprietary rights in and to the FAS System and that the FAS System
constitutes confidential material and trade secrets of FAS, its
affiliates or unrelated person; and Customer agrees to maintain the
Confidential of the FAS System. THIS AGREEMENT AND THE ATTACHED
EXHIBITS ARE CONSIDERED CONFIDENTIAL AND PROPRIETARY AND SHALL BE
SHARED ONLY WITH THOSE PERSONS WHO HAVE A NEED TO KNOW AND WHO ARE
EMPLOYED OF CUSTOMER OR ITS AFFILIATES OR FAS AND ITS AFFILIATES.
7.09 Customer acknowledges that this Agreement in no way gives Customer any
rights in or to the FAS System or FAS Facilities.
7.10 Customer acknowledges its responsibility to provide actuarial and
legal support for policy and agent administration and financial
reporting.
7.11 Any policies, certificates, booklets, termination notices, or other
written communications delivered by the Customer to FAS for delivery
to its policyholders shall be delivered by FAS promptly after receipt
of instructions from the Customer to do so.
7.12 To the extent that FAS adjusts and settles claims, the compensation to
FAS with regard to the policies shall in no way be contingent on claim
experience.
7.13 Customer acknowledges its responsibility to provide cooperation in
registering FAS as a third party administrator in Wyoming. This
entails completing and authorizing a certificate of registration and a
surety bond (Exhibit F). In turn, FAS will provide a
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<PAGE> 8
written notice, approved by the Customer, to insured individuals,
advising them of the identity of and relationship among FAS, the
policy owner and the Customer.
7.14 Upon receipt of any summons, written pleadings or other notice of suit
or any regulatory inquiry or complaint, relating to the service
provided or business conducted under this Agreement, FAS shall forward
to Customer a copy of same along with supporting documents for
handling by the Customer.
7.15 FAS shall (a) provide evidence that it has the insurance coverage
specified in Exhibit H attached hereto or (b) provide a guarantee from
Phoenix Home Mutual Life Insurance Company of FAS's obligations under
this contract.
SECTION 8
PAYMENTS AND COLLECTIONS
8.01 The payment to FAS of any premiums, loan repayments or charges for
insurance by or on behalf of a policy owner is considered received by
Customer upon receipt by FAS. The payment of return premiums or
claims by Customer to FAS is not considered payment to the policy
owner or claimant until the payments are received by the policy owner
or claimant. FAS agrees that all such premiums and insurance charges
shall be made payable to and remain the property of Customer. Subject
to Section 8.05, Customer hereby authorizes FAS to sign and endorse
any checks representing premiums and insurance charges; provided,
however, Customer reserves the right to change, modify or withdraw the
authorization at any time. Provided, further, that the Customer
releases FAS of any liability and FAS shall not be considered in
breach, if FAS is unable to perform its functions under this Agreement
as a result of such change, modification or withdrawal.
8.02 All premiums, loans repayments and other receipts shall be payable to
the order of Customer and shall be directed to a customer-owned lock
box for deposit in a customer owned account. In the event FAS
receives any such monies, it shall deposit such checks or other funds
collected on behalf of Customer in the bank accounts opened and
maintained by Customer for such purposes. Any funds held by FAS in
connection with this Agreement shall be held in trust for Customer and
shall not be commingled by FAS for any personal use whatsoever. FAS
shall immediately remit such funds to the person or persons entitled
thereto or shall promptly deposit them in the bank accounts to be
established by Customer as set forth in this Agreement. Customer
shall require the bank or banks in which the accounts are maintained
to keep records clearly recording the deposits in and withdrawals from
such accounts on behalf of Customer for which FAS may collect
insurance charges or premiums. FAS shall promptly obtain and keep
copies of all records and, upon request of Customer, furnish Customer
with copies of such records pertaining to deposits and withdrawals of
behalf of or for Customer.
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<PAGE> 9
8.03 All claims paid by FAS from funds collected on behalf of Customer
shall be paid only on checks or draft of Customer and as authorized by
Customer. FAS shall not be responsible for any claims determination
or approval.
8.04 To the extent required by applicable law, FAS will provide a written
notice to the policy owner advising him of the identity of and
relationship among FAS, the policy owner and Customer. If FAS
collects funds from the policy owner, FAS will provide the policy
owner with written notice of the premium charged by Customer for such
insurance coverage.
8.05 Customer shall establish one or more bank accounts for use by FAS to
carry out its responsibilities under this Agreement. Such accounts
will include an account for the deposit of all premium remittances
received by FAS for the benefit of Customer and an account to enable
FAS to process and pay claims under the Policies.
Customer shall authorize such individuals as FAS shall designate to
draw against any such account subject to the right of Customer to
terminate such authority at any time in Customer's sole discretion and
further subject to the prior deposit by Customer of periodic deposits
to such account in such amounts as are necessary for the payment of
ail valid claims under the Policies.
Notwithstanding the foregoing authorization by Customer of FAS
employees to use these accounts, the parties hereby agree that such
bank accounts are the sole and absolute property of Customer.
It is understood by the parties hereto that the amounts payable by
Customer to FAS hereunder may be paid at, Customer's option, by
Customer allowing FAS to have access to such accounts for payment of
such fees. The access granted by Customer to FAS is for the
convenience of Customer and may be withdrawn by Customer at any time
in its sole discretion.
Nothing herein shall be construed to afford FAS any rights in the bank
accounts, it being expressly understood that all rights with respect
to these accounts are vested in Customer.
SECTION 9
COMPUTER ACCESS
9.01 Subject to the term and condition set forth below, Customer shall be
entitled to obtain access on a "view only" basis to all data relating
to Policies (the "Information") which is maintained on the computers
utilized by or on behalf of FAS in providing services to Customer
pursuant to this Agreement ("System Access").
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<PAGE> 10
9.02 Customer's access to such data shall be on Mondays through Fridays,
exclusive of holidays, between the hours of 8 a.m. and 5 p.m.,
Hartford, Connecticut time. FAS makes no representations or
warranties as to the ability of Customer to successfully utilize
System Access at any given time, in light of the fact that computer
facilities suffer occasional "down time."
9.03 Customer shall take no actions to affect or modify System Access, the
Information or any of the hardware or software utilized by or on
behalf of FAS in conjunction with System Access. Use of System Access
to view data shall be made only through means and codes authorized by
FAS hereunder or pursuant hereto, which means and codes Customer
agrees not to divulge to any person other than those of its employees
it wishes to have System Access. Neither FAS nor any of its
affiliates shall have responsibility for determining whether a person
with the proper procedures and codes to utilize System Access was
properly authorized to do so by Customer.
9.04 FAS shall have the right to modify or cause the modification of the
System Access program from time to time at its sole discretion without
prior notice to Customer.
9.05 In the event that Customer suspects a possible breach of security with
respect to System Access, including any unintended disclosure of code,
or Customer obtains information through System Access, on any person
other than its own policy owners, then Customer shall immediately
notify FAS of such circumstances by telephone, followed by a
confirmation in writing, specifying the nature of the problem.
9.06 Customer shall indemnify FAS and its affiliates and hold them harmless
from all direct losses and all liabilities resulting to them, as well
as all costs and expenses. (including court costs and attorneys fees)
reasonably incurred by them, due to Customer's failure to properly
safeguard the codes and/or passwords provided pursuant here to for its
use. Customer shall also indemnify FAS and its affiliates and hold
them harmless from all liabilities, costs and expenses (including cost
costs and attorneys fees) reasonably incurred as a result of
Customer's breach of its obligations of confidentiality with respect
to the Information. Customer shall further indemnify and hold FAS and
its affiliates harmless from all liabilities, costs and expenses
(including court costs and attorneys fees) reasonably incurred by them
due to any act or omission of Customer in its use of Information,
including, but not limited to, erroneous eligibility or claim coverage
determinations.
9.07 FAS shall indemnify Customer and hold it harmless from all direct
losses and all liabilities resulting to it, as well as all costs and
expenses (including court costs and attorneys fees) reasonably
incurred by it due to FAS's failure to properly safeguard the codes
and/or passwords provided used by it to prevent unauthorized access.
FAS shall also indemnify Customer and hold it harmless from all
liabilities, costs and expenses (including court costs and attorneys
fees) reasonably incurred as a result of FAS's breach
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<PAGE> 11
of its obligations of confidentiality with respect to the Information.
FAS shall further indemnify and hold Customer harmless from all
liabilities, costs and expenses (including court costs and attorneys
fees) reasonably incurred by it due to any act or omission of FAS in
the entry of Information, including, but not limited to, inaccurate or
incomplete information which results in erroneous eligibility or claim
coverage determinations by FAS or Customer.
SECTION 10
TERMINATION OF AGREEMENT
10.01 Subsequent to e initial term as defined in Section 2.01, this
Agreement may be terminated by either party by written notice to the
other, one hundred and eighty (180) days following delivery by
registered mail of such notice to the other party.
10.02 Not fewer than ninety (90) days prior to the end of any term hereof,
FAS shall give Customer written notice if FAS desires to increase its
fees or charges to Customer or to change the manner of payment. If
FAS and Customer do not agree in writing upon fees and changes before
the end of the term during which such notice is given by FAS, this
Agreement shall terminate immediately and automatically at the end of
such term, not withstanding Section 10.01.
10.03 If Customer is more than ninety (90) days late in fulfilling its
obligations under Section 3, FAS may terminate its services upon sixty
(60) days notice to Customer.
10.04 If either of the parties hereto shall materially breach this Agreement
or be materially in default in the performance of any of its duties
and obligation hereunder, (the "Defaulting Party"), other than
Customer's obligation of payment, the other party hereto may give
written notice of such default or breach to the Defaulting Party. If
such default or breach shall not have been remedied within sixty (60)
days after such written notice is given, then the non-defaulting party
may terminate this Agreement by giving sixty (60) days written notice
of such termination to the Defaulting Party. Provided, however, that
if FAS elects to terminate this Agreement for other than non-payment
of fees and charges and if Customer shall so request in writing, FAS
shall continue to provide uninterrupted services as described herein
to Customer for such period of time as Customer may request, not to
exceed six (6) months following the date on which this Agreement would
otherwise terminate. Such service shall be provided in accordance
with the terms of this Agreement and at one hundred and twenty-five
(125%) percent of the fees in effect for the term immediately
preceding such period. Termination of this Agreement by Customer for
default or breach shall not constitute a waiver of any rights of FAS
in reference to services performed prior to such termination or rights
of FAS to be reimbursed for out of pocket expenditures. Termination
of this Agreement by FAS for default or breach shall not constitute a
waiver by Customer of any other rights it might have under this
Agreement.
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<PAGE> 12
SECTION 11
CHANGES AND MODIFICATIONS
11.01 FAS shall have the right, at any time, and from time to time, to alter
and modify any system, programs, procedures or facilities used or
employed in performing its duties and obligations hereunder, provided
that no such alterations or modifications hall, without the consent of
Customer, materially change or affect the operation and procedures of
Customer in using or employing the FAS System or FAS Facilities
hereunder.
SECTION 12
ASSIGNMENT
12.01 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party hereto without the prior written consent of
the other, which consent shall not be unreasonably withheld. The
foregoing notwithstanding, either party may assign its rights and
obligations hereunder without the other party's prior written
approval: (a) to affiliated companies or (b) by operation of law in
the event of a merger.
12.02 This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
SECTION 13
DISPUTE RESOLUTION
13.01 The parties to this Agreement understand and agree that the
implementation of this Agreement will be enhanced by the timely and
open resolution of any disputes or disagreements between such parties.
Each party hereto agrees to use its best efforts to cause any disputes
or disagreements between them to be considered, negotiated in good
faith and resolved as soon as possible.
13.02 In the event that any dispute or disagreement between the parties
cannot be resolved to the satisfaction of the parties' administrative
personnel within twenty (20) days after either party has notified the
other in writing of the need to resolve the specific dispute or
disagreement, then the dispute or disagreement shall be immediately
referred in writing to Allan E. Burrill of FAS and Margaret M.
McKinney of IL Annuity and Insurance Company (or their respective
successors) for consideration.
13.03 Any and all disputes arising out of or in connection with the
execution, interpretation, performance, or nonperformance of this
Agreement or any other certificate, agreement, or other instrument
between, involving, or affecting the parties (including the validity,
scope, and enforceability of this arbitration agreement) shall be
solely and finally settled by arbitration. In such cases the parties
will submit their differences to three (3)
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disinterested arbitrators, one to be selected by each party and the
third to be selected by the arbitrators named by the parties.
Arbitration may be initiated by either party ("Petitioner") by written
notice to the other party ("Respondent") demanding arbitration and
naming its arbitrator. The Respondent shall have 20 days after
receipt of said notice to designate its arbitrator. If the Respondent
fails to designate its arbitrator within 20 days of receipt of the
notice or the 2 designated arbitrators are unable to agree on the
choice of the third, the President of the American Arbitration
Association shall select the second or third arbitrator, as the case
may be.
Arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the
"Rules") in effect as of the date of the initiation of the
arbitration; provided, however, that in the event of conflict between
the Rules and the terms of this Agreement, the terms of this Agreement
shall govern.
On the thirtieth business day following the appointment of the
arbitrators, the arbitration shall be held at the location of the home
office of the Petitioner. In the event of a disagreement between the
arbitrators, the decision will rest with the majority. The
arbitrators will be relieved of all judicial formality and may abstain
from the strict rules of law.
The decision of the majority of the arbitrators shall be binding upon
the parties herein without appeal. The decision of the arbitration
may be entered as a judgement in any court of competent jurisdiction.
Any monetary award shall be promptly paid in US dollars free of any
tax, deduction or offset. The parties further agree that any costs,
fees or taxes incident to enforcing the award shall, to the extent
permitted by law, be charged to the party resisting such enforcement.
Each party shall, except as otherwise provided herein, be responsible
for its own expenses, including legal fees, incurred in the course of
any arbitration proceedings. The fees of the arbitrators shall be
divided evenly between the parties.
No resolution or attempted resolution of any dispute or disagreement
pursuant to this section shall be deemed to be a waiver of any term or
provision of this Agreement or consent to any breach or default unless
such waiver or consent shall be in writing and signed by the party
claimed to have waived or consented.
SECTION 14
MISCELLANEOUS
14.01 Confidentiality - The parties hereto agree that all tapes, books,
reference manuals, instructions, records, information and data
pertaining to the business of the other party,
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<PAGE> 14
the FAS System and the identity of the policy owners served by FAS
hereunder which are exchanged or received pursuant to the negotiations
of and/or implementation of this Agreement shall remain confidential
and shall not be voluntarily disclosed to any other person and that
all such tapes, books, reference manuals, instructions, records,
information and data in possession of each of the parties hereto shall
be returned to the party from whom it was obtained upon the
termination or expiration of this Agreement.
14.02 Independent Contractor - It is understood and agreed that all services
performed hereunder by FAS shall be as an independent contractor and
not as an employee of Customer.
14.03 Definitions - For the purposes of this Agreement, the terms
"policies", "certificate", "certificates contracts", and "contracts"
are interchangeable where appropriate and refer to the primary
coverage documents for each insured.
14.04 Entire Agreement. Amendment- This Agreement, the Exhibits and
Schedules hereto constitutes the entire agreement between the parties
and supersedes all prior agreements with respect to the subject matter
hereof, whether oral or written. This Agreement may not be modified
and no provision may be waived except in a written instrument executed
by both of the parties. The written instrument shall specify if the
waiver of a provision is to apply to a single occasion or is to apply
until notice of revocation is given. The waiver by either party of
any provision of this Agreement may be revoked by that party upon
written notice of the revocation. The other party is entitled to rely
upon a written waiver until it has received the notice of revocation
unless the written notice of waiver expressly states that the waiver
applies to a single occasion.
14.05 Survival - The representations, warranties, and covenants contained
herein shall survive the execution of the Agreement and the
performance of services hereunder.
14.06 Governing Law - This Agreement shall be governed by the laws of the
State of Connecticut.
14.07 Exhibits - The Exhibits and Schedules referred to herein and delivered
pursuant hereto, including any amendment shall be deemed a part of
this Agreement as fully and effectively as set forth in full in the
body of this Agreement. The terms used in the Exhibits and Schedules
shall have the same meaning as the terms have in this Agreement,
unless the contrary intention is clearly manifested therein.
14.08 Severability - Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent
of such invalidity or non-enforceability without invalidating or
rendering unenforceable the remaining provisions hereof, and any such
invalidity or non-enforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
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<PAGE> 15
14.09 Approval of Advertising - FAS may use only such advertising pertaining
to the business underwritten by the Customer as is approved by the
Customer in advance of its use.
14.10 FAS shall deliver to Customer, within 10 days of receipt, a copy of
any preliminary or final examination or audit report with regard to
the Policies or services provided under this Agreement which is issued
by FAS's independent auditor, any federal, state or local governmental
agency.
14.11 Notices - All notices and requests in connection with this Agreements
shall be given or made upon the respective parties in writing and
shall be deemed as given as of the date either deposited in the U.S.
mails, postage prepaid, certified or registered, return receipt
requested, or sent by facsimile or recognized overnight carrier, and
addressed as follows:
<TABLE>
<S> <C>
For Customer For FAS
------------ -------
Margaret M. McKinney, Esq. Allan E. Burrill, CLU/FLMI/CDP
IL Annuity and Insurance Co. Financial Administration Services, Inc.
2960 North Meridian Street 95 Bridge Street
Indianapolis, IN 46208 Haddam, CT 06438
</TABLE>
or such other address as a party to receive the notice or request so designates
by written notice to the other.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers as of the date and year first above written.
IL ANNUITY AND INSURANCE
Attest: By:
------------------- -------------------
Title:
------------------
FINANCIAL ADMINISTRATIVE SERVICES, INC.
Attest: By:
------------------- -------------------
Title:
------------------
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<PAGE> 16
EXHIBIT A
POLICIES
The Visionary Variable Annuity
