FILE NO. 33-90474
811-9002
As Filed with the Securities and Exchange Commission September 15, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and /or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
SEPARATE ACCOUNT ONE
(Exact Name of Registrant)
NORTHERN LIFE INSURANCE COMPANY
(Name of Depositor)
1501 Fourth Avenue, Suite 1000, Seattle, Washington 98101-3620
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (206) 292-1111
Stewart D. Gregg
Northern Life Insurance Company
20 Washington Avenue South
Minneapolis, Minnesota 55401
(Name and Address of Agent for Service)
Approximate date of proposed Public Offering:
As soon as practicable after the Registration Statement becomes effective.
It is proposed that this filing will become effective
(check appropriate space)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date), pursuant to paragraph (b) of Rule 485
[X] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date), pursuant to paragraph (a) of Rule 485.
If appropriate, check the following box:
[ ] This Post-Effective Amendment designates a new effective date of a
previously filed Post-Effective Amendment.
Title of Securities Being Registered: Variable Annuity Contracts Issued by a
Registered Separate Account
<PAGE>
SEPARATE ACCOUNT ONE
CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
<TABLE>
<CAPTION>
FORM N-4
ITEM NUMBER PART A HEADING IN PROSPECTUS
- ------------- ------------------------------------------------------
<S> <C>
1 Cover Page
2 Definitions
3 Summary
4 Condensed Financial Information
5 The Company; The Variable Account; Investments
of the Variable Account
6 Charges Made by the Company
7 The Contracts
8 Annuity Provisions
9 The Contracts
10 The Contracts
11 The Contracts
12 Federal Tax Status
13 Legal Proceedings
14 Statement of Additional Information Table of
Contents
PART B HEADING IN STATEMENT OF ADDITIONAL INFORMATION
------------------------------------------------------
15 Cover Page
16 Table of Contents
17 Introduction
18 Not Applicable
19 Distribution of the Contracts
20 Distribution of the Contracts
21 Calculation of Yields and Total Returns
22 Annuity Provisions (In Prospectus)
23 Financial Statements
PART C HEADINGS
------------------------------------------------------
24 Financial Statements and Exhibits
25 Directors and Officers of the Depositor
26 Persons Controlled by or Under Common Control
with the Depositor or Registrant
27 Number of Contract Owners
28 Indemnification
29 Principal Underwriter
30 Location of Accounts and Records
31 Not Applicable
32 Undertakings
</TABLE>
<PAGE>
NOVEMBER , 1999
NORTHERN LIFE
ADVANTAGE ANNUITY
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
SEPARATE ACCOUNT ONE
NORTHERN LIFE INSURANCE COMPANY
PROFILE OF OUR INDIVIDUAL FIXED AND VARIABLE ANNUITY CONTRACTS
THIS PROFILE IS A SUMMARY OF SOME OF THE MORE IMPORTANT FEATURES OF THE
CONTRACTS THAT YOU SHOULD KNOW AND CONSIDER BEFORE PURCHASING A CONTRACT. THE
CONTRACTS ARE MORE FULLY DESCRIBED IN THE PROSPECTUS WHICH ACCOMPANIES THIS
PROFILE. PLEASE READ THE PROSPECTUS CAREFULLY.
1. THE ANNUITY CONTRACT: The fixed and variable annuity contracts we are
offering are contracts between you, the owner, and us, Northern Life Insurance
Company (the "Company").
We offer three series of Contracts. Transfer Series Contracts include an
individual deferred tax sheltered annuity contract, an individual deferred
retirement annuity contract and an individual deferred annuity contract
("Transfer Series"). The Flex Series Contracts include a flexible premium
individual deferred tax sheltered annuity contract, a flexible premium
individual retirement annuity contract, and a flexible premium individual
deferred annuity contract for deferred compensation plans established under
Section 457 of the Code ("Flex Series"). The Retail Series Contracts include a
flexible premium individual deferred tax sheltered annuity contract, a flexible
premium individual retirement annuity contract, and a flexible premium
individual deferred annuity contract for deferred compensation plans established
under Section 457 of the Code ("Retail Series").
For Transfer Series Contracts, Flex Series Contracts, and Retail Series
Contracts which are Qualified Plans, the Company will accept periodic, single
sum, rollover and transfer Purchase Payments as permitted by the Code which are
not less than the specific contract minimum Purchase Payment. For the
non-qualified Transfer Series Contracts and Retail Series Contracts, the Company
will accept periodic and single sum Purchase Payments, as well as amounts
transferred under Section 1035 of the Code, which are not less than the
specified Contract minimum Purchase Payment.
The Transfer Series, Flex Series and Retail Series differ in terms of the
amount of Purchase Payments required, when Purchase Payments can be made and
certain charges.
The Contracts provide a means for selecting one or more investment funds
("Investment Funds" or "Funds") on a tax-deferred basis. The Contracts are
intended for retirement savings or other long-term investment purposes and
provide for a death benefit and guaranteed income options.
Through the Variable Account, the Contracts offer up to 28 investment
options from which you can choose up to 16 over the lifetime of the Contract.
The returns on these investment options are not guaranteed and you can possibly
lose money. Currently, there is no charge for transfers.
The Contracts also offer three Fixed Accounts. These Fixed Accounts have an
interest rate that is set periodically by the Company. The minimum rate is the
guaranteed rate. While your money is in a fixed account, the interest you earn
and your principal are guaranteed by the Company.
The Contracts have two phases: the accumulation phase and the income or
payout phase. During the accumulation phase, earnings accumulate on a
tax-deferred basis and are not taxed as income until you make a withdrawal. The
amounts accumulated during the accumulation phase will determine the amount of
annuity payments. The income phase occurs when you begin receiving regular
annuity payments from your contract on the annuity commencement date.
2. ANNUITY PAYMENTS (THE INCOME PHASE): If you want to receive regular income
from your annuity, you can choose one of three options: (1) monthly payments
for your life (assuming you are the
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annuitant); (2) monthly payments for your life, but with payments continuing to
the beneficiary for 10 years if you die before the end of the selected period;
and (3) monthly payments for your life and for the life of another person
(usually your spouse) selected by you. Once you begin receiving regular annuity
payments, you cannot change your payment plan.
During the income phase, you have the same investment options you had
during the accumulation phase. You can choose to have annuity payments come from
Fixed Account A or B, the Variable Account or any combination of these. If you
choose to have any part of your annuity payments come from the Variable Account,
the dollar amount of your annuity payments may go up or down.
3. PURCHASE: The minimum amount the Company will accept as an initial purchase
payment is $15,000 for Transfer Series Contracts, $50 for Flex Series Contracts,
and $5,000 per periodic payment for Retail Series Contracts (or if periodic
payments are being made, the minimum is $50 per lump sum payment). The Company
may choose not to accept any subsequent purchase payment for a Transfer Series
Contract if it is less than $5,000, for a Flex Series Contract if it is less
than $50, and for a Retail Series Contract if it is less than $5,000 (or if
periodic payments are being made, the payment is less than $50). The Company may
choose not to accept any subsequent purchase payments if the additional
payments, when added to the Contract Value at the next Valuation Date, would
exceed $1,000,000.
4. INVESTMENT OPTIONS: You can put your money in up to 16 of these 28 investment
options which are described in the prospectuses for the Funds. You do not have
to choose your investment options in advance, but upon participation in the
sixteenth Fund you would only be able to transfer within the 16 already utilized
and which are still available.
<TABLE>
<CAPTION>
FIDELITY VARIABLE INSURANCE FIDELITY VARIABLE INSURANCE FIDELITY VARIABLE INSURANCE
THE ALGER AMERICAN FUND PRODUCTS FUND PRODUCTS FUND II PRODUCTS FUND III
- ------------------------- ----------------------------- ----------------------------- ----------------------------
<S> <C> <C> <C>
Alger American VIP Equity-Income VIP II Asset Manager: VIP III Growth
Growth Portfolio Portfolio Growth Portfolio Opportunities
Alger American VIP Growth Portfolio VIP II Contrafund Portfolio
Leveraged AllCap VIP Money Market Portfolio
Portfolio Portfolio VIP II Index 500
Alger American Portfolio
MidCap Growth VIP II Investment
Portfolio Grade Bond
Alger American Portfolio
Small Capitalization
Portfolio
</TABLE>
<TABLE>
<CAPTION>
NEUBERGER BERMAN ADVISERS
JANUS ASPEN SERIES MANAGEMENT TRUST NORTHSTAR GALAXY TRUST OCC ACCUMULATION TRUST
- ---------------------- -------------------------- ------------------------ ------------------------
<S> <C> <C> <C>
Aggressive Growth Limited Maturity Bond Emerging Growth Equity Portfolio
Portfolio Portfolio Portfolio Global Equity Portfolio
Growth Portfolio Partners Portfolio Growth + Value Managed Portfolio
International Growth Socially Responsive Portfolio Small Cap Portfolio
Portfolio Portfolio International Value
Worldwide Growth Portfolio
Portfolio Research Enhanced
Index Portfolio
High Yield Bond
Portfolio
</TABLE>
Depending upon market conditions, you can make or lose money in any of these
Funds.
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<PAGE>
5. EXPENSES: The Contract has insurance features and investment features, and
there are costs related to each.
Each year the Company deducts a $30 contract maintenance charge from your
Contract. The Company reserves the right to waive this Annual Contract Charge
where the cumulative purchase payments, less any cumulative partial surrenders,
exceed $25,000. For a Retail Series Contract, we will also waive this charge
where the annual purchase payments, less any cumulative partial surrenders equal
or exceed $5,000. We also deduct for insurance and administrative charges which
annually total 1.40% of the average daily value of your Contract allocated to
the investment portfolios.
There are also investment fund annual expenses which range from 0.28% to
1.50% of the average daily value of the investment fund depending upon the
investment option which you select.
No deduction for a sales charge is made from Purchase Payments on the date
they are received by the Company. However, if you take all or a part of your
money out, we may assess a withdrawal charge. For a Transfer Series Contract the
charge for each Purchase Payment is equal to a maximum of 6% in years 1 and 2
and reduces to 0 after year 6. For a Flex Series Contract this charge from the
issue date of the Contract is equal to 8% in years 1 through 3 and reduces to 0
after year 10. For a Retail Series Contract issued as a Non-Qualified or IRA
Contract this charge for each purchase payment is equal to a maximum of 7% in
years 1 and 2 and reduces to 0 after year 6. For a Retail Series Contract issued
as a TSA or 457 Contract, this charge for each purchase payment is equal to a
maximum of 7% in years 1 and 2 and reduces to 0 after year 6; however, 12 years
after the original Issue Date, this charge will automatically be 0. We may also
assess a state premium tax charge which ranges from 0% to 3.5% depending upon
the state.
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The following chart is designed to help you understand the expenses in the
Contract. The column "Total Annual Expenses" shows the total of the $30 contract
maintenance charge (which is represented as .25% below), the 1.40% insurance
charges, and the investment expenses for each investment portfolio. The next two
columns show you two examples of the expenses, in dollars, you would pay under a
Contract. The examples assume that you invested $1,000 in a Contract which earns
5% annually and that you withdraw your money: (1) at the end of year 1, and (2)
at the end of year 10. For year 1, the Total Annual Expenses are assessed as
well as the withdrawal charges. For year 10, the example shows the aggregate of
all the annual expenses assessed for the 10 years, but there is no withdrawal
charge. The premium tax is assumed to be 0% in both examples.
<TABLE>
<CAPTION>
TOTAL TOTAL
ANNUAL ANNUAL
INSURANCE PORTFOLIO TOTAL ANNUAL
INVESTMENT FUNDS CHARGES EXPENSES EXPENSES
- ---------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio ........... 1.65% 0.79% 2.44%
Alger American Leveraged AllCap
Portfolio ................................ 1.65% 0.96% 2.61%
Alger American MidCap Growth
Portfolio ................................ 1.65% 0.84% 2.49%
Alger American Small Capitalization
Portfolio ................................ 1.65% 0.89% 2.54%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND:
VIP Equity-Income Portfolio ............... 1.65% 0.57% 2.22%
VIP Growth Portfolio ...................... 1.65% 0.66% 2.31%
VIP Money Market Portfolio ................ 1.65% 0.30% 1.95%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II:
VIP II Asset Manager: Growth
Portfolio ................................ 1.65% 0.72% 2.37%
VIP II Contrafund Portfolio ............... 1.65% 0.66% 2.31%
VIP II Index 500 Portfolio ................ 1.65% 0.28% 1.93%
VIP II Investment Grade Bond
Portfolio ................................ 1.65% 0.57% 2.22%
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND III:
VIP III Growth Opportunities
Portfolio ................................ 1.65% 0.70% 2.35%
JANUS ASPEN SERIES:
Aggressive Growth Portfolio ............... 1.65% 0.75% 2.40%
Growth Portfolio .......................... 1.65% 0.68% 2.33%
International Growth Portfolio ............ 1.65% 0.86% 2.51%
Worldwide Growth Portfolio ................ 1.65% 0.72% 2.37%
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST:
Limited Maturity Bond Portfolio ........... 1.65% 0.76% 2.41%
Partners Portfolio ........................ 1.65% 0.84% 2.49%
Socially Responsive Portfolio ............. 1.65% 1.50% 3.15%
NORTHSTAR GALAXY TRUST:
Emerging Growth Portfolio ................. 1.65% 0.90% 2.55%
Growth + Value Portfolio .................. 1.65% 0.80% 2.45%
International Value Portfolio ............. 1.65% 1.00% 2.65%
Research Enhanced Index Portfolio ......... 1.65% 0.90% 2.55%
High Yield Bond Portfolio ................. 1.65% 0.80% 2.45%
OCC ACCUMULATION TRUST:
Equity Portfolio .......................... 1.65% 0.94% 2.59%
Global Equity Portfolio ................... 1.65% 1.13% 2.78%
Managed Portfolio ......................... 1.65% 0.82% 2.47%
Small Cap Portfolio ....................... 1.65% 0.88% 2.53%
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
EXAMPLES:
TOTAL ANNUAL
EXPENSES AT END OF:
----------------------------------------------------------
(1) (2) (3) (1) (2) (3)
1 YEAR 1 YEAR 1 YEAR 10 YEAR 10 YEAR 10 YEAR
TRANSFER FLEX RETAIL TRANSFER FLEX RETAIL
INVESTMENT FUNDS SERIES SERIES SERIES SERIES SERIES SERIES
- --------------------------------------------- ---------- -------- -------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
THE ALGER AMERICAN FUND:
Alger American Growth Portfolio ........... $79 $ 99 $88 $278 $278 $276
Alger American Leveraged AllCap
Portfolio ................................ $80 $100 $89 $295 $295 $293
Alger American MidCap Growth
Portfolio ................................ $79 $ 99 $88 $283 $283 $281
Alger American Small Capitalization
Portfolio ................................ $80 $100 $89 $288 $288 $286
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND:
VIP Equity-Income Portfolio ............... $77 $ 97 $86 $257 $257 $254
VIP Growth Portfolio ...................... $78 $ 98 $86 $267 $267 $263
VIP Money Market Portfolio ................ $74 $ 94 $83 $228 $228 $227
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND II:
VIP II Asset Manager: Growth
Portfolio ................................ $78 $ 98 $87 $272 $272 $269
VIP II Contrafund Portfolio ............... $78 $ 98 $86 $269 $269 $263
VIP II Index 500 Portfolio ................ $74 $ 94 $83 $233 $233 $224
VIP II Investment Grade Bond
Portfolio ................................ $77 $ 97 $86 $256 $256 $254
FIDELITY VARIABLE INSURANCE
PRODUCTS FUND III:
VIP III Growth Opportunities
Portfolio ................................ $78 $ 98 $87 $270 $270 $267
JANUS ASPEN SERIES:
Aggressive Growth Portfolio ............... $78 $ 98 $87 $274 $274 $272
Growth Portfolio .......................... $78 $ 98 $87 $267 $267 $265
International Growth Portfolio ............ $79 $ 99 $88 $285 $285 $283
Worldwide Growth Portfolio ................ $78 $ 98 $87 $271 $271 $269
NEUBERGER BERMAN ADVISERS
MANAGEMENT TRUST:
Limited Maturity Bond Portfolio ........... $78 $ 98 $87 $275 $275 $273
Partners Portfolio ........................ $79 $ 99 $88 $283 $283 $281
Socially Responsive Portfolio ............. $86 $105 $95 $346 $346 $343
NORTHSTAR GALAXY TRUST:
Emerging Growth Portfolio ................. $80 $100 $89 $289 $289 $287
Growth + Value Portfolio .................. $79 $ 99 $88 $279 $279 $277
International Value Portfolio ............. $81 $101 $90 $299 $299 $296
Research Enhanced Index Portfolio ......... $80 $100 $89 $289 $289 $287
High Yield Bond Portfolio ................. $79 $ 99 $88 $279 $279 $277
OCC ACCUMULATION TRUST:
Equity Portfolio .......................... $80 $100 $89 $293 $293 $291
Global Equity Portfolio ................... $82 $102 $91 $311 $311 $309
Managed Portfolio ......................... $79 $ 99 $88 $281 $281 $279
Small Cap Portfolio ....................... $80 $ 99 $89 $287 $287 $285
</TABLE>
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<PAGE>
Certain of the portfolios are subject to fee waiver or reimbursement
arrangements. The charges listed above reflect any expense reimbursement or fee
waiver. For more detailed information, see Summary of Contract Expenses in the
Prospectus for the Contract.
6. TAXES: Your earnings are not taxed until you take them out. If you withdraw
money, earnings may come out first and will be taxed as income. If you are
younger than 591/2 when you take money out, you may be charged a 10% federal tax
penalty on the amount treated as taxable income. Annuity payments during the
income phase may be considered partly a return of your original investment, in
which case that part of each payment is not taxable as income.
7. ACCESS TO YOUR MONEY: You can take money out at any time during the
accumulation phase. For a Transfer Series Contract and a Flex Series Contract,
during any 12 month period, you can take up to 10% of the Contract Value less
any Outstanding Loan Balance each year without charge from us. For a Retail
Series Contract, during any Contract Year, you can take the greater of: all
Contract earnings; or 10% (as of the last Contract Anniversary) of purchase
payments still subject to a surrender fee.Withdrawals in excess of these amounts
will be charged the applicable surrender charge. After we have a payment for 6
years (Transfer Series), 6 years (Retail Series) or 10 years (Flex Series),
there is no charge for withdrawals for those payments. You may also have to pay
income tax and a tax penalty on any money you take out. Withdrawals from
Contracts that are tax sheltered annuity contracts established pursuant to
Section 403(b) of the Code are subject to special restrictions on withdrawals,
as discussed in the Prospectus.
8. PERFORMANCE: The value of the Contract will vary up or down depending upon
the investment performance of the investment funds you choose. The following
chart shows total returns through December 31, 1998, for each investment fund
for the time periods shown. This chart reports performance returns only from the
date an investment fund was offered through the Variable Account by one or more
Contracts and for periods where our Contracts offered the investment fund for a
complete year. These numbers reflect the insurance charges, the contract
maintenance charge, the investment expenses and all other expenses of the
investment fund. These numbers do not reflect any withdrawal charges and if
applied these charges would reduce such performance. Past performance is not a
guarantee of future results. Investment in the money market fund option is
neither insured nor guaranteed by the U.S. government and there can be no
assurance that it will be able to maintain a stable net asset value of $1 per
share.
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<PAGE>
Performances of certain of the portfolios reflect a voluntary expense
limitation, as described in the prospectus. In the absence of this voluntary
limitation the total return would have been lower.
<TABLE>
<CAPTION>
CALENDAR YEAR
1998 1997 1996 1995
------------- ----------- ----------- -----
<S> <C> <C> <C> <C>
THE ALGER AMERICAN FUND
Alger American Growth Portfolio ....................... 45.76% 23.75% 11.51% n/a
Alger American Leveraged AllCap Portfolio ............. 55.39% 17.76% 10.22% n/a
Alger American MidCap Growth Portfolio ................ 28.24% 13.15% 10.08% n/a
Alger American Small Capitalization Portfolio ......... 13.67% 9.59% 2.47% n/a
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Equity-Income Portfolio ........................... 9.82% 26.08% 12.43% n/a
VIP Growth Portfolio .................................. 37.30% 21.51% 12.85% n/a
VIP Money Market Portfolio ............................ 3.76% 3.77% 3.69% n/a
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager: Growth Portfolio ................ 15.68% 23.08% 18.00% n/a
VIP II Contrafund Portfolio ........................... 27.92% 22.16% 19.36% n/a
VIP II Index 500 Portfolio ............................ 26.29% 30.60% 20.85% n/a
VIP II Investment Grade Bond Portfolio ................ n/a n/a n/a n/a
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
VIP III Growth Opportunities Portfolio ................ n/a n/a n/a n/a
JANUS ASPEN SERIES
Aggressive Growth Portfolio ........................... 32.14% n/a n/a n/a
Growth Portfolio ...................................... 33.52% n/a n/a n/a
International Growth Portfolio ........................ 15.35% n/a n/a n/a
Worldwide Growth Portfolio ............................ 26.88% n/a n/a n/a
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Limited Maturity Bond Portfolio ....................... 2.69% n/a n/a n/a
Partners Portfolio .................................... 2.51% n/a n/a n/a
Socially Responsive Portfolio ......................... n/a n/a n/a n/a
NORTHSTAR GALAXY TRUST
Emerging Growth Portfolio ............................. 15.42% 13.76% 11.95% n/a
Growth + Value Portfolio .............................. 17.42% 12.81% 21.12% n/a
International Value Portfolio ......................... 15.05% n/a n/a n/a
Research Enhanced Index Portfolio ..................... (0.31)% 5.27% 11.44% n/a
High Yield Bond Portfolio ............................. (1.06)% n/a n/a n/a
OCC ACCUMULATION TRUST
Equity Portfolio ...................................... 10.05% n/a n/a n/a
Global Equity Portfolio ............................... 11.46% n/a n/a n/a
Managed Portfolio ..................................... 5.38% n/a n/a n/a
Small Cap Portfolio ................................... (10.54)% n/a n/a n/a
</TABLE>
9. DEATH BENEFIT: If you die prior to the income phase, the person you have
chosen as your beneficiary will receive a death benefit. For Flex Series and
Transfer Series Contracts, this death benefit will be the greater of three
amounts: 1) the money you've put in reduced by any money you've taken out, any
Outstanding Loan Balance and previously deducted Annual Contract Charges, or 2)
the current value of your Contract less the Outstanding Loan Balance, or 3) the
value of your Contract at the most recent Specified Contract Anniversary (as
defined in the Prospectus) plus any money you've added since that anniversary
reduced by any money you've taken out since that anniversary or any Outstanding
Loan Balance and previously deducted Annual Contract Charges. For Retail Series
Contracts the death benefit is the greater of (1), (2) or (3). For an additional
premium of .15% you can purchase a rider that will provide a death benefit that
is the greater of (1), (2) or (3) and the Specified Contract Anniversary is each
anniversary. If you die after age 80, your beneficiary will receive the Contract
Value less the Outstanding Loan Balance.
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<PAGE>
10. OTHER INFORMATION
FREE LOOK. For a Flex Series and Transfer Series Contract, if you cancel the
Contract within 10 days after receiving it (or whatever period is required in
your state), we will return the Contract Value without assessing a withdrawal
charge. The Contract Value may be more or less than your original payment.
However, if required by applicable law, we will return your payments.
For Retail Series Contracts, if you reside in a state requiring the return
of purchase payments made for any cancellation during a free look period the
amount of your initial payments will be allocated to the money market option
during the free look period in your state plus five calendar days. If you cancel
your Contract we will return your payments made. If you keep your Contract, we
will then allocate your initial payments plus Contract Earnings to the
appropriate fund(s) you have chosen.
NO PROBATE. In most cases, when you die, the person you choose as your
beneficiary will receive the death benefit without going through probate.
WHO SHOULD PURCHASE THE CONTRACT? This Contract is designed for people seeking
long-term tax-deferred accumulation of assets, generally for retirement or other
long-term purposes. The tax-deferred feature is most attractive to people in
high federal and state tax brackets. You should not buy this Contract if you are
looking for a short-term investment or if you cannot take the risk of getting
back less money than you put in.
ADDITIONAL FEATURES. This Contract has additional Features you might be
interested in. These include:
o If the Contract you purchase is issued for use with a Qualified Plan
pursuant to Section 403(b) of the Code, loans from the Contract may be
available. These loans are subject to certain restrictions.
o You can arrange to have money automatically sent to you each month while
your Contract is still in the accumulation phase. Of course, you'll have
to pay taxes on money you receive. We call this feature Systematic
Withdrawal.
o You can arrange to have a regular amount of money automatically
transferred to investment portfolios each month to provide for regular
level investments over time. We call this feature Dollar Cost Averaging.
o The Company will automatically readjust the money in your Contract between
investment portfolios periodically to keep the blend you select.
We call this feature Automatic Reallocation.
These features are not available in all states and may not be suitable for your
particular situation.
11. INQUIRIES If you need more information, please contact us at:
Northern Life Insurance Company
1501 Fourth Avenue, Suite 1000
Seattle, Washington 98101-3620
1-800-870-0453
or the distributor of the Contracts, our affiliated Company,
Washington Square Securities, Inc.
20 Washington Avenue South
Minneapolis, Minnesota 55401
1-800-621-3750
or your registered representative.
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NORTHERN LIFE
ADVANTAGE ANNUITY
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
SEPARATE ACCOUNT ONE
NORTHERN LIFE INSURANCE COMPANY
1501 FOURTH AVENUE, SUITE 1000, SEATTLE, WASHINGTON 98101-3620
TELEPHONE: (206) 292-1111
This Prospectus offers three Series of flexible premium Individual Deferred
Variable/Fixed Annuity Contracts ("Contracts"). The three Series of Contracts
offered by this Prospectus (the "Flex Series", the "Transfer Series", and the
"Retail Series") differ in the amount of Purchase Payments required, when
Purchase Payments can be made and certain charges imposed under the Contracts.
The Transfer Series is not available in Massachusetts. The Contracts are offered
by Northern Life Insurance Company (the "Company") for use in connection with
retirement plans qualifying for special tax treatment under the Internal Revenue
Code. (See "Federal Tax Status.") In addition, two of the Contracts described in
this Prospectus are offered on a non-qualified basis.
The Contracts provide for accumulation of Contract Value and payment of
annuity benefits on a variable or fixed basis, or a combination variable and
fixed basis. Annuity Payouts under the Contracts are deferred until a selected
later date.
Subject to certain restrictions, you can allocate premiums to:
o three separate Fixed Accounts (Fixed Account A, Fixed Account B, and
Fixed Account C), which are accounts that provide a minimum specified
rate of interest; and
o Sub-Accounts of Separate Account One (the "Variable Account"), a
variable account allowing you to invest in certain portfolios of the
following Funds (the "Investment Funds"):
<TABLE>
<S> <C>
The Alger American Fund Janus Aspen Series
Fidelity Variable Insurance Products Fund (VIP) Neuberger Berman Advisers Management Trust
Fidelity Variable Insurance Products Fund II (VIP II) Northstar Galaxy Trust
Fidelity Variable Insurance Products Fund III (VIP III) OCC Accumulation Trust
</TABLE>
The Variable Account, your account value and the amount of any variable
annuity payments that you receive will vary, primarily based on the investment
performance of the Investment Funds you select. (For more information about
investing in the Investment Funds, see "Investments of the Variable Account".)
The Fixed Accounts are part of the general account of the Company. Information
about the Fixed Accounts is contained in Appendix A.
Additional information about the Contracts, the Company, and the Variable
Account is contained in a Statement of Additional Information dated 1999, which
has been filed with the Securities and Exchange Commission ("SEC") and is
available upon request without charge by writing to Northern Life Insurance
Company, 1501 Fourth Avenue, Suite 1000, Seattle, Washington, 98101-3620, by
calling (800) 870-0453, or by accessing the SEC's Internet web site
(http://www.sec.gov). The Statement of Additional Information is incorporated by
reference in this Prospectus. The Table of Contents for the Statement of
Additional Information may be found on page 35 of this Prospectus.
THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION ABOUT THE CONTRACTS THAT A
PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING AND SHOULD BE RETAINED FOR
FUTURE REFERENCE.
These insurance and investment products:
o ARE NOT BANK DEPOSITS OR GUARANTEED BY A BANK
o ARE NOT INSURED OR GUARANTEED BY THE FDIC, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY
o ARE AFFECTED BY MARKET FLUCTUATIONS AND INVOLVE INVESTMENT RISK,
INCLUDING POSSIBLE LOSS OF PRINCIPAL
o HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS IS ACCOMPANIED BY THE CURRENT PROSPECTUSES FOR THE INVESTMENT
FUNDS OFFERED BY THE ALGER AMERICAN FUND, FIDELITY VARIABLE INSURANCE PRODUCTS
FUND, FIDELITY VARIABLE INSURANCE PRODUCTS FUND II, FIDELITY VARIABLE INSURANCE
PRODUCTS FUND III, JANUS ASPEN SERIES, NEUBERGER BERMAN ADVISERS MANAGEMENT
TRUST, NORTHSTAR GALAXY TRUST, AND OCC ACCUMULATION TRUST.
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
TABLE OF CONTENTS
Definitions............................................................... 4
Summary of Contract Expenses.............................................. 6
The Company............................................................... 13
The Variable Account...................................................... 13
Investments of the Variable Account....................................... 14
Reinvestment............................................................. 17
Addition, Deletion or Substitution of Fund Shares........................ 17
Charges Made by the Company............................................... 18
Withdrawal Charge (Contingent Deferred Sales Charge)..................... 18
Waiver of Withdrawal Charge for Certain Contracts........................ 19
Partial Waiver of Withdrawal Charge...................................... 20
Reduction of Withdrawal Charge........................................... 21
Annual Contract Charge................................................... 21
Mortality Risk Charge.................................................... 22
Expense Risk Charge...................................................... 22
Administrative Charge.................................................... 22
Sufficiency of Charges................................................... 22
Premium and Other Taxes.................................................. 22
Reduction of Charges..................................................... 23
Expenses of the Funds.................................................... 23
Administration............................................................ 23
The Contracts............................................................. 23
Contract Application and Purchase Payments............................... 23
Revocation............................................................... 24
Allocation of Purchase Payments.......................................... 24
Accumulation Unit Value.................................................. 24
Net Investment Factor.................................................... 24
Death Benefit Before the Start Date...................................... 25
Payment of Death Benefit Before the Start Date........................... 26
Death Benefit After Start Date........................................... 26
Withdrawal (Redemption).................................................. 26
Systematic Withdrawals................................................... 27
Loans Available from Certain Qualified Contracts......................... 27
Reallocations............................................................ 28
Written Reallocations................................................... 28
Telephone Reallocations................................................. 29
Automatic Reallocations................................................. 29
Dollar Cost Averaging Reallocations..................................... 29
Reallocations from the Fixed Accounts................................... 30
Assignments.............................................................. 30
Contract Owner and Beneficiaries......................................... 31
Contract Inquiries....................................................... 31
Annuity Provisions........................................................ 31
Start Date............................................................... 31
Annuity Payout Selection................................................. 31
Forms of Annuity Payouts................................................. 32
Frequency and Amount of Annuity Payouts.................................. 32
Annuity Payouts.......................................................... 32
Sub-Account Annuity Unit Value........................................... 33
Assumed Investment Rate.................................................. 33
Partial Annuitization.................................................... 33
Federal Tax Status........................................................ 33
Introduction............................................................. 33
Tax Status of the Contract............................................... 34
2
<PAGE>
Taxation of Annuities.................................................... 35
Transfers, Assignments or Exchanges of a Contract........................ 36
Withholding.............................................................. 36
Multiple Contracts....................................................... 36
Taxation of Qualified Plans.............................................. 36
Corporate Pension and Profit-Sharing Plans and H.R. 10 Plans............. 37
Individual Retirement Annuities.......................................... 37
Tax Sheltered Annuities.................................................. 37
Section 457 Plans........................................................ 37
Possible Charge for the Company's Taxes.................................. 37
Other Tax Consequences................................................... 38
Possible Changes in Taxation............................................. 38
Voting of Fund Shares..................................................... 38
Distribution of the Contracts............................................. 38
Reports to Contract Owners................................................ 39
Legal Proceedings......................................................... 39
Preparing for the Year 2000............................................... 39
Financial Statements and Experts.......................................... 39
Further Information....................................................... 39
Separate Account One Statement of Additional Information Table
of Contents.............................................................. 41
Appendices................................................................ A-1
3
<PAGE>
DEFINITIONS
ACCUMULATION UNIT. A unit of measure used to determine the Variable Account
Contract Value.
ANNUITANT. The person whose life determines the annuity payouts payable at the
Start Date under a Contract.
ANNUITY PAYOUT DATE. Unless otherwise agreed to by the Company, the first
business day of any calendar month in which a Fixed or Variable Annuity
Payout is made under a Contract.
ANNUITY UNIT. A unit of measure used to determine the amount of a Variable
Annuity Payout after the first Variable Annuity Payout.
BENEFICIARY. The person(s) named by the Contract Owner to receive the Death
Benefit upon the death of the Contract Owner or Annuitant, if applicable,
before the Start Date and to receive the balance of annuity payouts, if any,
under the annuity payout(s) in effect at the Annuitant's death.
CODE. The Internal Revenue Code of 1986, as amended.
COMPANY. Northern Life Insurance Company, a stock life insurance company
incorporated under the laws of the State of Washington.
CONTINGENT BENEFICIARY. The person(s) named to become the Beneficiary if the
Beneficiary dies, if applicable.
CONTRACT ANNIVERSARY. The same day and month as the Issue Date each year.
CONTRACT EARNINGS. The Contract Value on any Valuation Date, plus the aggregate
Purchase Payments withdrawn up to that date, minus the aggregate Purchase
Payments made up to that date.
CONTRACT OWNER. The person who controls all the rights and privileges under a
Contract.
CONTRACT VALUE. The sum of the Variable Account Contract Value, plus the sum of
the Fixed Account A, Fixed Account B, and Fixed Account C Contract Values.
CONTRACT YEAR. Each twelve-month period starting with the Issue Date and each
Contract Anniversary thereafter.
DEATH BENEFIT. The amount payable, if any, upon the death before the Start Date
of the Contract Owner of a qualified Contract or the Annuitant or Contract
Owner in the case of a non-qualified Contract.
DEATH BENEFIT VALUATION DATE. The Valuation Date next following the date the
Company receives proof of death and an appropriate written request for
payment of the Death Benefit from the Beneficiary.
FIXED ACCOUNT A. Part of the general account of the Company, which consists of
all assets of the Company, other than those assets allocated to separate
accounts of the Company.
FIXED ACCOUNT A CONTRACT VALUE. An amount equal to the sum of Purchase Payments
allocated to Fixed Account A, increased by reallocations made to Fixed
Account A (including amounts reallocated to the Loan Account) and interest
credited to Fixed Account A, less reallocations out of Fixed Account A,
withdrawals from Fixed Account A (including amounts applied to purchase
annuity payouts, withdrawal charges and applicable premium taxes) and
deductions for the Annual Contract Charge.
FIXED ACCOUNT B. Part of the general account of the Company, which consists of
all assets of the Company, other than those assets allocated to separate
accounts of the Company.
FIXED ACCOUNT B CONTRACT VALUE. An amount equal to the sum of Purchase Payments
allocated to Fixed Account B, increased by reallocations made to Fixed
Account B and interest credited to Fixed Account B, less reallocations out of
Fixed Account B, withdrawals from Fixed Account B (including amounts applied
to purchase annuity payouts, withdrawal charges and applicable premium taxes)
and deductions for the Annual Contract Charge.
FIXED ACCOUNT C. Part of the general account of the Company, which consists of
all assets of the Company, other than those assets allocated to separate
accounts of the Company.
4
<PAGE>
FIXED ACCOUNT C CONTRACT VALUE. An amount equal to the sum of Purchase Payments
allocated to Fixed Account C, increased by interest credited to Fixed Account
C, less reallocations from Fixed Account C (including withdrawal charges and
applicable premium taxes), and deductions for the Annual Contract Charge.
FIXED ANNUITY PAYOUT. A series of periodic payments to the Payee which do not
vary in amount, are guaranteed as to principal and interest, and are paid
from the general account of the Company.
FUND. Any open-end management investment company (or portfolio thereof) or unit
investment trust (or series thereof) in which a Sub-Account invests as
described herein.
INITIAL PURCHASE PAYMENT TRANSFER DATE. The Initial Purchase Payment Transfer
Date is the date that is five calendar days after the applicable state free
look period, and is generally 16 days after the Contract Date. This may vary
by state.
ISSUE DATE. The date on which the Contract is issued as shown on the Contract
data page.
LOAN ACCOUNT. The portion, if any, of Contract Value segregated within Fixed
Account A which is designated as security for a loan under the Contract.
OUTSTANDING LOAN BALANCE. The aggregate value, if any, of all existing loans,
plus any accumulated loan interest, less any loan repayments.
PAYEE. The person to whom the Company will make Annuity Payouts.
PURCHASE PAYMENT. A payment made to the Company under a Contract which, if
permitted under a Contract includes periodic, single lump sum, rollover and
transfer payments.
QUALIFIED PLAN. A retirement plan under Sections 401(a), 403(b), 408, 408A or
457 of the Code.
SEC. The Securities and Exchange Commission.
SPECIFIED CONTRACT ANNIVERSARY. Each sixth Contract Anniversary.
START DATE. The date on which all of the Contract Value is used to purchase a
Fixed and/or Variable Annuity Payout.
SUB-ACCOUNT. A subdivision of the Variable Account available under a Contract
which invests in shares of a specific Fund.
SUB-ACCOUNT CONTRACT VALUE. For any Sub-Account, an amount equal to the number
of Accumulation Units of that Sub-Account under a Contract when the
Sub-Account Contract Value is computed, multiplied by the accumulation unit
value for that Sub-Account.
WITHDRAWAL VALUE. The Contract Value less any applicable Withdrawal Charge, any
Outstanding Loan Balance and in the case of a full withdrawal, less the
Annual Contract Charge.
VALUATION DATE. Each day on which the New York Stock Exchange is open for
business except for a day that a Sub-Account's corresponding Fund does not
value its shares. The New York Stock Exchange is currently closed on
weekends and on the following holidays: New Year's Day; Rev. Dr. Martin
Luther King, Jr. Day; President's Day; Good Friday; Memorial Day; July
Fourth; Labor Day; Thanksgiving Day; and Christmas Day.
VALUATION PERIOD. The period of time between a Valuation Date and the next
Valuation Date.
VARIABLE ACCOUNT. Separate Account One, which is a separate investment account
of the Company.
VARIABLE ACCOUNT CONTRACT VALUE. The sum of all Sub-Account Contract Values
under a Contract.
VARIABLE ANNUITY PAYOUT. A series of periodic payments to the Payee which will
vary in amount based on the investment performance of the Sub-Accounts
selected under a Contract.
5
<PAGE>
SUMMARY OF CONTRACT EXPENSES
<TABLE>
<S> <C>
CONTRACT OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Purchases ...................................... None
Maximum Withdrawal Charge Transfer Series (a) .......................... 6%
Maximum Withdrawal Charge Flex Series (a) .............................. 8%
Maximum Withdrawal Charge Retail Series (a) ............................ 7%
Reallocation Charge (b) ................................................ None
ANNUAL CONTRACT CHARGE (C) ............................................. $30
VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average account value)
Mortality and Expense Risk Charges ..................................... 1.25%
Other Account Fees and Expenses (See "Administrative Charge.") ......... .15%
Total Variable Account Annual Expenses ................................. 1.40%
</TABLE>
In addition to the costs and expenses shown in this table, state premium
taxes may also be applicable. For more information on state premium taxes, see
"Premium and Other Taxes."
6
<PAGE>
ANNUAL INVESTMENT FUND EXPENSES AFTER REIMBURSEMENTS (d)*
(as a percentage of Fund average net assets)
<TABLE>
<CAPTION>
TOTAL
INVESTMENT
MANAGEMENT FUND
(ADVISORY) ANNUAL
FEES(D) OTHER EXPENSES EXPENSE
------------ ---------------- -----------
<S> <C> <C> <C>
Alger American Growth Portfolio (d) .................... 0.75% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio (d) .......... 0.85% 0.11% 0.96%
Alger American MidCap Growth Portfolio (d) ............. 0.80% 0.04% 0.84%
Alger American Small Capitalization Portfolio (d) ...... 0.85% 0.04% 0.89%
Fidelity VIP Equity-Income Portfolio (d)(e) ............ 0.49% 0.09% 0.58%
Fidelity VIP Growth Portfolio (d)(e) ................... 0.59% 0.09% 0.68%
Fidelity VIP Money Market Portfolio (d) ................ 0.20% 0.10% 0.30%
Fidelity VIP II Asset Manager: Growth
Portfolio (d)(e) ...................................... 0.59% 0.14% 0.73%
Fidelity VIP II Contrafund Portfolio (d)(e) ............ 0.59% 0.11% 0.70%
Fidelity VIP II Index 500 Portfolio (d)(e) ............. 0.24% 0.11% 0.35%
Fidelity VIP II Investment Grade Bond
Portfolio (d) ......................................... 0.43% 0.14% 0.57%
Fidelity VIP III Growth Opportunities
Portfolio (d)(e) ...................................... 0.59% 0.12% 0.71%
Janus Aggressive Growth Portfolio (d)(f) ............... 0.72% 0.03% 0.75%
Janus Growth Portfolio (d)(f) .......................... 0.65% 0.03% 0.68%
Janus International Growth Portfolio (d)(f) ............ 0.66% 0.20% 0.86%
Janus Worldwide Growth Portfolio (d)(f) ................ 0.65% 0.07% 0.72%
Neuberger Berman Advisers Management Trust
Limited Maturity Bond Portfolio (d)(g) ................ 0.65% 0.11% 0.76%
Neuberger Berman Advisers Management Trust
Partners Portfolio (d)(g) ............................. 0.78% 0.06% 0.84%
Neuberger Berman Advisers Management Trust
Socially Responsive Portfolio (d)(g)(h) ............... 0.85% 0.65% 1.50%
Northstar Galaxy Trust Emerging Growth
Portfolio (i) ......................................... 0.75% 0.15% 0.90%
Northstar Galaxy Trust Growth + Value Portfolio (i)..... 0.75% 0.05% 0.80%
Northstar Galaxy Trust International Value
Portfolio (i) ......................................... 1.00% 0.00% 1.00%
Northstar Galaxy Trust Research Enhanced Index
Portfolio (i) ......................................... 0.75% 0.15% 0.90%
Northstar Galaxy Trust High Yield Bond
Portfolio (i) ......................................... 0.75% 0.05% 0.80%
OCC Equity Portfolio (d)(j) ............................ 0.80% 0.14% 0.94%
OCC Global Equity Portfolio (d)(j) ..................... 0.80% 0.33% 1.13%
OCC Managed Portfolio (d)(j) ........................... 0.78% 0.04% 0.82%
OCC Small Cap Portfolio (d)(j) ......................... 0.80% 0.08% 0.88%
</TABLE>
- ------------------
* The fees and expense information regarding the Funds was provided by the
Funds. Except for the Northstar Galaxy Trust, neither the Funds nor their
advisers are affiliated with the Company.
7
<PAGE>
EXAMPLES
If a full withdrawal of the Contract Value is made at the end of the
applicable time period, the following expenses on a $1,000 investment, assuming
a 5% annual return on assets, would be paid:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-------------------------------- -------------------------------
TRANSFER FLEX RETAIL TRANSFER FLEX RETAIL
SERIES SERIES SERIES SERIES SERIES SERIES
---------- -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Alger American Growth Portfolio ............ $79 $ 99 $88 $121 $144 $121
Alger American Leveraged AllCap
Portfolio ................................. 80 100 89 126 149 126
Alger American MidCap Growth
Portfolio ................................. 79 99 88 123 145 122
Alger American Small Capitalization
Portfolio ................................. 80 100 89 124 147 124
Fidelity VIP Equity-Income Portfolio ....... 77 97 86 115 138 114
Fidelity VIP Growth Portfolio .............. 78 98 86 118 141 117
Fidelity VIP Money Market Portfolio ........ 74 94 83 106 130 106
Fidelity VIP II Asset Manager:
Growth Portfolio .......................... 78 98 87 119 142 119
Fidelity VIP II Contrafund Portfolio ....... 78 98 86 118 142 117
Fidelity VIP II Index 500 Portfolio ........ 74 94 83 108 132 106
Fidelity VIP II Investment Grade Bond
Portfolio ................................. 77 97 86 114 138 114
Fidelity VIP III Growth Opportunities
Portfolio ................................. 78 98 87 119 142 118
Janus Aggressive Growth Portfolio .......... 78 98 87 120 143 120
Janus Growth Portfolio ..................... 78 98 87 118 141 118
Janus International Growth Portfolio ....... 79 99 88 123 146 123
Janus Worldwide Growth Portfolio ........... 78 98 87 119 142 119
Neuberger Berman Advisers Management
Trust Limited Maturity Bond Portfolio ..... 78 98 87 120 143 120
Neuberger Berman Advisers Management
Trust Partners Portfolio .................. 79 99 88 123 145 122
Neuberger Berman Advisers Management
Trust Socially Responsive Portfolio ....... 86 105 95 142 164 142
Northstar Galaxy Trust Emerging
Growth Portfolio .......................... 80 100 89 124 147 124
Northstar Galaxy Trust Growth + Value
Portfolio ................................. 79 99 88 121 144 121
Northstar Galaxy Trust International
Value Portfolio ........................... 81 101 90 127 150 127
Northstar Galaxy Trust Research
Enhanced Index Portfolio .................. 80 100 89 124 147 124
Northstar Galaxy Trust High Yield
Bond Portfolio ............................ 79 99 88 121 144 121
OCC Equity Portfolio ....................... 80 100 89 126 148 125
OCC Global Equity Portfolio ................ 82 102 91 131 154 131
OCC Managed Portfolio ...................... 79 99 88 122 145 122
OCC Small Cap Portfolio .................... 80 99 89 124 147 124
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
5 YEARS 10 YEARS
- -------------------------------- -------------------------------
TRANSFER FLEX RETAIL TRANSFER FLEX RETAIL
SERIES SERIES SERIES SERIES SERIES SERIES
- ---------- -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
$148 $181 $148 $278 $278 $276
157 189 156 295 295 293
151 184 150 283 283 281
153 186 153 288 288 286
138 171 137 257 257 254
143 176 141 267 267 263
123 158 123 228 228 227
145 178 144 272 272 269
144 177 141 269 269 263
126 160 122 233 233 224
137 171 137 256 256 254
144 177 143 270 270 267
146 179 146 274 274 272
143 176 142 267 267 265
152 185 151 285 285 283
145 178 144 271 271 269
147 180 146 275 275 273
151 184 150 283 283 281
183 214 182 346 346 343
154 186 153 289 289 287
149 182 148 279 279 277
159 191 158 299 299 296
154 186 153 289 289 287
149 182 148 279 279 277
156 188 155 293 293 291
165 197 165 311 311 309
150 183 149 281 281 279
153 185 152 287 287 285
</TABLE>
9
<PAGE>
If the Contract is annuitized at the end of the applicable time period or if it
is not surrendered, the following cumulative expenses on an initial $1,000
investment assuming a 5% annual return would be paid:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
-------------------------------- -------------------------------
TRANSFER FLEX RETAIL TRANSFER FLEX RETAIL
SERIES SERIES SERIES SERIES SERIES SERIES
---------- -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Alger American Growth Portfolio ............ $25 $25 $25 $76 $76 $76
Alger American Leveraged AllCap
Portfolio ................................. 26 26 26 81 81 81
Alger American MidCap Growth
Portfolio ................................. 25 25 25 78 78 77
Alger American Small Capitalization
Portfolio ................................. 26 26 26 79 79 79
Fidelity VIP Equity-Income Portfolio ....... 23 23 23 70 70 69
Fidelity VIP Growth Portfolio .............. 24 24 23 73 73 72
Fidelity VIP Money Market Portfolio ........ 20 20 20 61 61 61
Fidelity VIP II Asset Manager:
Growth Portfolio .......................... 24 24 24 74 74 74
Fidelity VIP II Contrafund Portfolio ....... 24 24 23 73 73 72
Fidelity VIP II Index 500 Portfolio ........ 20 20 20 63 63 61
Fidelity VIP II Investment Grade Bond
Portfolio ................................. 23 23 23 69 69 69
Fidelity VIP III Growth Opportunities
Portfolio ................................. 24 24 24 74 74 73
Janus Aggressive Growth Portfolio .......... 24 24 24 75 75 75
Janus Growth Portfolio ..................... 24 24 24 73 73 73
Janus International Growth Portfolio ....... 25 25 25 78 78 78
Janus Worldwide Growth Portfolio ........... 24 24 24 74 74 74
Neuberger Berman Advisers Management
Trust Limited Maturity Bond Portfolio ..... 24 24 24 75 75 75
Neuberger Berman Advisers Management
Trust Partners Portfolio .................. 25 25 25 78 78 77
Neuberger Berman Advisers Management
Trust Socially Responsive Portfolio ....... 32 32 32 97 97 97
Northstar Galaxy Trust Emerging
Growth Portfolio .......................... 26 26 26 79 79 79
Northstar Galaxy Trust Growth + Value
Portfolio ................................. 25 25 25 76 76 76
Northstar Galaxy Trust International
Value Portfolio ........................... 27 27 27 82 82 82
Northstar Galaxy Trust Research
Enhanced Index Portfolio .................. 26 26 26 79 79 79
Northstar Galaxy Trust High Yield
Bond Portfolio ............................ 25 25 25 76 76 76
OCC Equity Portfolio ....................... 26 26 26 81 81 80
OCC Global Equity Portfolio ................ 28 28 28 86 86 86
OCC Managed Portfolio ...................... 25 25 25 77 77 77
OCC Small Cap Portfolio .................... 26 26 26 79 79 79
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
5 YEARS 10 YEARS
- -------------------------------- -------------------------------
TRANSFER FLEX RETAIL TRANSFER FLEX RETAIL
SERIES SERIES SERIES SERIES SERIES SERIES
- ---------- -------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
$130 $130 $130 $278 $278 $276
139 139 138 295 295 293
133 133 132 283 283 281
135 135 135 288 288 286
120 120 119 257 257 254
125 125 123 267 267 263
105 105 105 228 228 227
127 127 126 272 272 269
126 126 123 269 269 263
108 108 104 233 233 224
119 119 119 256 256 254
126 126 125 270 270 267
128 128 128 274 274 272
125 125 124 267 267 265
134 134 133 285 285 283
127 127 126 271 271 269
129 129 128 275 275 273
133 133 132 283 283 281
165 165 164 346 346 343
136 136 135 289 289 287
131 131 130 279 279 277
141 141 140 299 299 296
136 136 135 289 289 287
131 131 130 279 279 277
138 138 137 293 293 291
147 147 147 311 311 309
132 132 131 281 281 279
135 135 134 287 287 285
</TABLE>
11
<PAGE>
- ------------------
(a) The Withdrawal Charge for the Transfer Series Contracts applies to each
Purchase Payment. The Withdrawal Charge is 6% in the Contract Year a
Purchase Payment is received by the Company and the Contract Year
immediately following. It decreases to 0% beginning the sixth year after a
Purchase Payment was received by the Company. For the Flex Series
Contracts, the Withdrawal Charge is based on Contract Years. It decreases
from 8% in the first three Contract Years to 0% after the tenth Contract
Year. The Withdrawal Charge for the Retail Series Contracts applies to each
Purchase Payment. The Withdrawal Charge is 7% in the Contract Year a
Purchase Payment is received by the Company and the Contract Year
immediately following. It decreases to 0% beginning the sixth year after a
Purchase Payment was received by the Company. Under certain situations
amounts may be withdrawn free of any Withdrawal Charge or the Withdrawal
Charge may be reduced or waived. For more information on the Withdrawal
Charge, see "Withdrawal Charge (Contingent Deferred Sales Charge)." The
Company reserves the right to charge a partial withdrawal processing fee
not to exceed the lesser of 2% of the partial withdrawal amount or $25. For
more information on the processing fee, see "Withdrawal Charge (Contingent
Deferred Sales Charge)."
(b) The Company currently does not assess a charge on reallocations between
Sub-Accounts or to or from the Fixed Accounts, although the Company
reserves the right to assess a charge not to exceed $25 per each
reallocation.
(c) The Company currently deducts an Annual Contract Charge of $30 from the
Contract Value, but reserves the right to waive the charge where the
Contract Value exceeds $25,000. For a Retail Series Contract, we also waive
this charge where the annual purchase payments, less any cumulative partial
surrenders equal or exceed $5,000.
(d) The Company or its affiliates may receive compensation from an affiliate or
affiliates of certain of the Funds based upon an annual percentage of the
average net assets held in that Fund by the Company and by certain of the
Company's insurance company affiliates. These amounts are intended to
compensate the Company or the Company's affiliates for administrative,
recordkeeping, and in some cases, distribution, and other services provided
by the Company and its affiliates to Funds and/or the Funds' affiliates.
Payments of such amounts by an affiliate or affiliates of the Funds do not
increase the fees paid by the Funds or their shareholders. The percentage
paid may vary from one fund company to another.
(e) A portion of the brokerage commissions that certain Portfolios pay was used
to reduce Portfolio expenses. In addition, certain Portfolios have entered
into arrangements with their custodian whereby credits realized as a result
of uninvested cash balances were used to reduce custodian expenses.
Including these reductions, the total operating expenses presented in the
table would have been 0.57% for VIP Equity-Income Portfolio, 0.66% for VIP
Growth Portfolio, 0.72% for VIP II Asset Manager: Growth Portfolio, 0.66%
for VIP II Contrafund Portfolio, 0.28% for VIP II Index 500 Portfolio, and
0.70% for VIP III Growth Opportunities Portfolio.
(f) The fees and expenses in the table above are based on net expenses after
expense offset arrangements for the fiscal year ended December 31, 1998.
The information is net of fee reductions from Janus Capital. Fee reductions
for the Aggressive Growth, Growth, International Growth, and Worldwide
Growth Portfolios reduce the management fee to the level of the
corresponding Janus retail fund. Other waivers, if applicable, are first
applied against the Management Fee and then against Other Expenses. Without
such reductions, the Management Fee, Other Expenses and Total Investment
Fund Annual Expenses for the Shares would have been 0.72%, 0.03%, and 0.75%
for Aggressive Growth Portfolio; 0.72%, 0.03%, and 0.75% for Growth
Portfolio; 0.75%, 0.20%, and 0.95% for International Growth Portfolio; and
0.67%, 0.07% and 0.74% for Worldwide Growth Portfolio. Janus Capital has
agreed to continue these fee reductions until at least the next annual
renewal of the advisory agreement.
(g) Neuberger Berman Advisers Management Trust is comprised of separate
Portfolios, the following of which are available as funding options under
the contract: Limited Maturity Bond Portfolio, Partners Portfolio and
Socially Responsive Portfolio ("Portfolio series"). Unlike the other
funding options available under the contract, each of the Portfolio series
invests all of its net investable assets in AMT Limited Maturity Bond
Investments, AMT Partners Investments and AMT Socially Responsive
Investments, respectively, of Advisers Managers Trust ("Investment
series"). The Investment series in turn, invest directly in securities. For
a more complete discussion of this structure, please see the prospectus for
Neuberger Berman Advisers Management Trust Limited Maturity Bond Portfolio,
Partners Portfolio and Socially Responsive Portfolio. Please note that the
figures reported under "Management Fees" and "Other Expenses" include the
aggregate of (i) the management fees paid by the Investment series, (ii)
the administration fees paid by the Portfolio series, and (iii) all other
expenses in the aggregate for the Investment series and Portfolio series,
respectively.
(h) Neuberger Berman Management Inc. ("NBMI") has undertaken to reimburse the
Socially Responsive Portfolio for certain operating expenses, including the
compensation of NBMI and excluding taxes, interest, extraordinary expenses,
brokerage commissions and transactions costs, that exceed in the aggregate,
1.50% of the average daily net asset value of the Socially Responsive
Portfolio. The Socially Responsive Portfolio had not commenced operations
as of December 31, 1998, and therefore these expense figures are estimated.
Estimated expenses are expected to be 2.50% for the fiscal period ending
December 31, 1999, prior to the reimbursement. The expense reimbursement
policy is subject to termination upon 60 days' written notice after April
30, 2000. There can be no assurance that this policy will be continued. See
"Expense Limitation" in the Socially Responsive Portfolio prospectus for
further information.
(i) The fee and expense information for the Northstar Galaxy Trust Emerging
Growth Portfolio and International Value Portfolio has been restated to
reflect current fees and expenses effective November 9, 1998. The fee and
12
<PAGE>
expense information for the Northstar Galaxy Trust Research Enhanced Index
Portfolio has been restated to reflect current fees and expenses effective
April 30, 1999.
The investment adviser to the Northstar Galaxy Trust has agreed to
reimburse the Growth + Value Portfolio and High Yield Bond Portfolio for
any expenses in excess of 0.80% of each Portfolio's average daily net
assets. It also has agreed to reimburse the Emerging Growth Portfolio,
International Value Portfolio and Research Enhanced Index Portfolio for
expenses in excess of .90%, 1.00% and 0.90%, respectively. In the absence
of these expense reimbursements, the Total Investment Fund Annual Expenses
that would have been paid by each Portfolio during its fiscal year ended
December 31, 1998 would have been: Emerging Growth Portfolio: 1.14%; Growth
+ Value Portfolio: 1.02%; International Value Portfolio: 1.68%; Research
Enhanced Index Portfolio: 1.29%; and High Yield Bond Portfolio: 1.23%.
Expense reimbursements are voluntary. There is no assurance of ongoing
reimbursement.
The Northstar Galaxy Trust Emerging Growth Portfolio (formerly the
Northstar Galaxy Trust Income and Growth Portfolio) operated under an
investment objective of seeking income balanced with capital appreciation
from inception through November 8, 1998, when the investment objective was
modified to seeking long-term capital appreciation. The Northstar Galaxy
Trust Research Enhanced Index Portfolio (formerly the Northstar Galaxy
Trust Multi-Sector Bond Portfolio) operated under an investment objective
of seeking current income while preserving capital through April 29, 1999,
when the investment objective was modified to seeking long-term capital
appreciation.
(j) The Management Fees reflect effective management fees after taking into
effect any waiver. Other Expenses are shown net of expense offsets afforded
the Portfolios. Total Investment Fund Annual Expenses for the Equity, Small
Cap and Managed Portfolios are limited by OpCap Advisors so that their
respective annualized operating expenses (net of any expense offsets) do
not exceed 1.00% of average daily net assets. Total Investment Fund Annual
Expenses for the Global Equity Portfolio are limited to 1.25% of average
daily net assets (net of expense offsets).
THE EXAMPLES SHOWN IN THE TABLE ABOVE SHOULD NOT BE CONSIDERED
REPRESENTATIONS OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN. THE 5% ANNUAL RETURN ASSUMED IS HYPOTHETICAL AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE ANNUAL RETURNS, WHICH MAY BE
GREATER OR LESS THAN THE ASSUMED RATE.
The purpose of this table is to assist a Contract Owner in understanding
the various costs and expenses that a Contract Owner will bear either directly
or indirectly. The table reflects the anticipated expenses of the Variable
Account as well as the actual expenses of the Funds. The $30 Annual Contract
Charge is reflected as an annual percentage charge in this table based on the
anticipated average net assets in the Variable Account and Fixed Account, which
translates into a charge equal to an annual rate of 0.252% of the Variable
Account and Fixed Account values.
THE COMPANY
The Company, organized in 1906, is a stock life insurance company
incorporated under the laws of the State of Washington. The Company is an
indirect, wholly-owned subsidiary of ReliaStar Financial Corp., a
publicly-traded holding company incorporated under the laws of the State of
Delaware, whose subsidiaries specialize in the life insurance and related
financial services businesses. The Company offers individual and group annuity
contracts. The Company is admitted to do business in the District of Columbia
and all states except New York. Its Home Office is at 1501 Fourth Avenue, Suite
1000, Seattle, Washington 98101-3620.
The Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE VARIABLE ACCOUNT
The Variable Account is a separate account of the Company established under
the insurance laws of the State of Washington on March 22, 1994. The Company has
complete ownership and control of the assets in the Variable Account, but these
assets are held separately from the Company's other assets and are not part of
the Company's general account.
The portion of the assets of the Variable Account equal to its reserves and
other Contract liabilities will not be chargeable with liabilities arising out
of any other business of the Company. The income, gains and losses, realized or
unrealized, from assets allocated to the Variable Account will be credited to or
charged against the Variable Account, without regard to the other income, gains,
or losses of the Company.
13
<PAGE>
The Variable Account is registered with the SEC as a unit investment trust
under the Investment Company Act of 1940, as amended ("1940 Act"). Such
registration does not involve supervision by the SEC of the management or
investment policies or practices of the Variable Account, the Company or the
Funds.
Purchase Payments allocated to the Variable Account are allocated to one or
more Sub-Accounts selected by the Contract Owner. Each Sub-Account invests in
shares of a specific Fund at net asset value. The future Variable Account
Contract Value will depend, primarily, on the investment performance of the
Funds whose shares are held in the Sub-Accounts.
INVESTMENTS OF THE VARIABLE ACCOUNT
When a Contract is applied for, the Contract Owner may elect to have
Purchase Payments allocated to one or more of the available Sub-Accounts.
Purchase Payments allocated to one or more Sub-Accounts will be invested in
shares of one or more of the Funds at net asset value. The Variable Account
Contract Value and the amount of Variable Annuity Payouts will vary, primarily
based on the investment performance of the Funds whose shares are held in the
Sub-Accounts selected. The Contract Owner may also, subject to the limits
discussed below, change a Purchase Payment allocation for future Purchase
Payments and may reallocate all or part of any Sub-Account Contract Value to
another Sub-Account that invests in shares of another Fund.
There are currently twenty-eight Sub-Accounts, each of which invests in
shares of one of the Funds. The Company reserves the right, subject to
compliance with applicable law, to offer additional Sub-Accounts, each of which
could invest in a new fund with a specified investment objective.
A Contract Owner is limited to participating in a maximum of sixteen
Sub-Accounts over the lifetime of the Contract. The Contract Owner would not be
required to select the Sub-Accounts in advance, but upon reaching participation
in sixteen Sub-Accounts since issue of the Contract, the Contract Owner would
only be able to transfer within the sixteen Sub-Accounts already selected and
which are still available under the Variable Account. For example, assume a
Contract Owner selects six Sub-Accounts. Later, the Contract Owner transfers out
of all of the six initial selections and chooses ten different Sub-Accounts,
none of which are the same as the original six selections. The Contract Owner
has now used the maximum selection of sixteen Sub-Accounts. The Contract Owner
may still allocate Purchase Payments or transfer Contract Values among any of
the sixteen Sub-Accounts that were previously selected. However, the Contract
Owner may not allocate funds to the remaining Sub-Accounts at any time. A
Contract Owner may transfer partial or complete Contract Values from the
Variable Account to Fixed Accounts A and B at any time.
14
<PAGE>
The Funds currently offered are described below.
INVESTMENT FUNDS
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
=================== ====================== ================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
The Alger American Fred Alger
Alger Growth Portfolio Management, Inc.
American ---------------------- ------------------ -------------- -------------- -----------------
Fund Alger American Fred Alger
Leveraged AllCap Management, Inc.
New York, N.Y. Portfolio
---------------------- ------------------ -------------- -------------- -----------------
Alger American Fred Alger
MidCap Growth Management, Inc.
Portfolio
---------------------- ------------------ -------------- -------------- -----------------
Alger American Fred Alger
Small Capitalization Management, Inc.
Portfolio
=================== ====================== ================== ============== ============== =================
Fidelity VIP Fidelity X
Investments(R) Equity-Income Management
Portfolio & Research
Company
Boston, Mass.
---------------------- ------------------ -------------- -------------- -----------------
VIP Growth Fidelity
Portfolio Management
& Research
Company
---------------------- ------------------ -------------- -------------- -----------------
VIP Fidelity X
Money Market Management
Portfolio & Research
Company
---------------------- ------------------ -------------- -------------- -----------------
VIP II Asset Fidelity
Manager: Growth Management
Portfolio & Research
Company
---------------------- ------------------ -------------- -------------- -----------------
VIP II Fidelity
Contrafund Management
Portfolio & Research
Company
---------------------- ------------------ -------------- -------------- -----------------
VIP II Fidelity X
Index 500 Management
Portfolio & Research
Company
---------------------- ------------------ -------------- -------------- -----------------
VIP II Fidelity X
Investment Grade Management
Bond Portfolio & Research
Company
---------------------- ------------------ -------------- -------------- -----------------
Fidelity VIP III Fidelity
Investments(R) Growth Management
is a registered Opportunities & Research
trademark of Portfolio Company
FMR Corp.
=================== ====================== ================== ============== ============== =================
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
PRIMARY
INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVES INVESTMENTS
=============== ========== ======== ================== ===================== ==========================
<S> <C> <C> <C> <C> <C>
X Long-term capital Equity securities of
appreciation large companies
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X Long-term capital Equity securities of
appreciation companies of any size
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X Long-term capital Equity securities within
appreciation the range of S&P
MidCap 400 Index
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X Long-term capital Equity securities within
appreciation the range of Russell 2000
Growth or S&P SmallCap
600 Indexes
=============== ========== ======== ================== ===================== ==========================
Reasonable Income-producing
income; equity securities and
also considers debt obligations
potential for
capital
appreciation
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X Capital Common stocks
appreciation
- --------------- ---------- -------- ------------------ --------------------- --------------------------
High level of U.S. dollar-denominated
current income money market securities
consistent with
preservation of
capital and
liquidity
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X Maximum total Stocks, bonds, and
return over the short-term and money
long term market instruments
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X Capital Securities of
appreciation companies whose value
the adviser believes
is not fully recognized
by the public
- --------------- ---------- -------- ------------------ --------------------- --------------------------
Total return that Common stocks of
corresponds to that S&P 500
of S&P 500 Index
- --------------- ---------- -------- ------------------ --------------------- --------------------------
X High current Investment-grade
income consistent intermediate fixed
with preservation securities
of capital
- --------------- ---------- -------- ------------------ --------------------- --------------------------
Capital growth Common stocks
=============== ========== ======== ================== ===================== ==========================
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
================== ================== ================== ============== ============== =================
<S> <C> <C> <C> <C> <C>
Janus Aspen Series Janus
Aggressive Capital
Denver, Colo. Growth Portfolio Corporation
------------------ ------------------ -------------- -------------- -----------------
Aspen Series Janus
Growth Portfolio Capital
Corporation
------------------ ------------------ -------------- -------------- -----------------
Aspen Series Janus
International Capital
Growth Portfolio Corporation
------------------ ------------------ -------------- -------------- -----------------
Aspen Series Janus
Worldwide Capital
Growth Portfolio Corporation
================== ================== ================== ============== ============== =================
Neuberger Advisers Neuberger X
Berman Management Trust Berman
Limited Management Inc./
Maturity Bond Neuberger
Portfolio Berman,
LLC
------------------ ------------------ -------------- -------------- -----------------
New York, N.Y. Advisers Neuberger
Management Trust Berman
Partners Management Inc./
Portfolio Neuberger
Berman,
LLC
------------------ ------------------ -------------- -------------- -----------------
Advisers Neuberger
Management Trust Berman
Socially Management Inc./
Responsive Neuberger
Portfolio Berman,
LLC
================== ================== ================== ============== ============== =================
Northstar Emerging Northstar
Growth Portfolio Investment
Stamford, Conn. Management
Corporation
------------------ ------------------ -------------- -------------- -----------------
Growth + Value Northstar
Portfolio Investment
Management
Corporation/
Navellier Fund
Management, Inc.
------------------ ------------------ -------------- -------------- -----------------
International Northstar
Value Portfolio Investment
Management
Corporation/
Brandes
Investment
Partners, L.P.
------------------ ------------------ -------------- -------------- -----------------
Research Northstar
Enhanced Investment
Index Portfolio Management
Corporation/
J.P. Morgan
Investment
Management Inc.
------------------
High Yield Northstar
Portfolio Investment
Management
Corporation
================== ================== ================== ============== ============== =================
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
PRIMARY
INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVES INVESTMENTS
=============== ========== ======== ================== ==================== =========================
<S> <C> <C> <C> <C> <C>
X Long-term growth Nondiversified portfolio
of of common stocks
capital
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Long-term capital Diversified common
growth stocks
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Long-term capital Foreign issuers of
growth common stocks
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Long-term capital Foreign and domestic
growth common stocks
=============== ========== ======== ================== ==================== =========================
Highest available Short-to-intermediate
current income term investment-grade
consistent with debt securities
liquidity and low
risk to principal;
total return is a
secondary goal
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Growth of capital Common stocks of
medium-to-large
capitalization
companies
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Long-term Common stocks of
growth of capital medium-to-large
by investing capitalization
primarily in companies
companies that
meet financial and
social criteria
=============== ========== ======== ================== ==================== =========================
X Long-term capital Common stocks
appreciation
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Capital Equity Securities
appreciation
from investing in
a diversified
portfolio of
equity securities
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Long-term capital International equities
appreciation
- --------------- ---------- -------- ------------------ -------------------- -------------------------
X Capital Common stocks
appreciation
- --------------- ---------- -------- ------------------ -------------------- -------------------------
High current yield High-yield bonds
and capital
appreciation
=============== ========== ======== ================== ==================== =========================
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
ADVISER/
FUND GROUP FUND SUBADVISER MONEY MARKET FIXED INCOME GROWTH & INCOME
================= ================== ============ ============== ============== =================
<S> <C> <C> <C> <C> <C>
OCC OCC Accumulation OpCap
Trust Equity Advisors
New York, N.Y. Portfolio
------------------ ------------ -------------- -------------- -----------------
OCC Accumulation OpCap
Trust Global Advisors
Portfolio
------------------ ------------ -------------- -------------- -----------------
OCC Accumulation OpCap
Trust Managed Advisors
Portfolio
------------------ ------------ -------------- -------------- -----------------
OCC Accumulation OpCap
Trust Small Advisors
Cap Portfolio
================= ================== ============ ============== ============== =================
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
PRIMARY
INTERNATIONAL BALANCED GROWTH AGGRESSIVE GROWTH OBJECTIVES INVESTMENTS
=============== ========== ======== ================== =================== ======================
<S> <C> <C> <C> <C> <C>
X Long-term capital Securities of
appreciation undervalued
companies
- -------------- ----------- -------- ------------------ ------------------- ----------------------
X Long-term capital Global investments in
appreciation equity securities
- -------------- ----------- -------- ------------------ ------------------- ----------------------
X Growth of capital Common stocks,
bonds and cash
equivalents
- -------------- ----------- -------- ------------------ ------------------- ----------------------
X Capital Equity securities of
appreciation companies under
$1 billion
=============== ========== ======== ================== =================== ======================
</TABLE>
You should read the prospectuses of the Funds for more detailed information
and particularly, a more thorough explanation of investment objectives of the
Funds. THE FUND PROSPECTUSES SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS OR REALLOCATIONS AMONG THE
SUB-ACCOUNTS. There is no assurance that any Fund will achieve its investment
objective(s). There is a possibility that one Fund might become liable for any
misstatement, inaccuracy or incomplete disclosure in another Fund's prospectus.
The Funds are available to registered separate accounts of insurance
companies, other than the Company, offering variable annuity Contracts and
variable life insurance policies. The Company currently does not foresee any
disadvantages to Contract Owners resulting from the Funds selling shares to fund
products other than the Contracts. However, there is a possibility that a
material conflict may arise between Contract Owners whose Contract Values are
allocated to the Variable Account and the Contract Owners of variable life
insurance policies and variable annuity Contracts issued by the Company or by
such other companies whose assets are allocated to one or more other separate
accounts investing in any one of the Funds. In the event of a material conflict
the Company will take any necessary steps, including removing the Variable
Account's investment in the Fund, to resolve the matter. The Board of Directors
or Trustees of each Fund will monitor events in order to identify any material
conflicts that possibly may arise and determine what action, if any, should be
taken in response to those events or conflicts. See each individual Fund
prospectus for more information.
REINVESTMENT
The Funds described above have as a policy the distribution of income,
dividends and capital gains. However, under the Contracts described in this
Prospectus there is an automatic reinvestment of such distributions.
ADDITION, DELETION OR SUBSTITUTION OF FUND SHARES
The Company, in its sole discretion, reserves the following rights:
o The Company may add to, delete from or substitute shares that may be
purchased for or held in the Variable Account. The Company may establish
additional Sub-Accounts, each of which would invest in shares of a new
portfolio of a Fund or in shares of another investment company having a
specified investment objective. Any new Sub-Accounts may be made available
to existing Contract Owners on a basis to be determined by the Company.
o The Company may, in its sole discretion, eliminate one or more
Sub-Accounts, or close Sub-Accounts to new premium or transfers, if
marketing, tax considerations or investment conditions warrant.
o If the shares of a Fund are no longer available for investment or if in
the Company's judgment further investment in a Fund should become
inappropriate in view of the purposes of the Variable Account, the Company
may redeem the shares, if any, of that portfolio and substitute shares of
another registered open-end management investment company.
17
<PAGE>
o The Company may, if it deems it to be in the best interests of Contract
Owners and Annuitants:
-- manage the Variable Account as a management investment company under
the 1940 Act;
-- deregister the Variable Account under the 1940 Act if registration is
no longer required;
-- combine the Variable Account with other separate account(s) of the
Company; or
-- reallocate assets of the Variable Account to another Separate
Account.
o Restrict or eliminate any voting privileges of Contract Owners or other
persons who have voting privileges as to the Variable Account.
o Make any changes required by the 1940 Act.
o In the event any of the foregoing changes or substitutions are made, the
Company may endorse the Contracts to reflect the change or substitution.
The Company's reservation of rights is expressly subject to the following
when required:
o Applicable Federal and state laws and regulations.
o Notice to Contract Owners.
o Approval of the SEC and/or state insurance authorities.
CHARGES MADE BY THE COMPANY
WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE)
No deduction for a sales charge is made from Purchase Payments. However, if
part or all of the Purchase Payments made under a Transfer Series Contract or a
Retail Series Contract, or part or all of Contract Value under a Flex Series
Contract, are withdrawn, a Withdrawal Charge (Contingent Deferred Sales Charge)
may be made by the Company.
Withdrawal Charges are deducted from the amount being withdrawn and are
considered a part of the withdrawal.
The Withdrawal Charge is intended to reimburse the Company for expenses
relating to the sale of the Contracts, including commissions to sales personnel,
costs of sales material and other promotional activities and sales
administration costs.
TRANSFER SERIES CONTRACT. For purposes of determining Withdrawal Charges,
withdrawals will be taken first from Purchase Payments on a first-in, first-out
basis, then from Contract Earnings as of the Valuation Date next following the
date of the Company's receipt of the withdrawal request.
RETAIL SERIES CONTRACT. For purposes of determining Withdrawal Charges,
withdrawals will be taken first from Contract Earnings as of the Valuation Date
next following the date of the Company's receipt of the withdrawal request, then
from Purchase Payments on a first-in, first-out basis.
18
<PAGE>
The Withdrawal Charge for full or partial withdrawal is determined by
multiplying the amount of each Purchase Payment withdrawn that is not eligible
for a free withdrawal, by the applicable Withdrawal Charge percentage as set
forth in the following table:
<TABLE>
<CAPTION>
TRANSFER SERIES CONTRACT
WITHDRAWAL CHARGE PERCENTAGE TABLE
-----------------------------------------------------
CONTRACT YEAR OF
WITHDRAWAL MINUS WITHDRAWAL CHARGE AS A
CONTRACT YEAR OF PURCHASE PERCENTAGE OF EACH
PAYMENT PURCHASE PAYMENT
--------------------------- -----------------------
<S> <C>
0 6%
1 6
2 5
3 5
4 4
5 2
6 and later 0
</TABLE>
<TABLE>
<CAPTION>
RETAIL SERIES CONTRACT
WITHDRAWAL CHARGE PERCENTAGE TABLE
-----------------------------------------------------
CONTRACT YEAR OF
WITHDRAWAL MINUS WITHDRAWAL CHARGE AS A
CONTRACT YEAR OF PURCHASE PERCENTAGE OF EACH
PAYMENT PURCHASE PAYMENT
--------------------------- -----------------------
<S> <C>
0 7%
1 7
2 6
3 5
4 4
5 2
6 and later 0
</TABLE>
For Qualified Retail Series Contracts, the Withdrawal Charge will be zero
after the twelfth Contract Year.
FLEX SERIES CONTRACTS. If a Flex Series Contract is withdrawn in full or in
part before the eleventh Contract Year, the Company may deduct a Withdrawal
Charge from the Contract Value. The Withdrawal Charge is determined by
multiplying the Contract Value subject to the charge by the applicable
Withdrawal Charge percentage as set forth in the following table:
<TABLE>
<CAPTION>
CONTRACT YEAR WITHDRAWAL CHARGE
--------------- ------------------
<S> <C>
1 8%
2 8
3 8
4 7
5 6
6 5
7 4
8 3
9 2
10 1
11 0
</TABLE>
WAIVER OF WITHDRAWAL CHARGE FOR CERTAIN CONTRACTS
For Contracts which are Qualified Plans under Section 457 of the Code, we
will waive the Withdrawal Charge on full and partial withdrawals you request
anytime while this Contract is in force if:
o The Annuitant separates from service with the Contract Owner;
o The Annuitant dies;
19
<PAGE>
o The Annuitant becomes permanently and totally disabled as defined in
Section 22(e)(3) of the Code;
o The Annuitant demonstrates a financial hardship, as defined in Section
457(d)(1)(iii) of the Code and Treasury Regulations thereunder; or
o Minimum distributions from the Contract must be made as required by
Section 457(d)(2) of the Code.
Withdrawals requested because of the death of the Annuitant (or the Owner
for a Retail Series Contract) will be paid to the Beneficiary(ies) designated in
the Contract, or if none, to the Annuitant's (or the Owner's for a Retail Series
Contract) estate. All other withdrawals requested hereunder will be paid to the
Annuitant.
We reserve the right to receive written proof from the Contract Owner that
the requirements for waiver of the Withdrawal Charge are met before we waive
such charge. Total or partial withdrawals may be subject to income taxes and a
10% tax penalty. You should consult your tax advisor before making a withdrawal.
PARTIAL WAIVER OF WITHDRAWAL CHARGE
TRANSFER SERIES AND FLEX SERIES. During any 12-month period, the Contract
Owner may withdraw a portion of the Contract Value without a Withdrawal Charge.
The 12-month period begins with the Contract Owner's first withdrawal. For the
first withdrawal, the amount available without a Withdrawal Charge will be
determined on the date of the requested withdrawal and will be the greater of:
o 10% of the Contract Value less any Outstanding Loan Balance; or
o For Transfer Series Contracts, the Purchase Payments remaining which are
no longer subject to a Withdrawal Charge, and for Flex Series Contracts,
the Contract Value no longer subject to a Withdrawal Charge.
We call this amount the "Free Surrender Amount."
If the first withdrawal equals the Free Surrender Amount, other withdrawals
during the 12-month period are subject to the Withdrawal Charge. If the first
withdrawal exceeds the Free Surrender Amount, the excess is subject to the
Withdrawal Charge, as are all other Withdrawals requested during the 12-month
period.
If the first withdrawal is less than the Free Surrender Amount, the Company
will keep track of the unused portion of the Free Surrender Amount for the
12-month period. The unused portion of the Free Surrender Amount may be applied
against no more than three (3) additional withdrawals during the 12-month
period.
The unused portion of the Free Surrender Amount available for withdrawal
will be computed by the Company on the date of any withdrawal request made after
the first withdrawal in the 12-month period and will be based upon:
10% x [(Greater of A or B) - C] D
Where:
A= Contract Value on the date of the first withdrawal in the 12-month
period;
B= Contract Value on the date of the withdrawal request;
C= Outstanding Loan Balance on the date of the withdrawal request; and
D= Any prior withdrawals made during the same 12-month period.
RETAIL SERIES. For a Retail Series Contract, during any Contract Year, the
Contract Owner may withdraw a portion of the Contract Value without a Withdrawal
Charge. For each Contract Year, the amount available without a Withdrawal Charge
will be determined on the date of the requested withdrawal and will be the
greater of:
o Earnings; or
o 10% of Purchase Payments, as of the last Contract Anniversary, subject to
the Withdrawal Charge.
20
<PAGE>
This amount can be taken in up to four withdrawals per Contract Year. We call
this the "Free Surrender Amount." If the first withdrawal exceeds this amount,
the excess is subject to the Withdrawal Charge. If the first withdrawal equals
the Free Surrender Amount, other withdrawals during the Contract Year may be
subject to the Withdrawal Charge, although Contract Earnings are always
available without being subject to the Withdrawal Charge.
If the first withdrawal is less than the Free Surrender Amount, the Company
will keep track of the unused portion of the Free Surrender Amount for the
Contract Year. The unused portion of the Free Surrender Amount may be applied
against no more than three (3) additional withdrawals during the Contract Year,
and Contract Earnings are always available without being subject to the
Withdrawal Charge.
The unused portion of the Free Surrender Amount available for withdrawal
will be computed by the Company on the date of any withdrawal request made
during the Contract Year and will be based upon:
10% x [(Greater of A or B) - C] D
Where:
A= Contract Value on the Contract Anniversary of the Contract Year;
B= Contract Value on the date of the withdrawal request;
C= Outstanding Loan Balance on the date of the withdrawal request; and
D= Any prior withdrawals made during the same Contract Year period.
GENERAL INFORMATION. The Withdrawal Charges described above will be waived
in the event of the death of the Contract Owner or in the case of a
non-qualified Contract, the death of the Annuitant. In addition, for Contracts
qualified under Section 403(b) of the Code only, Withdrawal Charges may be
waived under certain circumstances.
The Company reserves the right to charge a partial withdrawal processing
fee not to exceed the lesser of 2% of the amount withdrawn or $25.
Withdrawals may be subject to a 10% federal penalty tax if made by the
Contract Owner before age 591/2. (See "Taxation of Annuities.")
Contracts purchased as "tax sheltered annuities," and Contracts purchased
under state optional retirement programs are subject to certain withdrawal
restrictions. (See "Withdrawal (Redemption).")
REDUCTION OF WITHDRAWAL CHARGE
The Company may, at its option, provide a reduction in the Withdrawal
Charge for specific classes of Contract purchasers. Currently, the Company
provides a reduced Withdrawal Charge for purchasers of Tax Sheltered Annuities
issued pursuant to Section 403(b) of the Code to employees of certain school
districts which, in the judgment of the Company, have provided cost reduction
benefits to the Company in the distribution of its contracts. For such
purchasers, the Withdrawal Charge on Flex Series contracts is reduced to 5% in
each of the first five Contract Years. The Withdrawal Charge on the Transfer
Series Contract is reduced to 5% in each of the first two Contract Years
following receipt of a Purchase Payment.
ANNUAL CONTRACT CHARGE
On each Contract Anniversary prior to the Start Date, the Company deducts
an Annual Contract Charge of $30 from the Contract Value to reimburse it for
administrative expenses relating to the Contract, the Variable Account and the
Sub-Accounts. The Company will not increase the Annual Contract Charge. The
Company reserves the right to waive the Annual Contract Charge where the
Contract Value exceeds $25,000. For the Retail Series Contract, the Company also
waives this charge where the Annual Purchase Payments, less any withdrawals,
equal or exceed $5,000. However, the Company reserves the right to reinstate the
Charge on Contracts qualifying for the waiver. For all Contract Values, in any
Contract Year when a full withdrawal of Contract Value is made on other than the
Contract Anniversary, the Annual Contract Charge will be deducted at the time of
such withdrawal.
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MORTALITY RISK CHARGE
The Variable Annuity Payouts made to Annuitants will vary in accordance
with the investment performance of the Sub-Accounts selected by the Contract
Owner. However, they will not be affected by the mortality experience (death
rate) of persons receiving Variable Annuity Payouts. The Company assumes this
"mortality risk" and has guaranteed the annuity rates incorporated in the
Contract, which cannot be changed.
To compensate the Company for assuming this mortality risk and the
mortality risk that Beneficiaries of Annuitants dying before the Start Date may
receive amounts in excess of the then current Contract Value, the Company
deducts a Mortality Risk Charge from the Variable Account Contract Value. (See
"Death Benefit Before Start Date.") This deduction is made daily in an amount
that is equal to an annual rate of .85% of the daily Contract Values under the
Variable Account. The Company may not increase the rate charged for the
Mortality Risk Charge under any Contract.
EXPENSE RISK CHARGE
The Company will not increase charges for administrative expenses
regardless of its actual expenses. To compensate the Company for assuming this
expense risk, the Company deducts an Expense Risk Charge from the Variable
Account Contract Value. This deduction is made daily in an amount that is equal
to an annual rate of .40% of the daily Variable Account Contract Values. The
Company may not increase the rate of the Expense Risk Charge under any Contract.
ADMINISTRATIVE CHARGE
The Company deducts a daily Administrative Charge from the Variable Account
Contract Value in an amount equal to an annual rate of .15% of the daily
Variable Account Contract Values. This charge is deducted to reimburse the
Company for the cost of providing administrative services under the Contracts
and the Variable Account. The Company may not increase the rate of the
Administrative Charge under any Contract. There is not necessarily a
relationship between the amount of the Administrative Charge imposed on a given
Contract and the amount of expenses that may be attributable to that Contract.
SUFFICIENCY OF CHARGES
If the amount of the Withdrawal Charge assessed in connection with the
Contracts is not enough to cover all distribution expenses incurred in
connection therewith, the loss will be borne by the Company. Any excess
distribution expenses borne by the Company will be paid out of its general
account which may include, among other things, proceeds derived from the
Mortality Risk Charge and the Expense Risk Charge deducted from the Variable
Account.
The Company does not currently believe that the Withdrawal Charges imposed
will cover the expected costs of distributing the Contracts.
If the amount derived from the Mortality Risk Charge and the Expense Risk
Charge is not sufficient to cover the actual cost of the mortality and expense
risks assumed by the Company, the Company will bear the shortfall. Conversely,
if the charges prove more than sufficient, the excess will be profit to the
Company and will be available for any proper corporate purpose including, among
other things, payment of distribution expenses.
PREMIUM AND OTHER TAXES
Various states and other governmental entities levy a premium tax,
currently ranging up to 3.50%, on annuity Contracts issued by insurance
companies. If a Contract Owner lives in a jurisdiction that levies such a tax,
the Company will pay the taxes when due and reserves the right to deduct the
amount of the tax either from Purchase Payments as they are received or from the
Contract Value immediately before the Contract Value is applied to an Annuity
Payout as permitted or required by applicable law.
The current range of premium tax rates is a guide only and should not be
relied on to determine actual premium taxes on any Purchase Payment or Contract
because the taxes are subject to change from time to time by legislative and
other governmental action. The timing of tax levies also varies from one taxing
authority to another. Consequently, in many cases the Contract Owner will not be
able to accurately determine the premium tax applicable to the Contract by
reference to the range of tax rates described above. The Company reserves the
right to deduct charges for any other tax or economic burden resulting from the
application of the tax laws that it determines to be applicable to the Contract.
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REDUCTION OF CHARGES
The Withdrawal and Contract Charges described above (except the Mortality
Risk Charge) may be reduced or eliminated for Contracts issued in circumstances
where the Company estimates that it will incur lower distribution or
administrative expenses or perform fewer sales or administrative services than
those originally contemplated in establishing the level of those charges. Lower
distribution and administrative expenses may be the result of economics
associated with
o the use of mass enrollment procedures,
o the performance of administrative or enrollment functions by an employer,
o the use by an employer of automated techniques in submitting Purchase
Payments or information related to Purchase Payments on behalf of its
employees, or
o any other circumstances which reduce distribution or administrative
expenses. The exact amount of Withdrawal and Contract Charges applicable
to a particular Contract will be stated in that Contract.
EXPENSES OF THE FUNDS
There are investment advisory fees, direct operating expenses and
investment related expenses of the Funds that are reflected in each Fund's daily
share price. These fees and expenses are described in the accompanying
prospectuses for the Funds.
ADMINISTRATION
The Company has primary responsibility for all administration of the
Contracts and the Variable Account. The Company's Administrative Service Center
is located at the Home Office of the Company in Seattle, Washington, and its
telephone number is 1-800-870-0453.
The administrative services provided include, but are not limited to:
issuance of the Contracts; maintenance of Contract Owner records; Contract Owner
services; calculation of Accumulation Unit Values; and preparation of Contract
Owner reports.
THE CONTRACTS
CONTRACT APPLICATION AND PURCHASE PAYMENTS
Individuals who want to purchase a Contract must complete an application
and provide an initial Purchase Payment which will be sent to the Company's Home
Office. The initial Purchase Payment will be credited within two business days
after receipt at the Company's Home Office if accompanied by a complete
application. The Company may retain Purchase Payments for up to five business
days while attempting to complete an incomplete application. If an incomplete
application cannot be completed within five days of its receipt, the applicant
will be notified of the reasons for the delay and any Purchase Payments received
will be returned immediately unless the applicant specifically consents to have
the Company retain them pending completion of the application.
For Transfer Series Contracts, Flex Series Contracts and Retail Series
Contracts which are Qualified Plans, the Company will accept periodic, single
sum, rollover and transfer Purchase Payments as permitted by the Code. For the
non-qualified Transfer Series Contracts and Retail Series Contracts, the Company
will accept periodic and single sum Purchase Payments, as well as amounts
transferred under Section 1035 of the Code. The minimum initial Purchase Payment
the Company will accept under a Transfer Series Contract is $15,000 and
subsequent payments may not be less than $5,000. The minimum amount of the
initial and subsequent Purchase Payments the Company will accept under a Flex
Series Contract is $50. The minimum amount of the initial and subsequent
Purchase Payments the Company will accept under a Retail Series Contract is
$5,000 or $50 for periodic premiums. The minimum payment to Fixed Account C is
$5,000.
The Company may choose not to accept any subsequent Purchase Payment under
the Transfer Series Contracts and Flex Series Contracts if the Purchase Payment,
together with the Contract Value at the next Valuation Date, exceeds $1,000,000.
Any Purchase Payment not accepted by the Company will be refunded. The Company
reserves the right to accept smaller or larger initial and subsequent Purchase
Payments in connection with special circumstances, including, but not limited to
sales through group or sponsored arrangements.
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REVOCATION
The Contract Owner may revoke a Contract by sending the Contract and
written notice of revocation to the Company's Home Office in Seattle,
Washington, or to the agent from whom a Contract was purchased, no later than
the 10th day after the Contract Owner's receipt of the Contract. As soon as the
Company receives the Contract, it will be deemed void. For Flex Series and
Transfer Series Contracts, the Company will refund the Contract Value as of the
next Valuation Date after receipt of the Contract and written notice of
revocation. If required by applicable law, the Company will refund all Purchase
Payments it has received under the Contract. For Retail Series Contracts, the
Company will refund the Contract Value unless you reside in a state requiring
return of Purchase Payment, in which case the Company will refund Purchase
Payments paid.
The liability of the Variable Account under this provision is limited to
the Contract Value in each Sub-Account on the date of revocation. Any additional
amounts refunded to the Contract Owner will be paid by the Company.
ALLOCATION OF PURCHASE PAYMENTS
The Contract Owner may allocate Purchase Payments among Sub-Accounts, Fixed
Account A, Fixed Account B, and/or Fixed Account C. (See Appendix A.)
For the Retail Series Contracts issued in states that require that we
refund all Purchase Payments upon the revocation of a Contract during the free
look period, we will credit the initial Purchase Payment and any Purchase
Payments received prior to the Initial Purchase Payment Transfer Date to the
Fidelity VIP Money Market Sub-Account. On the Initial Purchase Payment Transfer
Date, we will transfer the Contract Value in the Fidelity Money Market
Sub-Account to the Fixed Account and the Sub-Accounts of the Variable Account as
the Contract Owner designated on the Contract application. After the Initial
Purchase Payment Transfer Date, we credit payments to the Fixed Account and
Sub-Accounts of the Variable Account as designated by the Contract Owner on the
Contract application.
Upon allocation to Sub-Accounts of the Variable Account, a Purchase Payment
is converted into Accumulation Units of the Sub-Account by dividing the amount
of the Purchase Payment allocated to the Sub-Account by the value of an
Accumulation Unit for the Sub-Account.
ACCUMULATION UNIT VALUE
Each Accumulation Unit of a Sub-Account was initially valued at $10 when
the first Fund shares were purchased. Thereafter the value of each Accumulation
Unit will vary up or down according to a Net Investment Factor, described below.
Dividend and capital gain distributions from a Fund will be automatically
reinvested in additional shares of such Fund and allocated to the appropriate
Sub-Account. The number of Accumulation Units does not increase because of the
additional shares, but the Accumulation Unit value may increase.
NET INVESTMENT FACTOR
The Net Investment Factor is an index number which reflects charges under
the Contract and the investment performance during a Valuation Period of the
Fund whose shares are held in the particular Sub-Account. If the Net Investment
Factor is greater than one, the Accumulation Unit or Annuity Unit value has
increased. If the Net Investment Factor is less than one, the Accumulation Unit
or Annuity Unit value has decreased. The Net Investment Factor for a Sub-Account
is determined by dividing (1) by (2) then subtracting (3) from the result,
where:
(1) Is the net result of:
(a) The net asset value per share of the Fund shares held in the
Sub-Account, determined at the end of the current Valuation Period;
(b) PLUS the per share amount of any dividend or capital gain distributions
made on the Fund shares held in the Sub-Account during the current
Valuation Period;
(c) PLUS a per share credit or minus a per share charge for any taxes
reserved for which the Company determines to have resulted from the
operations of the Sub-Account and to be applicable to a Contract.
(2) Is the net result of:
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(a) The net asset value per share of the Fund shares held in the
Sub-Account, determined at the end of the last prior Valuation Period;
(b) PLUS a per share credit or minus a per share charge for any taxes
reserved for the last prior Valuation Period which the Company
determines to have resulted from the investment operations of the
Sub-Account and to be applicable to the Contract.
(3) Is a daily factor representing the Mortality Risk Charge, the Expense Risk
Charge and the Administrative Charge adjusted for the number of days in the
period, which is equal to, on an annual basis, 1.40% of the daily net asset
value of the Sub-Account.
DEATH BENEFIT BEFORE THE START DATE
Before the Start Date, the Beneficiary will be entitled to receive the
Death Benefit described below. The Death Benefit will be determined as follows:
For Flex Series and Transfer Series Contracts,
(1) If the Contract Owner dies before the first day of the month following the
Contract Owner's 80th birthday, or in the case of a non-qualifed Contract,
the Annuitant dies on or before the first day of the month following the
Annuitant's 80th birthday, then as of the Death Benefit Valuation Date, the
Death Benefit will be the greatest of:
(a) The Contract Value less any Outstanding Loan Balance;
(b) The sum of the Purchase Payments received by the Company under the
Contract, less any withdrawals, amounts used to purchase annuity
payouts, any Outstanding Loan Balance, and the amount of previously
deducted Annual Contract Charges; or
(c) The Contract Value on the Specified Contract Anniversary immediately
preceding the Contract Owner's or the Annuitant's death, whichever is
applicable, plus any Purchase Payments since that Anniversary, less any
withdrawals or amounts used to purchase annuity payouts since that
Anniversary, less the amount of any previously deducted Annual Contract
Charges since that Anniversary and less the Outstanding Loan Balance.
(2) If the Contract Owner, or in the case of a non-qualified Contract, the
Annuitant, dies after the first day of the month following the Contract
Owner's or Annuitant's 80th birthday, the Death Benefit will be Contract
Value less the Outstanding Loan Balance as of the Death Benefit Valuation
Date.
(3) If the Contract Owner of a non-qualified Contract dies, the Death Benefit
will be Withdrawal Value as of the Death Benefit Valuation Date.
For Retail Series Contracts,
(1) If the Contract Owner dies before the first day of the month following the
Contract Owner's 80th birthday, then as of the Death Benefit Valuation Date,
the Death Benefit will be the greatest of:
(a) The Contract Value less any Outstanding Loan Balance;
(b) The sum of the Purchase Payments received by the Company under the
Contract, less the proportional amount of any withdrawals, proportional
amounts used to purchase annuity payouts, any Outstanding Loan Balance,
and the amount of previously deducted Annual Contract Charges; or
(c) The Contract Value on the Specified Contract Anniversary immediately
preceding the Contract Owner's death, plus any Purchase Payments since
that Anniversary, less the proportional amount of any withdrawals or
amounts used to purchase annuity payouts since that Anniversary, less
the amount of any previously deducted Annual Contract Charges since that
Anniversary and less the Outstanding Loan Balance.
(2) If the Contract Owner dies after the first day of the month following the
Contract Owner's 80th birthday, the Death Benefit will be the greater of (a)
or (b) above.
(3) If the Annuitant of a non-qualified Contract dies, the Death Benefit will be
Withdrawal Value as of the Death Benefit Valuation Date.
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For a Retail Series Contract, the Contract Owner may purchase a rider to
the Contract that entitles the Contract Owner to change the Specified Contract
Anniversary to the Contract Value on the first Contract Anniversary immediately
preceding the Contract Owner's death. The fee for this rider is equal to an
annual rate of .15% of the average daily Variable Account Contract Value. This
fee is charged monthly.
PAYMENT OF DEATH BENEFIT BEFORE THE START DATE
The Beneficiary may elect to have any portion of the Death Benefit:
(1) Paid in a single sum;
(2) Applied to any of the annuity payouts (in no event may annuity payouts to a
Beneficiary extend beyond the Beneficiary's life expectancy or any period
certain greater than the Beneficiary's life expectancy); or
(3) Paid by another distribution method acceptable to the Company.
The timing and manner of payment must satisfy certain requirements under
the Code. In general, the Death Benefit must either be applied to an annuity
payout within one year of the Contract Owner's or Annuitant's death, or the
entire Contract Value must be distributed within five years of the Contract
Owner's or Annuitant's date of death. An exception to this provision applies if
the Beneficiary is the surviving spouse, in which case the Beneficiary may
continue the Contract as the Contract Owner and generally may exercise all
rights to the Contract. (See "Federal Tax Status.")
If the Beneficiary requests payment of the Death Benefit in a single sum,
it will be paid to the Beneficiary within seven days after the Death Benefit
Valuation Date. An annuity payout selection or request for another form of
distribution method must be in writing and received by the Company within a time
period permitted under the Code, or the Death Benefit as of the Death Benefit
Valuation Date will be paid in a single sum to the Beneficiary and the Contract
will be canceled.
DEATH BENEFIT AFTER START DATE
If the Annuitant dies after the Start Date, remaining annuity payouts, if
any, will be as stated in the form of annuity payout in effect.
WITHDRAWAL (REDEMPTION)
If permitted by law or any applicable Qualified Plan, the Contract Owner
may withdraw all or part of the Withdrawal Value of the Contract by sending a
properly completed withdrawal request to the Company. (See "Federal Tax
Status.") The Contract Owner may request withdrawal of either:
o a gross amount, in which case the applicable Withdrawal Charge and taxes
will be deducted from the gross amount requested, or
o a specific amount after deduction of the applicable Withdrawal Charge and
taxes.
If a full withdrawal occurs on a date other than the Contract Anniversary,
a deduction will be made for the Annual Contract Charge in addition to the
deduction made on the previous Contract Anniversary. (See "Withdrawal Charge
(Contingent Deferred Sales Charge)" and "Annual Contract Charge.")
Partial withdrawals may be made in amounts not less than $1,000 and no
partial withdrawal may cause the Contract Value to fall below the greater of:
o $1,000, or
o the Outstanding Loan Balance divided by 85%.
No withdrawals are permitted from Fixed Account C.
The Company will not honor requests that do not meet these requirements.
A withdrawal will be processed on the next Valuation Date after a properly
completed withdrawal request is received by the Company and payment will be made
within seven days after such Valuation Date. Unless otherwise agreed to by the
Company, a partial withdrawal will be taken proportionately from the Fixed
Accounts and Sub-Accounts on a basis that reflects their proportionate
percentage of the Withdrawal Value.
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No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
The Company reserves the right to assess a processing fee not to exceed the
lesser of 2% of the partial withdrawal amount or $25. No processing fee will be
charged in connection with full withdrawals.
The Company may cancel the Contract when:
o the entire Withdrawal Value is withdrawn on or before the Start Date, or
o the Outstanding Loan Balance is equal to or greater than the Contract
Value less applicable Withdrawal Charges.
If a Contract is purchased as a "tax-sheltered annuity" under Code Section
403(b), it is subject to certain restrictions on withdrawals imposed by Section
403(b)(11) of the Code. (See "Tax-Sheltered Annuities.") Section 403(b)(11) of
the Code restricts the distribution under Section 403(b) annuity contracts of:
(i) contributions made pursuant to a salary reduction agreement in years
beginning after December 31, 1988; (ii) earnings on those contributions; and
(iii) earnings in such years on amounts held as of the first year beginning
before January 1, 1989. Distributions of the foregoing amounts may only occur
upon the death of the employee, attainment of age 59-1/2, separation from
service, disability or hardship. In addition, income attributable to salary
reduction contributions may not be distributed in the case of hardship. Similar
restrictions may apply on distributions from Contracts used in connection with
state optional retirement programs.
Withdrawal payments may be taxable. For tax purposes such payments shall be
deemed to be from earnings until cumulative withdrawal payments equal all
accumulated earnings and thereafter from Purchase Payments received by the
Company. Consideration should be given to the tax implications of a withdrawal
prior to making a withdrawal request, including a withdrawal in connection with
a Qualified Plan.
SYSTEMATIC WITHDRAWALS
A Systematic Withdrawal is an automatic form of partial withdrawal. (See
"Withdrawal (Redemption)." The Contract Owner may elect to take Systematic
Withdrawals by withdrawing a specified dollar amount or percentage of the
Contract Value on a monthly, quarterly, semi-annual or annual basis. Withdrawal
Charges are not waived on Systematic Withdrawals. (See "Withdrawal Charge
(Contingent Deferred Sales Charge)." Systematic Withdrawals may be discontinued
by the Contract Owner at any time by notifying the Company in writing.
The Company reserves the right to modify or discontinue offering Systematic
Withdrawals. However, any such modification or discontinuation will not affect
any Systematic Withdrawal programs already commenced. While the Company does not
currently charge a processing fee for partial withdrawals under this program, it
reserves the right to charge a processing fee not to exceed the lesser of 2% of
each Systematic Withdrawal payment or $25.
Systematic Withdrawals may be included in the Contract Owner's gross income
in the year in which the Systematic Withdrawal occurs. Systematic Withdrawals
occurring before the Contract Owner reaches age 591/2 may also be subject to a
10% Federal tax penalty. The Contract Owner should consult with his or her tax
advisor before requesting any Systematic Withdrawal. (See "Taxation of
Annuities.")
Contract Owners interested in participating in the Systematic Withdrawal
program may obtain a separate application form and full information concerning
the program and its restrictions from their registered representative.
LOANS AVAILABLE FROM CERTAIN QUALIFIED CONTRACTS
Loans may be available from Contracts issued for use with Qualified Plans
qualified under Section 403(b) of the Code. A loan generally will not be treated
as a taxable distribution provided that the term is no longer than five years
(except for certain home loans) and the loan amount does not exceed certain
limits discussed below. Loans are subject to the limitations, interest rates,
and repayment procedures set forth in the loan document and Contract. The loan
must be repaid, in substantially equal payments, by the earlier of five years
from the date of approval of the loan or the Start Date, or if used to purchase
a primary residence of the Contract Owner, the earlier of 20 years or the Start
Date.
Under the Code, the maximum amount that may be borrowed, including loans
from other Qualified Plans of the employer, generally may not exceed the lesser
of $50,000 or 50% of the current value of an
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employee's interest in the Plans. For Plans other than Plans subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), up to
$10,000 may be borrowed even if it is more than 50% of the value of the
employee's accrued benefit under the Qualified Plans. The $50,000 dollar limit
is reduced by the highest loan balances owed during the prior one-year period.
The Company allows loan amounts (minimum $1,000) that do not exceed the
Withdrawal Value less an amount representing annual loan interest, provided such
amount does not exceed the maximum loan amount set by law.
Upon the Company's receipt of a properly completed loan document, an amount
equal to the loan will be reallocated from the Contract Value, on a pro rata
basis, to the Loan Account, which is part of Fixed Account A. The Contract Value
reallocated to the Loan Account will be used to secure the loan. Amounts
reallocated from the Sub-Accounts to the Loan Account will be valued on the next
Valuation Date following the Company's receipt of the loan document. Amounts
transferred from the Sub-Accounts to the Loan Account will result in a reduction
of Variable Account Contract Value and will not participate in the investment
experience of any Sub-Account. No loans are permitted from Fixed Account C. A
loan document can be obtained by writing to the Company's Home Office in
Seattle, Washington.
The amounts reallocated to the Loan Account may earn an interest rate less
than that credited to other amounts allocated to Fixed Account A, but it will
never earn less than the guaranteed rate of 3%. The annual interest rate
assessed by the Company on the loan will not exceed 8% in arrears and will never
be less than 5.5% in arrears.
If any loan repayment due under a loan is not paid within 90 days of the
scheduled payment date, the Company will declare the Outstanding Loan Balance
immediately due and payable without notice to the Contract Owner. Unless
prohibited by law, the Outstanding Loan Balance, along with any applicable
Withdrawal Charges will be withdrawn from the Loan Account. Such forfeiture of
Contract Value is a taxable event, and may be subject to a 10% penalty tax for
early withdrawal or adversely affect the treatment of the Contract under Section
403(b) of the Code. (See "Tax Sheltered Annuities.")
The Company reserves the right to charge a loan service fee not to exceed
$25 for each loan and to limit loans in the first Contract Year and after the
Contract Owner reaches age 70-1/2.
The foregoing discussion of Contract loans is general and does not address
the tax consequences resulting from all situations in which a person may receive
a Contract loan. A competent tax advisor should be consulted before obtaining a
Contract loan.
REALLOCATIONS
Prior to the Start Date, the Contract Owner may transfer Variable Account
Contract Value among the Sub-Accounts and may transfer Fixed Account Contract
Value to various Sub-Accounts. Likewise, Variable Contract Value may be
transferred from a Sub-Account to either Fixed Account A or Fixed Account B.
Transfers of Variable Contract Values from one Sub-Account to another involve
the exchange of accumulation units of one Sub-Account for another on a
dollar-equivalent basis. Subject to certain limitations, Fixed Account Contract
Value may be transferred from either Fixed Account A or Fixed Account B to the
other Fixed Account or to a Sub-Account. (See "Reallocations from the Fixed
Accounts.")
Fixed Account C Contract Value may only be transferred to one or more
Sub-Accounts, and such transfers may only be made by Dollar Cost Averaging
Reallocations. Reallocations from Fixed Account C to Fixed Account A or Fixed
Account B or from Fixed Account A, Fixed Account B, or the Variable Account to
Fixed Account C are not permitted. Currently, there are four methods by which a
Contract Owner may make the reallocations described above: in writing, by
telephone, through Automatic Reallocations and by Dollar Cost Averaging.
WRITTEN REALLOCATIONS. The Contract Owner may request a reallocation in
writing. All or part of a Sub-Account's value may be reallocated to other
Sub-Accounts or to Fixed Account A or Fixed Account B. The reallocations will be
made by the Company on the first Valuation Date after the request for such a
reallocation is received by the Company. Currently, there is no charge for such
a reallocation. The Company reserves the right, however, to charge a
reallocation fee not to exceed $25 per reallocation and to limit the amount and
number of reallocations made by the Contract Owner. After the Start Date, an
Annuitant who has selected Variable Annuity Payouts may request reallocation of
Annuity Unit
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values in the same manner and subject to the same requirements as for a
reallocation of Accumulation Unit values. However, no reallocations of Annuity
Unit values may be made to or from the Fixed Accounts after the Start Date.
The conditions applicable to Written Reallocations also apply to Telephone
Reallocations, Automatic Reallocations and Dollar Cost Averaging Reallocations.
TELEPHONE REALLOCATIONS. Telephone reallocations are available when the
Contract Owner completes a telephone reallocation form and a personal
identification number has been assigned. If the Contract Owner elects to
complete the telephone reallocation form, the Contract Owner thereby agrees that
the Company will not be liable for any loss, liability, cost or expense when the
Company acts in accordance with the telephone reallocation instructions which
are received and recorded on voice recording equipment. If a telephone
reallocation, processed after the Contract Owner has completed the telephone
reallocation form, is later determined not to have been made by the Contract
Owner or was made without the Contract Owner's authorization, and a loss results
from such unauthorized reallocation, the Contract Owner bears the risk of this
loss. The Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. In the event the Company does not employ
such procedures, the Company may be liable for any losses due to unauthorized or
fraudulent instructions. Such procedures may include, among others, requiring
forms of personal identification prior to acting upon telephone instructions,
providing written confirmation of such instructions and/or tape recording
telephone instructions.
AUTOMATIC REALLOCATIONS. The Contract Owner may elect to have the Company
automatically reallocate Contract Value on each quarterly anniversary of the
Issue Date or other date as permitted by Company practice to maintain a certain
percentage of Contract Value in particular Sub-Accounts. The Contract Value
allocated to each Sub-Account, as selected by the Contract Owner, will grow or
decline in value at different rates during the quarter. Automatic Reallocation
is intended to reallocate Contract Value from those Sub-Accounts that have
increased in value to those Sub-Accounts that have declined in value or
increased at a slower rate. This investment method does not guarantee profits
nor does it assure that a Contract Owner will avoid losses.
To elect Automatic Reallocations, the Contract Value must be at least
$10,000 and an Automatic Reallocation application in proper form must be
received at the Home Office of the Company. An Automatic Reallocation
application can be obtained by writing to the Company's Home Office in Seattle,
Washington. The Contract Owner must indicate on the application the applicable
Sub-Accounts and the percentage of Contract Value to be maintained on a
quarterly basis in each Sub-Account. All Contract Value in a selected
Sub-Account will be available for the automatic reallocations.
Automatic Reallocation of Contract Value will occur on each quarterly
anniversary of the Issue Date or other date as permitted by Company practice,
which the Company received the Automatic Reallocation application in proper
form. The amounts reallocated will be credited at the Accumulation Unit value as
of the end of the Valuation Dates on which the reallocations are made.
A Contract Owner may instruct the Company at any time to terminate
Automatic Reallocations by written request to the Company's Home Office. Any
Contract Value in a Sub-Account that has not been reallocated will remain in
that Sub-Account regardless of the percentage allocation unless the Contract
Owner instructs otherwise. If a Contract Owner wants to continue Automatic
Reallocations after they have been terminated, a new Automatic Reallocation
application must be completed and sent to the Company's Home Office and the
Contract Value at the time the request is made must be at least $10,000.
The Company reserves the right to discontinue, modify or suspend Automatic
Reallocations and it reserves the right to charge a fee not to exceed $25 per
each reallocation between Sub-Accounts or from the unencumbered portion of Fixed
Account A Contract Value. Contract Value in Fixed Account B and Fixed Account C
is not eligible for Automatic Reallocations.
DOLLAR COST AVERAGING REALLOCATIONS. The Contract Owner may direct the
Company to automatically transfer a fixed dollar amount or a specified
percentage of Sub-Account Contract Value or Fixed Account A or Fixed Account C
Contract Value to any one or more other Sub-Accounts or to the Fixed Account A
or Fixed Account B. No reallocations from Fixed Account B or to Fixed Account C
are permitted under this service. Reallocations of this type from Fixed Account
A may be made on a
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monthly, quarterly, semi-annual or annual basis. Reallocations from Fixed
Account C may be made only on a monthly basis. This service is intended to allow
the Contract Owner to utilize "Dollar Cost Averaging," a long term investment
method which provides for regular investments over time in a level or variable
amount. The Company makes no guarantees that Dollar Cost Averaging will result
in a profit or protect against loss. The Contract Owner may discontinue Dollar
Cost Averaging at any time by notifying the Company in writing.
Contract Owners interested in Dollar Cost Averaging may obtain a separate
application form and full information concerning this service and its
restrictions from their registered representatives.
The Company reserves the right to discontinue, modify or suspend Dollar
Cost Averaging. Although the Company currently charges no fees for reallocations
made under the Dollar Cost Averaging program, the Company reserves the right to
charge a processing fee not to exceed $25 for each Dollar Cost Averaging
reallocation between Sub-Accounts or from Fixed Account A or Fixed Account C.
REALLOCATIONS FROM THE FIXED ACCOUNTS. Subject to the conditions applicable
to reallocations among Sub-Accounts, reallocations of amounts from Fixed Account
A not designated to the Loan Account may be made to the Sub-Accounts or to Fixed
Account B any time before the Start Date. After the Start Date, amounts
supporting Fixed Annuity Payouts cannot be reallocated.
Reallocations of Fixed Account B Contract Value to the Sub-Accounts or to
Fixed Account A are subject to the following conditions:
o Reallocations may only be made during the period starting 30 days before
and ending 30 days after the Contract Anniversary, and only one
reallocation may be made during such period;
o The Company must receive the reallocation request no more than 30 days
before the start of the reallocation period and not later than 10 days
before the end of the reallocation;
o Reallocations not in excess of the greater of 25% of Fixed Account B
Contract Value or $1,000 may be made (unless the balance after such
reallocation would be less than $1,000, in which case the full Fixed
Account B Contract Value may be reallocated); and
o Such reallocation must involve at least $250 of the total Fixed Account B
Contract Value (or the total Fixed Account B Contract Value, if less).
Reallocations of Fixed Account C Contract Values are subject to the
following conditions:
o Reallocations from Fixed Account C must begin within 30 days of deposit,
and must be substantially equal payments over a 12 month period.
Reallocation from Fixed Account C will be transferred any time before the
29th day of each month. You may direct us on which day you want the
reallocation.
o If additional Purchase Payment(s) are received for allocation to Fixed
Account C, the balance of Fixed Account C will be adjusted to reflect the
subsequent payment(s) and reallocations will be recalculated based on the
remaining 12 month period.
o You may change the Variable Sub-Account(s) receiving Fixed Account C
reallocations with written notice prior to the Reallocation Date. Only one
reallocation of Fixed Account C shall take place at any one time.
o If reallocations from Fixed Account C are discontinued prior to the end of
the 12 month term, the remaining balance of Fixed Account C will be
reallocated to Fixed Account A.
After the Start Date, reserves supporting Fixed Annuity Payouts cannot be
reallocated.
The Company reserves the right to permit reallocations from Fixed Accounts
A and B in excess of the limits described above on a non-discriminatory basis.
ASSIGNMENTS
Except for Section 457 plans, if the Contract is issued pursuant to or in
connection with a Qualified Plan, it may not be sold, transferred, pledged or
assigned to any person or entity other than the Company. With respect to Section
457 plans, for such plans maintained by tax exempt organizations, all rights and
benefits remain the exclusive property of the organization and are subject to
its general creditors. For such plans maintained by state or local governments,
however, all plan assets are
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maintained for the exclusive benefit of plan participants in accordance with
Section 457(g). In other circumstances, an assignment of the Contract is
permitted, but only before the Start Date, by giving the Company the original or
a certified copy of the assignment. The Company shall not be bound by any
assignment until it is actually received by the Company and shall not be
responsible for the validity of any assignment. Any payments made or actions
taken by the Company before the Company actually receives any assignment shall
not be affected by the assignment.
CONTRACT OWNER AND BENEFICIARIES
Unless someone else is named as the Contract Owner in the application for
the Contract, the applicant is the Contract Owner of the Contract and before the
Start Date may exercise all of the Contract Owner's rights under the Contract.
The Contract Owner may name a Beneficiary and a Contingent Beneficiary. In
the event a Contract Owner (or the Annuitant in the case of a non-qualified Flex
Series or Transfer Series Contract) dies before the Start Date, the Beneficiary
shall receive a Death Benefit as provided in the Contract. In the event the
Payee dies on or after the date Annuity Payouts commence, the Beneficiary, if
the Annuity Payout in effect at the Annuitant's death so provides, may continue
receiving payouts or be paid a lump sum. If the Beneficiary or Contingent
Beneficiary is not living on the date payment is due or if no Beneficiary or
Contingent Beneficiary has been named, the Payee's estate will receive the
applicable proceeds.
A person named as an Annuitant, a Payee, a Beneficiary or a Contingent
Beneficiary shall not be entitled to exercise any rights relating to the
Contract or to receive any payments or settlements under the Contract or any
Annuity Payout, unless such person is living on the day due proof of death of
the Contract Owner, the Annuitant or the Beneficiary, whichever is applicable,
is received by the Company.
Unless different arrangements have been made with the Company by the
Contract Owner, if more than one Beneficiary is entitled to payments from the
Company the payments shall be in equal shares.
Before the Start Date, the Contract Owner may change the Beneficiary or the
Contingent Beneficiary by giving the Company written notice of the change, but
the change shall not be effective until actually received by the Company. Upon
receipt by the Company of a notice of change, it will be effective as of the
date it was signed but shall not affect any payments made or actions taken by
the Company before the Company received the notice, and the Company shall not be
responsible for the validity of any change.
CONTRACT INQUIRIES
Inquiries regarding a Contract may be made by writing to the Company's Home
Office in Seattle, Washington.
ANNUITY PROVISIONS
START DATE
Unless otherwise agreed to by the Company, the Start Date must be the first
business day of any calendar month. The earliest Start Date is the first
business day of the first month after issue. If the Start Date selected by the
Contract Owner does not occur on a Valuation Date at least 60 days after the
date on which the Contract was issued, the Company reserves the right to adjust
the Start Date to the first Valuation Date after the Start Date selected by the
Contract Owner which is at least 60 days after the Contract issue date. If the
Contract Owner does not select a Start Date, the Start Date will be the Contract
Owner's 85th birthday. The latest Start Date is the Contract Owner's 99th
birthday.
The Contract Owner may change the Start Date by giving written notice
received by the Company at least 30 days before the Start Date currently in
effect and the new Start Date. The new Start Date must satisfy the requirements
for a Start Date.
For Contracts issued in connection with Qualified Plans, the Start Date
and form of payout must satisfy certain requirements under the Code. (See
"Federal Tax Status.")
ANNUITY PAYOUT SELECTION
The Contract Owner may select a Variable Annuity Payout, a Fixed Annuity
Payout, or both, with payments starting at the Start Date selected by the
Contract Owner. The Contract Owner may change the form of Annuity Payout(s) by
giving written notice received by the Company before the Start Date.
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If the Contract Owner has not selected the form of Annuity Payout(s) before the
Start Date, the Company will apply the Fixed Account Contract Value to provide
Fixed Annuity Payouts and the Variable Account Contract Value to provide
Variable Annuity Payouts, both in the form of a Life Annuity with Payments
Guaranteed for 10 years (120 months) which will be automatically effective.
FORMS OF ANNUITY PAYOUTS
Variable Annuity Payouts and Fixed Annuity Payouts are available in any of
the following Annuity Forms:
LIFE ANNUITY. Unless otherwise agreed to by the Company, an annuity payable
on the first business day of each calendar month during the Annuitant's life,
starting with the first payment due according to the Contract. Payments cease
with the payment made on the first business day of the calendar month in which
the Annuitant's death occurs. IT WOULD BE POSSIBLE UNDER THIS ANNUITY PAYOUT FOR
THE ANNUITANT TO RECEIVE ONLY ONE PAYMENT IF HE OR SHE DIED BEFORE THE SECOND
ANNUITY PAYMENT, ONLY TWO PAYMENTS IF HE OR SHE DIED BEFORE THE THIRD ANNUITY
PAYMENT, ETC.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10 YEARS (120 MONTHS). Unless
otherwise agreed to by the Company, an annuity payable on the first business day
of each calendar month during the Annuitant's life, starting with the first
payment due according to the Contract. If the Annuitant receives all of the
guaranteed payments, payments will continue thereafter but cease with the
payment made on the first business day of the calendar month in which the
Annuitant's death occurs. If all of the guaranteed payments have not been made
before the Annuitant's death, the unpaid installments of the guaranteed payments
will be continued to the Beneficiary.
JOINT AND FULL SURVIVOR ANNUITY. Unless otherwise agreed to by the Company,
an annuity payable on the first business day of each month during the
Annuitant's life and the life of a named person (the "Joint Annuitant"),
starting with the first payment due according to the Contract. Payments will
continue while either the Annuitant or the Joint Annuitant is living and cease
with the payment made on the first business day of the calendar month in which
the death of the Annuitant or the Joint Annuitant, whichever lives longer,
occurs. THERE IS NOT A MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS ANNUITY
PAYOUT. PAYMENTS CEASE UPON THE DEATH OF THE LAST SURVIVOR OF THE ANNUITANT AND
THE JOINT ANNUITANT REGARDLESS OF THE NUMBER OF PAYMENTS RECEIVED.
The Company will pay Fixed and Variable Annuity Payouts under other Annuity
Forms that may be offered by the Company. Your registered representative can
provide you with the details.
FREQUENCY AND AMOUNT OF ANNUITY PAYOUTS
Annuity Payouts will be paid as monthly installments, unless the Annuitant
and the Company agree to a different payout schedule. However, if the Contract
Value less any Outstanding Loan Balance at the Start Date is less than $5,000,
the Company may pay the difference in a single sum and the Contract will be
canceled. Also, if a monthly payout would be or become less than $100, the
Company may change the frequency of payouts to intervals that will result in
payouts of at least $100 each.
ANNUITY PAYOUTS
The amount of the first Fixed Annuity Payout is determined by applying the
Contract Value to be used for a fixed annuity at the Start Date to the annuity
table in the Contract for the Fixed Annuity Payout selected. The table shows the
minimum guaranteed amount of the initial annuity payment for each $1,000
applied. All subsequent payments shall be equal to the initial annuity payment.
The amount of the first Variable Annuity Payout is determined by applying
the Contract Value to be used for a variable annuity at the Start Date to the
annuity table in the Contract for the Annuity Payout selected. Subsequent
Variable Annuity Payouts vary in amount in accordance with the investment
performance of the applicable Sub-Account. Assuming annuity payouts are based on
the Annuity Unit values of a single Sub-Account, the dollar amount of the first
annuity payout, determined as set forth above, is divided by the Sub-Account
Annuity Unit value as of the Start Date to establish the number of Annuity Units
representing each annuity payout. This number of Annuity Units remains fixed
during the annuity payout period. The dollar amount of the second and subsequent
payouts is not predetermined and may change from month to month. The dollar
amount of the second and each subsequent annuity payout is determined by
multiplying the fixed number of Annuity Units by the Sub-Account Annuity Unit
Value for the Valuation Period with respect to which the annuity payout is due.
If the monthly
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payout is based upon the Annuity Unit values of more than one Sub-Account, the
foregoing procedure is repeated for each applicable Sub-Account and the sum of
the payments based on each Sub-Account is the amount of the monthly annuity
payout.
The annuity tables in the Contracts are based upon the 1983 Mortality Table
a and a 3% interest rate. Unisex rates will apply for Contracts issued under
Qualified Plans and will be derived by calculating the weighted average of 15%
male mortality and 85% female mortality. Sex-distinct rates will apply for
non-qualified Contracts.
The Company guarantees that the dollar amount of each Variable Annuity
Payout after the first payout will not be affected by variations in expenses
(including those related to the Variable Account) or in mortality experience
from the mortality assumptions used to determine the first payout.
SUB-ACCOUNT ANNUITY UNIT VALUE
Each Sub-Account's Annuity Units were initially valued at $10 each at the
time Accumulation Units with respect to the Sub-Account were first converted
into Annuity Units. The Sub-Account Annuity Unit value for any subsequent
Valuation Period is determined by multiplying the Sub-Account Annuity Unit value
for the immediately preceding Valuation Period by the Net Investment Factor for
the Sub-Account for the Valuation Period for which the Sub-Account Annuity Unit
Value is being calculated, and multiplying the result by an interest factor to
neutralize the assumed investment rate of 3% per annum built into the annuity
tables contained in the Contracts. (See "Net Investment Factor.")
ASSUMED INVESTMENT RATE
A 3% assumed investment rate is built into the annuity tables contained in
the Contracts. If the actual net investment rate on the assets of the Variable
Account is equal to the assumed investment rate, Variable Annuity Payouts will
remain level. If the actual net investment rate exceeds the assumed investment
rate, Variable Annuity Payouts will increase. Conversely, if it is less, then
the payouts will decrease.
PARTIAL ANNUITIZATION
Any time before the Start Date, a Contract Owner may apply a portion of the
Contract Value to the purchase of Fixed or Variable Annuity Payouts or to a
combination of Fixed and Variable Annuity Payouts. This is called a partial
annuitization and occurs in the same manner as described above for application
of the entire Contract Value to annuity payouts at the Start Date, except that
values as of the Valuation Date immediately following receipt by the Company of
a written request for a partial annuitization are used in place of values as of
the Start Date.
Upon the occurrence of a partial annuitization, the Contract Value applied
to purchase annuity payouts is considered a withdrawal from the Contract. (See
"Withdrawals (Redemptions)" and "Taxation of Annuities.") The Company reserves
the right to deduct the amount of any premium taxes not already paid under a
Contract.
After a partial annuitization, annuity payouts based on the Contract Value
applied and the annuity options selected are made in the same manner as if the
Start Date had occurred and no Contract Value remained under the Contract. Any
remaining Contract Value not applied to purchase annuity payouts, the Contract
continues as if no partial annuitization had occurred.
FEDERAL TAX STATUS
INTRODUCTION
THIS DISCUSSION IS GENERAL AND NOT INTENDED AS TAX ADVICE. This discussion
is not intended to address the tax consequences resulting from all of the
situations in which a person may be entitled to or may receive a distribution
under a Contract.
A Contract may be purchased on a non-qualified basis ("Non-Qualified
Contract") or purchased and used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). Generally, a Qualified Contract
is designed for use where Purchase Payments are comprised solely of proceeds
from and/or contributions under retirement plans which are intended to qualify
as plans entitled to special income tax treatment under Sections 401(a), 403(b),
408, 408A or 457 of the Code.
The ultimate effect of federal income taxes on the amounts held under a
Contract, or annuity payouts, and on the economic benefit to the Contract Owner,
the Annuitant, the Payee or the
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Beneficiary, depends on the age and tax and employment status of the individual
concerned, the type of retirement plan, and on the Company's tax status. In
addition, certain requirements must be satisfied in purchasing a Qualified
Contract with proceeds from a Qualified Plan and receiving distributions from a
Qualified Contract in order to continue receiving favorable tax treatment.
Therefore, purchasers of Contracts should seek competent legal and tax advice
regarding the suitability of a Contract for their situation, the applicable
requirements, and the tax treatment of the rights and benefits of a Contract.
The following discussion assumes that Qualified Contracts are purchased and
proceeds from and/or contributions under retirement plans that qualify for the
intended special federal income tax treatment.
The discussion is based on the Company's understanding of Federal income
tax laws as currently interpreted. No representation is made regarding the
likelihood of the continuation of the present Federal income tax laws or the
current interpretation by the Internal Revenue Service ("IRS").
No attempt is made to consider any applicable state or other tax laws.
TAX STATUS OF THE CONTRACT
DIVERSIFICATION REQUIREMENTS
Section 817(h) of the Code provides that separate account investments
underlying a Contract must be "adequately diversified" in accordance with
Treasury regulations in order for the Contract to qualify as an annuity Contract
under Section 72 of the Code. The Variable Account, through each of the Funds,
intends to comply with the diversification requirements prescribed in
regulations under Section 817(h) of the Code, which affect how the assets in the
various Sub-Accounts may be invested. The Company expects that each Fund in
which the Variable Account owns shares will meet the diversification
requirements and that the Contract will be treated as an annuity Contract under
the Code.
The Treasury has also announced that the diversification regulations do not
provide guidance concerning the extent to which Contract Owners may direct their
investments to particular Sub-Accounts of the Variable Account or how
concentrated the investments of the Funds underlying a variable account may be.
The number of underlying investment options available under a variable contract
may also be relevant in determining whether the product qualifies for the
desired tax treatment. It is possible that if additional rules, regulations or
guidance in this regard are issued, the Contract may need to be modified to
comply with such additional rules or guidance. For these reasons, the Company
reserves the right to modify the Contracts as necessary to attempt to prevent
the Contract Owner from being considered the owner of the assets of the Funds or
otherwise to qualify the Contract for favorable tax treatment.
REQUIRED DISTRIBUTIONS
In order to be treated as an annuity Contract for federal income tax
purposes, Section 72(s) of the Code also requires any Non-Qualified Contract to
provide that: (a) if any Contract Owner dies on or after the Start Date but
prior to the time the entire interest in the Contract has been distributed, the
remaining portion of such interest will be distributed at least as rapidly as
under the method of distribution being used as of the date of that Contract
Owner's death; and (b) if any Contract Owner dies prior to the Start Date, the
entire interest in the Contract will be distributed within five years after the
date of the Contract Owner's death. These requirements will be considered
satisfied as to any portion of the Contract Owner's interest which is payable to
or for the benefit of a "designated Beneficiary" and which is distributed over
the life of such Beneficiary or over a period not extending beyond the life
expectancy of that Beneficiary, provided that such distributions begin within
one year of that Contract Owner's death. The Contract Owner's "designated
Beneficiary" is the person designated by such Contract Owner as a Beneficiary
and to whom ownership of the Contract passes by reason of death and must be a
natural person. However, if the Contract Owner's "designated Beneficiary" is the
surviving spouse of the Contract Owner, the Contract may be continued with the
surviving spouse as the new Contract Owner. If the Contract Owner is not an
individual, any change in the primary Annuitant is treated as a change of
Contract Owner for tax purposes.
The Non-Qualified Contracts contain provisions which are intended to comply
with the requirements of Section 72(s) of the Code, although no regulations
interpreting these requirements have yet been issued. The Company intends to
review such provisions and modify them if necessary to assure that they comply
with the requirements of Code Section 72(s) when clarified by regulation or
otherwise. Other rules may apply to Qualified Contracts.
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TAXATION OF ANNUITIES
IN GENERAL
Section 72 of the Code governs taxation of annuities in general. The
Company believes that a Contract Owner who is a natural person generally is not
taxed on increases in the value of a Contract until distribution occurs by
withdrawing all or part of the Contract Value (e.g., partial withdrawals and
complete withdrawals) or as annuity payouts under the form of annuity payout
selected. For this purpose, the assignment, pledge, or agreement to assign or
pledge any portion of the Contract Value (and in the case of a Qualified
Contract, any portion of an interest in the qualified plan) generally will be
treated as a distribution. The taxable portion of a distribution (in the form of
a single sum payment or annuity) is taxable as ordinary income.
Except as provided in the Code, a Contract Owner who is not a natural
person generally must include in income any increase in the excess of the net
withdrawal value over the "investment in the Contract" during the taxable year.
WITHDRAWALS
In the case of a withdrawal from a Qualified Contract, under Section 72(e)
of the Code a ratable portion of the amount received is taxable, generally based
on the ratio of the "investment in the Contract" to the participant's total
accrued benefit or balance under the retirement plan. The "investment in the
Contract" generally equals the portion, if any, of any Purchase Payments paid by
or on behalf of any individual under a Contract which was not under-excluded
from the individual's gross income. For Contracts issued in connection with
Qualified Plans, the "investment in the Contract" can be zero. Special tax rules
may be available for certain distributions from Qualified Contracts.
In the case of a withdrawal (including Systematic Withdrawals) from a
Non-Qualified Contract before the Start Date, under Code Section 72(e) amounts
received are generally first treated as taxable income to the extent that the
Contract Value immediately before withdrawal exceeds the "investment in the
Contract" at that time. Any additional amount withdrawn is not taxable.
In the case of a full withdrawal under a Qualified or Non-Qualified
Contract, the amount received generally will be taxable only to the extent it
exceeds the "investment in the Contract."
A Federal penalty tax may apply to certain withdrawals from Qualified and
Non-Qualified Contracts. (See "Penalty Tax on Certain Distributions" below.)
ANNUITY PAYOUTS
Although tax consequences may vary depending on the annuity form selected
under the Contract, in general, only the portion of the annuity payout that
represents the amount by which the Contract Value exceeds the investment in the
Contract will be taxed; after the investment in the Contract is recovered, the
full amount of any additional annuity payouts is taxable. For Variable Annuity
Payouts, the taxable portion is generally determined by an equation that
establishes a specific dollar amount of each payment that is not taxed. The
dollar amount is determined by dividing the investment in the Contract by the
total number of expected periodic annuity payouts. However, the entire
distribution will be taxable once the recipient has recovered the dollar amount
of his or her investment in the Contract. For Fixed Annuity Payouts, in general
there is no tax on the portion of each payout which represents the same ratio
that the investment in the Contract bears to the total expected value of the
annuity payouts for the term of the payouts; however, the remainder of each
annuity payout is taxable until the recovery of the investment in the Contract,
and thereafter the full amount of each annuity payout is taxable.
TAXATION OF DEATH BENEFIT PROCEEDS
Amounts may be distributed from a Transfer Series or Flex Series Contract
because of the death of a Contract Owner or an Annuitant. For a Retail Series
Contract, amounts may be distributed from a Contract because of the death of a
Contract Owner. Generally, such amounts are includible in the income of the
recipient as follows: (i) if distributed in a lump sum, they are taxed in the
same manner as a full withdrawal from the Contract; or (ii) if distributed under
a payout option, they are taxed in the same way as annuity payouts.
PENALTY TAX ON CERTAIN DISTRIBUTIONS
In the case of a distribution pursuant to a Non-Qualified Contract, a
Federal penalty equal to 10% of the amount treated as taxable income may be
imposed. In general, however, there is no penalty on distributions:
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o Made on or after the taxpayer reaches age 59-1/2;
o Made on or after the death of the holder (a holder is considered a
Contract Owner) (or if the holder is not an individual, the death of
the primary annuitant);
o Attributable to the taxpayer becoming disabled;
o A part of a series of substantially equal periodic payments (not less
frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the
taxpayer and his or her designated beneficiary;
o Made under an annuity Contract that is purchased with a single premium
when the annuity starting date is no later than a year from purchase
of the annuity and substantially equal periodic payments are made, not
less frequently than annually, during the annuity period; and
o Made under certain annuities issued in connection with structured
settlement agreements.
Other tax penalties may apply to certain distributions under a Qualified
Contract, as well as to certain contributions to, loans from, and other
circumstances, applicable to the Qualified Plan of which the Qualified Contract
is part.
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership or assignment of a Contract, the designation of an
Annuitant, Payee or other Beneficiary who is not also the Contract Owner, or the
exchange of a Contract may result in certain tax consequences to the Contract
Owner that are not discussed herein. A Contract Owner contemplating any such
transfer, assignment, or exchange of a Contract should contact a competent tax
adviser with respect to the potential tax effects of such a transaction.
WITHHOLDING
Pension and annuity distributions generally are subject to withholding for
the recipient's Federal income tax liability at rates that vary according to the
type of distribution and the recipient's tax status. Some recipients may elect
not to have tax withheld from distributions. Distributions from certain
qualified plans are generally subject to mandatory withholding. Withholding for
Contracts issued to retirement plans established under Section 401 of the Code
is the responsibility of the plan trustee.
MULTIPLE CONTRACTS
Section 72(e)(11) of the Code treats all non-qualified deferred annuity
Contracts entered into after October 21, 1988 that are issued by the Company (or
its affiliates) to the same Contract Owner during any calendar year as one
annuity Contract for purposes of determining the amount includible in gross
income under Code Section 72(e). The effects of this rule are not clear;
however, it could affect the time when income is taxable and the amount that
might be subject to the 10% penalty tax described above. In addition, the
Treasury Department has specific authority to issue regulations that prevent the
avoidance of Section 72(e) through the serial purchase of annuity Contracts or
otherwise. There may also be other situations in which the Treasury may conclude
that it would be appropriate to aggregate two or more annuity Contracts
purchased by the same Contract Owner. Accordingly, a Contract Owner should
consult a competent tax adviser before purchasing more than one annuity
Contract.
TAXATION OF QUALIFIED PLANS
The Contracts are designed for use with several types of Qualified Plans.
The tax rules applicable to participants in these Qualified Plans vary according
to the type of Plan and the terms and conditions of the Plan itself. Special
favorable tax treatment may be available for certain types of contributions and
distributions. Adverse tax consequences may result from contributions in excess
of specified limits; distributions prior to age 59-1/2 (subject to certain
exceptions); distributions that do not conform to specified commencement and
minimum distribution rules; aggregate distributions in excess of a specified
annual amount; and in other specified circumstances. Therefore, no attempt is
made to provide more than general information about the use of the Contracts
with the various types of Qualified Plans. Contract Owners, Annuitants, Payees
and Beneficiaries are cautioned that the rights of any person to any benefits
under these Qualified Plans will be subject to the terms and conditions of the
Plans themselves, regardless of the terms and conditions of the Contracts issued
in connection with the Plans. The Company shall not be bound by the terms and
conditions of such Qualified Plans to the extent such terms contradict the
Contract, unless the Company consents. Some retirement plans are subject to
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distribution and other requirements that are not incorporated into the Company's
Contract administration procedures. Contract Owners, participants and
Beneficiaries are responsible for determining that contributions, distributions
and other transactions with respect to the Contracts comply with applicable law.
Brief descriptions follow of the various types of Qualified Plans in connection
with a Contract.
CORPORATE PENSION AND PROFIT-SHARING PLANS AND H.R. 10 PLANS
Code Section 401(a) permits employers to establish various types of
retirement plans for employees, and permits self-employed individuals to
establish retirement plans for themselves and their employees. These retirement
plans may permit the purchase of the Contracts to accumulate retirement savings
under the plans. Adverse tax consequences to the plan, to the participant or to
both may result if this Contract is assigned or transferred to any individual as
a means to provide benefit payments.
INDIVIDUAL RETIREMENT ANNUITIES
Sections 408 and 408A of the Code permit eligible individuals to contribute
to an individual retirement program known as an "Individual Retirement Annuity"
or "IRA." All IRAs are subject to limits on the amount that may be contributed,
the persons who may be eligible, and on the time when distributions may
commence.
TRADITIONAL IRAs. Section 408 governs "traditional" IRAs. Subject to
certain income limits, contributions to a traditional IRA may be tax deductible.
Distributions from a traditional IRA, if attributable to deductible
contributions, are generally subject to income tax. Distributions must begin in
the year the contract owner reaches age 701/2. Distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into a traditional IRA.
ROTH IRAs. Section 408A of the Code permits individuals to contribute to a
special type of IRA called a Roth IRA. The IRA must be designated as a "Roth
IRA" at the time it is established, in accordance with IRS rules. Contributions
to a Roth IRA are not deductible. If certain conditions are met, qualified
distributions from a Roth IRA are tax free. Subject to special limitations, a
distribution from a traditional IRA or another Roth IRA may be rolled over to a
Roth IRA.
Sales of a Contract for use with traditional or Roth IRAs may be subject to
special requirements of the IRS. The IRS has not reviewed the Contract for
qualification as an IRA, and has not addressed in a ruling of general
applicability whether a death benefit provision such as the provision in the
Contract comports with IRS qualification requirements.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code allows employees of certain Section 501(c)(3)
organizations and public schools to exclude from their gross income the Purchase
Payments paid, within certain limits, on a Contract that will provide an annuity
for the employee's retirement. Code Section 403(b)(11) restricts the
distribution under Code Section 403(b) annuity Contracts of: (i) elective
contributions made in years beginning after December 31, 1988; (ii) earnings on
those contributions; and (iii) earnings in such years on amounts held as of the
last year beginning before January 1, 1989. Distribution of those amounts may
only occur upon 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.
SECTION 457 PLANS
Code Section 457 allows tax exempt organizations and state and local
governments to establish deferred compensation plans that allow individuals who
perform services for them as employees or independent contractors to
participate. Plans maintained by tax exempt organizations require that all
rights and benefits provided thereunder remain the property of the employer,
subject to its general creditors. Plans maintained by state and local
governments, however, must be maintained for the exclusive benefit of plan
participants. Section 457 plans are subject to rules and limits on the timing of
deferrals and amount that may be contributed. The Code also regulates when
distributions may (or must) commence. Sale of a Contract for use with Section
457 plans may be subject to special IRS requirements. The IRS has not reviewed
the Contract for qualification purposes.
POSSIBLE CHARGE FOR THE COMPANY'S TAXES
At the present time, the Company makes no charge to the Sub-Accounts for
any Federal, state, or local taxes that the Company incurs which may be
attributable to such Sub-Accounts or to the Contracts.
37
<PAGE>
The Company, however, reserves the right in the future to make a charge for any
such tax that it determines to be properly attributable to the Sub-Accounts of
the Contracts.
OTHER TAX CONSEQUENCES
As noted above, the foregoing comments about the Federal tax consequences
under these Contracts are not exhaustive, and special rules are provided with
respect to other tax situations not discussed in this Prospectus. Further, the
Federal income tax consequences discussed herein reflect the Company's
understanding of current law and the law may change. Federal estate and state
and local estate, inheritance, and other tax consequences of ownership or
receipt of distributions under a Contract depend on the individual circumstances
of each Contract Owner or recipient of the distribution. A competent tax adviser
should be consulted for further information.
POSSIBLE CHANGES IN TAXATION
In past years, legislation has been proposed that would have adversely
modified the Federal taxation of certain annuities. There is always the
possibility that tax treatment of annuities could change by legislation or other
means (such as IRS regulations, revenue rulings, judicial decisions, etc.).
Moreover, it is also possible that any change could be retroactive (that is,
effective prior to the date of the change).
Although the likelihood of legislative changes is uncertain, there is
always the possibility that the tax treatment of the Contract could change by
legislation or other means (such as IRS regulations, revenue rulings, judicial
decisions, etc.). Moreover, it is also possible that any change could be
retroactive (that is, effective prior to the date of the change). You should
consult a tax adviser with respect to legislative developments and their effect
on the Contract.
VOTING OF FUND SHARES
As long as the Variable Account is registered as a unit investment trust
under the Investment Company Act of 1940 and the assets of the Variable Account
are allocated to Sub-Accounts that are invested in Fund shares, the Fund shares
held in the Sub-Accounts will be voted by the Company in accordance with the
instructions received from the person having voting interests under the
Contracts as described below. If the Company determines pursuant to applicable
law or regulation that Fund shares held in the Sub-Accounts and attributable to
the Contracts need not be voted pursuant to instructions received from persons
otherwise having the voting interests, then the Company may vote such Fund
shares held in the Sub-Accounts in its own right.
Before Variable Annuity Payouts begin, the Contract Owner will have the
voting interest with respect to the Fund shares attributable to a Contract.
After Variable Annuity Payouts begin, the Annuitant will have the voting
interest with respect to the Fund shares attributable to the Annuity Units under
a Contract. Such voting interest will generally decrease during the Variable
Annuity Payout period.
Any Fund shares held in the Variable Account for which the Company does not
receive timely voting instructions, or which are not attributable to Contract
Owners, will be voted by the Company in proportion to the instructions received
from all Contract Owners having a voting interest in the Fund. Any Fund shares
held by the Company or any of its affiliates in general accounts will, for
voting purposes, be allocated to all separate accounts having voting interests
in the Fund in proportion to each account's voting interest in the respective
Fund and will be voted in the same manner as are the respective account's votes.
All Fund proxy material will be sent to persons having voting interests
together with appropriate forms which may be used to give voting instructions.
Persons entitled to voting interests and the number of votes which they may cast
shall be determined as of a record date, to be selected by the Fund.
Persons having voting interests under the Contracts as described above will
not, as a result thereof, have voting interests with respect to meetings of the
stockholders of the Company.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be distributed by the Principal Underwriter, Washington
Square Securities, Inc., 20 Washington Avenue South, Minneapolis, Minnesota
55401, which is an affiliate of the Company. Commissions and other distribution
compensation will be paid by the Company. The Contracts will be sold by licensed
insurance agents in those states where the Contracts may be lawfully sold. Such
agents
38
<PAGE>
will be registered representatives of broker-dealers registered under the
Securities Exchange Act of 1934 who are members of the National Association of
Securities Dealers, Inc. Generally such payments will not exceed 7.00% of the
Purchase Payments. In some cases a trail commission based on the Contract Value
may also be paid.
REPORTS TO CONTRACT OWNERS
The Company will mail to the Contract Owner, at the last known address of
record at the Home Office of the Company, a statement showing the Contract
Value. The Company will also provide to Contract Owners immediate written
confirmation of every financial transaction made under their Contracts; however,
Contract Owners who make Purchase Payments through salary reduction arrangements
with their employers will receive quarterly confirmations of Purchase Payments
made to their Contracts.
To reduce expenses, only one copy of most financial reports and
prospectuses will be mailed to your household, even if you or other persons in
your household have more than one Contract. Call (800) 870-0453 if you need
additional copies of financial reports, prospectuses, or annual and semi-annual
reports.
LEGAL PROCEEDINGS
There are no legal proceedings to which the Variable Account is a party.
The Company and its affiliates, like other life insurance companies, are
periodically involved in lawsuits, including class action lawsuits. In some
class action and other lawsuits involving insurers, substantial damages have
been sought and/or material settlement payments have been made. Although the
outcome of any litigation cannot be predicted with certainty, the Company
believes that at the present time there are not pending or threatened lawsuits
that are reasonably likely to have a material adverse impact on the Variable
Account or the Company.
PREPARING FOR THE YEAR 2000
The Company's business units utilize data processing systems in the
administration of the insurance and financial services products which they
market. Most of the Company's data processing systems have required
modifications to enable them to process dates including the year 2000 and
beyond.
In 1995, the Company initiated an enterprise wide program of identifying
and modifying systems affected by the year 2000. The Company developed a plan
whereby all systems would be identified, modified and tested for Year 2000
compliance. The Company initiated a structured review and reporting system
whereby senior management is regularly advised of the status of the project. As
of June 30, 1999, ReliaStar had converted, tested for Year 2000 compliance and
put into production all of its core business applications.
The Company conducts business with a multitude of business entities whose
ability to comply with Year 2000 systems issues may affect the business
operations of the Company. The Company has made an attempt to determine whether
such entities have adequate plans for Year 2000 compliance, and the Company is
not aware of any instances where a key supplier or vendor will not be compliant.
The Company does not have the ability to assure with any certainty the
compliance capacity of third parties.
The Company's business would be adversely affected if it does not meet its
goals relative to Year 2000 preparedness, and the Company's plans and actions
reflect the importance of this project. Although the Company has contingency
plans in place, it is not reasonably possible to develop contingency plans which
would comprehensively address widespread systems failures.
FINANCIAL STATEMENTS AND EXPERTS
The annual financial statements of Separate Account One as of December 31,
1998 and for each of the two years then ended and the annual statutory basis
financial statements of Northern Life Insurance Company as of and for the years
ended December 31, 1998 and 1997, which are incorporated by reference in the
Statement of Additional Information, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are incorporated herein
by reference, and have been so incorporated by reference in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
FURTHER INFORMATION
A Registration Statement under the Securities Act of 1933 has been filed
with the SEC, with respect to the Contracts described herein. The Prospectus
does not contain all of the information set forth in the
39
<PAGE>
Registration Statement and exhibits thereto, to which reference is hereby made
for further information concerning the Variable Account, the Company and the
Contracts. The information so omitted may be obtained from the SEC's principal
office in Washington, D.C., upon payment of the fee prescribed by the SEC, or
examined there without charge. Statements contained in this Prospectus as to the
provisions of the Contracts and other legal documents are summaries, and
reference is made to the documents as filed with the SEC for a complete
statement of the provisions thereof.
40
<PAGE>
SEPARATE ACCOUNT ONE
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction .................................... SAI- 2
Custody of Assets ............................... SAI- 2
Independent Auditors ............................ SAI- 3
Distribution of the Contracts ................... SAI- 3
Calculation of Yields and Total Returns ......... SAI- 3
Company Holidays ................................ SAI-13
Financial Statements ............................ SAI-13
</TABLE>
If you would like to receive a copy of the Separate Account One Statement of
Additional Information, please call 1-800-621-3750 or return this request to:
WASHINGTON SQUARE SECURITIES, INC.
20 WASHINGTON AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55401
Your name ---------------------------------------------------------------------
Address -----------------------------------------------------------------------
City ------------------------------- State --------------------- Zip ---------
Please send me a copy of the Separate Account One Statement of Additional
Information.
- --------------------------------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ACCOMPANYING
FUND PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
41
<PAGE>
APPENDIX A
THE FIXED ACCOUNTS
CONTRIBUTIONS AND REALLOCATIONS TO FIXED ACCOUNT A, FIXED ACCOUNT B, AND
FIXED ACCOUNT C (COLLECTIVELY, THE "FIXED ACCOUNTS") UNDER THE CONTRACTS BECOME
PART OF THE GENERAL ACCOUNT OF THE COMPANY (THE "GENERAL ACCOUNT"), WHICH
SUPPORTS INSURANCE AND ANNUITY OBLIGATIONS. BECAUSE OF EXEMPTIVE AND
EXCLUSIONARY PROVISIONS, INTERESTS IN THE FIXED ACCOUNTS HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 ("1933 ACT") NOR ARE THE FIXED
ACCOUNTS REGISTERED AS INVESTMENT COMPANIES UNDER THE INVESTMENT COMPANY ACT OF
1940 ("1940 ACT"). ACCORDINGLY, NEITHER THE FIXED ACCOUNTS NOR ANY INTERESTS
THEREIN ARE GENERALLY SUBJECT TO THE PROVISIONS OF THE 1933 OR 1940 ACTS AND THE
COMPANY HAS BEEN ADVISED THAT THE STAFF OF THE SECURITIES AND EXCHANGE
COMMISSION HAS NOT REVIEWED THE DISCLOSURES IN THIS PROSPECTUS WHICH RELATE TO
THE FIXED PORTION OF THE CONTRACTS. DISCLOSURES REGARDING THE FIXED PORTION OF
THE CONTRACTS AND THE FIXED ACCOUNTS, HOWEVER, MAY BE SUBJECT TO CERTAIN
GENERALLY APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE
ACCURACY AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES.
The Fixed Accounts are part of the General Account, which is made up of all
of the general assets of the Company other than those allocated to any separate
account. We offer the option of having all or a portion of Purchase Payments
allocated to the Fixed Accounts as selected by the Contract Owner at the time of
purchase or as subsequently changed. The Company will invest the assets
allocated to the Fixed Accounts in those assets chosen by the Company and
allowed by applicable law. Investment income from such Fixed Accounts' assets
will be allocated between the Company and the Contracts participating in the
Fixed Accounts, in accordance with the terms of such Contracts.
Fixed Annuity Payouts made to Annuitants under the Contracts will not be
affected by the mortality experience (death rate) of persons receiving such
payments or of the general population. The Company assumes this "mortality risk"
by virtue of annuity rates incorporated in the Contracts which cannot be
changed. In addition, the Company guarantees that it will not increase charges
for maintenance of the Contracts regardless of its actual expenses.
Investment income from the Fixed Accounts allocated to the Company includes
compensation for mortality and expense risks borne by the Company in connection
with Fixed Account Contracts. The Company expects to derive a profit from this
compensation.
The Company may credit interest in excess of the guaranteed rate of 3%. For
a Flex Series and a Transfer Series Contract any interest rate in effect when an
amount is allocated or reallocated to the Fixed Accounts is guaranteed for that
amount until the end of the calendar year in which it is received. After the end
of that calendar year, the Company may change the amount of interest credited at
its discretion. All amounts in the Fixed Accounts after the end of the calendar
years referenced above are credited with excess interest at the rates then in
effect for the then current calendar year. Such rates are established at the
beginning of each calendar year and are guaranteed for the entire calendar year.
For a Retail Series Contract, any interest rate in effect when an amount is
allocated or reallocated to the Fixed Accounts is guaranteed for that amount for
at least 12 months, and subsequent interest rates for that amount will not be
changed more often than once every 12 months.
There is no specific formula for the determination of excess interest
credits. Such credits, if any, will be determined by the Company based on many
factors, including, but not limited to: investment yield rates, taxes, Contract
persistency, and other experience factors. ANY INTEREST CREDITED TO AMOUNTS
ALLOCATED TO THE FIXED ACCOUNTS IN EXCESS OF 3% PER YEAR WILL BE DETERMINED IN
THE SOLE DISCRETION OF THE COMPANY. THE CONTRACT OWNER ASSUMES THE RISK THAT
INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY NOT EXCEED THE MINIMUM
GUARANTEE OF 3% FOR ANY GIVEN YEAR.
The Company is aware of no statutory limitations on the maximum amount of
interest it may credit, and the Board of Directors has set no limitations.
However, inherent in the Company's exercise of discretion in this regard is the
equitable allocation of distributable earnings and surplus among its various
Contractholders and Contract Owners and to its stockholder.
Excess interest, if any, will be credited on the Fixed Account Contract
Value. The Company guarantees that, at any time, the Fixed Account Contract
Value will not be less than the amount of Purchase Payments and transfers
allocated to the Fixed Accounts, plus interest at the rate of 3% per year,
compounded annually, plus any additional interest which the Company may, in its
discretion, credit to the Fixed Accounts, less the sum of all annual
administrative charges or Withdrawal Charges levied, any applicable premium
taxes, and less any amounts withdrawn or reallocated from the Fixed Accounts.
A-1
<PAGE>
If the Contract Owner makes a full withdrawal, the amount available from the
Fixed Accounts will be reduced by any applicable Withdrawal Charge and Annual
Contract Charge. (See "Charges Made by the Company.")
A-2
<PAGE>
APPENDIX B
PERFORMANCE INFORMATION AND CONDENSED FINANCIAL INFORMATION
PERFORMANCE INFORMATION
From time to time, the Company may advertise or include in sales literature
yields, effective yields, and total returns for the available Sub-Accounts.
THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE OR PROJECT
FUTURE PERFORMANCE. Each Sub-Account may, from time to time, advertise or
include in sales literature performance relative to certain performance rankings
and indices compiled by independent organizations. More detailed information as
to the calculation of performance information, and comparisons with unmanaged
market indices appears in the Statement of Additional Information.
Yields, effective yields and total returns for the Sub-Accounts are based
on the investment performance of the corresponding portfolios of the Funds. The
performance, in part, reflects the Funds' expenses. See the Prospectuses for the
Funds.
The yield of the Sub-Account investing in the VIP Money Market Portfolio
refers to the annualized income generated by an investment in the Sub-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 Sub-Account is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment.
The yield of a Sub-Account (except the Money Market Sub-Account investing
in the VIP Money Market Portfolio) refers to the annualized income generated by
an investment in the Sub-Account over a specified 30 day or one-month period.
The yield is calculated by assuming that the income generated by the investment
during that 30-day or one-month period is generated each period over a 12-month
period and is shown as a percentage of the investment.
The total return of a Sub-Account refers to return quotations assuming an
investment under a Contract has been held in the Sub-Account for various periods
of time including, but not limited to, a period measured from the date the
Sub-Account commenced operations. Average annual total return refers to total
return quotations that are annualized based on an average return over various
periods of time.
Total returns generally will be presented in "standardized" format. This
means, among other things, that performance will be shown from the date of
inception of the Variable Account, or, if later, the inception date of the
applicable Investment Fund. In some instances, "non-standardized" returns may be
shown from prior to the inception date of the Variable Account. Non-standardized
information will be accompanied by standardized information.
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 the investment as of the last day of
each of the periods for which total return quotations are provided. Average
annual total return information shows the average percentage change in the value
of an investment in the Sub-Account from the beginning date of the measuring
period to the end of that period. This version of average annual total return
reflects all historical investment results, less all charges and deductions
applied against the Sub-Account (including any Withdrawal Charge that would
apply if a Contract Owner terminated the Contract at the end of each period
indicated, but excluding any deductions for premium taxes).
When a Sub-Account has been in operation for one, five, and ten years,
respectively, the average annual total return for these periods will be
provided. For periods prior to the date the Sub-Account commenced operations,
performance information for Contracts funded by the Sub-Accounts will be
calculated based on the performance of the Funds' Portfolios and the assumption
that the Sub-Accounts were in existence for the same periods as those indicated
for the Funds' Portfolios, with the level of Contract Charges that were in
effect at the inception of the Sub-Accounts for the Contracts.
Average total return information may be presented, computed on the same
basis as described above, except deductions will not include the Withdrawal
Charge. In addition, the Company may from
B-1
<PAGE>
time to time disclose average annual total return in non-standard formats and
cumulative total return for Contracts funded by the Sub-Accounts.
The Company may, from time to time, also disclose yields and total returns
for the Portfolios of the Funds, including such disclosure for periods prior to
the dates the Sub-Accounts commenced operations.
For additional information regarding the calculation of other performance
data, please refer to the Statement of Additional Information.
In advertising and sales literature, the performance of each Sub-Account
may be compared to the performance of other variable annuity issuers in general
or to the performance of particular types of variable annuities investing in
mutual funds, or investment series of mutual funds with investment objectives
similar to each of the Sub-Accounts. Lipper Analytical Services, Inc.
("Lipper"), Morningstar, Inc. ("Morningstar") and the Variable Annuity Research
Data Service ("VARDS") 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, Morningstar and
VARDS each rank such issuers on the basis of total return, assuming reinvestment
of distributions, but do not take sales charges, redemption fees, or certain
expense deductions at the separate account level into consideration. In
addition, VARDS prepares risk adjusted rankings, which consider the effects of
market risk on total return performance. This type of ranking provides data as
to which funds provide the highest total return within various categories of
funds defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each
Sub-Account to the Standard & Poor's Composite 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.
The Company may also report other information including the effect of
tax-deferred compounding on a Sub-Account's investment returns, or returns in
general, which may be illustrated by tables, graphs, or charts. The Company may
also illustrate the accumulation of Contract Value and payment of annuity
benefits on a variable or fixed basis, or a combination variable and fixed
basis, based on hypothetical rates of return, and compare those illustrations to
mutual fund hypothetical illustrations, using charts, tables, and graphs,
including software programs utilizing such charts, tables, and graphs. All
income and capital gains derived from Sub-Account investments are reinvested and
can lead to substantial long-term accumulation of assets, provided that the
underlying portfolio's investment experience is positive.
B-2
<PAGE>
The following table shows, for each Sub-Account of the Variable Account,
the value of a Sub-Account Accumulation Unit as it is invested in portfolios at
the dates shown, and the total number of Sub-Account Accumulation Units
outstanding at the end of each period:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
------------- ------------- ------------- ------------
1995 1996 1997 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
THE ALGER AMERICAN FUND:
(All Sub-Accounts from October 20, 1995)
Alger American Growth Portfolio
Beginning of period ........................ $ 10.0000 $ 10.0072 $ 11.1842 $ 13.8684
End of period .............................. $ 10.0072 $ 11.1842 $ 13.8684 $ 20.2501
Units outstanding at end of period ......... 7,531 162,852 402,925 958,685
Alger American Leveraged AllCap Portfolio
Beginning of period ........................ $ 10.0000 $ 10.2636 $ 11.3381 $ 13.3809
End of period .............................. $ 10.2636 $ 11.3381 $ 13.3809 $ 20.8260
Units outstanding at end of period ......... 3,864 130,393 260,380 491,436
Alger American MidCap Growth Portfolio
Beginning of period ........................ $ 10.0000 $ 9.8937 $ 10.9156 $ 12.3791
End of period .............................. $ 9.8937 $ 10.9156 $ 12.3791 $ 15.9059
Units outstanding at end of period ......... 2,208 227,029 405,580 590,794
Alger American Small Capitalization
Portfolio
Beginning of period ........................ $ 10.0000 $ 9.8255 $ 10.0929 $ 11.0864
End of period .............................. $ 9.8255 $ 10.0929 $ 11.0864 $ 12.6301
Units outstanding at end of period ......... 9,498 261,902 527,947 751,967
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
(VIP):
(All Sub-Accounts from October 20, 1995)
VIP Equity-Income Portfolio
Beginning of period ........................ $ 10.0000 $ 10.7172 $ 12.0764 $ 15.2559
End of period .............................. $ 10.7172 $ 12.0764 $ 15.2559 $ 16.7931
Units outstanding at end of period ......... 3,922 370,036 1,040,329 1,850,470
VIP Growth Portfolio
Beginning of period ........................ $ 10.0000 $ 9.8237 $ 11.1104 $ 13.5286
End of period .............................. $ 9.8237 $ 11.1104 $ 13.5286 $ 18.6089
Units outstanding at end of period ......... 5,112 210,258 624,734 1,117,355
VIP Money Market Portfolio
Beginning of period ........................ $ 10.0000 $ 10.0743 $ 10.4712 $ 10.8926
End of period .............................. $ 10.0743 $ 10.4712 $ 10.8926 $ 11.3294
Units outstanding at end of period ......... -- 104,844 446,458 605,376
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
(VIP II):
VIP II Asset Manager: Growth Portfolio
(From October 20, 1995)
Beginning of period ........................ $ 10.0000 $ 10.3997 $ 12.2982 $ 15.1675
End of period .............................. $ 10.3997 $ 12.2982 $ 15.1675 $ 17.5847
Units outstanding at end of period ......... 6,432 58,201 293,160 652,013
VIP II Contrafund Portfolio
(From October 20, 1995)
Beginning of period ........................ $ 10.0000 $ 10.2935 $ 12.3119 $ 15.0718
End of period .............................. $ 10.2935 $ 12.3119 $ 15.0718 $ 19.3181
Units outstanding at end of period ......... 7,417 314,103 1,124,760 2,090,469
VIP II Index 500 Portfolio
(From October 20, 1995)
Beginning of period ........................ $ 10.0000 $ 10.5862 $ 12.8201 $ 16.7757
End of period .............................. $ 10.5862 $ 12.8201 $ 16.7757 $ 21.2285
Units outstanding at end of period ......... 702 231,904 1,310,992 3,336,587
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
------------- ------------- ----------------- ----------------
1995 1996 1997 1998
------------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C>
VIP II Investment Grade Bond Portfolio
(From April 30, 1999)
Beginning of period ........................ N/A N/A N/A N/A
End of period .............................. N/A N/A N/A N/A
Units outstanding at end of period ......... N/A N/A N/A N/A
FIDELITY VARIABLE INSURANCE PRODUCTS
FUND III (VIP III):
(From January 1, 1999)
VIP III Growth Opportunities Portfolio
Beginning of period ........................ N/A N/A N/A N/A
End of period .............................. N/A N/A N/A N/A
Units outstanding at end of period ......... N/A N/A N/A N/A
JANUS ASPEN SERIES:
(All Sub-Accounts From August 8, 1997)
Aggressive Growth Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.8993
End of period .............................. N/A N/A $ 10.8993 $ 14.4299
Units outstanding at end of period ......... N/A N/A 17,506 143,611
Growth Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.1307
End of period .............................. N/A N/A $ 10.1307 $ 13.5522
Units outstanding at end of period ......... N/A N/A 82,286 662,697
International Growth Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 9.5720
End of period .............................. N/A N/A $ 9.5720 $ 11.0658
Units outstanding at end of period ......... N/A N/A 81,884 275,637
Worldwide Growth Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 9.7818
End of period .............................. N/A N/A $ 9.7818 $ 12.4357
Units outstanding at end of period ......... N/A N/A 295,875 2,066,481
NEUBERGER BERMAN AMT:
Limited Maturity Bond Portfolio
(From August 8, 1997)
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.1973
End of period .............................. N/A N/A $ 10.1973 $ 10.4971
Units outstanding at end of period ......... N/A N/A 22,029 210,709
Partners Portfolio
(From August 8, 1997)
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.2686
End of period .............................. N/A N/A $ 10.2686 $ 10.5521
Units outstanding at end of period ......... N/A N/A 255,773 1,582,048
Socially Responsive Portfolio
(From January 1, 1999)
Beginning of period ........................ N/A N/A N/A N/A
End of period .............................. N/A N/A N/A N/A
Units outstanding at end of period ......... N/A N/A N/A N/A
NORTHSTAR GALAXY TRUST:
Emerging Growth Portfolio
(From October 20, 1995)
Beginning of period ........................ $ 10.0000 $ 10.3844 $ 11.6519 $ 13.2845
End of period .............................. $ 10.3844 $ 11.6519 $ 13.2845 $ 15.3663
Units outstanding at end of period ......... 2,292 62,237 270,968 338,593
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31
------------- ------------- ------------- ------------
1995 1996 1997 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Growth + Value Portfolio
(From October 20, 1995)
Beginning of period ........................ $ 10.0000 $ 10.1010 $ 12.2601 $ 13.8613
End of period .............................. $ 10.1010 $ 12.2601 $ 13.8613 $ 16.3103
Units outstanding at end of period ......... 1,068 318,138 1,118,716 1,333,885
International Value Portfolio
(From August 8, 1997)
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.0734
End of period .............................. N/A N/A $ 10.0734 $ 11.6150
Units outstanding at end of period ......... N/A N/A 57,507 330,553
Research Enhanced Index Portfolio
(From October 20, 1995)
Beginning of period ........................ $ 10.0000 $ 10.2402 $ 11.4374 $ 12.0694
End of period .............................. $ 10.2402 $ 11.4374 $ 12.0694 $ 12.0629
Units outstanding at end of period ......... 1,937 52,791 238,691 403,214
High Yield Bond Portfolio
(From August 8, 1997)
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.1766
End of period .............................. N/A N/A $ 10.1766 $ 10.0942
Units outstanding at end of period ......... N/A N/A 105,615 885,662
OCC ACCUMULATION TRUST
(All Sub-Accounts From August 8, 1997)
Equity Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.6410
End of period .............................. N/A N/A $ 10.6410 $ 11.7375
Units outstanding at end of period ......... N/A N/A 45,654 227,143
Global Equity Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 9.4593
End of period .............................. N/A N/A $ 9.4593 $ 10.5673
Units outstanding at end of period ......... N/A N/A 18,968 70,138
Managed Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.0801
End of period .............................. N/A N/A $ 10.0801 $ 10.6480
Units outstanding at end of period ......... N/A N/A 274,773 1,659,488
Small Cap Portfolio
Beginning of period ........................ N/A N/A $ 10.0000 $ 10.1959
End of period .............................. N/A N/A $ 10.1959 $ 9.1466
Units outstanding at end of period ......... N/A N/A 48,630 252,954
</TABLE>
o The Sub-Accounts investing in The Alger American Fund, Fidelity Variable
Insurance Products Fund, Fidelity Variable Insurance Products Fund II and
Northstar Galaxy Trust were not available through the Variable Account
prior to 1995.
o The Sub-Accounts investing in the Janus Aspen Series, Neuberger Berman AMT
Limited Maturity Bond Portfolio and Partners Portfolio, the Northstar
Galaxy Trust High Yield Bond Fund, the Northstar Galaxy Trust
International Value Fund and OCC Accumulation Trust were not available
through the Variable Account prior to August 8, 1997.
o The Sub-Accounts investing in the Fidelity Variable Insurance Products
Fund III and Neuberger Berman AMT Socially Responsive Portfolio were not
available through the Variable Account prior to January 1, 1999.
o The Sub-Account investing in the Fidelity VIP II Investment Grade Bond
Portfolio was not available through the Variable Account prior to April
30, 1999.
B-5
<PAGE>
TABLE OF CONTENTS
"THE NORTHERN LIFE ADVANTAGE INVESTMENT OPTIONS"
The Alger American Fund:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
Fidelity Variable Insurance Products Fund (VIP):
VIP Equity-Income Portfolio
VIP Growth Portfolio
VIP Money Market Portfolio
Fidelity Variable Insurance Products Fund II (VIP II):
VIP II Asset Manager: Growth Portfolio
VIP II Contrafund Portfolio
VIP II Index 500 Portfolio
VIP II Investment Grade Bond Portfolio
Fidelity Variable Insurance Products Fund III (VIP III):
VIP III Growth Opportunities Portfolio
Janus Aspen Series:
Aggressive Growth Portfolio
Growth Portfolio
International Growth Portfolio
Worldwide Growth Portfolio
Neuberger Berman Advisers Management Trust:
Limited Maturity Bond Portfolio
Partners Portfolio
Socially Responsive Portfolio
Northstar Galaxy Trust:
Emerging Growth Portfolio
Growth + Value Portfolio
International Value Portfolio
Research Enhanced Index Portfolio
High Yield Bond Portfolio
OCC Accumulation Trust:
Equity Portfolio
Global Equity Portfolio
Managed Portfolio
Small Cap Portfolio
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FOR NORTHERN LIFE
ADVANTAGE ANNUITY
------------------
INDIVIDUAL DEFERRED VARIABLE/FIXED ANNUITY CONTRACTS
ISSUED BY
SEPARATE ACCOUNT ONE
AND
NORTHERN LIFE INSURANCE COMPANY
This Statement of Additional Information is not a Prospectus, but should be
read in conjunction with the Prospectus dated , 1999 (the "Prospectus")
relating to the Individual Deferred Variable/Fixed Annuity Contracts issued by
Separate Account One (the "Variable Account") and Northern Life Insurance
Company (the "Company"). Much of the information contained in this Statement of
Additional Information expands upon subjects discussed in the Prospectus. A copy
of the Prospectus may be obtained from Washington Square Securities, Inc., 20
Washington Avenue South, Minneapolis, Minnesota 55401.
Capitalized terms used in this Statement of Additional Information that are
not otherwise defined herein shall have the meanings given to them in the
Prospectus.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Introduction ..................................... SAI-2
Custody of Assets ................................ SAI-2
Independent Auditors ............................. SAI-3
Distribution of the Contracts .................... SAI-3
Calculation of Yields and Total Returns .......... SAI-3
Company Holidays ................................. SAI-13
Financial Statements ............................. SAI-13
</TABLE>
------------------
The date of this Statement of Additional Information is November , 1999.
SAI-1
<PAGE>
INTRODUCTION
The Individual Deferred Variable/Fixed Annuity Contracts described in the
Prospectus are flexible Purchase Payment Contracts. The Contracts are sold to or
in connection with retirement plans which may or may not qualify for special
federal tax treatment under the Internal Revenue Code. (See "Federal Tax Status"
in the Prospectus.) Annuity Payouts under the Contracts are deferred until a
later date selected by the Contract Owner.
Purchase Payments may be allocated to one or more of the available
Sub-Accounts of the Variable Account, a separate account of the Company, and/or
to Fixed Account A, Fixed Account B and/or Fixed Account C (which are part of
the general account of the Company).
Purchase payments allocated to one or more of the available Sub-Accounts of
the Variable Account, as selected by the Contract Owner, will be invested in
shares at net asset value of one or more of a group of investment funds
("Funds"). The Funds currently are:
o the Alger American Growth Portfolio, Alger American Leveraged AllCap
Portfolio, Alger American MidCap Growth Portfolio and Alger American Small
Capitalization Portfolio of The Alger American Fund which are managed by
Fred Alger Management, Inc.;
o the VIP Equity-Income Portfolio, VIP Growth Portfolio, and VIP Money
Market Portfolio of the Variable Insurance Products Fund, VIP II Asset
Manager: Growth Portfolio, VIP II Contrafund Portfolio, VIP II Index 500
Portfolio and VIP II Investment Grade Bond Portfolio of the Variable
Insurance Products Fund II, and VIP III Growth Opportunities Portfolio of
the Variable Insurance Products Fund III, all of which are managed by
Fidelity Management & Research Company;
o the Aggressive Growth Portfolio, Growth Portfolio, International Growth
Portfolio and Worldwide Growth Portfolio of the Janus Aspen Series which
are managed by Janus Capital Corporation;
o the Limited Maturity Bond Portfolio, Partners Portfolio and Socially
Responsive Portfolio of the Neuberger Berman Advisers Management Trust,
which are managed by Neuberger Berman Management Inc. with assistance of
Neuberger Berman, LLC as sub-adviser;
o the Emerging Growth Portfolio, Growth + Value Portfolio, International
Value Portfolio, Research Enhanced Index Portfolio, and High Yield Bond
Portfolio of the Northstar Galaxy Trust which are managed by Northstar
Investment Management Corporation; the Growth + Value Portfolio is
sub-advised by Navellier Fund Management, Inc., the International Value
Portfolio is sub-advised by Brandes Investment Partners, L.P., and the
Research Enhanced Index Portfolio is sub-advised by J.P. Morgan Investment
Management, Inc.;
o the Equity Portfolio, Global Equity Portfolio, Managed Portfolio and Small
Cap Portfolio of the OCC Accumulation Trust which are managed by OpCap
Advisors, a subsidiary of Oppenheimer Capital.
Purchase Payments allocated to Fixed Account A, Fixed Account B or Fixed
Account C, which are part of the general account of the Company, will be
credited with interest at a rate not less than 3% per year. Interest credited in
excess of 3%, if any, will be determined at the sole discretion of the Company.
That part of the Contract relating to Fixed Account A, Fixed Account B and Fixed
Account C is not registered under the Securities Act of 1933 and the Fixed
Accounts are not subject to the restrictions of the Investment Company Act of
1940. (See Appendix A to the Prospectus.)
CUSTODY OF ASSETS
The Company, whose address appears on the cover of the Prospectus,
maintains custody of the assets of the Variable Account. As Custodian, the
Company holds cash balances for the Variable Account pending investment in the
Investment Funds or distribution. The Investment Fund shares owned by the
Sub-accounts are reflected only on the records of the Funds and are not issued
in certificated form.
SAI-2
<PAGE>
INDEPENDENT AUDITORS
The financial statements as of December 31, 1998 and the two years then
ended of Separate Account One and the statutory basis financial statements of
Northern Life Insurance Company as of and for the two years ended December 31,
1998 and 1997, which are incorporated by reference into this Statement of
Additional Information, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are incorporated herein by reference,
and have been so incorporated by reference in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
DISTRIBUTION OF THE CONTRACTS
The Contracts will be distributed by Washington Square Securities, Inc.
("WSSI"), the principal underwriter which is an affiliate of the Company. The
Contracts will be sold by licensed insurance agents in those states where the
Contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc.
For the years ended December 31, 1996, 1997 and 1998, WSSI was paid fees by
the Company in connection with distribution of the Transfer Series and Flex
Series Contracts aggregating $1,123,993, $5,551,624, and $10,569,750,
respectively. No fees have been paid to WSSI by the Company in connection with
the distribution of the Retail Series Contracts as they were not available prior
to November , 1999.
The offering of the Contracts is continuous.
There are no special purchase plans or exchange privileges not described
in the Prospectus. (See "Reduction of Charges" in the Prospectus.)
No deduction for a sales charge is made from the Purchase Payments for the
Contracts. However, if part or all of a Contract's value is withdrawn,
Withdrawal Charges (which may be deemed to be Contingent Deferred Sales Charges)
may be made by the Company. The method used to determine the amount of such
charges is described in the Prospectus under the heading "Charges Made By The
Company -- Withdrawal Charge (Contingent Deferred Sales Charge)." There is no
difference in the amount of this charge or any of the other charges described in
the Prospectus as between Contracts purchased by members of the public as
individuals or groups, and Contracts purchased by any class of individuals, such
as officers, directors or employees of the Company or of the Principal
Underwriter.
CALCULATION OF YIELDS AND TOTAL RETURNS
From time to time, the Company may disclose yields, total returns, and
other performance data pertaining to the Contracts for a Sub-Account. Such
performance data will be computed, or accompanied by performance data computed,
in accordance with the standards defined by the Securities and Exchange
Commission.
Because of the charges and deductions imposed under a Contract, the yield
for the Sub-Accounts will be lower than the yield for their respective
portfolios. The calculations of yields, total returns, and other performance
data do not reflect the effect of any premium tax that may be applicable to a
particular Contract. Premium taxes currently range from 0% to 3.5% of premium
based on the state in which the Contract is sold.
VIP MONEY MARKET PORTFOLIO SUB-ACCOUNT YIELD. From time to time,
advertisements and sales literature may quote the current annualized yield of
the Money Market Sub-Account for a seven-day period in a manner which does not
take into consideration any realized or unrealized gains or losses on shares of
the VIP Money Market Portfolio or on its portfolio securities.
The current annualized yield is computed by determining the net change
(exclusive of realized gains and losses on the sale of securities and
unrealized appreciation and depreciation) at the end of the seven-day period in
the value of a hypothetical account under a Contract having a balance of one
Accumulation Unit of the Money Market Sub-Account at the beginning of the
period dividing such net change in account value of the hypothetical account to
determine the base period return, and annualizing this quotient on a 365-day
basis. The net change in account value reflects: 1) net income from the
Portfolio attributable to the hypothetical account; and 2) charges and
deductions imposed under the Contract which are attributable to the
hypothetical account. The charges and deductions include the per unit charges
for the hypothetical account for: 1) the Annual Contract Charge; 2)
Administration Charge;
SAI-3
<PAGE>
and 3) the Mortality and Expense Risk Charges. For purposes of calculating
current yields for a Contract, an average per unit administration fee is used
based on the $30 Annual Contract Charge deducted at the end of each Contract
Year. Current Yield will be calculated according to the following formula:
Current Yield = ((NCS - ES)/UV) x (365/7)
Where:
NCS = the net change in the value of the Portfolio (exclusive of realized
gains or losses on the sale of securities and unrealized appreciation
and depreciation) for the seven-day period attributable to a
hypothetical account having a balance of 1 Sub-Account Accumulation
Unit.
ES = per unit expenses attributable to the hypothetical account for the
seven-day period.
UV = The Accumulation Unit value on the first day of the seven-day period.
The current yield of the sub-account for the seven day period ended
December 31, 1998 was 3.43%.
EFFECTIVE YIELD. The effective yield of the Money Market Sub-Account
determined on a compounded basis for the same seven-day period may also be
quoted.
The effective yield is calculated by compounding the unannualized base
period return according to the following formula:
Effective Yield = (1 + ((NCS - ES)/UV)) 365/7 - 1
Where:
NCS = the net change in the value of the Portfolio (exclusive of realized
gains and losses on the sale of securities and unrealized
appreciation and depreciation) for the seven-day period attributable
to a hypothetical account having a balance of 1 Sub-Account unit.
ES = per Accumulation Unit expenses attributable to the hypothetical
account for the seven-day period.
UV = the Accumulation Unit value for the first day of the seven-day
period.
The effective yield of the sub-account for the seven day period ended
December 31, 1998 was 3.49%.
Because of the charges and deductions imposed under the Contracts, the
yield for the Money Market Sub-Account will be lower than the yield for the VIP
Money Market Portfolio.
The current and effective yields on amounts held in the Money Market
Sub-Account normally will fluctuate on a daily basis. THEREFORE, THE DISCLOSED
YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR REPRESENTATION OF FUTURE
YIELDS OR RATES OF RETURN. The Money Market Sub-Account's actual yield is
affected by changes in interest rates on money market securities, average
portfolio maturity of the VIP Money Market Portfolio, the types and quality of
portfolio securities held by VIP Money Market Portfolio and the VIP Money Market
Portfolio's operating expenses. Yields on amounts held in the Money Market
Sub-Account may also be presented for periods other than a seven-day period.
OTHER SUB-ACCOUNT YIELDS. From time to time, sales literature or
advertisements may quote the current annualized yield of one or more of the
Sub-Accounts (except the Money Market Sub-Account) for a Contract for 30-day or
one-month periods. The annualized yield of a Sub-Account refers to income
generated by the Sub-Account over a specific 30-day or one-month period. Because
the yield is annualized, the yield generated by a Sub-Account during a 30-day or
one-month period is assumed to be generated each period over a 12-month period.
The yield is computed by: 1) dividing the net investment income of the
Fund attributable to the Sub-Account Accumulation Units less Sub-Account
expenses for the period; by 2) the maximum offering price per Accumulation Unit
on the last day of the period times the daily average number of units
outstanding for the period; by 3) compounding that yield for a six-month
period; and by 4) multiplying that result by 2. Expenses attributable to the
Sub-Account include the Administration Charge and the Mortality and Expense
Risk Charges. The yield calculation assumes an Annual Contract Charge of $30
per year per Contract deducted at the end of each Contract Year. For purposes
of
SAI-4
<PAGE>
calculating the 30-day or one-month yield, an average Annual Contract Charge per
dollar of Contract Value in the Variable Account is used to determine the amount
of the charge attributable to the Sub-Account for the 30-day or one-month
period. The 30-day or one-month yield is calculated according to the following
formula:
Yield = 2 \x [(((NI - ES)/(U x UV)) + 1) 6 - 1]
Where:
NI = net income of the Portfolio for the 30-day or one-month period
attributable to the Sub-Account's Accumulation Units.
ES = expenses of the Sub-Account for the 30-day or one-month period.
U = the average number of Accumulation Units outstanding.
UV = the Accumulation Unit value of the close (highest) of the last day in
the 30-day or one-month period.
The annualized yield for the Northstar Galaxy Trust High Yield Bond
Portfolio Sub-Account for the month ended December 31, 1998 was 8.23%. The
annualized yield for the Neuberger Berman Advisers Management Trust Limited
Maturity Bond Portfolio Sub-Account for the month ended December 31, 1998 was
5.05%. The VIP II Investment Grade Bond Portfolio Sub-Account was not available
through the Variable Account prior to April 30, 1999. Therefore, the annualized
yield for the VIP II Investment Grade Bond Portfolio Sub-Account for the month
ended December 31, 1998 is not available.
Because of the charges and deductions imposed under the Contract, the yield
for the Sub-Account will be lower than the yield for the corresponding Fund.
The yield on the amounts held in the Sub-Accounts normally will fluctuate
over time. THEREFORE, THE DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN. The
Sub-Account's actual yield is affected by the types and quality of portfolio
securities held by the Fund and its operating expenses.
Yield calculations do not take into account the Withdrawal Charges under
the Contracts. The Withdrawal Charge for Transfer Series Contracts is equal to
2% to 6% of Purchase Payments paid during the six years prior to the withdrawal
(including the year in which the withdrawal is made) on amounts withdrawn under
the Contract. The Withdrawal Charge for Flex Series Contracts is equal to 1% to
8% of amounts withdrawn under the Contracts during the first 10 Contract Years.
The Withdrawal Charge for Retail Series Contracts is equal to 2% to 7% of
Purchase Payments paid during the six years prior to the withdrawal (including
the year in which the withdrawal is made) on amounts withdrawn under the
Contract.
AVERAGE ANNUAL TOTAL RETURNS. From time to time, sales literature or
advertisements may also quote average annual total returns for one or more of
the Sub-Accounts for various periods of time, excluding the money market
Sub-Account.
Average annual total returns represent the average annual compounded rates
of return that would equate an initial investment of $1,000 under a Contract to
the redemption value of that investment as of the last day of each of the
periods. The ending date for each period for which total return quotations are
provided will be for the most recent month-end practicable, considering the type
and media of the communication and will be stated in the communication.
Average annual total returns will be calculated using Sub-Account
Accumulation Unit values which the Company calculates on each Valuation Date
based on the performance of the Sub-Account's underlying Fund, the deductions
for the Mortality and Expense Risk Charges, the Administration Charge, and the
Annual Contract Charge. The calculation assumes that the Annual Contract Charge
is $30 per year per Contract deducted at the end of each Contract Year. For
purposes of calculating average annual total return, an average per dollar
Annual Contract Charge attributable to the hypothetical account for the period
is used. The calculation also assumes full withdrawal of the Contract at the end
of the period for the return quotation. Total returns will therefore reflect a
deduction of the
SAI-5
<PAGE>
Withdrawal Charge for any period less than six years for Transfer Series and
Retail Series Contracts, and for any period less than 11 years for Flex Series
Contracts. The total return will then be calculated according to the following
formula:
TR = ((ERV/P) 1/N) - 1
Where:
TR = The average annual total return net of Sub-Account recurring charges.
ERV = the ending redeemable value (net of any applicable surrender charge)
of the hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
SAI-6
<PAGE>
Following are the Average Annual Total Returns for Sub-Accounts as of
December 31, 1998.
<TABLE>
<CAPTION>
FOR THE 1-YEAR PERIOD ENDED
SUB-ACCOUNT 12/31/98
- ------------------------------------------------------ -----------------------------------------
++T.S. F.S. R.S.
<S> <C> <C> <C>
Alger American Growth Portfolio 40.36% 35.27% 39.46%
(Sub-Account Inception: 10/20/95)
Alger American Leveraged AllCap Portfolio 49.99% 44.20% 49.09%
(Sub-Account Inception: 10/20/95)
Alger American MidCap Growth Portfolio 22.84% 19.00% 21.94%
(Sub-Account Inception: 10/20/95)
Alger American Small Capitalization Portfolio 8.27% 5.49% 7.37%
(Sub-Account Inception: 10/20/95)
Fidelity VIP Equity-Income Portfolio 4.42% 1.92% 3.52%
(Sub-Account Inception: 10/20/95)
Fidelity VIP Growth Portfolio 31.90% 27.41% 31.00%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Asset Manager: Growth Portfolio 10.28% 7.36% 9.38%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Contrafund Portfolio 22.52% 18.71% 21.62%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Index 500 Portfolio 20.89% 17.20% 19.99%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Investment Grade Bond Portfolio N/A N/A N/A
(Sub-Account Inception: 4/30/99)
Fidelity VIP III Growth Opportunities Portfolio N/A N/A N/A
(Sub-Account Inception: 1/1/99)
Janus Aggressive Growth Portfolio 26.74% 22.63% 25.84%
(Sub-Account Inception: 8/8/97)
Janus Growth Portfolio 28.12% 23.91% 27.22%
(Sub-Account Inception: 8/8/97)
Janus International Growth Portfolio 9.95% 7.05% 9.05%
(Sub-Account Inception: 8/8/97)
Janus Worldwide Growth Portfolio 21.48% 17.74% 20.58%
(Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust (2.71)% (4.71)% (3.61)%
Limited Maturity Bond Portfolio
(Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust (2.89)% (4.87)% (3.79)%
Partners Portfolio (Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust N/A N/A N/A
Socially Responsive Portfolio (d)
(Sub-Account Inception: 1/1/99)
Northstar Galaxy Trust Emerging Growth 10.02% 7.11% 9.12%
Portfolio (a) (Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust Growth + Value Portfolio 12.02% 8.96% 11.12%
(Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust International Value Portfolio 9.65% 6.77% 8.75%
(Sub-Account Inception: 8/8/97)
Northstar Galaxy Trust Research Enhanced Index (5.71)% (7.48)% (6.61)%
Portfolio(b) (Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust High Yield Bond Portfolio (6.46)% (8.18)% (7.36)%
(Sub-Account Inception: 8/8/97)
OCC Equity Portfolio (c) 4.65% 2.13% 3.75%
(Sub-Account Inception: 8/8/97)
OCC Global Equity Portfolio 6.06% 3.44% 5.16%
(Sub-Account Inception: 8/8/97)
OCC Managed Portfolio (c) (0.02)% (2.21)% (0.92)%
(Sub-Account Inception: 8/8/97)
OCC Small Cap Portfolio (c) (15.94)% (16.98)% (16.84)%
(Sub-Account Inception: 8/8/97)
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
FOR THE PERIOD FROM DATE OF
INCEPTION OF SUB-ACCOUNT TO
SUB-ACCOUNT 12/31/98
- ------------------------------------------------------ -----------------------------------------
T.S. F.S. R.S.
<S> <C> <C> <C>
Alger American Growth Portfolio 23.64% 22.00% 23.64%
(Sub-Account Inception: 10/20/95)
Alger American Leveraged AllCap Portfolio 24.75% 23.08% 24.75%
(Sub-Account Inception: 10/20/95)
Alger American MidCap Growth Portfolio 14.35% 13.06% 14.35%
(Sub-Account Inception: 10/20/95)
Alger American Small Capitalization Portfolio 6.07% 5.13% 6.07%
(Sub-Account Inception: 10/20/95)
Fidelity VIP Equity-Income Portfolio 16.40% 15.03% 16.40%
(Sub-Account Inception: 10/20/95)
Fidelity VIP Growth Portfolio 20.31% 18.80% 20.31%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Asset Manager: Growth Portfolio 18.15% 16.71% 18.15%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Contrafund Portfolio 21.78% 20.22% 21.78%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Index 500 Portfolio 25.55% 23.85% 25.55%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Investment Grade Bond Portfolio N/A N/A N/A
(Sub-Account Inception: 4/30/99)
Fidelity VIP III Growth Opportunities Portfolio N/A N/A N/A
(Sub-Account Inception: 1/1/99)
Janus Aggressive Growth Portfolio 26.15% 22.91% 26.15%
(Sub-Account Inception: 8/8/97)
Janus Growth Portfolio 20.38% 17.49% 20.38%
(Sub-Account Inception: 8/8/97)
Janus International Growth Portfolio 3.39% 1.59% 3.39%
(Sub-Account Inception: 8/8/97)
Janus Worldwide Growth Portfolio 12.88% 10.47% 12.88%
(Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust (0.67)% (2.20)% (0.67)%
Limited Maturity Bond Portfolio
(Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust (0.28)% (1.83)% (0.28)%
Partners Portfolio (Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust N/A N/A N/A
Socially Responsive Portfolio (d)
(Sub-Account Inception: 1/1/99)
Northstar Galaxy Trust Emerging Growth 13.08% 11.84% 13.08%
Portfolio (a) (Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust Growth + Value Portfolio 15.30% 13.97% 15.30%
(Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust International Value Portfolio 7.22% 5.18% 7.22%
(Sub-Account Inception: 8/8/97)
Northstar Galaxy Trust Research Enhanced Index 4.51% 3.64% 4.51%
Portfolio(b) (Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust High Yield Bond Portfolio (3.57)% (4.90)% (3.57)%
(Sub-Account Inception: 8/8/97)
OCC Equity Portfolio (c) 8.08% 5.98% 8.08%
(Sub-Account Inception: 8/8/97)
OCC Global Equity Portfolio (0.17)% (1.73)% (0.17)%
(Sub-Account Inception: 8/8/97)
OCC Managed Portfolio (c) 0.41% (1.19)% 0.41%
(Sub-Account Inception: 8/8/97)
OCC Small Cap Portfolio (c) (10.56)% (11.42)% (10.56)%
(Sub-Account Inception: 8/8/97)
</TABLE>
- -----------------
++ Key: T.S. = Transfer Series Contract; F.S. = Flex Series Contract; R.S. =
Retail Series Contract. (See "Withdrawal Charge (Contingent Deferred Sale
Charge)" in the Prospectus.)
From time to time, sales literature or advertisements may quote average
annual total returns for periods prior to the date the Sub-Accounts commenced
operations. Such performance information for the Sub-Accounts will be calculated
based on the performance of the Funds and the assumption that the Sub-Accounts
were in existence for the same periods as those indicated for the Funds, with
the level of Contract charges currently in effect.
SAI-7
<PAGE>
Such average annual total return information for the Sub-Accounts is as
follows:
<TABLE>
<CAPTION>
FOR THE 1-YEAR
PERIOD ENDED
SUB-ACCOUNT 12/31/98
- ------------------------------------------------------ -----------------------------------------
++T.S. F.S. R.S.
<S> <C> <C> <C>
Alger American Growth Portfolio 40.36% 35.27% 39.46%
(Portfolio Inception: 1/9/89)
Alger American Leveraged AllCap Portfolio 49.99% 44.20% 49.09%
(Portfolio Inception: 1/25/95)
Alger American MidCap Growth Portfolio 22.84% 19.00% 21.94%
(Portfolio Inception: 5/3/93)
Alger American Small Capitalization Portfolio 8.27% 5.49% 7.37%
(Portfolio Inception: 9/21/88)
Fidelity VIP Equity-Income Portfolio 4.42% 1.92% 3.52%
(Portfolio Inception: 10/9/86)
Fidelity VIP Growth Portfolio 31.90% 27.41% 31.00%
(Portfolio Inception: 10/9/86)
Fidelity VIP II Asset Manager: Growth Portfolio 10.28% 7.36% 9.38%
(Portfolio Inception: 1/3/95)
Fidelity VIP II Contrafund Portfolio 22.52% 18.71% 21.62%
(Portfolio Inception: 1/3/95)
Fidelity VIP II Index 500 Portfolio 20.89% 17.20% 19.99%
(Portfolio Inception: 8/27/92)
Fidelity VIP II Investment Grade Bond Portfolio 1.68% (0.63)% 0.78%
(Portfolio Inception: 12/5/88)
Fidelity VIP III Growth Opportunities Portfolio 17.23% 13.80% 16.33%
(Portfolio Inception: 1/3/95)
Janus Aggressive Growth Portfolio 26.74% 22.63% 25.84%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 28.12% 23.91% 27.22%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio 9.95% 7.05% 9.05%
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 21.48% 17.74% 20.58%
(Portfolio Inception: 9/13/93)
Neuberger Berman Advisers Management Trust (2.71)% (4.71)% (3.61)%
Limited Maturity Bond Portfolio
(Portfolio Inception: 9/10/84)
Neuberger Berman Advisers Management Trust (2.89)% (4.87)% (3.79)%
Partners Portfolio
(Portfolio Inception: 3/22/94)
Neuberger Berman Advisers Management Trust N/A N/A N/A
Socially Responsive Portfolio (d)
(Portfolio Inception: 8/19/98)
Northstar Galaxy Trust Emerging Growth Portfolio (a) 10.02% 7.11% 9.12%
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust Growth + Value Portfolio 12.02% 8.96% 11.12%
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust International Value Portfolio 9.65% 6.77% 8.75%
(Portfolio Inception: 8/8/97)
Northstar Galaxy Trust Research Enhanced (5.71)% (7.48)% (6.61)%
Index Portfolio (b)
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust High Yield Bond Portfolio (6.46)% (8.18)% (7.36)%
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio (c) 4.65% 2.13% 3.75%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio 6.06% 3.44% 5.16%
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio (c) (0.02)% (2.21)% (0.92)%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio (c) (15.94)% (16.98)% (16.84)%
(Portfolio Inception: 8/1/88)
</TABLE>
[WIDE TABLE CONTINUED]
<TABLE>
<CAPTION>
FOR THE 5-YEAR
PERIOD ENDED
SUB-ACCOUNT 12/31/98
- ------------------------------------------------------ -----------------------------------
T.S. F.S. R.S.
<S> <C> <C> <C>
Alger American Growth Portfolio 21.64% 20.85% 21.81%
(Portfolio Inception: 1/9/89)
Alger American Leveraged AllCap Portfolio N/A N/A N/A
(Portfolio Inception: 1/25/95)
Alger American MidCap Growth Portfolio 16.74% 16.05% 16.93%
(Portfolio Inception: 5/3/93)
Alger American Small Capitalization Portfolio 10.83% 10.29% 11.07%
(Portfolio Inception: 9/21/88)
Fidelity VIP Equity-Income Portfolio 16.54% 15.86% 16.74%
(Portfolio Inception: 10/9/86)
Fidelity VIP Growth Portfolio 19.49% 18.74% 19.67%
(Portfolio Inception: 10/9/86)
Fidelity VIP II Asset Manager: Growth Portfolio N/A N/A N/A
(Portfolio Inception: 1/3/95)
Fidelity VIP II Contrafund Portfolio N/A N/A N/A
(Portfolio Inception: 1/3/95)
Fidelity VIP II Index 500 Portfolio 21.48% 20.69% 21.64%
(Portfolio Inception: 8/27/92)
Fidelity VIP II Investment Grade Bond Portfolio 4.38% 4.02% 4.68%
(Portfolio Inception: 12/5/88)
Fidelity VIP III Growth Opportunities Portfolio N/A N/A N/A
(Portfolio Inception: 1/3/95)
Janus Aggressive Growth Portfolio 17.12% 16.42% 17.31%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 19.17% 18.43% 19.35%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio N/A N/A N/A
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 19.07% 18.33% 19.25%
(Portfolio Inception: 9/13/93)
Neuberger Berman Advisers Management Trust 2.84% 2.53% 3.16%
Limited Maturity Bond Portfolio
(Portfolio Inception: 9/10/84)
Neuberger Berman Advisers Management Trust N/A N/A N/A
Partners Portfolio
(Portfolio Inception: 3/22/94)
Neuberger Berman Advisers Management Trust N/A N/A N/A
Socially Responsive Portfolio (d)
(Portfolio Inception: 8/19/98)
Northstar Galaxy Trust Emerging Growth Portfolio (a) N/A N/A N/A
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust Growth + Value Portfolio N/A N/A N/A
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust International Value Portfolio N/A N/A N/A
(Portfolio Inception: 8/8/97)
Northstar Galaxy Trust Research Enhanced N/A N/A N/A
Index Portfolio (b)
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust High Yield Bond Portfolio N/A N/A N/A
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio (c) 18.06% 17.34% 18.25%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio N/A N/A N/A
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio (c) 16.93% 16.24% 17.12%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio (c) 6.25% 5.83% 6.53%
(Portfolio Inception: 8/1/88)
</TABLE>
The Company may also disclose average annual total returns for the Funds
since their inception, including such disclosure for periods prior to the date
the Variable Account commenced operations.
SAI-8
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
FOR THE 10-YEAR DATE OF INCEPTION OF
PERIOD ENDED PORTFOLIO TO
12/31/98 12/31/98
- --------------------------------------- ---------------------------------------
T.S. F.S. R.S. T.S. F.S. R.S.
<S> <C> <C> <C> <C> <C>
N/A N/A N/A 20.19% 20.08% 20.19%
N/A N/A N/A 36.79% 35.00% 36.79%
N/A N/A N/A 21.36% 20.63% 21.49%
18.08% 18.08% 18.08% 17.09% 17.09% 17.09%
13.85% 13.85% 13.85% 12.65% 12.65% 12.65%
17.60% 17.60% 17.60% 15.57% 15.57% 15.57%
N/A N/A N/A 18.88% 17.61% 18.88%
N/A N/A N/A 26.10% 24.61% 26.10%
N/A N/A N/A 19.28% 18.59% 19.28%
6.66% 6.66% 6.66% 6.64% 6.64% 6.64%
N/A N/A N/A 23.73% 22.31% 23.73%
N/A N/A N/A 19.71% 18.98% 19.87%
N/A N/A N/A 18.64% 17.94% 18.81%
N/A N/A N/A 16.57% 15.62% 16.57%
N/A N/A N/A 21.81% 21.05% 21.96%
5.11% 5.11% 5.11% 6.24% 6.24% 6.24%
N/A N/A N/A 17.44% 16.49% 17.44%
N/A N/A N/A N/A N/A N/A
N/A N/A N/A 12.58% 11.74% 12.58%
N/A N/A N/A 15.83% 14.90% 15.83%
N/A N/A N/A 7.22% 5.18% 6.59%
N/A N/A N/A 5.80% 5.16% 5.80%
N/A N/A N/A 7.18% 6.49% 7.18%
15.77% 15.77% 15.77% 15.25% 15.25% 15.25%
N/A N/A N/A 13.34% 12.23% 13.34%
17.56% 17.56% 17.56% 17.24% 17.24% 17.24%
11.49% 11.49% 11.49% 11.16% 11.16% 11.16%
</TABLE>
- -----------------
++ Key: T.S. = Transfer Series Contract; F.S. = Flex Series Contract; R.S. =
Retail Series Contract. (See "Withdrawal Charge (Contingent Deferred Sale
Charge)" in the Prospectus.)
SAI-9
<PAGE>
Such average annual total return information for the Funds is as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM DATE OF
FOR THE 1-YEAR FOR THE 5-YEAR FOR THE 10-YEAR INCEPTION OF
PERIOD ENDED PERIOD ENDED PERIOD ENDED PORTFOLIO TO
PORTFOLIO 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------- ---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Alger American Growth Portfolio 48.07% 23.90% N/A 19.42%
(Portfolio Inception: 1/9/89)
Alger American Leveraged AllCap Portfolio 57.83% N/A N/A 56.03%
(Portfolio Inception: 1/25/95)
Alger American MidCap Growth Portfolio 30.30% 18.98% N/A 29.22%
(Portfolio Inception: 5/3/93)
Alger American Small Capitalization Portfolio 15.53% 13.09% 19.85% 21.09%
(Portfolio Inception: 9/21/88)
Fidelity VIP Equity-Income Portfolio 11.63% 18.77% 15.62% 15.79%
(Portfolio Inception: 10/9/86)
Fidelity VIP Growth Portfolio 39.49% 21.74% 19.41% 19.03%
(Portfolio Inception: 10/9/86)
Fidelity VIP II Asset Manager: Growth Portfolio 17.57% N/A N/A 29.55%
(Portfolio Inception: 1/3/95)
Fidelity VIP II Contrafund Portfolio 29.98% N/A N/A 39.90%
(Portfolio Inception: 1/3/95)
Fidelity VIP II Index 500 Portfolio 28.33% 23.72% N/A 25.59%
(Portfolio Inception: 8/27/92)
Fidelity VIP II Investment Grade Bond Portfolio 8.85% 6.70% 8.35% 9.30%
(Portfolio Inception: 12/5/88)
Fidelity VIP III Growth Opportunities Portfolio 24.61% N/A N/A 36.48%
(Portfolio Inception: 1/3/95)
Janus Aggressive Growth Portfolio 34.26% 19.35% N/A 27.66%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 35.66% 21.41% N/A 26.31%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio 17.23% N/A N/A 24.59%
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 28.92% 21.32% N/A 30.38%
(Portfolio Inception: 9/13/93)
Neuberger Berman Advisers Management Trust 4.39% 5.18% 6.79% 8.52%
Limited Maturity Bond Portfolio
(Portfolio Inception: 9/10/84)
Neuberger Berman Advisers Management Trust 4.21% N/A N/A 25.54%
Partners Portfolio (Portfolio Inception: 3/22/94)
Neuberger Berman Advisers Management Trust Socially N/A N/A N/A N/A
Responsive Portfolio (d) (Portfolio Inception: 8/19/98)
Northstar Galaxy Trust Emerging Growth Portfolio (a) 17.30% N/A N/A 19.34%
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust Growth + Value Portfolio 19.33% N/A N/A 23.63%
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust International Value Portfolio 16.93% N/A N/A 53.12%
(Since Inception 8/8/97)
Northstar Galaxy Trust Research Enhanced Index 1.35% N/A N/A 11.06%
Portfolio (b)
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust High Yield Bond Portfolio 0.59% N/A N/A 12.79%
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio (c) 11.86% 20.41% 17.62% 19.03%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio 13.29% N/A N/A 22.34%
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio (c) 7.12% 19.25% 19.40% 21.26%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio (c) (9.03)% 8.53% 13.21% 14.31%
(Portfolio Inception: 8/1/88)
</TABLE>
SAI-10
<PAGE>
OTHER TOTAL RETURNS. From time to time, sales literature or advertisements
may quote average annual total returns that do not reflect the Withdrawal
Charge. These returns are calculated in exactly the same way as average annual
total returns described above, except that the ending redeemable value of the
hypothetical account for the period is replaced with an ending value for the
period that does not take into account any charges on amounts withdrawn. Because
the Withdrawal Charge will not be reflected in those quotations, there is no
differentiation between the Transfer Series Contracts, the Flex Series
Contracts, and the Retail Series Contracts. Listed in the chart below are the
Average Annual Total Returns for the Sub-Accounts for the indicated periods.
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM DATE OF
FOR THE 1-YEAR INCEPTION OF
PERIOD ENDED SUB-ACCOUNT TO
SUB-ACCOUNT 12/31/98 12/31/98
- --------------------------------------------------------------------------- ---------------- ---------------
Alger American Growth Portfolio 45.76% 24.52%
(Sub-Account Inception: 10/20/95)
<S> <C> <C>
Alger American Leveraged AllCap Portfolio 55.39% 25.62%
(Sub-Account Inception: 10/20/95)
Alger American MidCap Growth Portfolio 28.24% 15.40%
(Sub-Account Inception: 10/20/95)
Alger American Small Capitalization Portfolio 13.67% 7.29%
(Sub-Account Inception: 10/20/95)
Fidelity VIP Equity-Income Portfolio 9.82% 17.41%
(Sub-Account Inception: 10/20/95)
Fidelity VIP Growth Portfolio 37.30% 21.25%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Asset Manager: Growth Portfolio 15.68% 19.12%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Contrafund Portfolio 27.92% 22.70%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Index 500 Portfolio 26.29% 26.40%
(Sub-Account Inception: 10/20/95)
Fidelity VIP II Investment Grade Bond Portfolio N/A N/A
(Sub-Account Inception: 4/30/99)
Fidelity VIP III Growth Opportunities Portfolio N/A N/A
(Sub-Account Inception: 1/1/99)
Janus Aggressive Growth Portfolio 32.14% 29.66%
(Sub-Account Inception: 8/8/97)
Janus Growth Portfolio 33.52% 23.95%
(Sub-Account Inception: 8/8/97)
Janus International Growth Portfolio 15.35% 7.17%
(Sub-Account Inception: 8/8/97)
Janus Worldwide Growth Portfolio 26.88% 16.54%
(Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust 2.69% 3.18%
Limited Maturity Bond Portfolio
(Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust 2.51% 3.56%
Partners Portfolio (Sub-Account Inception: 8/8/97)
Neuberger Berman Advisers Management Trust N/A N/A
Socially Responsive Portfolio (d) (Sub-Account Inception: 1/1/99)
Northstar Galaxy Trust Emerging Growth Portfolio (a) 15.42% 14.15%
(Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust Growth + Value Portfolio 17.42% 16.32%
(Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust International Value Portfolio 15.05% 10.95%
(Sub-Account Inception: 8/8/97)
Northstar Galaxy Trust Research Enhanced Index Portfolio (b) (0.31)% 5.78%
(Sub-Account Inception: 10/20/95)
Northstar Galaxy Trust High Yield Bond Portfolio (1.06)% 0.32%
(Sub-Account Inception: 8/8/97)
OCC Equity Portfolio (c) 10.05% 11.80%
(Sub-Account Inception: 8/8/97)
OCC Global Equity Portfolio 11.46% 3.67%
(Sub-Account Inception: 8/8/97)
OCC Managed Portfolio (c) 5.38% 4.24%
(Sub-Account Inception: 8/8/97)
OCC Small Cap Portfolio (c) (10.54)% (6.55)%
(Sub-Account Inception: 8/8/97)
</TABLE>
SAI-11
<PAGE>
The Average Annual Total Returns listed below do not reflect deduction of
the withdrawal charge and are calculated based on the assumption that the
Sub-Accounts were in existence for the same periods as those indicated for the
funds:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM DATE OF
FOR THE 1-YEAR FOR THE 5-YEAR FOR THE 10-YEAR INCEPTION OF
PERIOD ENDED PERIOD ENDED PERIOD ENDED PORTFOLIO TO
SUB-ACCOUNT 12/31/98 12/31/98 12/31/98 12/31/98
- ----------------------------------------------------------- ---------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Alger American Growth Portfolio 45.76% 21.97% N/A 20.19%
(Portfolio Inception: 1/9/89)
Alger American Leveraged AllCap Portfolio 55.39% N/A N/A 37.25%
(Portfolio Inception: 1/25/95)
Alger American MidCap Growth Portfolio 28.24% 17.13% N/A 21.62%
(Portfolio Inception: 5/3/93)
Alger American Small Capitalization Portfolio 13.67% 11.31% 18.08% 17.09%
(Portfolio Inception: 9/21/88)
Fidelity VIP Equity-Income Portfolio 9.82% 16.93% 13.85% 12.65%
(Portfolio Inception: 10/9/86)
Fidelity VIP Growth Portfolio 37.30% 19.84% 17.60% 15.57%
(Portfolio Inception: 10/9/86)
Fidelity VIP II Asset Manager: Growth Portfolio 15.68% N/A N/A 19.54%
(Portfolio Inception: 1/3/95)
Fidelity VIP II Contrafund Portfolio 27.92% N/A N/A 26.65%
(Portfolio Inception: 1/3/95)
Fidelity VIP II Index 500 Portfolio 26.29% 21.81% N/A 19.28%
(Portfolio Inception: 8/27/92)
Fidelity VIP II Investment Grade Bond Portfolio 7.08% 4.98% 6.66% 6.64%
(Portfolio Inception: 12/5/88)
Fidelity VIP III Growth Opportunities Portfolio 22.63% N/A N/A 24.32%
(Portfolio Inception: 1/3/95)
Janus Aggressive Growth Portfolio 32.14% 17.50% N/A 20.02%
(Portfolio Inception: 9/13/93)
Janus Growth Portfolio 33.52% 19.52% N/A 18.97%
(Portfolio Inception: 9/13/93)
Janus International Growth Portfolio 15.35% N/A N/A 17.01%
(Portfolio Inception: 5/2/94)
Janus Worldwide Growth Portfolio 26.88% 19.43% N/A 22.10%
(Portfolio Inception: 9/13/93)
Neuberger Berman Advisers Management Trust 2.69% 3.48% 5.11% 6.24%
Limited Maturity Bond Portfolio
(Portfolio Inception: 9/10/84)
Neuberger Berman Advisers Management Trust 2.51% N/A N/A 17.85%
Partners Portfolio (Portfolio Inception: 3/22/94)
Neuberger Berman Advisers Management Trust Socially N/A N/A N/A N/A
Responsive Portfolio (d) (Portfolio Inception: 8/19/98)
Northstar Galaxy Trust Emerging Growth Portfolio (a) 15.42% N/A N/A 13.08%
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust Growth + Value Portfolio 17.42% N/A N/A 16.28%
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust International Value Portfolio 15.05% N/A N/A 10.95%
(Portfolio Inception: 8/8/97)
Northstar Galaxy Trust Research Enhanced Index (0.31)% N/A N/A 6.42%
Portfolio (b)
(Portfolio Inception: 5/6/94)
Northstar Galaxy Trust High Yield Bond Portfolio (1.06)% N/A N/A 7.77%
(Portfolio Inception: 5/6/94)
OCC Equity Portfolio (c) 10.05% 18.43% 15.77% 15.25%
(Portfolio Inception: 8/1/88)
OCC Global Equity Portfolio 11.46% N/A N/A 14.15%
(Portfolio Inception: 3/1/95)
OCC Managed Portfolio (c) 5.38% 17.31% 17.56% 17.24%
(Portfolio Inception: 8/1/88)
OCC Small Cap Portfolio (c) (10.54)% 6.80% 11.49% 11.16%
(Portfolio Inception: 8/1/88)
</TABLE>
SAI-12
<PAGE>
(a) The Northstar Galaxy Trust Emerging Growth Portfolio (formerly the Northstar
Galaxy Trust Income and Growth Portfolio) operated under an investment
objective of seeking income balanced with capital appreciation from
inception through November 8, 1998, when the investment objective was
modified to seeking long-term capital appreciation.
(b) The Northstar Galaxy Trust Research Enhanced Index Portfolio (formerly the
Northstar Galaxy Trust Multi-Sector Bond Portfolio) operated under an
investment objective of seeking current income while preserving capital
through April 29, 1999, when the investment objective was modified to
seeking long-term capital appreciation.
(c) On September 16, 1994, an investment company then called Quest for Value
Accumulation Trust (the "Old Trust") was effectively divided into two
investment funds, the Old Trust and the present OCC Accumulation Trust (the
"Trust") at which time the Trust commenced operations. The total net assets
for the Equity, Managed, and Small Cap Portfolios immediately after the
transaction were $86,789,755, $682,601,380, and $139,812,573, respectively,
with respect to the Old Trust and for the Equity, Managed, and Small Cap
Portfolios, $3,764,598, $51,345,102, and $8,129,274, respectively with
respect to the Trust. For the period prior to September 14, 1994, the
performance figures for the Equity, Managed, and Small Cap Portfolios of the
Trust reflect the performance of the Equity, Managed, and Small Cap
Portfolios of the Old Trust.
(d) The Neuberger Berman Advisers Management Trust Socially Responsive Portfolio
had not commenced operations as of December 31, 1998.
The Company may disclose Cumulative Total Returns in conjunction with the
standard formats described above. The Cumulative Total Returns will be
calculated using the following formula:
CTR = ERV/P - 1
Where:
CTR = the Cumulative Total Return net of Sub-Account recurring charges for
the period.
ERV = the ending redeemable value of the hypothetical investment at the end
of the period.
P = a hypothetical single payment of $1,000.
EFFECT OF THE ANNUAL CONTRACT CHARGE ON PERFORMANCE DATA. The Contract
provides for a $30 Annual Contract Charge to be deducted annually at the end of
each Contract Year, from the Sub-Accounts and the Fixed Accounts based on the
proportion that the value of each such account bears to the total Contract
Value. For purposes of reflecting the Annual Contract Charge in yield and total
return quotations, the annual charge is converted into a per-dollar of per-day
charge based on the Annual Contract Charges collected from the average total
assets of the Variable Account and the Fixed Accounts during the calendar year.
COMPANY HOLIDAYS
The Company is closed on the following holidays: New Year's Day, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Holidays
that fall on a Saturday will be recognized on the previous Friday. Holidays that
fall on a Sunday will be recognized on the following Monday.
FINANCIAL STATEMENTS
The Statement of Additional Information incorporates by reference the
Financial Statements for the Separate Account One as of December 31, 1998 and
for the two years ended December 31, 1998 and 1997. Deloitte & Touche LLP serves
as independent auditors for the Separate Account One. Although the financial
statements are audited, the period they cover is not necessarily indicative of
the longer term performance of the assets held in the Separate Account One.
The financial statements for the Company as of and for the years ended
December 31, 1998 and 1997 have been prepared on the basis of statutory
accounting principles ("STAT") rather than generally accepted accounting
principles ("GAAP"). The financial statements of the Company, which are
incorporated by reference in this Statement of Additional Information, should be
considered only as bearing on the ability of the Company to meet its obligations
under the Contracts. They should not be considered as bearing on the investment
performance of the assets held in the Separate Account One.
SAI-13
<PAGE>
NORTHERN LIFE SEPARATE ACCOUNT ONE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
--------
<S> <C>
Independent Auditors' Report ....................................................... *
Statement of Assets and Liabilities as of December 31, 1998 ........................ *
Statements of Operations and Changes in Contract Owners' Equity for the years ended
December 31, 1998 and 1997 ........................................................ *
Notes to Financial Statements ...................................................... *
</TABLE>
- ------------------
* Incorporated by reference to Post-effective amendment No. 7 to the Form N-4
Registration Statement of Northern Life Insurance Company, File No.
33-90474, filed April 23, 1999.
SAI-14
<PAGE>
NORTHERN LIFE INSURANCE COMPANY
(A WHOLLY OWNED SUBSIDIARY OF RELIASTAR LIFE INSURANCE COMPANY)
STATUTORY BASIS FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND
INDEPENDENT AUDITORS' REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
--------
<S> <C>
INDEPENDENT AUDITORS' REPORT ................................................ *
STATUTORY BASIS FINANCIAL STATEMENTS:
Statutory Basis Statements of Admitted Assets, Liabilities, Surplus and
Other Funds ............................................................. *
Statutory Basis Statements of Operations ................................. *
Statutory Basis Statements of Changes in Capital and Surplus ............. *
Statutory Basis Statements of Cash Flows ................................. *
Notes to Statutory Basis Financial Statements ............................ *
</TABLE>
- ------------------
* Incorporated by reference to Post-effective amendment No. 7 to the Form N-4
Registration Statement of Northern Life Insurance Company, File No.
33-90474, filed April 23, 1999.
SAI-15
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Part A: None
Part B: SEPARATE ACCOUNT ONE(1)
Independent Auditors' Report
Statement of Assets and Liabilities as of December 31, 1998
Combined Statements of Operations and Changes in
Contract Owners' Equity for the years ended December 31, 1998
and December 31, 1997
Notes to Financial Statements
NORTHERN LIFE INSURANCE COMPANY(1)
Independent Auditors' Report
Statutory-Basis Statements of Admitted Assets, Liabilities,
Surplus and Other Funds as of December 31, 1998 and 1997
Statutory-Basis Statements of Operations for the years ended
December 31, 1998 and 1997
Statutory-Basis Statements of Changes in Capital and Surplus for
the years ended December 31, 1998 and 1997
Statutory-Basis Statement of Cash Flows for the years ended
December 31, 1998 and 1997
Notes to Statutory Basis Financial Statements
Independent Auditor's Report on Supplemental Schedule of Assets
and Liabilities
Supplemental Schedule of Assets and Liabilities for the year
ended December 31, 1998
(b) Exhibits:
1. Resolution of the Executive Committee of the Board of Directors of
Northern Life Insurance Company ("Depositor") authorizing the
establishment of Separate Account One ("Registrant").(2)
2. Not Applicable.
3. (a) Form of Distribution and Administrative Services Agreement between
Washington Square Securities, Inc. and Depositor.(2)
(b) Form of selling group (or distribution) agreement between Washington
Square Securities, Inc. and selling group members.(2)
(c) Form of Amended Broker/Dealer Variable Annuity Compensation
Schedule.
4. (a) Individual Deferred Tax Sheltered Annuity Contract (Transfer
Series).(2)
(b) Individual Deferred Annuity Contract (Transfer Series) for use with
non-qualified plans.(2)
(c) Individual Deferred Retirement Annuity Contract (Transfer Series).
(2)
(d) Flexible Premium Individual Deferred Tax-Sheltered Annuity
Contract.(2)
(e) Flexible Premium Individual Deferred Retirement Annuity Contract.2
(f) ERISA Endorsement.(3)
(g) TSA Endorsement.(4)
(h) Contract Data Page Form No. 13000 (FL-PBC) 2-95 for use with Form
No. 13000 (FL) 2-95 in Florida.(5)
(i) Table of Sample Values Endorsement Form No. 13058 3-97 for use with
Form No. 13000 (FL-PBC) 2-95 in Florida.(5)
(j) Flexible Premium Individual Deferred Annuity Contract (457 Variable
Annuity Contract).(2)
II-1
<PAGE>
(k) Roth IRA Endorsement.(2)
(l) Fixed Account C Endorsement.(6)
(m) Waiver Endorsement.(1)
(n) Endorsement.(1)
(o) Form of Flexible Premium Individual Deferred Annuity Contract
(Retail Series -- TSA).
(p) Form of Individual Deferred Retirement Annuity Contract (Retail
Series -- IRA/Non-Qualified).
(q) Form of One Year Step Up Death Benefit Endorsement.
5. (a) Contract Application Form (Transfer Series and Flex Series).(2)
(b) Contract Application Form (Retail Series).
6. (a) Articles of Incorporation of Depositor.(2)
(b) Bylaws of Depositor.(2)
7. Not Applicable.
8. (a) Participation Agreement with The Alger American Fund and Fred
Alger and Company.(2)
(b) Participation Agreement among Fidelity Variable Insurance Products
Fund, Fidelity Distributors Corporation, and Northern Life Insurance
Company.(2)
(c) Amendment to Participation Agreement among Fidelity Variable
Insurance Products Fund, Fidelity Distributors Corporation, and
Northern Life Insurance Company, dated July 24, 1997.(5)
(d) Participation Agreement among Fidelity Variable Insurance Products
Fund II, Fidelity Distributors Corporation, and Northern Life
Insurance Company.(2)
(e) Amendment to Participation Agreement among Fidelity Variable
Insurance Products Fund II, Fidelity Distributors Corporation, and
Northern Life Insurance Company, dated July 24, 1997.(5)
(f) Form of Participation Agreement among Fidelity Variable Insurance
Products Fund III, Fidelity Distributors Corporation and Northern
Life Insurance Company.(1)
(g) Participation Agreement by and between the Janus Aspen Series and
Northern Life Insurance Company, dated August 8, 1997.(5)
(h) Participation Agreement by and among Northern Life Insurance
Company, Neuberger Berman Advisers Management Trust, Advisers
Managers Trust and Neuberger Berman Management Inc., dated August 8,
1997.(5)
(i) Amendment No. 1 to Participation Agreement by and among Northern
Life Insurance Company, Neuberger Berman Advisers Management Trust,
Advisers Managers Trust and Neuberger Berman Management Inc. dated
December 1, 1998.(1)
(j) Participation Agreement by and among OCC Accumulation Trust,
Northern Life Insurance Company and OCC Distributors, dated August
8, 1997.(5)
(k) Service Agreement by and between Fred Alger Management, Inc. and
Northern Life Insurance Company, dated as of August 8, 1997.(5)
(l) Form of Service Agreement and Contract between ReliaStar Life
Insurance Company, WSSI, and Fidelity Investments Institutional
Operations Company and Fidelity Distributors Corporation dated
January 1, 1997.(7)
(m) Service Agreement by and between Janus Capital Corporation and
Northern Life Insurance Company, dated August 8, 1997.(5)
(n) Service Agreement by and between Neuberger Berman Management Inc.
and Northern Life Insurance Company, effective August 8, 1997.(5)
II-2
<PAGE>
(o) Service Agreement by and between OpCap Advisors and Northern Life
Insurance Company, dated as of August 8, 1997.(5)
9. Consent and Opinion of James M. Odland as to the legality of the
securities being registered.
10. Consent of Deloitte & Touche LLP.
11. No financial statements are omitted from Item 23.
12. Not Applicable.
13. Schedule of computation of performance data.(1)
14. Financial Data Schedule. Not required.
15. Powers of Attorney for Richard R. Crowl, Michael J. Dubes, Wayne R.
Huneke, Kenneth U. Kuk, Robert C. Salipante, John G. Turner, Mark S.
Jordahl and James R. Miller.2 Power of Attorney for Susan W.A. Mead.(6)
- ------------------
1 Incorporated by reference to Post-Effective Amendment No. 7 to the
Registrant's Form N-4 Registration Statement, File No. 33-90474, filed
April 23, 1999.
2 Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Form N-4 Registration Statement File No. 33-90474, filed April
20, 1998.
3 Incorporated by reference to Post-Effective Amendment No. 1 to the
Registrant's Form N-4 Registration Statement File No. 33-90474, filed April
23, 1996.
4 Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Form N-4 Registration Statement File No. 33-90474, filed April
28, 1997.
5 Incorporated by reference to Post-Effective Amendment No. 4 to the
Registrant's Form N-4 Registration Statement File No. 33-90474, filed July
29, 1997.
6 Incorporated by reference to Post-Effective Amendment No. 6 to the
Registrant's Form N-4 Registration Statement File No. 33-90474, filed
December 23, 1998.
7 Incorporated by reference to Post-Effective Amendment No. 4 to ReliaStar Life
Insurance Company's Form N-4 Registration Statement File No. 33-69892,
filed April 14, 1997.
II-3
<PAGE>
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
- ----------------------------- -------------------------------------------------
<S> <C>
John G. Turner Director; Chairman
20 Washington Avenue South
Minneapolis, Minnesota 55401
Richard R. Crowl Director; Senior Vice President, General Counsel
20 Washington Avenue South and Assistant Secretary
Minneapolis, Minnesota 55401
Michael J. Dubes Director; President and Chief Executive Officer
1501 Fourth Avenue
Seattle, Washington 98101
Wayne R. Huneke Director; Assistant Treasurer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Mark S. Jordahl Director; Assistant Treasurer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Kenneth U. Kuk Director; Assistant Treasurer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Susan W.A. Mead Director
20 Washington Avenue South
Minneapolis, Minnesota 55401
James R. Miller Director; Assistant Treasurer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Robert C. Salipante Director
20 Washington Avenue South
Minneapolis, Minnesota 55401
Elisabeth R. Bennett Vice President and Medical Director
20 Washington Avenue South
Minneapolis, Minnesota 55401
Richard Contreras Vice President, Marketing
1501 Fourth Avenue
Seattle, Washington 98101
Brad J. Corbin Vice President, Sales
1501 Fourth Avenue
Seattle, Washington 98101
John A. Johnson Vice President
20 Washington Avenue South
Minneapolis, Minnesota 55401
Novian Junus Vice President
1501 Fourth Avenue
Seattle, Washington 98101
Douglas R. Kaufman Vice President and Chief Information Officer
1501 Fourth Avenue
Seattle, Washington 98101
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
- ------------------------------ --------------------------------------------
<S> <C>
Jerome A. Mills Vice President, Strategic Alliances
1501 Fourth Avenue
Seattle, Washington 98101
Jeryl A. Millner Vice President, Chief Financial Officer and
1501 Fourth Avenue Treasurer
Seattle, Washington 98101
Susan M. Bergen Secretary
20 Washington Avenue South
Minneapolis, Minnesota 55401
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
Registrant is a separate account of Depositor. Depositor is an indirect,
wholly-owned subsidiary of ReliaStar Financial Corp., formerly known as The
NWNL Companies, Inc., a Delaware corporation.
II-5
<PAGE>
The following chart identifies the subsidiaries of ReliaStar Financial
Corp. and their relationship to one another, all of which, except where
indicated, are either directly or indirectly wholly-owned by ReliaStar Financial
Corp., except for directors' qualifying shares.
ORGANIZATIONAL CHART
ReliaStar Financial Corp., the Parent Company ("RLR"), owns directly or
indirectly, capital stock of subsidiary companies as follows as of July 14, 1999
(second and third tier subsidiaries are listed, indented, directly below their
parent company):
<TABLE>
<CAPTION>
OWNER AND
COMPANY PERCENTAGE
- -------------------------------------------------------- --------------------
<S> <C>
ReliaStar Life Insurance Company ("RLIC") RLR-100%
Northern Life Insurance Company ("NLIC") RLIC-100%
Norlic, Inc. NLIC-100%
Security-Connecticut Life Insurance Company ("SCL") RUSL-100%
ReliaStar Life Insurance Company of New York ("RLNY") SCL-100%
North Atlantic Life Agency, Inc. RLNY-100%
NWNL Benefits Corporation ("NBC") RLIC-100%
ReliaStar Reinsurance Group (UK), Ltd. RLIC-100%
ReliaStar Investment Research, Inc. RLR-100%
Washington Square Securities, Inc. RLR-100%
Washington Square Insurance Agency, Inc. WSSI-100%
Northstar Holding, Inc. ("NI") RLR-100%
Northstar Investment Management Corp. NI-100%
Northstar Distributors, Inc. ("NDI") NI-100%
Northstar Funding, Inc. NDI-100%
Northstar Administrators Corporation NI-100%
IB Holdings, Inc. ("IB") RLR-100%
Northeastern Corporation IB-100%
The New Providence Insurance Company, Limited IB-100%
Successful Money Management Seminars, Inc. ("SMMS") RLR-100%
PrimeVest Financial Services, Inc. ("PVF") RLR-100%
PrimeVest Insurance Agency of Alabama, Inc. PVF-100%
PrimeVest Insurance Agency of New Mexico, Inc. PVF-100%
PrimeVest Insurance Agency of Ohio, Inc. Class A Robert Chapman-100%
Class B PVF-100%
Branson Insurance Agency, Inc. PVF-100%
Granite Investment Services, Inc. PVF-100%
Arrowhead, Ltd. RLR-100%
ReliaStar Payroll Agent, Inc. RLR-100%
ReliaStar Bancshares, Inc. ("RBS") RLR-100%
ReliaStar Bank ("RB") RBS-100%
ReliaStar Investment Services, Inc. RB-100%
ReliaStar Managing Underwriters, Inc. RLR-100%
Financial Northeastern Corp. ("FNC") RLR-100%
Financial Northeastern Securities, Inc. RLR-100%
FNC Insurance Services, Inc. RLR-100%
</TABLE>
ITEM 27. NUMBER OF CONTRACT OWNERS
As of August 31, 1999, there were 35,345 owners of the Contracts, 33,242 of
which were owners of qualified Contracts.
ITEM 28. INDEMNIFICATION
Reference is hereby made to Article VII, Section 6 of Depositor's Bylaws,
filed as an Exhibit to this registration statement filed on Form N-4. The Bylaws
of Depositor mandate indemnification by Depositor of its directors, officers and
certain others, and permit indemnification of directors, officers, employees and
agents of Washington Square Securities, Inc. ("WSSI") under certain conditions.
Section 4.01 of the Bylaws of WSSI mandates indemnification by WSSI of its
directors and officers under certain conditions.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
Depositor or WSSI, pursuant to the foregoing provisions or otherwise, Depositor
and WSSI have 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
II-6
<PAGE>
payment by Depositor of expenses incurred or paid by a director or officer or
controlling person of Depositor or WSSI in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
of Depositor or WSSI in connection with the securities being registered,
Depositor or WSSI, as the case may be, 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 of whether or not such indemnification
by it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
An insurance company blanket bond is maintained providing $25,000,000
coverage for Depositor and the Principal Underwriter, subject to a $500,000
deductible.
ITEM 29. PRINCIPAL UNDERWRITERS
WSSI is the distributor and principal underwriter of the Contracts. WSSI
also acts as the principal distributor and underwriter of:
o variable annuity contracts issued by ReliaStar Life Insurance Company
("ReliaStar Life") through the ReliaStar Select Variable Account, a
separate account of ReliaStar Life registered as a unit investment trust
under the Investment Company Act of 1940;
o variable life insurance policies issued by ReliaStar Life through
Select-Life Variable Account, a separate account of ReliaStar Life
registered as a unit investment trust under the Investment Company Act of
1940;
o variable life insurance policies issued by RLNY through ReliaStar Life
Insurance Company of New York Variable Life Separate Account I, a separate
account of RLNY registered as a unit investment trust under the
Investment Company Act of 1940.
II-7
<PAGE>
(a) The directors and officers of WSSI are as follows:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
BUSINESS ADDRESS POSITIONS AND OFFICES WITH DEPOSITOR
- ----------------------------- ------------------------------------------------------
<S> <C>
Michael J. Dubes Director
1501 Fourth Avenue
Seattle, Washington 98101
James R. Gelder Director
20 Security Drive
Avon, Connecticut 06001
Wayne R. Huneke Director
20 Washington Avenue South
Minneapolis, Minnesota 55401
Kenneth U. Kuk Director
20 Washington Avenue South
Minneapolis, Minnesota 55401
Robert C. Salipante Director
20 Washington Avenue South
Minneapolis, Minnesota 55401
Jeffrey A. Montgomery President and Chief Executive Officer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Kenneth S. Cameranesi Executive Vice President and Chief Operations Officer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Gene Grayson Vice President, National Sales and Marketing
20 Washington Avenue South
Minneapolis, Minnesota 55401
Keith Loveland Vice President and Chief Compliance Officer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Daniel S. Kuntz Assistant Vice President
20 Washington Avenue South
Minneapolis, Minnesota 55401
Susan M. Bergen Secretary
20 Washington Avenue South
Minneapolis, Minnesota 55401
Margaret B. Wall Treasurer and Chief Financial Officer
20 Washington Avenue South
Minneapolis, Minnesota 55401
Loralee A. Renelt Assistant Secretary
20 Washington Avenue South
Minneapolis, Minnesota 55401
Allen Kidd Assistant Secretary
222 North Arch Road
Richmond, Virginia 23236
</TABLE>
(c) For the year ended December 31, 1998 WSSI received $10,569,750 in
fees, including gross concessions, in connection with distribution of the
Transfer Series and Flex Series Contracts.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of Registrant are located at the offices of
Depositor at 1501 Fourth Avenue, Suite 1000, Seattle, Washington 98101-3620.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
II-8
<PAGE>
ITEM 32. UNDERTAKINGS
Registrant will file a post-effective amendment to this Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in this Registration Statement are never more than 16 months old for
so long as payments under the Contracts may be accepted.
Registrant will include either (1) as part of any application to purchase a
Contract offered by the Prospectus, a space that an applicant can check to
request a Statement of Additional Information, or (2) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information.
Registrant will deliver any Statement of Additional Information and any
financial statements required to be made available under this form promptly upon
written or oral request.
The Depositor and the Registrant rely on a no-action letter issued by the
Division of Investment Management to the American Council of Life Insurance on
November 28, 1988 and represent that the conditions enumerated therein have been
or will be complied with.
The Depositor represents that the fees and charges deducted under the
Advantage series variable annuity 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.
The Depositor and Registrant rely on SEC regulation (section)270.6c-7 with
respect to offering variable annuity contracts under the Texas Optional
Retirement Program and represent that the provisions of paragraphs (a)-(d) of
that regulation have been or will be complied with.
II-9
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Registrant has caused this Post-Effective Amendment No. 8 to the
Registration Statement to be signed on its behalf, in the City of Seattle and
State of Washington, on this 14th day of September, 1999.
SEPARATE ACCOUNT ONE
(Registrant)
By: NORTHERN LIFE INSURANCE COMPANY
(Depositor)
By /S/ MICHAEL J. DUBES
------------------------------------
Michael J. Dubes
President and Chief Executive Officer
As required by the Securities Act of 1933 and the Investment Company Act of
1940, Depositor has caused this Post-Effective Amendment No. 8 to the
Registration Statement to be signed on its behalf, in the City of Seattle and
State of Washington, on this 14th day of September, 1999.
NORTHERN LIFE INSURANCE COMPANY
By /S/ MICHAEL J. DUBES
------------------------------------
Michael J. Dubes
President and Chief Executive Officer
As required by the Securities Act of 1933, Post-Effective Amendment No. 8 to
the Registration Statement has been signed on this 14th day of September, 1999
by the following directors and officers of Depositor in the capacities
indicated:
SIGNATURE TITLE
--------- -----
/s/ MICHAEL J. DUBES President and Chief Executive Officer
- ------------------------------------
Michael J. Dubes
/s/ JERYL A. MILLNER Vice President, Chief Financial Officer
- ------------------------------------ and Treasurer
Jeryl A. Millner
Richard R. Crowl Mark S. Jordahl James R. Miller
Michael J. Dubes Kenneth U. Kuk Robert C. Salipante
Wayne R. Huneke Susan W. A. Mead John G. Turner
James E. Nelson, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named directors of Northern Life Insurance Company
pursuant to powers of attorney duly executed by such persons.
/S/ JAMES E. NELSON
-----------------------------------
James E. Nelson, Attorney-In-Fact
II-10
<PAGE>
EXHIBIT INDEX
(b) Exhibits
3. (c) Broker/Dealer Compensation Schedule
4. (o) Form of Flexible Premium Individual Deferred Annuity Contract
(Retail Series -- TSA).
(p) Form of Individual Deferred Retirement Annuity Contract (Retail
Series -- IRA/Non-Qualified).
(q) Form of One Year Step Up Death Benefit Endorsement.
5. (b) Contract Application Form (Retail Series).
9. Consent and Opinion of James M. Odland as to the legality of the
securities being registered.
10. Consent of Deloitte & Touche LLP.
EXHIBIT 99.3c
[LOGO] RELIASTAR
NORTHERN LIFE
BROKER/DEALER INSURANCE COMPANY
VARIABLE ANNUITY COMPENSATION SCHEDULE A RELIASTAR COMPANY
- --------------------------------------------------------------------------------
Your dealer concession will be the following percentage of the premium received
by us. No dealer concessions are payable on a policy after the 20th policy year.
This Schedule is effective with business written 1 October 1999.
PERIODIC SERIES
TSA, IRA, NONQUALIFIED, 457 % OF PAID PREMIUM
- --------------------------- -----------------
PERIODIC & INCREASE OPTION A OPTION B OPTION C OPTION D
- ------------------- -------- -------- -------- --------
Policy Years 1-2 6 4 1 3
Policy Year 3 5 4 1 2
Policy Years 4-6 5 4 .5 1
Policy Years 7-20 5 4 0 1
TRANSFER
Policy Years 1-2 6 4 1 3
Policy Year 3 5 4 1 2
Policy Years 4-5 5 4 .5 1
Policy Years 6-20 0 0 0 0
TRANSFER SERIES
TSA, IRA, NONQUALIFIED, 457 % OF PAID PREMIUM
- --------------------------- -----------------
TRANSFER OPTION A OPTION B OPTION C OPTION D
- -------- -------- -------- -------- --------
Policy Years 1-2 6.5 5.25 1 3
Policy Year 3 6.5 5.25 1 3
Policy Years 4-6 6.5 5.25 1 2
Policy Years 7-20 6.5 5.25 1 1
ADVANTAGE II SERIES
TSA, 457 % OF PAID PREMIUM
- -------- -----------------
PERIODIC & INCREASE OPTION A OPTION B OPTION D
- ------------------- -------- -------- --------
Policy Years 1-5 6.75 5.25 3
Policy Year 6 6.25 5.25 3
Policy Year 7 5.5 4 2
Policy Year 8 5.25 4 2
Policy Years 9-20 5 4 2
TRANSFER
Policy Years 1-5 6.75 5.25 3
Policy Year 6 6.25 5.25 3
Policy Year 7 5.5 4 2
Policy Year 8 5.25 4 2
Policy Years 9-10 5 4 2
Policy Years 11-20 0 0 0
IRA/NONQUALIFIED % OF PAID PREMIUM
-----------------
PERIODIC OR TRANSFER OPTION A OPTION B OPTION D
- ------------------- -------- -------- --------
Policy Years 1-5 6.75 5.25 3
Policy Years 6-10 6.75 5.25 3
Policy Years 11-20 6.75 5.25 2
ASSET-BASED COMMISSION INFORMATION
Asset-based commission (ABC) is paid monthly based on the percent of
accumulation value. The yearly rate is below. Divide by 12 to find the monthly
payout.
<PAGE>
PERIODIC SERIES
POLICY YEARS OPTION A OPTION B OPTION C OPTION D
------------ -------- -------- -------- --------
1 0 0 0 0
2-6 0 .25 0 .2
7-10 0 .25 1 .2
11-20 0 .25 1 1
TRANSFER SERIES
POLICY YEARS OPTION A OPTION B OPTION C OPTION D
------------ -------- -------- -------- --------
1 0 0 0 0
2-6 0 .25 1 .2
7-10 0 .25 1 1
11-20 0 .25 1 1
ADVANTAGE II SERIES
TSA, IRA, NONQUALIFIED, 457
- ---------------------------
POLICY YEARS OPTION A OPTION B OPTION D
------------ -------- -------- --------
1 0 0 .2
2-10 0 .25 .2
11-20 0 .25 1
Signature:_____________________________________
Printed Name:__________________________________
Title:_________________________________________
(If corporation)
Corporation Name:______________________________
GENERAL RULES PERTAINING TO VARIABLE CONTRACTS
1. CHANGE OF DEALER AUTHORIZATION. No compensation of any kind shall be
payable in respect of Variable Contracts following Insurer's or General
Distributor's receipt of a change of dealer authorization applicable to
such Variable Contract.
2. CHANGE IN REPRESENTATIVE'S STATUS. Broker/Dealer agrees that in the event
a Representative ceases to be an associated person of Broker/Dealer or
ceases to be validly licensed or registered, Broker/Dealer shall not
receive any compensation based on any Variable Contract, its values, or on
premium or purchase payments thereafter received by Northern Life and/or
WSSI from such former Representative's customers. Provided, however, if
within 60 days after such Representative ceases to be a representative of
Broker/Dealer, Broker/Dealer designates another registered representative
of Broker/Dealer to service the former Representative's business, the
compensation not paid shall be payable to Broker/Dealer. If an assigned
Representative's replacement is not designated within such 60 day period,
Broker/Dealer may not thereafter designate a replacement Representative
for such Variable Contracts and shall not be entitled to such
compensation.
3. EXCLUSIVE COMPENSATION. Broker/Dealer agrees that no compensation of any
kind other than as described herein is payable by Insurer or General
Distributor in respect of Broker/Dealer's sales of Variable Contracts.
4. REPLACEMENT BUSINESS. The amount and time of payment of commissions on
replacements, changes, transfers, or exchanges from a policy previously
issued by Insurer or an affiliate shall be governed by Insurer's rules and
regulations.
5. COMMISSIONS. Commissions shall accrue on Variable Contracts issued as and
when premium is received by Insurer and applied as premium due or payable
on such policies, except as Insurer's practices may otherwise provide.
6. CHARGE BACKS. In any case where Insurer has credited a commission to
Broker/Dealer on the basis of a premium on a Variable Contract issued and
the premium is returned to the purchaser, Insurer will charge back such
commissions.
7. ISSUE AGE. Issue age is based upon the annuitant's age on last birthday.
EXHIBIT 99.4o
[LOGO]
NORTHERN LIFE INSURANCE COMPANY {HOME OFFICE:
A Stock Company P.O. Box 12530
1501 4th Avenue Seattle, WA 98111-4530}
Suite 1000 {RELIASTAR SERVICE CENTER:
Seattle, WA 98101-3620 P.O. Box 5050
Minot, North Dakota 58702-5050}
RIGHT TO EXAMINE AND CANCEL CONTRACT
You may cancel this contract by giving written notice of cancellation to
{Northern Life Insurance Company, P.O. Box 12530, Seattle, WA 98111-4530, or
Reliastar Service Center, P.O. Box 5050, Minot, North Dakota 58702-5050}. You
may also give notice to the agent from whom you bought the contract. You must
also return the contract before midnight of the tenth day after the date you
receive the contract. As soon as you return it, we will consider it void from
the start. When these conditions are met, we will refund the Contract Value as
of the next Valuation Date after receiving your request. However, if applicable
law so requires, the full amount of any Purchase Payments we receive will be
refunded.
NOTICE
ANNUITY PAYOUTS AND CONTRACT VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE AND
MAY INCREASE OR DECREASE IN VALUE BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT.
This contract is a legal contract between you and Northern Life Insurance
Company. READ YOUR CONTRACT CAREFULLY.
We will make Fixed and/or Variable Annuity Payouts subject to the terms of this
contract. You may change the Start Date, the annuity payout option, or both, as
shown in the contract.
If you die while this contract is in force, we will pay the death benefit when
we receive written notice of your death.
Your rights under this contract cannot be forfeited.
We issue this contract in consideration of the attached application and the
payment of Purchase Payments according to the terms of this contract.
The provisions on the following pages are a part of this contract.
/s/ Susan M. Bergen /s/ Michael J. Dubes
Secretary President
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED ANNUITY CONTRACT
Nonparticipating
VARIABLE AND/OR FIXED ACCUMULATION
VARIABLE AND/OR FIXED DOLLAR ANNUITY PAYOUTS
Form No. 13076 7-99
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
----
Section 1 Definitions 3
Section 2 The Contract 5
Section 3 Purchase Payments 6
Section 4 Fixed Account 7
Section 5 Variable Account 8
Section 6 Reallocations of Contract Value 12
Section 7 Withdrawals 15
Section 8 Annuity Benefits 20
Section 9 General Provisions 26
Section 10 Payments at Death 29
Section 11 Restrictions on Distributions 31
Section 12 Loans 33
Section 13 Amendment and Disclaimer 35
Section 14 Termination 36
- --------------------------------------------------------------------------------
Additional benefits, if any, are listed on the Contract Data Page(s).
- --------------------------------------------------------------------------------
Form No. 13076 7-99
<PAGE>
CONTRACT DATA PAGE
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED ANNUITY CONTRACT
PURCHASE PAYMENTS:
Minimum Initial or Subsequent Lump Sum Purchase Payment $5,000.00
Minimum Periodic Payment(s) $50.00
Purchase Payments are allocated to the Fixed Account and Separate Account One
(Variable Account) as shown below unless changed as provided in this contract:
VARIABLE ACCOUNT
SUB-ACCOUNTS INITIAL ALLOCATION
NORTHSTAR GALAXY TRUST
Emerging Growth Portfolio 0%
Research Enhanced Index Portfolio 0%
Growth + Value Portfolio 0%
High Yield Bond Portfolio 0%
International Value Portfolio 0%
FIDELITY VARIABLE INSURANCE PRODUCT FUND
VIP Money Market Portfolio 0%
VIP Growth Portfolio 0%
VIP Equity-Income Portfolio 0%
FIDELITY VARIABLE INSURANCE PRODUCT FUND II
VIP II Investment Grade Bond Portfolio 0%
VIP II Asset Manager: Growth Portfolio 0%
VIP II Index 500 Portfolio 0%
VIP II Contrafund Portfolio 0%
FIDELITY VARIABLE INSURANCE PRODUCT FUND III
VIP III Growth Opportunities Portfolio 0%
THE ALGER AMERICAN FUND
ALGER AMERICAN Small Capitalization Portfolio 0%
ALGER AMERICAN Growth Portfolio 0%
ALGER AMERICAN MidCap Growth Portfolio 0%
ALGER AMERICAN Leveraged AllCap Portfolio 0%
Form No. 13076 7-99 A
<PAGE>
SUB-ACCOUNTS (CONTINUED) INITIAL ALLOCATION
JANUS ASPEN SERIES
Aggressive Growth Portfolio 0%
Growth Portfolio 0%
International Growth Portfolio 0%
Worldwide Growth Portfolio 0%
OCC ACCUMULATION TRUST
Managed Portfolio 0%
Small Cap Portfolio 0%
Equity Portfolio 0%
Global Equity Portfolio 0%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Partners Portfolio 0%
Limited Maturity Bond Portfolio 0%
Socially Responsive Portfolio 0%
FIXED ACCOUNT
Fixed Account A 0%
Fixed Account B 0%
Fixed Account C 0%
-----------------------------------------------------------------------
Total Allocation 100%
---------------------------------------------------------------
TABLE OF WITHDRAWAL CHARGES
---------------------------------------------------------------
CONTRACT YEAR OF WITHDRAWAL CHARGE AS
TOTAL/PARTIAL WITHDRAWAL PERCENTAGE OF EACH
MINUS CONTRACT YEAR OF PURCHASE PAYMENT
PURCHASE PAYMENT
---------------------------------------------------------------
0 7%
---------------------------------------------------------------
1 7%
---------------------------------------------------------------
2 6%
---------------------------------------------------------------
3 5%
---------------------------------------------------------------
4 4%
---------------------------------------------------------------
5 2%
---------------------------------------------------------------
6+ zero
---------------------------------------------------------------
Twelve years from the original Issue Date, the withdrawal fee
will go to zero regardless of the table above.
---------------------------------------------------------------
OTHER CHARGES:
Mortality Risk Charge: .85% of the daily net asset value
Expense Risk Charge: .40% of the daily net asset value
Administrative Charge: .15% of the daily net asset value
Annual Contract Charge: $30
OWNER: John Doe
ISSUE DATE: December 1, 1999
CONTRACT NO.: VA00123456
Form No. 13076 7-99 B
<PAGE>
SECTION 1 DEFINITIONS
- --------------------------------------------------------------------------------
ACCUMULATION UNIT A unit of measure used to determine the Variable
Account Contract Value.
ANNUITANT The person whose life determines the annuity
payouts payable under the contract at the Start
Date. The Owner is always the Annuitant unless
an Owner's surviving spouse or former spouse is
the Annuitant.
ANNUITY PAYOUT DATE The first business day of any calendar month in
which a Fixed or Variable Annuity Payout is made
under the contract.
ANNUITY UNIT A unit of measure used to determine the amount
of a Variable Annuity Payout after the first
annuity payout.
BENEFICIARY The person(s) named by you to receive any
payments after your death.
CODE The Federal Internal Revenue Code of 1986 (IRC),
as amended.
CONTINGENT BENEFICIARY The person(s) you name to become the Beneficiary
if the Beneficiary dies.
CONTRACT ANNIVERSARY The same day and month as the Issue Date each
year that this contract remains in force.
CONTRACT EARNINGS On any Valuation Date, the Contract Value,
PLUS the aggregate Purchase Payments
withdrawn up to that date,
LESS the aggregate Purchase Payments
made up to that date.
CONTRACT VALUE The sum of the Fixed Account Contract Value (as
defined in Section 4D),
PLUS the Variable Account Contract Value
(as defined in Section 5D) on a
Valuation Date,
LESS prior withdrawals (including early
withdrawal charges),
LESS applicable taxes, and
PLUS all interest earned.
CONTRACT YEAR Each 12-month period starting with the Issue
Date and each Contract Anniversary after that.
DISTRIBUTEE You or your surviving spouse as Beneficiary or
your former spouse as alternate Payee under a
qualified domestic relations order (QDRO) within
the meaning of IRC Section 414(p), as
applicable.
Form No. 13076 7-99 3
<PAGE>
SECTION 1 DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
FIXED ACCOUNT One or more accounts under this contract that
guarantee both principal and interest. The Fixed
Accounts are held in our General Account. We
have complete ownership and control of the
assets in the General Account.
FIXED ANNUITY PAYOUT A series of periodic payments to the Payee which
do not vary in amount. The principal and
interest amounts are guaranteed. These payments
are made from the General Account.
FUND Any open-end management investment company (or
portfolio thereof) or any unit investment trust
(or series thereof) listed on the Contract Data
Page(s) on the Issue Date or thereafter made
available.
GENERAL ACCOUNT Our assets other than those allocated to the
Variable Account or any other separate account.
HOME OFFICE Northern Life Insurance Company at our home
office in Seattle, Washington, or our
administrative office in Minot, North Dakota.
IRREVOCABLE BENEFICIARY The Irrevocable Beneficiary cannot be removed as
Beneficiary without his or her consent.
The Irrevocable Beneficiary must also consent to
any full or partial withdrawal or ownership
change that the Owner wishes to make.
OUTSTANDING LOAN BALANCE The total of all existing loans,
PLUS any accumulated loan interest,
LESS any loan repayments.
OWNER (YOU, YOUR) The person named on the Application and the
Contract Data Page(s) to hold this contract and
to exercise all rights and privileges under it.
PAYEE The person to receive payments under a Fixed or
Variable Annuity Payout. Only the Annuitant or a
Beneficiary may be the Payee.
PURCHASE PAYMENTS These include periodic, single lump sum,
rollover, and transfer payments paid to us on
your behalf, less applicable premium taxes, if
any, as required by law.
REQUIRED DISTRIBUTION DATE The first day of April of the year following the
year in which you reach age 70 1/2or later if
permitted by law or regulation.
START DATE The date on which the entire Contract Value is
used to purchase a Fixed and/or Variable Annuity
Payout. As required by law, the Start Date will
not be earlier than the date on which you reach
age 59 1/2, unless you meet a permitted
exception.
Form No. 13076 7-99 4
<PAGE>
SECTION 1 DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
SUB-ACCOUNT A subdivision of the Variable Account.
Each Sub-Account's assets are invested
exclusively in one of the Funds.
The Sub-Accounts available on the Issue Date and
the percentage of Purchase Payments you have
allocated to each Sub-Account on the Issue Date
are shown on the Contract Data Page(s).
Other Sub-Accounts may be available after the
Issue Date.
VALUATION DATE Each day on which the New York Stock Exchange
(NYSE) is open for business, except for a day
that a Sub-Account's corresponding Fund does not
value its shares. The NYSE is currently closed
weekends and specified holidays.
VALUATION PERIOD The time between a Valuation Date and the next
Valuation Date.
VARIABLE ACCOUNT A separate investment account of ours,
identified on the Contract Data Page(s), which
has been established under the State of
Washington insurance laws and is divided into
Sub-Accounts.
VARIABLE ANNUITY PAYOUT A series of periodic payments to the Payee
varying in amount based on the investment
performance of the Variable Account Sub-Accounts
under this contract.
WE, US, OUR Northern Life Insurance Company at its Home
Office in Seattle, Washington and its
administrative office in Minot, North Dakota.
WRITTEN, IN WRITING A written request or notice signed, dated, and
received at an address designated by us in a
form we accept. You may ask us for the forms.
SECTION 2 THE CONTRACT
- --------------------------------------------------------------------------------
A. THE CONTRACT
The entire contract is the contract; the
Contract Data Page(s); the application; and
attached endorsements.
Unless fraudulent, all statements made by or on
behalf of anyone covered by this contract are
representations and not warranties.
Only statements found in the attached
application(s) may be used to cancel this
contract or as our defense if we refuse to pay a
claim.
B. MODIFICATION OF CONTRACT
Only our President or Secretary may change this
contract on our behalf. No agent or any other
person may change this contract. Any change must
be in writing.
Form No. 13076 7-99 5
<PAGE>
SECTION 3 PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
A. GENERAL
Purchase Payments must be in cash or a cash
equivalent and are payable at our Home Office.
We consider any payment we receive to be a
Purchase Payment unless you tell us that it is a
loan repayment.
You may make Purchase Payments at any time
before the Start Date while the contract is in
force.
The initial Purchase Payment must equal or
exceed the minimum as shown on the Contract Data
Page(s).
On a non-discriminatory basis, we may choose not
to accept an additional Purchase Payment if:
1. It is less than:
a. A minimum lump sum Purchase
Payment in the amount of $5,000;
or
b. A minimum periodic payment in
the amount of $50.00; or
2. The additional Purchase Payment plus the
Contract Value at the next Valuation
Date exceeds $1,000,000.
B. TRANSFERS AND ROLLOVERS
Purchase Payments that are transfers or
rollovers must be from another tax-sheltered
annuity or custodial account for regulated
investment company stock that qualifies under
Section 403(b) of the Code.
C. ALLOCATION OF
PURCHASE PAYMENTS
You specified the initial allocation of Purchase
Payments on your application for this contract.
This allocation is shown on the Contract Data
Page(s). The allocation of future Purchase
Payments will remain the same unless you change
it.
You may change the percentage allocation between
or among available Sub-Accounts and the Fixed
Accounts at any time by giving us written
notice. The change is subject to any limitations
on the number of Funds available through each
contract.
Changes in the allocation will not be effective
until the date we receive your notice and will
only affect Purchase Payments we receive after
that date.
The allocation may be 100% to any account or may
be divided between the accounts in whole
percentage points, totaling 100%.
Reallocations of the Contract Value are governed
by Section 6.
Form No. 13076 7-99 6
<PAGE>
SECTION 4 FIXED ACCOUNT
- --------------------------------------------------------------------------------
A. GENERAL
The Fixed Account consists of Fixed Accounts A,
B and C.
Purchase Payments allocated, and Contract Value
reallocated, to the Fixed Accounts will be
credited with interest at rates we determine
from time to time.
The rate will never be less than an effective
annual interest rate of three percent.
B. INTEREST CREDITING
1. GENERAL
We may credit interest in excess of the
guaranteed rate of three percent.
2. INTEREST RATE IN
EFFECT
Any interest rate in effect when an amount is
allocated or reallocated to the Fixed Account is
guaranteed for 12 months after it is received.
All amounts in the Fixed Account after the end
of the year referenced above, are credited with
excess interest at the rates in effect for the
then current 12-month period.
There may be more than one interest rate in
effect at any time for Fixed Accounts A, B or C.
While this contract is in force, interest rates
declared for Fixed Account A will not be more
than the interest rates declared for Fixed
Account B.
The interest rate for Fixed Account C may be
higher than Fixed Account A or B.
3. FACTORS DETERMINING
INTEREST RATE
In setting interest rates, we consider many
factors, including, but not limited to:
investment yield rates, taxes, and contract
persistency.
4. TIMING OF
INTEREST CREDITING
We will credit interest to the Fixed Account
Contract Value beginning on the date we receive
your Purchase Payment or reallocation until it
is withdrawn or otherwise reallocated. Interest
will be credited and compounded daily to the
Fixed Account Contract Value using the daily
equivalents of effective annual interest rates.
Form No. 13076 7-99 7
<PAGE>
SECTION 4 FIXED ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
5. EFFECT OF LOANS ON
INTEREST RATES
We will continue to credit interest on any part
of the Fixed Account A Contract Value that is
used as security for a loan from us.
The interest credited to the part of Fixed
Account A Contract Value represented by the loan
may be less than that credited to the rest of
the Fixed Account Contract Value.
Taking a loan may also affect the rate of
interest credited in the future to Fixed Account
A Contract Value, either up or down.
C. FIXED ACCOUNT C
Fixed Account C is provided as a vehicle for
dollar cost averaging to any of the
Sub-Accounts.
The Minimum Purchase Payment for Fixed Account C
is $5,000.
D. FIXED ACCOUNT CONTRACT
VALUE
The Fixed Account Contract Value on any
Valuation Date is:
1. The sum of your Purchase Payment(s)
allocated to Fixed Accounts A, B and C;
2. PLUS any reallocations from the Variable
Account to Fixed Accounts A and B;
3. PLUS interest credited to Fixed Accounts
A, B and C;
4. LESS any previous partial withdrawals,
amounts applied to purchase partial
annuity payouts, and the Annual Contract
Charges applied to the Fixed Account;
5. LESS any previous reallocations to the
Variable Account; and
6. LESS premium tax deducted, if any.
SECTION 5 VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
A. GENERAL
The Variable Account is registered with the
Securities and Exchange Commission as a unit
investment trust under the Investment Company
Act of 1940.
We have complete ownership and control of the
assets in the Variable Account. These assets are
held separately from our other assets and are
not part of our General Account.
The portion of the assets of the Variable
Account equal to the reserves, and other
contract liabilities of the Variable Account,
are not chargeable with liabilities from any
other business that we may conduct.
Form No. 13076 7-99 8
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
The income, gains and losses, realized or
unrealized, from assets allocated to the
Variable Account will be credited to, or charged
against, the Variable Account, without regard to
our other income, gains, or losses.
B. SUB-ACCOUNTS
The Variable Account is divided into
Sub-Accounts, some of which are available under
the contract. Each Sub-Account that is available
under this contract invests in shares of a Fund.
Funds initially available are set forth on the
Contract Data Page(s).
Shares of a Fund will be purchased and redeemed
for a Sub-Account at their net asset value.
We will reinvest the net asset value of the
income, dividends, and gains, distributed from
shares of a Fund, in additional shares of that
Fund.
The Fund prospectuses define the net asset value
and describe the Funds.
The dollar amounts of values and benefits of
this contract provided by the Variable Account
depend on the investment performance of the
Funds in which your selected Sub-Accounts are
invested.
We do not guarantee the investment performance
of the Funds. You bear the full investment risk
for amounts applied to the Sub-Accounts.
C. ACCUMULATION UNITS
Purchase Payments received under this contract
and allocated to, and any amounts reallocated
to, the Variable Account will be credited in the
form of Accumulation Units. To find the number
of Accumulation Units:
1. DIVIDE the amount of the Purchase
Payment allocated to, or any amount
reallocated to, the Sub-Account,
2. BY the value of an Accumulation Unit for
that Sub-Account on the next Valuation
Date.
To find the number of Accumulation Units
cancelled upon withdrawal, or reallocation, from
a Sub-Account:
1. DIVIDE the amount withdrawn or
reallocated,
2. BY the Accumulation Unit value on the
next Valuation Date.
Each Accumulation Unit value is set at $10 when
the Sub-Account first purchases investment
shares.
Form No. 13076 7-99 9
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
Subsequent values on any Valuation Date are
equal to:
1. The previous Accumulation Unit value;
2. MULTIPLIED by the net investment factor
for that Sub-Account for the Valuation
Date.
D. VARIABLE ACCOUNT
CONTRACT VALUE
The Variable Account Contract Value is the total
of the values of your interest in each
Sub-Account. Each Sub-Account is equal to:
1. The number of Accumulation Units;
2. MULTIPLIED by the Accumulation Unit
value.
The Variable Account Contract Value will vary
from Valuation Date to Valuation Date.
E. NET INVESTMENT FACTOR
The net investment factor is an index number
which reflects charges to this contract and the
investment performance during a Valuation Period
of the Fund in which a Sub-Account is invested.
If the net investment factor is greater than
one, the Accumulation Unit value has increased.
If the net investment factor is less than one,
the Accumulation Unit value has decreased.
The net investment factor for a Sub-Account is
determined by dividing (1) by (2) and then
subtracting (3) from the result, where:
1. Is the net result of:
a. The net asset value per share of
the Fund shares held in the Sub-
Account, determined at the end
of the current Valuation Period;
b. PLUS the per share amount of any
dividend or capital gain
distributions made on the Fund
shares held in the Sub-Account
during the current Valuation
Period;
c. PLUS a per share credit or LESS
a per share charge for any taxes
reserved which we determine to
have resulted from the
operations of the Sub-Account
and to be applicable to this
contract.
2. Is the net result of:
a. The net asset value per share of
the Fund shares held in the
Sub-Account, determined at the
end of the last prior Valuation
Period;
b. PLUS a per share credit; or
Form No. 13076 7-99 10
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
c. LESS a per share charge for any
taxes reserved for the last
prior Valuation Period which we
determine to have resulted from
the investment operations of the
Sub-Account and to be applicable
to this contract.
3. Is a daily factor representing the
Mortality Risk Charge, the Expense Risk
Charge, and the Administrative Charge
adjusted for the number of days in the
period. The charges are shown on an
annual basis on the Contract Data
Page(s).
F. MORTALITY RISK CHARGE
The Mortality Risk Charge pays us for assuming
the mortality risk under this contract.
This charge is included in the calculation of
the net investment factor and is shown on the
Contract Data Page(s).
G. EXPENSE RISK CHARGE
The Expense Risk Charge pays us for guaranteeing
that we will not increase the Annual Contract
Charge or the Administrative Charge even though
our cost of administering this contract and the
Variable Account may increase.
This Expense Risk Charge is included in the
calculation of the net investment factor. It is
shown on the Contract Data Page(s).
H. ADMINISTRATIVE CHARGE AND
ANNUAL CONTRACT CHARGE
The Administrative Charge and the Annual
Contract Charge shown on the Contract Data
Page(s) pay us for the administrative expenses
of the contract.
The Administrative Charge is included in the
calculation of the net investment factor.
The Annual Contract Charge will be deducted from
the Contract Value on each Contract Anniversary
before the Start Date.
We make the deduction from the Fixed Account and
the Variable Account on a basis that reflects
each account's proportionate percentage of the
unloaned Contract Value.
If you request a full withdrawal of this
contract on other than the Contract Anniversary,
the Annual Contract Charge will be deducted at
the time of the withdrawal.
Form No. 13076 7-99 11
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
I. RESERVED RIGHTS
We reserve the right, if permitted by applicable
law, to:
1. Create new variable accounts;
2. Combine variable accounts, including the
Variable Account;
3. Remove, add, or combine Sub-Accounts and
make the new Sub-Accounts available to
contract Owners at our discretion;
4. Substitute shares of one Fund for
another;
5. Reallocate assets of the Variable
Account, which we determine to be
associated with the class of contracts
to which this contract belongs, to
another variable account.
(If this type of reallocation is made,
the term "Variable Account" as used in
this contract will then mean the
variable account to which the assets
were reallocated);
6. De-register the Variable Account under
the Investment Company Act of 1940, if
registration is no longer required;
7. Make any changes required by the
Investment Company Act of 1940;
8. Operate the Variable Account as a
management investment company under the
Investment Company Act of 1940, or any
other form permitted by law;
9. Restrict or eliminate any voting
privileges of contract Owners or other
persons who have voting privileges as to
the Variable Account; and
10. Waive the Annual Contract Charge if the
Contract Value meets specified
conditions, for example:
a. If the Contract Value exceeds
$25,000, or
b. If you make minimum
contributions of at least $5,000
(net of withdrawals) per year.
SECTION 6 REALLOCATIONS OF CONTRACT VALUE
- --------------------------------------------------------------------------------
A. GENERAL
You may reallocate Contract Value between or
among Sub-Accounts, from one or more
Sub-Accounts to the Fixed Account, and from the
Fixed Account to one or more Sub-Accounts,
subject to certain limitations. Subject to the
restrictions in Section 6B, we make a
reallocation:
Form No. 13076 7-99 12
<PAGE>
SECTION 6 REALLOCATIONS OF CONTRACT VALUE (CONTINUED)
- --------------------------------------------------------------------------------
1. On the next Valuation Date after we
receive your written instructions
requesting the reallocation; or
2. As of a Valuation Date you request which
occurs thereafter.
Reallocations are subject to the availability of
Sub-Accounts.
On a non-discriminatory basis, we reserve the
right to:
1. Impose a charge of up to $25 for each
reallocation of Contract Value;
2. Limit the number of reallocations you
can make;
3. Establish minimum and maximum amounts
for reallocations; and
4. Reallocate the entire Contract Value
remaining in a Sub-Account or any Fixed
Account in the event that a reallocation
request would bring such remaining
Contract Value below a specified amount.
Allocation of Purchase Payments is governed by
Section 3.
B. REALLOCATIONS FROM
FIXED ACCOUNT
Before the Start Date, the part of Fixed Account
A Contract Value that is not serving as security
for a loan may be reallocated at any time to
Fixed Account B Contract Value or to the
Variable Account.
Before the Start Date, you may request in
writing the reallocation of part of Fixed
Account B to the Variable Account or to Fixed
Account A under the following conditions:
1. You may only reallocate Contract Value
during the reallocation period that
begins 30 days before and ends 30 days
after each Contract Anniversary. Only
one reallocation is allowed during each
reallocation period;
2. We must receive the request to
reallocate no more than 30 days before
the start of the reallocation period and
not later than 10 days before the end of
the reallocation period;
3. You may not reallocate more than the
greater of $1,000 or 25% of Fixed
Account B Contract Value. If the Fixed
Account B Contract Value is less than
$1,000 after the reallocation, the full
Fixed Account B Contract Value must be
reallocated; and
Form No. 13076 7-99 13
<PAGE>
SECTION 6 REALLOCATIONS OF CONTRACT VALUE (CONTINUED)
- --------------------------------------------------------------------------------
4. You must reallocate at least $250 or the
total Fixed Account B Contract Value, if
less.
We reserve the right to permit reallocations in
excess of these limits on a non-discriminatory
basis.
C. FIXED ACCOUNT C REALLOCATIONS
1. REQUIREMENTS
Reallocations from Fixed Account C to the
Variable Account must begin within 30 days from
receipt of the Purchase Payment.
They will be in substantially equal payments
over a period of 12 months.
You may change the Variable Sub-Account(s)
receiving Fixed Account C reallocations by
giving us written notice prior to the
Reallocation Date.
Only one reallocation of Fixed Account C will
take place at any one time.
If additional Purchase Payment(s) are received
for allocation to Fixed Account C:
1. The balance of Fixed Account C will be
adjusted to reflect the subsequent
payment(s); and
2. Reallocations will be recalculated based
on the number of months remaining in the
original 12-month period.
Reallocations from Fixed Accounts A, B, or the
Variable Account, to Fixed Account C are
prohibited. No loans or full or partial
withdrawals are available from Fixed Account C.
2. REALLOCATION DATE
Reallocations from Fixed Account C will be
transferred any time before the 29th day of each
month. You may tell us in writing the date you
want the reallocation to occur.
3. DISCONTINUING
REALLOCATIONS FROM
FIXED ACCOUNT C
If reallocations from Fixed Account C are
discontinued prior to the end of the 12-month
term, the remaining balance of Fixed Account C
will be reallocated to Fixed Account A, unless
you tell us differently.
D. ALL OTHER REALLOCATIONS
Before the Start Date, you may make a written
request to reallocate all or part of a
Sub-Account's Accumulation Units to other
Sub-Accounts or to Fixed Accounts A or B.
To accomplish this reallocation, the appropriate
Accumulation Units will be redeemed and their
value will be reinvested in other Sub-Accounts,
or reallocated to Fixed Accounts A or B as
directed in your request.
Form No. 13076 7-99 14
<PAGE>
SECTION 6 REALLOCATIONS OF CONTRACT VALUE (CONTINUED)
- --------------------------------------------------------------------------------
Subject to the restrictions in the following
paragraph, after a Variable Annuity Payout has
begun, you may make a written request to
reallocate your Annuity Units. This is done the
same way and subject to the same conditions as
reallocating Accumulation Units. However, we
reserve the right to restrict these
reallocations.
No reallocations to or from Fixed Accounts A, B
or C may be made after the Start Date. In the
event that part of the Contract Value is applied
to purchase annuity payouts, the remaining
Contract Value may be reallocated as described
above for periods prior to the Start Date.
SECTION 7 WITHDRAWALS
- --------------------------------------------------------------------------------
A. GENERAL
If permitted by law, you may request a full or
partial withdrawal by sending us a written
request. We reserve the right to deduct
applicable premium taxes and other state or
federal taxes from the Contract Value on the
date the withdrawal is taken.
The amount withdrawn from the Sub-Accounts will
be determined on the next Valuation Date
following our receipt of your written request.
This amount, LESS any charges, will normally be
sent to you within seven days of our receipt of
your written request.
By law, we have the right to defer payment of
withdrawals from the Fixed Account for up to six
months from the date we receive your request.
B. REQUIREMENTS FOR WITHDRAWALS
The IRS permits withdrawals of Purchase Payments
made by salary reduction and earnings credited
on those Purchase Payments only if you have:
1. Reached age 59 1/2; or
2. Separated from service (termination); or
3. Died; or
4. Become disabled within the meaning of
IRC Section 72(m)(7); or
5. Qualified for a hardship distribution
under IRS regulations. If a hardship is
shown, only the Purchase Payments may be
withdrawn and no minimum value need be
maintained.
You must take a loan before you take a hardship
distribution if required by law and if a loan is
available.
Under certain circumstances, withdrawals may be
subject to IRS tax penalties.
Form No. 13076 7-99 15
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
This Section applies only to Purchase Payments
made by salary reduction after December 31,
1988, to amounts transferred from IRC Section
403(b)(7) custodial accounts, and to earnings
credited on either.
This Section does not apply to transfers to
another qualified plan as provided in Section
7K. However, we require verification from a
qualified plan that the funds will be
transferred to that plan.
This Section does not apply to any transfer
payments which are attributable to contributions
made, and/or earnings credited, to another IRC
Section 403(b) tax sheltered annuity before
January 1, 1989.
This Section does not restrict your ability to
obtain a loan in accordance with Section 12 of
this contract.
C. ORDER OF WITHDRAWAL
For purposes of calculating withdrawal charges,
we will take out Contract Earnings as of the
Valuation Date next following our receipt of
your request; then withdrawals will be taken
from Purchase Payments on a first-in, first-out
basis.
Contract Earnings are not available under a
hardship distribution as described in Section
7B.
D. WITHDRAWAL CHARGE
For any amounts withdrawn that are subject to
the withdrawal charge, we calculate the
withdrawal charge this way:
Withdrawal charge =
Contract Value withdrawn allocable to Purchase Payments
X
Withdrawal charge percentage(s)
The withdrawal charge percentage(s) is
determined from the Table of Withdrawal Charges
shown on the Contract Data Page(s).
If you make Purchase Payments over the course of
a Contract Year, these payments will be bundled
together for the purpose of determining the
withdrawal charge. For example, Purchase
Payments made during year one, until the
Contract Anniversary marking the beginning of
year two, will all be considered to have been
made at the start of year one for withdrawal
charge calculation purposes.
In computing withdrawals, the withdrawal charge,
if any, will be deemed a part of the withdrawal,
but will not be received by you.
We will not apply the withdrawal charge to any
portion of the unloaned Contract Value used to
purchase an annuity payout.
Form No. 13076 7-99 16
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
E. FULL WITHDRAWAL
For a full withdrawal of the Contract Value, we
calculate the withdrawal value this way:
Withdrawal value = Contract Value
LESS Outstanding Loan Balance
LESS withdrawal charge
LESS Annual Contract Charge.
We will pay the withdrawal value to you in a
lump sum, less any applicable taxes.
The Outstanding Loan Balance is subject to any
applicable withdrawal charges. Withdrawal of the
entire Contract Value will result in termination
of the contract in accordance with Section 14A,
and we have no further obligation.
F. PARTIAL WITHDRAWAL
You may withdraw a portion of the unloaned
Contract Value. For a partial withdrawal, we
calculate the withdrawal value this way:
Withdrawal value = Contract Value
withdrawn
LESS withdrawal charge.
Some, or all, of the amount withdrawn may be
eligible for a waiver of the withdrawal charge
as described in Section 7H.
On a non-discriminatory basis, we reserve the
right to impose a charge not to exceed $25 for
each partial withdrawal and to limit the number
of partial withdrawals you may make.
Unless we agree, on a non-discriminatory basis,
each partial withdrawal must be at least $1,000,
excluding those under Section 7G. Following a
partial withdrawal, the remaining Contract Value
must be at least the greater of A or B, where:
1. A = $1,000; or
2. B = Outstanding Loan Balance DIVIDED by
85%
The Outstanding Loan Balance, withdrawal
charges, and any applicable taxes will not be
included in the amount payable to you.
Unless we agree otherwise, the withdrawal will
be made on a pro rata basis from all unloaned
portions of the Sub-Accounts and Fixed Account A
and B.
G. SYSTEMATIC WITHDRAWALS
You may make a written request to automatically
withdraw amounts from your contract. You may
elect to receive these withdrawals monthly,
quarterly, semi-annually, or annually, subject
to any applicable federal or state laws, rules
or regulations.
Form No. 13076 7-99 17
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
The minimum amount of each systematic withdrawal
may not be less than $300.
Systematic withdrawals, in excess of the amount
you can withdraw without withdrawal charges,
will be subject to withdrawal charges.
Systematic withdrawals will end:
1. When the election amount eligible for
withdrawal falls below $300;
2. When the contract ends due to election
of an annuity payout, full withdrawal of
the contract, or death of any Owner; or
3. When you give us written notice to end
this option.
H. PARTIAL WAIVER OF
WITHDRAWAL CHARGE
During any Contract Year, you may withdraw a
portion of the Contract Value without a
withdrawal charge. For each Contract Year, the
amount you may withdraw without a withdrawal
charge is the greater of:
1. Earnings; or
2. Ten percent of Purchase Payments, as of
the last Contract Anniversary, subject
to withdrawal charges.
This amount can be taken in up to four
withdrawals per Contract Year.
If your first withdrawal exceeds this amount,
the excess is subject to the withdrawal charge
in Section 7D. If your first withdrawal equals
this amount, other withdrawals during the
Contract Year may be subject to the withdrawal
charge in Section 7D.
If your first withdrawal is less than this
amount, any portion available for withdrawal may
be applied against no more than three additional
withdrawals during the Contract Year. The
maximum amount available for withdrawal remains
subject to the limitations in Section 7E and 7F.
I. TOTAL WAIVER OF
WITHDRAWAL CHARGE
On a basis which does not discriminate among
Owners of the same class, we reserve the right
to waive withdrawal charges on full and partial
withdrawals for anyone eligible for a withdrawal
under Section 7B.
Form No. 13076 7-99 18
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
J. REDUCTION IN
WITHDRAWAL CHARGES
On a basis which does not discriminate among
Owners of the same class, we reserve the right
to reduce the withdrawal charges shown on the
Contract Data Page(s).
K. DIRECT ROLLOVER
OR TRANSFER
The Distributee may tell us in writing to have a
portion of Distributee's contract interest
eligible for distribution paid by us as a direct
rollover to:
1. An individual retirement account
described in IRC Section 408(a);
2. An individual retirement annuity
described in IRC Section 408(b); or
3. Another annuity or custodial account
described in IRC Section 403(b) that
accepts direct rollovers, except in the
case of a surviving spouse as
Beneficiary.
This notice must be in writing and it must be in
a form prescribed by us.
An eligible rollover distribution is any
distribution of all or any portion of the
balance to the credit of the Distributee, other
than:
1. Any distribution that is one of a series
of substantially equal periodic payouts
(not less frequently than annually) made
for:
a. The life, or life expectancy, of
the Distributee, or
b. The joint lives, or
c. The life expectancies of the
Distributee and his or her
Beneficiary, or
d. A specified period of 10 years
or more;
2. Any distribution to the extent it is a
required minimum distribution under IRC
Section 403(b)(10); and
3. The portion of any distribution that is
not includible in gross income.
In order to be eligible for a direct rollover,
funds must be eligible for a distribution as
described in Section 7B. This provision will be
interpreted in accordance with IRC Section
403(b)(10), the regulations thereunder, and
successor provisions thereto.
If eligible, the Distributee or your Beneficiary
may request a transfer of withdrawal value to
another annuity or custodial account described
in IRC Section 403(b).
Eligible rollover distributions and transfers
are subject to any applicable withdrawal
charges.
Form No. 13076 7-99 19
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
L. QUALIFIED DOMESTIC
RELATIONS ORDER (QDRO)
As permitted by the Code, applicable regulations
and subject to any applicable withdrawal
charges, we may permit withdrawals to an
alternate Payee pursuant to a QDRO described in
IRC Section 414(p), as determined by the
administrator for each plan.
M. FEDERAL TAXES
Some or all of the withdrawal may be income on
which you must pay tax.
We must report such income according to the tax
laws; this may differ from the way we charge
withdrawals against the contract for purposes of
assessing withdrawal charges.
We may also be required to withhold taxes from
amounts otherwise payable. In addition, there
may be tax penalties if you make a withdrawal
before age 59 1/2.
SECTION 8 ANNUITY BENEFITS
- --------------------------------------------------------------------------------
A. APPLICATION OF CONTRACT VALUE
Upon receipt of your written request for an
annuity payout, we apply all or a portion of the
Contract Value to provide a Fixed Annuity Payout
or a Variable Annuity Payout or both. The
portion of the Contract Value we apply will be
considered a partial withdrawal for the purpose
of calculating the death benefit.
If the amount to be annuitized on the date the
annuity payout is scheduled to begin is less
than $5,000, instead we may pay the withdrawal
value in a lump sum.
We reserve the right to deduct applicable
premium taxes and other state or federal taxes
from the Contract Value on any Annuity Payout
Date as required by law.
B. ANNUITY PAYOUT OPTIONS
You may select an annuity payout by sending us a
written request.
Your request must be received by us at least 30
days before the annuity payout is scheduled to
begin.
If you have not selected a required minimum
distribution payment method, we will provide an
annuity payout option to you at age 85, unless
you notify us otherwise in writing.
Form No. 13076 7-99 20
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
The following options are available for annuity
payouts:
OPTION ONE
INSTALLMENTS FOR LIFE
WITH OR WITHOUT A
FIXED PERIOD CERTAIN
We will pay the proceeds in equal installments
for as long as the Payee lives.
If a fixed period certain is chosen, we
guarantee to make payments for at least 120
months.
If the Payee dies before the end of the fixed
period certain, we will pay the remaining
guaranteed payments in accordance with Section
10.
For each $1,000 of Contract Value applied, the
Annuity Payout Option One Table shows:
1. The guaranteed minimum rate for each
installment under a Fixed Annuity
Payout; or
2. The rate used to determine the first
installment under a Variable Annuity
Payout using an assumed yield of three
percent.
The rate depends upon:
1. Whether the 120-month fixed period
certain is chosen; and
2. The Payee's age on his/her birthday
nearest the date the first installment
is due.
OPTION TWO
JOINT AND SURVIVOR
ANNUITY PAYOUT
We will pay the proceeds in equal installments
for as long as either the Payee or the joint
Payee is alive.
For each $1,000 of Contract Value applied, the
Annuity Payout Option Two Table shows:
1. The guaranteed minimum rate for each
installment at various ages under a
Fixed Annuity Payout; or
2. The rate used to determine the first
installment under a Variable Annuity
Payout using an assumed yield of three
percent.
OPTION THREE
OTHER FIXED AND VARIABLE
ANNUITY PAYOUTS
We will pay the proceeds under any other Fixed
and Variable Annuity Payouts that we may offer.
Contact us for details.
Form No. 13076 7-99 21
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
C. CHANGE OF ANNUITY PAYOUT DATE
Unless we agree otherwise, the first Annuity
Payout Date must be at least 60 days after the
Issue Date. The first Annuity Payout Date is the
first business day of the first calendar month
in which an annuity payout will be made to you.
You may change the Start Date by giving us at
least 30 days advance written notice.
D. FREQUENCY AND
AMOUNT OF PAYMENTS
Annuity payments will be made monthly unless we
agree to a different payment schedule. We
reserve the right to change the frequency of
either Fixed or Variable Annuity Payouts so that
each payment will be at least $100.
E. FIXED ANNUITY PAYOUTS
The dollar amount of all payments is fixed
during the entire period of annuity payouts,
according to the provisions of the annuity
payout option selected.
Guaranteed minimum annuity payout option one and
two rates for Fixed Annuity Payouts are based
upon three percent yearly interest and unisex
rates derived from 1983 Mortality Table a.
Other Fixed Annuity Payout rates may be
available, but rates will never be less than
those shown in the Annuity Payout Option One and
Two Tables. Contact us for details.
In setting Fixed Annuity Payout rates, we
consider many factors, including, but not
limited to: investment yield rates; taxes; and
contract persistency.
F. PAYMENT OF PRESENT VALUE
Following the death of the Payee and any joint
Payee under a Fixed Annuity Payout, we may offer
the Beneficiary payment of the present value of
the unpaid remaining payments if he/she chooses
not to continue annuity payouts. If the present
value is payable, we calculate it this way:
1. We determine the number of unpaid
remaining payments when we receive proof
of death; and
2. We discount the remaining payments at
the rate specified in the terms of the
Fixed Annuity Payout supplemental
contract.
Form No. 13076 7-99 22
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
G. VARIABLE ANNUITY PAYOUTS
If you elect a Variable Annuity Payout, all or a
portion of the Variable Account Contract Value
is used to provide payments which:
1. After the first payment, are not
predetermined or guaranteed as to dollar
amount; and
2. Vary in amount with the investment
experience of the Sub-Accounts.
Based upon the option chosen, the first payout
is determined by the amount of the Contract
Value used to provide the Variable Annuity
Payout. The Contract Value is converted into a
fixed number of Annuity Units, and subsequent
payouts are determined by the value of the
Annuity Units.
Reallocations among Sub-Accounts before the
Start Date are governed by Section 6.
H. DETERMINATION OF THE FIRST
VARIABLE ANNUITY PAYMENT
If you elect a Variable Annuity Payout, the
Contract Value from a Sub-Account, less
applicable taxes, will be applied to the
applicable Annuity Payout Option Table. This
will be done:
1. On the Valuation Date immediately
preceding the seventh calendar day
before payouts begin; and
2. In accordance with the annuity payout
option chosen.
The amount payable for the first payment for
each $1,000 so applied under annuity payout
options one and two based upon an assumed yield
of 3%, are shown in the tables on pages 25 and
26.
I. VARIABLE ANNUITY PAYOUTS
AFTER THE FIRST ANNUITY PAYOUT
Variable Annuity Payouts after the first payout
are not fixed and vary in amount. The amount
changes with the investment performance of the
Sub-Accounts, and may change from month to
month. The dollar amount of such payouts is
determined as follows:
1. The dollar amount of the first Variable
Annuity Payout is divided by the Annuity
Unit value as of the Valuation Date
immediately preceding the seventh
calendar day before the payouts begin.
This result establishes the number of
Annuity Units for each monthly annuity
payout after the first payout. This
number of Annuity Units remains fixed
during the annuity payout period.
Form No. 13076 7-99 23
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
2. The fixed number of Annuity Units is
multiplied by the Annuity Unit value as
of the Valuation Date immediately
preceding the seventh calendar day
before the date the payout is due. The
result establishes the dollar amount of
the payout.
We guarantee the dollar amount of each payment
after the first will not be affected by
variations in expenses or mortality experience.
J. ANNUITY UNIT VALUES
For each Sub-Account, the Annuity Unit value was
set at $10 when Accumulation Units were first
converted into Annuity Units. Subsequent Annuity
Unit values for any Valuation Period are equal
to:
1. The net investment factor for the
Valuation Period for which the Annuity
Unit value is being calculated;
2. MULTIPLIED by the Annuity Unit value for
the preceding Valuation Period; and
3. DIVIDED by the daily factor at the
assumed yield not to exceed 5% (designed
to offset the assumed yield used to
determine the first payment) adjusted
for the number of days in the Valuation
Period.
NOTE: The net investment factor, the Annuity
Unit value, and the daily factor vary
from day to day, therefore, if you have
any questions you should contact us at
{800-426-7050}.
K. EXCHANGE OF ANNUITY UNITS
After annuity payouts begin, Annuity Units of
any Variable Sub-Account may be exchanged for
units of any of the other Variable Sub-Accounts.
This may be done no more than once a year. Once
annuity payouts start, no exchanges may be made
to or from any fixed annuity.
Form No. 13076 7-99 24
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
-----------------------------------------------
ANNUITY PAYOUT TABLE
OPTION ONE
Installments for Life with or without a Fixed
Period Certain
Monthly Income
for Each $1,000 of Contract Value
-----------------------------------------------
FIXED PERIOD IN MONTHS
-----------------------------------------------
AGE NONE 120
-----------------------------------------------
50 3.96 3.94
-----------------------------------------------
51 4.03 4.00
-----------------------------------------------
52 4.09 4.07
-----------------------------------------------
53 4.17 4.14
-----------------------------------------------
54 4.24 4.21
-----------------------------------------------
55 4.32 4.28
-----------------------------------------------
56 4.41 4.36
-----------------------------------------------
57 4.50 4.45
-----------------------------------------------
58 4.59 4.54
-----------------------------------------------
59 4.70 4.63
-----------------------------------------------
60 4.80 4.73
-----------------------------------------------
61 4.92 4.84
-----------------------------------------------
62 5.04 4.95
-----------------------------------------------
63 5.18 5.06
-----------------------------------------------
64 5.32 5.19
-----------------------------------------------
65 5.47 5.32
-----------------------------------------------
66 5.63 5.45
-----------------------------------------------
67 5.80 5.59
-----------------------------------------------
68 5.98 5.74
-----------------------------------------------
69 6.18 5.90
-----------------------------------------------
70 6.39 6.07
-----------------------------------------------
Instead of monthly installments, yearly, semi-
annual or quarterly installments may be
selected.
Amounts for ages not shown in this
table may be obtained on request.
------------------------------------------------
Form No. 13076 7-99 25
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNUITY PAYOUT TABLE
OPTION TWO
Joint and Survivor Annuity
Monthly Income for Each $1,000 of Contract Value
- --------------------------------------------------------------------------------
JOINT PAYEE'S AGE
- --------------------------------------------------------------------------------
PAYEE'S AGE 45 50 55 60 65 70
- --------------------------------------------------------------------------------
50 3.43 3.55 3.65 3.74 3.81 3.87
- --------------------------------------------------------------------------------
55 3.50 3.65 3.81 3.94 4.06 4.15
- --------------------------------------------------------------------------------
60 3.56 3.74 3.94 4.15 4.33 4.49
- --------------------------------------------------------------------------------
65 3.60 3.81 4.06 4.33 4.61 4.86
- --------------------------------------------------------------------------------
70 3.63 3.87 4.15 4.49 4.86 5.25
- --------------------------------------------------------------------------------
Amounts for ages not shown in this table may be obtained upon request.
- --------------------------------------------------------------------------------
SECTION 9 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
A. BENEFICIARY CHANGE
You have the right to name an Irrevocable
Beneficiary on the application.
You may add a Beneficiary or change the
Beneficiary by written request during your
lifetime if:
1. The contract is in force; and
2. We have the written consent of each
Irrevocable Beneficiary.
If there is more than one Beneficiary, we pay
them in equal shares unless you have requested
otherwise in writing.
Any addition or change of Beneficiary should be
sent to our Home Office.
The addition or change will take effect on the
date you signed the request. But, it will not
affect any payment or action we make before we
receive and record that request.
B. BENEFICIARIES
SUCCESSION OF INTEREST
If no Beneficiary is named, or if no Beneficiary
survives you, we will pay your estate.
Form No. 13076 7-99 26
<PAGE>
SECTION 9 GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
If a Beneficiary survives you, but dies before
receiving his/her full share, we will pay
his/her share in the following order, unless you
requested otherwise in writing:
1. To any surviving Beneficiary, in the
same class of Beneficiary;
2. To any Contingent Beneficiary;
3. To the Beneficiary's surviving spouse;
4. Equally to the Beneficiary's surviving
children; or
5. To the Beneficiary's estate.
C. EFFECT OF LAW AND
PLAN DOCUMENTS
This contract will be subject to and interpreted
in conformity with the provisions, terms, and
conditions of the tax-sheltered annuity plan
document of which this contract is a part, if
any, and with:
1. The terms and conditions of IRC Section
403(b), the regulations thereunder; and
2. Other applicable law (including, 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, you.
D. EVIDENCE OF SURVIVAL
We may require proof that a person is alive on
the Required Distribution Date, the Start Date,
or at any time thereafter.
E. INCONTESTABILITY
This contract has a two-year contestable period
running from its Issue Date. After this contract
has been in force for two years from its Issue
Date, we cannot claim that the contract is void
unless the contract has been terminated in
accordance with Section 14.
F. INTEREST ON DEATH BENEFIT
Any death benefit paid under this contract from
the Fixed Account will include interest from the
Death Benefit Valuation Date until the death
benefit is paid at a rate not less than that
required by law. Any death benefit paid under
this contract from the Variable Account will not
include interest.
Form No. 13076 7-99 27
<PAGE>
SECTION 9 GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
G. MISSTATEMENT OF AGE
If your age is misstated, the Required
Distribution Date and/or the Start Date will be
adjusted to reflect the true age.
If age has been misstated and payments have
begun under a Fixed or Variable Annuity Payout,
we will change the amounts payable to what the
Payee is entitled to at the true age.
If the misstatement caused us to make an
overpayment, we will deduct that amount from
future payments. If the misstatement caused us
to make an underpayment, we will pay that amount
immediately.
We have the right to require proof of a Payee's
age before we make payment under any Fixed or
Variable Annuity Payout.
H. NONPARTICIPATING
The contract does not share in our profits or
surplus. No dividends are paid under this
contract.
I. NONTRANSFERABLE
This contract may not be transferred, sold,
assigned, discounted or pledged either as
collateral for a loan or security for the
performance of an obligation or for any other
purpose, to any person or entity other than us.
J. PAYMENTS AND SETTLEMENTS
All payments and settlements we make are payable
from our Home Office. We may require that this
contract be returned before payments and
settlements are made.
K. PROOF OF DEATH
We accept any of the following as proof of
death:
1. A certified copy of a death certificate;
2. A certified copy of a decree of a court
of competent jurisdiction as to the
finding of death; or
3. Any other proof satisfactory to us.
L. PROTECTION OF PROCEEDS
Payments we make under this contract:
1. May not be assigned before they are due;
and
2. Except as permitted by law, are not
subject to claims of creditors or legal
process.
Form No. 13076 7-99 28
<PAGE>
SECTION 9 GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
M. TAX WITHHOLDING
We will withhold taxes from any payment made
when required by law or regulation.
N. YEARLY STATEMENT
At least once each Contract Year, we will send
you a report showing the Contract Value and, if
applicable, any Outstanding Loan Balance.
SECTION 10 PAYMENTS AT DEATH
- --------------------------------------------------------------------------------
A. GENERAL
At the Beneficiary's election, distribution of
all or part of the death benefit may be deferred
to the extent allowed by state or federal law or
IRS regulation.
B. DEFINITION OF TERMS
1. ADJUSTED PURCHASE
PAYMENT TOTAL
The initial Adjusted Purchase Payment Total is
equal to the amount of the first Purchase
Payment we receive. The Adjusted Purchase
Payment Total is increased by the amount of each
subsequent Purchase Payment. The Adjusted
Purchase Payment Total is decreased by each
Annual Contract Charge. For each partial
withdrawal, the Adjusted Purchase Payment Total
is reduced by multiplying it by the fraction A
divided by B, (A/B), where:
1. A is the Contract Value immediately
after a partial withdrawal; and
2. B is the Contract Value immediately
before a partial withdrawal.
2. RESET CONTRACT
ANNIVERSARY
The Reset Contract Anniversary is the last
consecutive six-year anniversary date measured
from the Issue Date.
3. RESET DEATH
BENEFIT
On the Reset Contract Anniversary, the Reset
Death Benefit is equal to the Contract Value.
The Reset Death Benefit is increased by the
amount of each Purchase Payment made after the
Reset Contract Anniversary.
Form No. 13076 7-99 29
<PAGE>
SECTION 10 PAYMENTS AT DEATH (CONTINUED)
- --------------------------------------------------------------------------------
For each partial withdrawal taken after the
Reset Contract Anniversary, the Reset Death
Benefit is reduced by multiplying it by the
fraction A divided by B, (A/B), where:
1. A is the Contract Value immediately
after the partial withdrawal; and
2. B is the Contract Value immediately
before the partial withdrawal.
C. DEATH BENEFIT
BEFORE THE START DATE
The amount of the death benefit is defined as
follows:
1. If you die on or before the first day of
the month following your 80th birthday,
the death benefit is the greater of A,
B, or C, less any Outstanding Loan
Balance where:
a. A is the Contract Value on the
Death Benefit Valuation Date; or
b. B is the Adjusted Purchase
Payment Total; or
c. C is the Reset Death Benefit.
2. If you die after the first day of the
month following your 80th birthday, the
death benefit is the greater of A or B,
less any Outstanding Loan Balance,
where:
a. A is the Contract Value on the
Death Benefit Valuation Date; or
b. B is the Adjusted Purchase
Payment.
D. DEATH BENEFIT VALUATION DATE
The Death Benefit Valuation Date is the
Valuation Date following the date we receive the
later of:
1. Proof of your death; or
2. The Beneficiary's written request in a
form which we approve for:
a. A single sum payment; or
b. An annuity payout permitted by
Code Section 401(a)(9).
E. PAYMENT OF DEATH BENEFIT
If the Beneficiary elects a single sum payment
of the death benefit, we will make payment
within seven days after the Death Benefit
Valuation Date.
If an annuity payout is requested, it may be any
annuity payout:
1. That could have been selected under
Section 8; and
2. Which is permitted by Code Sections
401(a)(9), 408(b)(10), and the
regulations thereunder.
Form No. 13076 7-99 30
<PAGE>
SECTION 10 PAYMENTS AT DEATH (CONTINUED)
- --------------------------------------------------------------------------------
F. DEATH BENEFIT ON OR
AFTER THE START DATE
On or after the Start Date, the amount of the
death benefit, if any, is governed by the
annuity payout in effect on the date of your
death.
SECTION 11 RESTRICTIONS ON DISTRIBUTIONS
- --------------------------------------------------------------------------------
A. GENERAL
This Section restricts how distributions may be
made under the contract both before and after
your death. It refers to IRC Sections 401(a)(9)
and 403(b)(10) and modifies any other provision
in the contract to the contrary.
B. REQUIRED DISTRIBUTIONS
WHILE LIVING
You must elect payments under Section 7, Section
8, or a combination of both, that commence on or
before the Required Distribution Date. These
payments are payable in substantially equal
amounts, no less frequently than annually. Your
entire interest in the contract must be
distributed in the following manner:
1. In one lump sum;
2. Over your life;
3. Over your life and the life of your
Beneficiary;
4. Over a period certain not exceeding your
life expectancy; or
5. Over the joint and last survivor life
expectancy of you and your Beneficiary.
If your entire interest is to be distributed in
other than one lump sum, then the amount to be
distributed each year (commencing with the
Required Distribution Date and each year
thereafter) will be determined in accordance
with IRC Section 403(b)(10) and the regulations
thereunder.
C. REQUIRED DISTRIBUTION
UPON DEATH
If you die after distribution of your entire
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 immediately preceding
your death.
Form No. 13076 7-99 31
<PAGE>
SECTION 11 RESTRICTIONS ON DISTRIBUTIONS (CONTINUED)
- --------------------------------------------------------------------------------
If you die before distribution has commenced (or
distribution has commenced for only a portion of
your interest) the death benefit must be
distributed no later than December 31 of the
calendar year in which the fifth anniversary of
your death occurs.
However, proceeds which are payable to a
Beneficiary who is a natural person may be
distributed in substantially equal installments
over his or her lifetime, or a period certain
not exceeding the life expectancy of the
Beneficiary. This distribution must commence not
later than December 31 of the calendar year
following the calendar year in which your death
occurred.
If the sole Beneficiary is your surviving
spouse, he or she may elect to receive equal, or
substantially equal, payments over his or her
life or life expectancy. This election must be
made by your surviving spouse no later than
December 31 of the calendar year in which the
fifth anniversary of your death occurs. These
payments commence at any date prior to the date
on which you would have reached age 70 1/2.
Payments will be calculated in accordance with
IRC Section 401(a)(9), 403(b)(10) and the
regulations thereunder.
For the purposes of this requirement, any amount
paid to your child will be treated as if it had
been paid to your surviving spouse if the
remainder of the interest becomes payable to the
surviving spouse when the child reaches the age
of majority.
D. MINIMUM INCIDENTAL
DEATH BENEFIT REQUIREMENT
If your spouse is not the Beneficiary, the
method of distribution selected must assure that
at least 50% of the present value of the amount
available for distribution is paid within your
life expectancy. This method of distribution
must comply with the requirements of IRC Section
401(a)(9), 403(b)(10) and the regulations
thereunder.
E. LIFE EXPECTANCY
For purposes of this Section, life expectancy
and joint and last survivor life expectancy will
be determined by use of the expected return
multiples in Tables V and VI of Treasury
Regulation 1.72-9 in accordance with IRC Section
403(b)(10) and the regulations thereunder.
In the case of distributions under Section 11B,
your life expectancy or, if applicable, the
joint and last survivor life expectancy of you
and your Beneficiary, will be initially
determined on the basis of attained ages in the
year you reach age 70 1/2.
Form No. 13076 7-99 32
<PAGE>
SECTION 11 RESTRICTIONS ON DISTRIBUTIONS (CONTINUED)
- --------------------------------------------------------------------------------
In the case of distributions under Section 11C,
life expectancy will be initially determined on
the basis of the Beneficiary's attained age in
the year distributions are required to commence.
Unless you (or your spouse) elect otherwise,
prior to the date distributions are required to
commence, your life expectancy and, if
applicable, your spouse's life expectancy will
be recalculated annually. This calculation is
based on attained ages in the year for which the
required distribution is being determined.
The life expectancy of a non-spouse Beneficiary
will not be recalculated.
In the case of a distribution other than in the
form of life income or joint life income, the
annual distribution required to be made by the
Required Distribution Date is for the calendar
year in which you reach age 70 1/2.
Annual payments for subsequent years, including
the year in which the Required Distribution Date
occurs, must be made by December 31 of each
year.
The amount distributed for each year will equal
or exceed the annuity value as of the close of
business on December 31 of the preceding year,
divided by the applicable life expectancy or
joint and last survivor life expectancy.
SECTION 12 LOANS
- --------------------------------------------------------------------------------
A. GENERAL
Before the Start Date, you may ask us in writing
for a cash loan using the contract as security.
You will be required to complete a loan
application.
We will loan you up to the withdrawal value,
less an amount representing annual loan
interest, provided such amount does not exceed
the maximum loan amount set by law.
Loans must be for a minimum of $1,000. On a
non-discriminatory basis, we reserve the right
to:
1. Charge a loan service fee not to exceed
$25 for each loan; and
2. Restrict loans in the first Contract
Year and after you reach age 70 1/2.
We have the right to delay payment for
up to six months.
B. SECURITY OF LOAN
An amount of Contract Value equal to the amount
of a loan will be segregated within Fixed
Account A as security for the loan.
Form No. 13076 7-99 33
<PAGE>
SECTION 12 LOANS (CONTINUED)
- --------------------------------------------------------------------------------
Amounts held as security for the loan will be
reallocated to Fixed Account A Contract Value
from the unloaned portion of the Contract Value
of Fixed Accounts A and B and the Variable
Account Contract Value on a pro rata basis.
Amounts equal to the portion of the loan
reallocated from the Sub-Accounts of the
Variable Account Contract Value to Fixed Account
A are valued on the next Valuation Date
following our receipt of your written request
for a loan. This will reduce the Variable
Account Contract Value.
Amounts segregated to secure the loan are not
treated as reallocations for the purpose of the
reallocation charge or the limit on the number
of reallocations in a Contract Year.
C. REPAYMENT OF LOAN
Loans will be repaid in substantially equal
monthly installments over a period not to exceed
five years. You may take up to 20 years to repay
the loan if the loan is used to purchase your
principal residence.
All repayment amounts will reduce the
Outstanding Loan Balance by the amount of each
payment. Repayments will be allocated in the
same manner as Purchase Payments in Section 3C.
If any installment is 90 days in arrears, the
loan will be due and payable at once, without
notice to you.
We will repay the loan using a partial
withdrawal. We will deduct the Outstanding Loan
Balance and applicable withdrawal charges from
the Contract Value, unless such a distribution
is prohibited by law. In the event such a
distribution is prohibited by law, we will treat
the Outstanding Loan Balance as permitted by the
Code.
Even if not in default, any Outstanding Loan
Balance and applicable withdrawal charges will
not be included in the amount available under
the contract for payment upon death, withdrawal,
or purchase of an annuity payout.
If at any time, the Outstanding Loan Balance
equals or exceeds the withdrawal value, less
applicable taxes, the contract may terminate
without value. We will use the Contract Value to
repay the Outstanding Loan Balance, applicable
withdrawal charges and taxes.
We have a prior lien against the contract for
any money owed to us under it. Our lien is
superior to the claim of any assignee or other
person.
D. INTEREST
We may charge up to eight percent interest in
arrears on loans. But, we have the right to
charge a lower rate of interest. The interest
rate will never be less than five and one-half
percent in arrears.
Form No. 13076 7-99 34
<PAGE>
SECTION 12 LOANS (CONTINUED)
- --------------------------------------------------------------------------------
Interest on the loan is included in each monthly
repayment. If the contract terminates, a pro
rata amount of interest will be due based upon
the monthly interest accrued to date.
The portion of the Contract Value which is
security for the loan may earn less interest
than is credited to the unloaned portion, but it
will never earn less than the guaranteed rate of
three percent.
A loan may affect the interest credited to the
Fixed Account in the future, either up or down.
E. TAX CONSEQUENCES
If the loan requirements are not satisfied, or
if your interest in the contract terminates
while a loan is outstanding, the Outstanding
Loan Balance:
1. Will be treated as a taxable
distribution;
2. May be subject to a penalty tax; and
3. The treatment of the contract under IRC
Section 403(b) may be adversely
affected.
You should seek tax and legal advice before
requesting a loan.
SECTION 13 AMENDMENT AND DISCLAIMER
- --------------------------------------------------------------------------------
A. AMENDMENT
We reserve the right to amend this contract in
order to include any future changes relating to
this contract's remaining qualified for
treatment as an annuity contract under the
following:
1. The Code; and
2. IRS rulings and regulations; and
3. Any requirements imposed by the Internal
Revenue Service.
B. DISCLAIMER
We will be under no obligation for any of the
following:
1. To determine whether a Purchase Payment,
loan, distribution or transfer under the
contract complies with the provisions,
terms and conditions of each plan or
with applicable law;
2. To administer such plan, including,
without limitation, any provisions
required by the Retirement Equity Act of
1984; or
3. For any tax penalties owed by any party
resulting from failure to comply with
the Code and IRS rulings, regulations,
and requirements applicable to this
contract.
Form No. 13076 7-99 35
<PAGE>
SECTION 14 TERMINATION
- --------------------------------------------------------------------------------
A. TERMINATION
This contract will end on the earliest of the
following:
1. When the entire withdrawal value is
withdrawn on or before the Start Date;
2. When the Contract Value is paid in a
lump sum as the death benefit before the
Start Date; or
3. If permitted by law, when the
Outstanding Loan Balance is equal to or
greater than the Contract Value less
applicable withdrawal charges.
In addition, if:
1. You have not made any Purchase Payments
for a period of two full years; and
2. The guaranteed monthly benefit under the
life annuity with payments for 10 or 20
years would be less than $20 per month
when you reach age 71, or at the end of
Contract Year 12, whichever is later;
then, we may terminate the contract by payment
of the current withdrawal value.
This payment may be made to:
1. You, if you qualify under Section 7B;
2. Another insurance company issuing an IRC
Section 403(b) contract; or
3. A custodial account for regulated
investment company stock that qualifies
under IRC Section 403(b).
Form No. 13076 7-99 36
<PAGE>
This page intentionally left blank
Form No. 13076 7-99
<PAGE>
- --------------------------------------------------------------------------------
FLEXIBLE PREMIUM INDIVIDUAL DEFERRED ANNUITY CONTRACT
Nonparticipating
VARIABLE AND/OR FIXED ACCUMULATION
VARIABLE AND/OR FIXED DOLLAR ANNUITY PAYOUTS
NOTICE: To make Purchase Payments, make a claim, or exercise your rights under
this contract, please write or call us at:
{Northern Life Insurance Company
P.O. Box 12530
Seattle, Washington 98111-4530
(800) 426-7050}
{Reliastar Service Center
P.O. Box 505
Minot, North Dakota 58702-5050
(877) 844-5050}
Please include your contract number in all correspondence.
{NORTHERN LIFE INSURANCE COMPANY
A Stock Company
1501 4th Avenue
Suite 1000
Seattle, WA 98101-3620}
{Reliastar Service Center
2000 21st Avenue NW
Minot, North Dakota 58703}
Form No. 13076 7-99
EXHIBIT 99.4p
[LOGO]
NORTHERN LIFE INSURANCE COMPANY
A Stock Company
HOME OFFICE: ADMINISTRATIVE OFFICE:
1501 4th Avenue, Suite 1000 {P.O. Box 12530
Seattle, WA 98101-3620 Seattle, WA 98111-4350}
{RELIASTAR SERVICE CENTER:
P.O. Box 5050
Minot, North Dakota 58702-5050}
- --------------------------------------------------------------------------------
RIGHT TO EXAMINE AND CANCEL CONTRACT
You may cancel this contract by giving written notice of cancellation to
Northern Life Insurance Company {P.O. Box 12530, Seattle, WA 98111-4530, or
ReliaStar Service Center, P.O. Box 5050, Minot, ND 58702-5050}. You may also
give notice to the agent from whom you bought the contract. You must also return
the contract before midnight of the tenth day after the date you receive the
contract. As soon as you return it, we will consider it void from the start.
When these conditions are met, we will refund the Contract Value as of the next
Valuation Date after receiving your request. However, if applicable law so
requires, the full amount of any Purchase Payments we receive will be refunded.
- --------------------------------------------------------------------------------
NOTICE
ANNUITY PAYOUTS AND CONTRACT VALUES PROVIDED BY THIS CONTRACT ARE VARIABLE AND
MAY INCREASE OR DECREASE IN VALUE BASED ON THE INVESTMENT EXPERIENCE OF THE
VARIABLE ACCOUNT.
This contract is a legal contract between you and Northern Life Insurance
Company. READ YOUR CONTRACT CAREFULLY.
We will make Fixed and/or Variable Annuity Payouts subject to the terms of this
contract. You may change the Start Date, the annuity payout option, or both, as
shown in the contract.
If you die while this contract is in force, we will pay the death benefit when
we receive written notice of your death.
Your rights under this contract cannot be forfeited.
We issue this contract in consideration of the attached application and the
payment of Purchase Payments according to the terms of this contract.
The provisions on the following pages are a part of this contract.
/s/ Susan M. Bergen /s/ Michael J. Dubes
Secretary President
INDIVIDUAL DEFERRED RETIREMENT ANNUITY CONTRACT
Nonparticipating
VARIABLE AND/OR FIXED ACCUMULATION
VARIABLE AND/OR FIXED DOLLAR ANNUITY PAYOUTS
Form No. 13077 7-99
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
----
Section 1 Definitions 3
Section 2 The Contract 5
Section 3 Purchase Payments 5
Section 4 Fixed Account 6
Section 5 Variable Account 8
Section 6 Reallocations of Contract Value 12
Section 7 Withdrawals 14
Section 8 Annuity Benefits 17
Section 9 General Provisions 23
Section 10 Payments at Death 25
Section 11 Amendment and Disclaimer 28
Section 12 Termination 29
Section 13 If your Contract is an IRA 29
- --------------------------------------------------------------------------------
Additional benefits, if any, are listed on the Contract Data Page(s).
- --------------------------------------------------------------------------------
Form No. 13077 7-99
<PAGE>
CONTRACT DATA PAGE
INDIVIDUAL DEFERRED RETIREMENT ANNUITY CONTRACT
PURCHASE PAYMENTS:
Minimum Initial or Subsequent Lump Sum Purchase Payment $5,000.00
Minimum Periodic Payment(s) $50.00
Purchase Payments are allocated to the Fixed Account and Separate Account One
(Variable Account) as shown below unless changed as provided in this contract:
VARIABLE ACCOUNT
SUB-ACCOUNTS INITIAL ALLOCATION
NORTHSTAR GALAXY TRUST
Emerging Growth Portfolio 0%
Research Enhanced Index Portfolio 0%
Growth + Value Portfolio 0%
High Yield Bond Portfolio 0%
International Value Portfolio 0%
FIDELITY VARIABLE INSURANCE PRODUCT FUND
VIP Money Market Portfolio 0%
VIP Growth Portfolio 0%
VIP Equity-Income Portfolio 0%
FIDELITY VARIABLE INSURANCE PRODUCT FUND II
VIP II Investment Grade Bond Portfolio 0%
VIP II Asset Manager: Growth Portfolio 0%
VIP II Index 500 Portfolio 0%
VIP II Contrafund Portfolio 0%
FIDELITY VARIABLE INSURANCE PRODUCT FUND III
VIP III Growth Opportunities Portfolio 0%
THE ALGER AMERICAN FUND
ALGER AMERICAN Small Capitalization Portfolio 0%
ALGER AMERICAN Growth Portfolio 0%
ALGER AMERICAN MidCap Growth Portfolio 0%
ALGER AMERICAN Leveraged AllCap Portfolio 0%
Form No. 13077 7-99 PAGE A
<PAGE>
SUB-ACCOUNTS (CONTINUED) INITIAL ALLOCATION
JANUS ASPEN SERIES
Aggressive Growth Portfolio 0%
Growth Portfolio 0%
International Growth Portfolio 0%
Worldwide Growth Portfolio 0%
OCC ACCUMULATION TRUST
Managed Portfolio 0%
Small Cap Portfolio 0%
Equity Portfolio 0%
Global Equity Portfolio 0%
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Partners Portfolio 0%
Limited Maturity Bond Portfolio 0%
Socially Responsive Portfolio 0%
FIXED ACCOUNT
Fixed Account A 0%
Fixed Account B 0%
Fixed Account C 0%
--------------------------------------------------------------------
Total Allocation 100%
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
TABLE OF WITHDRAWAL CHARGES
- ------------------------------------------------- -----------------------------------------------
CONTRACT YEAR OF TOTAL/PARTIAL WITHDRAWAL MINUS WITHDRAWAL CHARGE AS PERCENTAGE OF EACH
CONTRACT YEAR OF PURCHASE PAYMENT PURCHASE PAYMENT
- ------------------------------------------------- -----------------------------------------------
<S> <C>
0 7%
- ------------------------------------------------- -----------------------------------------------
1 7%
- ------------------------------------------------- -----------------------------------------------
2 6%
- ------------------------------------------------- -----------------------------------------------
3 5%
- ------------------------------------------------- -----------------------------------------------
4 4%
- ------------------------------------------------- -----------------------------------------------
5 2%
- ------------------------------------------------- -----------------------------------------------
6+ zero
- ------------------------------------------------- -----------------------------------------------
</TABLE>
OTHER CHARGES:
Mortality Risk Charge: .85% of the daily net asset value
Expense Risk Charge: .40% of the daily net asset value
Administrative Charge: .15% of the daily net asset value
Annual Contract Charge: $30
OWNER: John Doe
OWNER: Mary Doe
ISSUE DATE: December 1, 1999
CONTRACT NO.: VA00123456
ANNUITANT: Jimmy Doe
ANNUITANT: Debbie Doe
Form No. 13077 7-99 PAGE B
<PAGE>
SECTION 1 DEFINITIONS
- --------------------------------------------------------------------------------
ACCUMULATION UNIT A unit of measure used to determine the Variable
Account Contract Value.
ANNUITANT(S) You are the Annuitant(s) unless you designate someone
else to be the Annuitant(s).
ANNUITY PAYOUT DATE The first business day of any calendar month in which a
Fixed or Variable Annuity Payout is made under the
contract.
ANNUITY UNIT A unit of measure used to determine the amount of a
Variable Annuity Payout after the first annuity payout.
BENEFICIARY The person(s) named by you to receive any payments
after your death.
CODE The Federal Internal Revenue Code of 1986 (IRC), as
amended.
CONTINGENT BENEFICIARY The person(s) you name to become the Beneficiary if the
Beneficiary dies.
CONTRACT ANNIVERSARY The same day and month as the Issue Date each year that
this contract remains in force.
CONTRACT EARNINGS On any Valuation Date, the Contract Value,
1. PLUS the aggregate Purchase Payments withdrawn
up to that date,
2. LESS the aggregate Purchase Payments made up to
that date.
CONTRACT VALUE The sum of the Fixed Account Contract Value (as defined
in Section 4D),
1. PLUS the Variable Account Contract Value (as
defined in Section 5D) on a Valuation Date,
2. LESS prior withdrawals (including early
withdrawal charges),
3. LESS applicable taxes, and
4. PLUS all interest earned.
CONTRACT YEAR Each 12-month period starting with the Issue Date and
each Contract Anniversary after that.
FIXED ACCOUNT One or more accounts under this contract that guarantee
both principal and interest. The Fixed Accounts are
held in our General Account. We have complete ownership
and control of the assets in the General Account.
FIXED ANNUITY PAYOUT A series of periodic payments to the Payee which do not
vary in amount. The principal and interest amounts are
guaranteed. These payments are made from the General
Account.
Form No. 13077 7-99 3
<PAGE>
SECTION 1 DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
FUND Any open-end management investment company (or
portfolio thereof) or any unit investment trust (or
series thereof) listed on the Contract Data Page(s) on
the Issue Date or thereafter made available.
GENERAL ACCOUNT Our assets other than those allocated to the Variable
Account or any other separate account.
HOME OFFICE Northern Life Insurance Company at our home office in
Seattle, Washington, or our administrative office in
Minot, North Dakota.
IRREVOCABLE BENEFICIARY The Irrevocable Beneficiary cannot be removed as
Beneficiary without his or her consent.
The Irrevocable Beneficiary must also consent to any
full or partial withdrawal, or ownership change, that
the Owner wishes to make.
OWNER(S) (YOU, YOUR) The person(s) named on the Application and the Contract
Data Page(s) to hold this contract and to exercise all
rights and privileges under it.
The first Owner listed on the Contract Data Page will
be the person designated to receive all correspondence,
notices and the IRC forms we are required to send out
under the Code.
Any Owners own the contract equally. Any request that
affects the contract must be signed by both the Owners.
PAYEE The person to receive payments under a Fixed or
Variable Annuity Payout.
PURCHASE PAYMENTS These include periodic, single lump sum, rollover, and
transfer payments paid to us on your behalf, less
applicable premium taxes, if any, as required by law.
START DATE The date on which the entire Contract Value is used to
purchase a Fixed and/or Variable Annuity Payout. Unless
you tell us otherwise in writing, the Start Date will
be the first day of the month in which the Annuitant
reaches age 85.
If the Start Date is earlier than the date on which you
reach age 59 1/2, you may be subject to tax penalties
unless you meet a permitted exception.
SUB-ACCOUNT A subdivision of the Variable Account.
Each Sub-Account's assets are invested exclusively in
one of the Funds.
The Sub-Accounts available on the Issue Date and the
percentage of Purchase Payments you have allocated to
each Sub-Account on the Issue Date are shown on the
Contract Data Page(s).
Other Sub-Accounts may be available after the Issue
Date.
Form No. 13077 7-99 4
<PAGE>
SECTION 1 DEFINITIONS (CONTINUED)
- --------------------------------------------------------------------------------
VALUATION DATE Each day on which the New York Stock Exchange (NYSE) is
open for business, except for a day that a
Sub-Account's corresponding Fund does not value its
shares. The NYSE is currently closed weekends and
specified holidays.
VALUATION PERIOD The time between a Valuation Date and the next
Valuation Date.
VARIABLE ACCOUNT A separate investment account of ours, identified on
the Contact Data Page(s), which has been established
under the State of Washington insurance laws. It is
divided into Sub-Accounts.
VARIABLE ANNUITY PAYOUT A series of periodic payments to the Payee varying in
amount based on the investment performance of the
Variable Account Sub-Accounts under this contract.
WE, US, OUR Northern Life Insurance Company at its home office in
Seattle, Washington and its administrative office in
Minot, North Dakota.
WRITTEN, IN WRITING A written request or notice signed, dated, and received
at an address designated by us in a form we accept. You
may ask us for the forms.
SECTION 2 THE CONTRACT
- --------------------------------------------------------------------------------
A. THE CONTRACT
The entire contract is the contract; the Contract Data
Page(s); the application; and attached endorsements.
Unless fraudulent, all statements made by or on behalf
of anyone covered by this contract are representations
and not warranties.
Only statements found in the attached application(s)
may be used to cancel this contract or as our defense
if we refuse to pay a claim.
B. MODIFICATION OF CONTRACT
Only our President or Secretary may change this
contract on our behalf. No agent or any other person
may change this contract. Any change must be in
writing.
SECTION 3 PURCHASE PAYMENTS
- --------------------------------------------------------------------------------
A. GENERAL
Purchase Payments must be in cash or a cash equivalent
and are payable at our Home Office.
Subject to Section 13C, you may make Purchase Payments
at any time before the Start Date while the contract is
in force.
The initial Purchase Payment must equal or exceed the
minimum as shown on the Contract Data Page(s).
Form No. 13077 7-99 5
<PAGE>
SECTION 3 PURCHASE PAYMENTS (CONTINUED)
- --------------------------------------------------------------------------------
On a non-discriminatory basis, we may choose not to
accept an additional Purchase Payment if:
1. It is less than
a. A minimum lump sum Purchase Payment of
$5,000,
b. A minimum periodic payment in the amount of
$50.00; or
2. The additional Purchase Payment plus the
Contract Value at the next Valuation Date
exceeds $1,000,000.
B. ALLOCATION OF
PURCHASE PAYMENTS
You specified the initial allocation of Purchase
Payments on your application for this contract.
This allocation is shown on the Contract Data Page(s).
The allocation of future Purchase Payments will remain
the same unless you change it.
You may change the percentage allocation between or
among available Sub-Accounts and the Fixed Accounts at
any time by giving us written notice.
The change is subject to any limitations on the number
of Funds available through each contract.
Changes in the allocation will not be effective until
the date we receive your notice and will only affect
Purchase Payments we receive after that date.
The allocation may be 100% to any account or may be
divided between the accounts in whole percentage
points, totaling 100%.
Reallocations of the Contract Value are governed by
Section 6.
SECTION 4 FIXED ACCOUNT
- --------------------------------------------------------------------------------
A. GENERAL
The Fixed Account consists of Fixed Accounts A, B and
C.
Purchase Payments allocated, and Contract Value
reallocated, to the Fixed Accounts will be credited
with interest at rates we determine from time to time.
The rate will never be less than an effective annual
interest rate of three percent.
B. INTEREST CREDITING
1. GENERAL
We may credit interest in excess of the guaranteed rate
of three percent.
Form No. 13077 7-99 6
<PAGE>
SECTION 4 FIXED ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
2. INTEREST RATE
IN EFFECT
Any interest rate in effect when an amount is allocated
or reallocated to the Fixed Account is guaranteed for
12 months after it is received.
All amounts in the Fixed Account, after the end of the
year referenced above, are credited with excess
interest at the rates in effect for the then current
12-month period.
There may be more than one interest rate in effect at
any time for Fixed Accounts A, B or C.
While this contract is in force, interest rates
declared for Fixed Account A will not be more than the
interest rates declared for Fixed Account B.
The interest rate for Fixed Account C may be higher
than Fixed Account A or B.
3. FACTORS DETERMINING
INTEREST RATE
In setting interest rates, we consider many factors,
including, but not limited to: investment yield rates,
taxes, and contract persistency.
4. TIMING OF
INTEREST CREDITING
We will credit interest to the Fixed Account Contract
Value beginning on the date we receive your Purchase
Payment or reallocation until it is withdrawn or
otherwise reallocated.
Interest will be credited and compounded daily to the
Fixed Account Contract Value using the daily
equivalents of effective annual interest rates.
C. FIXED ACCOUNT C
Fixed Account C is provided as a vehicle for dollar
cost averaging to the Sub-Accounts.
The Minimum Purchase Payment for Fixed Account C is
$5,000.
D. FIXED ACCOUNT
CONTRACT VALUE
The Fixed Account Contract Value on any Valuation Date
is:
1. The sum of your Purchase Payment(s) allocated to
Fixed Accounts A, B and C;
2. PLUS any reallocations from the Variable Account
to Fixed Accounts A and B;
3. PLUS interest credited to Fixed Accounts A, B
and C;
Form No. 13077 7-99 7
<PAGE>
SECTION 4 FIXED ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
4. LESS any previous partial withdrawals, amounts
applied to purchase partial annuity payouts, and
the Annual Contract Charge(s) applied to the
Fixed Account;
5. LESS any previous reallocations to the Variable
Account; and
6. LESS premium tax deducted, if any.
SECTION 5 VARIABLE ACCOUNT
- --------------------------------------------------------------------------------
A. GENERAL
The Variable Account is registered with the Securities
and Exchange Commission as a unit investment trust,
under the Investment Company Act of 1940.
We have complete ownership and control of the assets in
the Variable Account. These assets are held separately
from our other assets and are not part of our General
Account.
The portion of the assets of the Variable Account equal
to the reserves, and other contract liabilities of the
Variable Account, are not chargeable with liabilities
from any other business that we may conduct.
The income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account will be
credited to, or charged against, the Variable Account,
without regard to our other income, gains, or losses.
B. SUB-ACCOUNTS
The Variable Account is divided into Sub-Accounts, some
of which are available under the contract. Each
Sub-Account that is available under this contract
invests in shares of a Fund. Funds initially available
are set forth on the Contract Data Page(s).
Shares of a Fund will be purchased and redeemed for a
Sub-Account at their net asset value.
We will reinvest the net asset value of the income,
dividends, and gains, distributed from shares of a
Fund, in additional shares of that Fund.
The Fund prospectuses define the net asset value and
describe the Funds.
The dollar amounts of values and benefits of this
contract provided by the Variable Account depend on the
investment performance of the Funds in which your
selected Sub-Accounts are invested.
We do not guarantee the investment performance of the
Funds. You bear the full investment risk for amounts
applied to the Sub-Accounts.
Form No. 13077 7-99 8
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
C. ACCUMULATION UNITS
Purchase Payments received under this contract and
allocated to, and any amounts reallocated to, the
Variable Account will be credited in the form of
Accumulation Units.
To find the number of Accumulation Units:
1. DIVIDE the amount of the Purchase Payment
allocated to or any amount reallocated to the
Sub-Account;
2. BY the value of an Accumulation Unit for that
Sub-Account on the next Valuation Date.
To find the number of Accumulation Units cancelled upon
withdrawal, or reallocation, from a Sub-Account:
1. DIVIDE the amount withdrawn or reallocated;
2. BY the Accumulation Unit value, on the next
Valuation Date.
Each Accumulation Unit value is set at $10 when the
Sub-Account first purchases investment shares.
Subsequent values on any Valuation Date are equal to:
1. The previous Accumulation Unit value;
2. MULTIPLIED by the net investment factor for that
Sub-Account for the Valuation Date.
D. VARIABLE ACCOUNT
CONTRACT VALUE
The Variable Account Contract Value is the total of the
values of your interest in each Sub-Account. Each
Sub-Account is equal to:
1. The number of Accumulation Units;
2. MULTIPLIED by the Accumulation Unit value.
The Variable Account Contract Value will vary from
Valuation Date to Valuation Date.
E. NET INVESTMENT FACTOR
The net investment factor is an index number which
reflects charges to this contract and the investment
performance during a Valuation Period of the Fund in
which a Sub-Account is invested.
If the net investment factor is greater than one, the
Accumulation Unit value has increased. If the net
investment factor is less than one, the Accumulation
Unit value has decreased.
The net investment factor for a Sub-Account is
determined by dividing (1) by (2) and then subtracting
(3) from the result, where:
Form No. 13077 7-99 9
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
1. Is the net result of:
a. The net asset value per share of the Fund
shares held in the Sub-Account, determined
at the end of the current Valuation Period;
b. PLUS the per share amount of any dividend or
capital gain distributions made on the Fund
shares held in the Sub-Account during the
current Valuation Period;
c. PLUS a per share credit; or
d. LESS a per share charge for any taxes
reserved which we determine to have resulted
from the operations of the Sub-Account and
to be applicable to this contract.
2. Is the net result of:
a. The net asset value per share of the Fund
shares held in the Sub-Account, determined
at the end of the last prior Valuation
Period;
b. PLUS a per share credit; or
c. LESS a per share charge for any taxes
reserved for the last prior Valuation Period
which we determine to have resulted from the
investment operations of the Sub-Account and
to be applicable to this contract.
3. Is a daily factor representing the Mortality
Risk Charge, the Expense Risk Charge, and the
Administrative Charge adjusted for the number of
days in the period. The charges are shown on an
annual basis on the Contract Data Page(s).
F. MORTALITY RISK CHARGE
The Mortality Risk Charge pays us for assuming the
mortality risk under this contract.
This charge is included in the calculation of the net
investment factor. It is shown on the Contract Data
Page(s).
G. EXPENSE RISK CHARGE
The Expense Risk Charge pays us for guaranteeing that
we will not increase the Annual Contract Charge or the
Administrative Charge even though our cost of
administering this contract and the Variable Account
may increase.
This Expense Risk Charge is included in the calculation
of the net investment factor. It is shown on the
Contract Data Page(s).
Form No. 13077 7-99 10
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
H. ADMINISTRATIVE CHARGE AND
ANNUAL CONTRACT CHARGE
The Administrative Charge and the Annual Contract
Charge shown on the Contract Data Page(s) pay us for
the administrative expenses of the contract.
The Administrative Charge is included in the
calculation of the net investment factor.
The Annual Contract Charge will be deducted from the
Contract Value on each Contract Anniversary before the
Start Date.
We make the deduction from the Fixed Account and the
Variable Account on a basis that reflects each
account's proportionate percentage of the Contract
Value.
If you request a full withdrawal of this contract on
other than the Contract Anniversary, the Annual
Contract Charge will be deducted at the time of the
withdrawal.
I. RESERVED RIGHTS
We reserve the right, if permitted by applicable law,
to:
1. Create new variable accounts;
2. Combine variable accounts, including the
Variable Account;
3. Remove, add, or combine Sub-Accounts and make
the new Sub-Accounts available to contract
Owners at our discretion;
4. Substitute shares of one Fund for another;
5. Reallocate assets of the Variable Account, which
we determine to be associated with the class of
contracts to which this contract belongs, to
another variable account.
(If this type of reallocation is made, the term
"Variable Account" as used in this contract will
then mean the variable account to which the
assets were reallocated);
6. De-register the Variable Account under the
Investment Company Act of 1940, if registration
is no longer required;
7. Make any changes required by the Investment
Company Act of 1940;
8. Operate the Variable Account as a management
investment company under the Investment Company
Act of 1940, or any other form permitted by law;
9. Restrict or eliminate any voting privileges of
contract Owners or other persons who have voting
privileges as to the Variable Account; and
Form No. 13077 7-99 11
<PAGE>
SECTION 5 VARIABLE ACCOUNT (CONTINUED)
- --------------------------------------------------------------------------------
10. Waive the Annual Contract Charge if the Contract
Value meets specified conditions, for example
if:
a. The Contract Value exceeds $25,000; or
b. You make minimum contributions of at least
$5,000 (net of withdrawals) per year.
We reserve the right to reinstate the Annual
Contract Charge if the Contract Value falls
below $25,000.
SECTION 6 REALLOCATIONS OF CONTRACT VALUE
- --------------------------------------------------------------------------------
A. GENERAL
You may reallocate Contract Value between or among
Sub-Accounts, from one or more Sub-Accounts to the
Fixed Account, and from the Fixed Account to one or
more Sub-Accounts, subject to certain limitations.
Subject to the restrictions in Section 6B, we make a
reallocation:
1. On the next Valuation Date after we receive your
written instructions requesting the
reallocation; or
2. As of a Valuation Date you request which occurs
thereafter.
Reallocations are subject to the availability of
Sub-Accounts.
On a non-discriminatory basis, we reserve the right to:
1. Impose a charge of up to $25 for each
reallocation of Contract Value;
2. Limit the number of reallocations you can make;
3. Establish minimum and maximum amounts for
reallocations; and
4. Reallocate the entire Contract Value remaining
in a Sub-Account or any Fixed Account in the
event that a reallocation request would bring
such remaining Contract Value below a specified
amount.
Allocation of Purchase Payments is governed by Section
3.
B. REALLOCATIONS FROM
FIXED ACCOUNT
Before the Start Date, Fixed Account A Contract Value
may be reallocated at any time to Fixed Account B
Contract Value or to the Variable Account.
Before the Start Date, you may request in writing the
reallocation of part of Fixed Account B to the Variable
Account or to Fixed Account A under the following
conditions:
Form No. 13077 7-99 12
<PAGE>
SECTION 6 REALLOCATIONS OF CONTRACT VALUE (CONTINUED)
- --------------------------------------------------------------------------------
1. You may only reallocate Contract Value during
the reallocation period that begins 30 days
before and ends 30 days after each Contract
Anniversary. Only one reallocation is allowed
during each reallocation period;
2. We must receive the request to reallocate no
more than 30 days before the start of the
reallocation period and not later than 10 days
before the end of the reallocation period;
3. You may not reallocate more than the greater of
$1,000 or 25% of Fixed Account B Contract Value.
If the Fixed Account B Contract Value is less
than $1,000 after the reallocation, the full
Fixed Account B Contract Value must be
reallocated; and
4. You must reallocate at least $250 or the total
Fixed Account B Contract Value, if less.
We reserve the right to permit reallocations in excess
of these limits on a non-discriminatory basis.
C. FIXED ACCOUNT C REALLOCATIONS
1. REQUIREMENTS
Reallocations from Fixed Account C to the Variable
Account must begin within 30 days from receipt of the
Purchase Payment. They will be in substantially equal
payments over a period of 12 months.
You may change the Variable Sub-Account(s) receiving
Fixed Account C reallocations by giving us written
notice prior to the Reallocation Date.
Only one reallocation of Fixed Account C will take
place at any one time.
If additional Purchase Payment(s) are received for
allocation to Fixed Account C:
1. The balance of Fixed Account C will be adjusted
to reflect the subsequent payment(s); and
2. Reallocations will be recalculated based on the
number of months remaining in the original
12-month period.
Reallocations from Fixed Accounts A, B, or the Variable
Account, to Fixed Account C are prohibited.
No full or partial withdrawals are available from Fixed
Account C.
2. REALLOCATION DATE
Reallocations from Fixed Account C will be transferred
any time before the 29th day of each month. You may
tell us in writing the date you want the reallocation
to occur.
Form No. 13077 7-99 13
<PAGE>
SECTION 6 REALLOCATIONS OF CONTRACT VALUE (CONTINUED)
- --------------------------------------------------------------------------------
3. DISCONTINUING
REALLOCATIONS FROM
FIXED ACCOUNT C
If reallocations from Fixed Account C are discontinued
prior to the end of the 12-month term, the remaining
balance of Fixed Account C will be reallocated to Fixed
Account A, unless you tell us differently.
D. ALL OTHER REALLOCATIONS
Before the Start Date, you may make a written request
to reallocate all or part of a Sub-Account's
Accumulation Units to other Sub-Accounts or to Fixed
Accounts A or B.
To accomplish this reallocation, the appropriate
Accumulation Units will be redeemed and their value
will be reinvested in other Sub-Accounts, or
reallocated to Fixed Accounts A or B as directed in
your request.
Subject to the restrictions in the following paragraph,
after a Variable Annuity Payout has begun, you may make
a written request to reallocate your Annuity Units.
This is done the same way and subject to the same
conditions as reallocating Accumulation Units. However,
we reserve the right to restrict these reallocations.
No reallocations to or from Fixed Accounts A, B or C
may be made after the Start Date. In the event that
part of the Contract Value is applied to purchase
annuity payouts, the remaining Contract Value may be
reallocated as described above for periods prior to the
Start Date.
SECTION 7 WITHDRAWALS
- --------------------------------------------------------------------------------
A. GENERAL
You may request a full or partial withdrawal by sending
us a written request.
We reserve the right to deduct applicable premium taxes
and other state or federal taxes from the Contract
Value on the date the withdrawal is taken.
The amount withdrawn from the Sub-Accounts will be
determined on the next Valuation Date following our
receipt of your written request. This amount, LESS any
charges, will normally be sent to you within seven days
of our receipt of your written request.
By law, we have the right to defer payment of
withdrawals from the Fixed Account for up to six months
from the date we receive your request.
Form No. 13077 7-99 14
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
B. ORDER OF WITHDRAWAL
For purposes of calculating withdrawal charges, we will
take out Contract Earnings as of the Valuation Date
next following our receipt of your request; then
withdrawals will be taken from Purchase Payments on a
first-in, first-out basis.
C. WITHDRAWAL CHARGE
For any amounts withdrawn that are subject to the
withdrawal charge, we calculate the withdrawal charge
this way:
1. The withdrawal charge equals the Contract Value
withdrawn allocable to Purchase Payments;
2. MULTIPLIED by the Withdrawal charge
percentage(s).
The withdrawal charge percentage(s) is determined from
the Table of Withdrawal Charges shown on the Contract
Data Page(s).
If you make Purchase Payments over the course of a
Contract Year, these payments will be bundled together
to determine the withdrawal charge. For example,
Purchase Payments made during year one, until the
Contract Anniversary marking the beginning of year two,
will all be considered to have been made at the start
of year one for withdrawal charge calculation purposes.
In computing withdrawals, the withdrawal charge, if
any, will be deemed a part of the withdrawal, but will
not be received by you.
We will not apply the withdrawal charge to any portion
of the Contract Value used to purchase an annuity
payout.
D. FULL WITHDRAWAL
For a full withdrawal of the Contract Value, we
calculate the withdrawal value this way:
1. Withdrawal value equals Contract Value;
2. LESS withdrawal charge; and
3. LESS Annual Contract Charge.
We will pay the withdrawal value to you in a lump sum,
less any applicable taxes.
Withdrawal of the entire Contract Value will result in
termination of the contract in accordance with Section
12A, and we have no further obligation.
Form No. 13077 7-99 15
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
E. PARTIAL WITHDRAWAL
You may withdraw a portion of the Contract Value. For a
partial withdrawal, we calculate the withdrawal value
this way:
1. Withdrawal value equals Contract Value
withdrawn;
2. LESS withdrawal charge.
Some, or all, of the amount withdrawn may be eligible
for a waiver of the withdrawal charge as described in
Section 7G.
On a non-discriminatory basis, we reserve the right to
impose a charge not to exceed $25 for each partial
withdrawal and to limit the number of partial
withdrawals you may make.
Unless we agree, on a non-discriminatory basis, each
partial withdrawal must be at least $1,000, excluding
those under Section 7F. Following a partial withdrawal,
the remaining Contract Value must be at least $1,000.
F. SYSTEMATIC WITHDRAWALS
You may make a written request to automatically
withdraw amounts from your contract. You may elect to
receive these withdrawals monthly, quarterly,
semi-annually, or annually, subject to any applicable
federal or state laws, rules or regulations. The
minimum amount of each systematic withdrawal may not be
less than $300.
Systematic withdrawals, in excess of amount you can
withdraw without withdrawal charges, will be subject to
withdrawal charges. This is described in Section 7G.
Systematic withdrawals will end:
1. When the election amount eligible for withdrawal
falls below $300;
2. When the contract ends due to election of an
annuity payout, full withdrawal of the contract,
or death of any Owner; or
3. You give us written notice to end this option.
G. PARTIAL WAIVER OF
WITHDRAWAL CHARGE
During any Contract Year, you may withdraw a portion of
the Contract Value without a withdrawal charge. For
each Contract Year, the amount you may withdraw without
a withdrawal charge is the greater of:
1. Earnings; or
2. Ten percent of Purchase Payments, as of the last
Contract Anniversary, subject to withdrawal
charges.
Form No. 13077 7-99 16
<PAGE>
SECTION 7 WITHDRAWALS (CONTINUED)
- --------------------------------------------------------------------------------
This amount can be taken in up to four withdrawals per
Contract Year.
If your first withdrawal exceeds this amount, the
excess is subject to the withdrawal charge in Section
7C. If your first withdrawal equals this amount, other
withdrawals during the Contract Year may be subject to
the withdrawal charge in Section 7C.
If your first withdrawal is less than this amount, any
portion available for withdrawal may be applied against
no more than three additional withdrawals during the
Contract Year. The maximum amount available for
withdrawal remains subject to the limitations in
Sections 7D and 7E.
H. FEDERAL TAXES
Some or all of the withdrawal may be income on which
you must pay tax.
We must report such income according to the tax laws;
this may differ from the way we charge withdrawals
against the contract for purposes of assessing
withdrawal charges.
We may also be required to withhold taxes from amounts
otherwise payable.
In addition, there may be tax penalties if you make a
withdrawal before age 59 1/2.
SECTION 8 ANNUITY BENEFITS
- --------------------------------------------------------------------------------
A. APPLICATION OF
CONTRACT VALUE
Upon receipt of your written request for an annuity
payout, we apply all or a portion of the Contract Value
to provide a Fixed Annuity Payout, or a Variable
Annuity Payout, or both. The portion of the Contract
Value we apply will be considered a partial withdrawal
for the purpose of calculating the death benefit
covered in Section 10.
If the amount to be annuitized on the date the annuity
payout is scheduled to begin is less than $5,000, we
may pay the withdrawal value in a lump sum.
We reserve the right to deduct applicable premium taxes
and other state or federal taxes from the Contract
Value on any Annuity Payout Date as required by law.
Form No. 13077 7-99 17
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
B. ANNUITY PAYOUT OPTIONS
You may select an annuity payout by sending us a
written request.
Your request must be received by us at least 30 days
before the annuity payout is scheduled to begin.
If you have not selected a required minimum
distribution payment method, we will provide an annuity
payout option to you at age 85, unless you notify us
otherwise in writing.
The following options are available for annuity
payouts:
OPTION ONE
INSTALLMENTS FOR LIFE
WITH OR WITHOUT A
FIXED PERIOD CERTAIN
We will pay the proceeds in equal installments for as
long as the Annuitant lives.
If a fixed period certain is chosen, we guarantee to
make payments for at least 120 months.
If the Annuitant dies before the end of the fixed
period certain, we will pay the remaining guaranteed
payments in accordance with Section 10.
For each $1,000 of Contract Value applied, the Annuity
Payout Option One Table shows:
1. The guaranteed minimum rate for each installment
under a Fixed Annuity Payout; or
2. The rate used to determine the first installment
under a Variable Annuity Payout using an assumed
yield of three percent.
The rate depends upon:
1. Whether the 120-month fixed period certain is
chosen; and
2. The Annuitant's age on his/her birthday nearest
the date the first installment is due.
OPTION TWO
JOINT AND SURVIVOR
ANNUITY PAYOUT
We will pay the proceeds in equal installments for as
long as either the Annuitant or the joint Annuitant is
alive.
Form No. 13077 7-99 18
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
For each $1,000 of Contract Value applied, the Annuity
Payout Option Two Table shows:
1. The guaranteed minimum rate for each installment
at various ages under a Fixed Annuity Payout; or
2. The rate used to determine the first installment
under a Variable Annuity Payout using an assumed
yield of three percent.
OPTION THREE
OTHER FIXED AND VARIABLE
ANNUITY PAYOUTS
We will pay the proceeds under any other Fixed and
Variable Annuity Payouts that we may offer. Contact us
for details.
C. CHANGE OF ANNUITY
PAYOUT DATE
Unless we agree otherwise, the first Annuity Payout
Date must be at least 60 days after the Issue Date. The
first Annuity Payout Date is the first business day of
the first calendar month in which an annuity payout
will be made to you.
You may change the Start Date by giving us at least 30
days advance written notice.
D. FREQUENCY AND AMOUNT OF
PAYMENTS
Annuity payments will be made monthly unless we agree
to a different payment schedule.
We reserve the right to change the frequency of either
Fixed or Variable Annuity Payouts so that each payment
will be at least $100.
E. FIXED ANNUITY PAYOUTS
The dollar amount of all payments is fixed during the
entire period of annuity payments, according to the
provisions of the annuity payout option selected.
If your contract is an IRA, guaranteed minimum Annuity
Payout Option One and Two rates for Fixed Annuity
Payouts are based upon three percent yearly interest
and rates derived from 1983 Mortality Table a.
Other Fixed Annuity Payout rates may be available, but
rates will never be less than those shown in the
Annuity Payout Option One and Two Tables. Contact us
for details.
In setting Fixed Annuity Payout rates, we consider many
factors, including, but not limited to: investment
yield rates; taxes; and contract persistency.
Form No. 13077 7-99 19
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
F. PAYMENT OF PRESENT VALUE
Following the death of the Annuitant and any joint
Annuitant under a Fixed Annuity Payout, we may offer
the Beneficiary payment of the present value of the
unpaid remaining payments if he/she chooses not to
continue annuity payouts.
If the present value is payable, we calculate it this
way:
1. We determine the number of unpaid remaining
payments when we receive proof of death; and
2. We discount the remaining payments at the rate
specified in the terms of the Fixed Annuity
Payout supplemental contract.
G. VARIABLE ANNUITY PAYOUTS
If you elect a Variable Annuity Payout, all or a
portion of the Variable Account Contract Value is used
to provide payments which:
1. After the first payment, are not predetermined
or guaranteed as to dollar amount; and
2. Vary in amount with the investment experience of
the Sub-Accounts.
Based upon the option chosen, the first payout is
determined by the amount of the Contract Value used to
provide the Variable Annuity Payout. The Contract Value
is converted into a fixed number of Annuity Units, and
subsequent payouts are determined by the value of the
Annuity Units.
Reallocations among Sub-Accounts before the Start Date
are governed by Section 6.
H. DETERMINATION OF THE FIRST
VARIABLE ANNUITY PAYMENT
If you elect a Variable Annuity Payout, the Contract
Value from a Sub-Account, less applicable taxes, will
be applied to the applicable Annuity Payout Option
Table. This will be done:
1. On the Valuation Date immediately preceding the
seventh calendar day before payments begin; and
2. In accordance with the annuity payout option
chosen.
The amount payable for the first payment for each
$1,000, so applied under Annuity Payout Options One and
Two based upon an assumed yield of three percent is
shown in the tables on pages 22 and 23.
Form No. 13077 7-99 20
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
I. VARIABLE ANNUITY PAYOUTS
AFTER THE FIRST ANNUITY PAYOUT
Variable Annuity Payouts after the first payout are not
fixed and vary in amount. The amount changes with the
investment performance of the Sub-Accounts, and may
change from month to month. The dollar amount of such
payments is determined as follows:
1. The dollar amount of the first Variable Annuity
Payout is divided by the Annuity Unit value as
of the Valuation Date immediately preceding the
seventh calendar day before the payments begin.
This result establishes the number of Annuity
Units for each monthly annuity payment after the
first payment. This number of Annuity Units
remains fixed during the annuity payment period.
2. The fixed number of Annuity Units is multiplied
by the Annuity Unit value as of the Valuation
Date immediately preceding the seventh calendar
day before the date the payment is due. The
result establishes the dollar amount of the
payment.
We guarantee the dollar amount of each payout after the
first will not be affected by variations in expenses or
mortality experience.
J. ANNUITY UNIT VALUES
For each Sub-Account, the Annuity Unit value was set at
$10 when Accumulation Units were first converted into
Annuity Units. Subsequent Annuity Unit values for any
Valuation Period are equal to:
1. The net investment factor for the Valuation
Period for which the Annuity Unit value is being
calculated;
2. MULTIPLIED by the Annuity Unit value for the
preceding Valuation Period; and
3. DIVIDED by the daily factor at the assumed yield
not to exceed five percent (designed to offset
the assumed yield used to determine the first
payment) adjusted for the number of days in the
Valuation Period.
NOTE: The net investment factor, the Annuity Unit
value, and the daily factor vary from day to
day. If you have any questions you should
contact us at {800-426-7050}.
K. EXCHANGE OF ANNUITY UNITS
After the annuity payout begins, Annuity Units of any
Sub-Account may be exchanged for units of any other
Sub-Accounts. This may be done no more than once a
year. Once the annuity payout starts, no exchanges may
be made to or from any fixed annuity.
Form No. 13077 7-99 21
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUITY PAYOUT TABLE
OPTION ONE
Installments for life with or
without a fixed period certain
Monthly income for each $1,000
of Contract Value
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Period in Months
- --------------------------- -------------------------------------------------- ----------------------------------------------------
MALE FEMALE
- --------------------------- -------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C>
AGE None 120 None 120
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
50 4.27 4.22 3.90 3.89
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
51 4.34 4.29 3.97 3.95
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
52 4.43 4.37 4.03 4.01
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
53 4.51 4.45 4.10 4.08
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
54 4.60 4.54 4.18 4.15
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
55 4.70 4.62 4.25 4.22
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
56 4.80 4.72 4.34 4.30
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
57 4.91 4.82 4.42 4.38
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
58 5.03 4.92 4.52 4.47
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
59 5.15 5.03 4.61 4.56
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
60 5.28 5.14 4.72 4.66
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
61 5.42 5.26 4.83 4.76
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
62 5.57 5.39 4.95 4.86
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
63 5.74 5.52 5.07 4.98
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
64 5.91 5.66 5.21 5.10
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
65 6.10 5.81 5.35 5.22
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
66 6.29 5.96 5.51 5.36
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
67 6.50 6.11 5.67 5.50
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
68 6.73 6.28 5.85 5.65
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
69 6.97 6.44 6.04 5.80
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
70 7.23 6.61 6.25 5.96
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
71 7.51 6.78 6.47 6.14
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
72 7.80 6.96 6.71 6.31
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
73 8.12 7.14 6.97 6.50
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
74 8.45 7.32 7.26 6.69
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
75 8.82 7.49 7.56 6.89
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
76 9.21 7.67 7.90 7.09
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
77 9.62 7.84 8.26 7.29
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
78 10.07 8.01 8.65 7.49
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
79 10.55 8.17 9.07 7.69
- --------------------------- ------------------------- ------------------------ ------------------------- --------------------------
80 11.06 8.33 9.53 7.89
- -----------------------------------------------------------------------------------------------------------------------------------
Instead of such monthly installments, yearly, semi-annual or quarterly
installments may be selected. Amounts for ages not shown in this table may be
obtained upon request.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Form No. 13077 7-99 22
<PAGE>
SECTION 8 ANNUITY BENEFITS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUITY PAYOUT TABLE
OPTION TWO
Joint and Survivor Annuity
Monthly Income for Each $1,000 of Contract Value
- ------------------------------------------------------------------------------------------------------------------------------------
FEMALE AGE
- --------------- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MALE AGE 50 55 60 65 70 75 80
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
50 3.60 3.75 3.88 3.99 4.08 4.15 4.20
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
55 3.69 3.88 4.06 4.23 4.38 4.50 4.58
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
60 3.76 3.99 4.23 4.49 4.72 4.91 5.06
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
65 3.81 4.07 4.38 4.72 5.07 5.39 5.65
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
70 3.84 4.14 4.50 4.93 5.40 5.89 6.34
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
75 3.87 4.18 4.58 5.08 5.68 6.37 7.07
- --------------- --------------- -------------- --------------- ---------------- --------------- ------------------ -----------------
80 3.88 4.21 4.64 5.19 5.90 6.78 7.77
- ------------------------------------------------------------------------------------------------------------------------------------
Amounts for ages not shown in this table may be obtained upon request.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SECTION 9 GENERAL PROVISIONS
- --------------------------------------------------------------------------------
A. BENEFICIARY CHANGE
You have the right to name an Irrevocable Beneficiary
on the application.
You may add a Beneficiary or change the Beneficiary by
written request during your lifetime if:
1. The contract is in force; and
2. We have the written consent of each Irrevocable
Beneficiary.
If there is more than one Beneficiary, we pay them in
equal shares unless you have requested otherwise in
writing.
Any addition or change of Beneficiary should be sent to
our Home Office.
The addition or change will take effect on the date you
signed the request. It will not affect any payment or
action we make before we receive and record that
request.
Form No. 13077 7-99 23
<PAGE>
SECTION 9 GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
B. BENEFICIARY'S
SUCCESSION OF INTEREST
If no Beneficiary is named, or if no Beneficiary
survives you, we will pay your estate.
If a Beneficiary survives you, but dies before
receiving his/her full share, we will pay his/her share
in the following order, unless you requested otherwise
in writing:
1. To any surviving Beneficiary, in the same class
of Beneficiary;
2. To any Contingent Beneficiary;
3. To the Beneficiary's surviving spouse;
4. Equally to the Beneficiary's surviving children;
or
5. To the Beneficiary's estate.
C. EVIDENCE OF SURVIVAL
We may require proof that a person is alive on the
Required Distribution Date, the Start Date, or at any
time thereafter.
D. INCONTESTABILITY
This contract has a two-year contestable period running
from its Issue Date.
After this contract has been in force for two years
from its Issue Date, we cannot claim that the contract
is void unless the contract has been terminated in
accordance with Section 12.
E. INTEREST ON DEATH BENEFIT
Any death benefit paid under this contract from the
Fixed Account will include interest from the death
benefit Valuation Date until the death benefit is paid
at a rate not less than that required by law. Any death
benefit paid under this contract from the Variable
Account will not include interest.
F. MISSTATEMENT OF AGE OR SEX
If your age or sex is misstated, the Required
Distribution Date and/or the Start Date will be
adjusted to reflect the true age or sex.
If age has been misstated and payments have begun under
a Fixed or Variable Annuity Payout, we will change the
amounts payable to what the Payee is entitled to at the
true age or sex.
If the misstatement caused us to make an overpayment,
we will deduct that amount from future payments. If the
misstatement caused us to make an underpayment, we will
pay that amount immediately.
Form No. 13077 7-99 24
<PAGE>
SECTION 9 GENERAL PROVISIONS (CONTINUED)
- --------------------------------------------------------------------------------
We have the right to require proof of an Annuitant's
age or sex before we make payment under any Fixed or
Variable Annuity Payout.
G. NONPARTICIPATING
The contract does not share in our profits or surplus.
No dividends are paid under this contract.
H. PAYMENTS AND SETTLEMENTS
All payments and settlements we make are payable from
our Home Office. We may require that this contract be
returned before payments and settlements are made.
I. PROOF OF DEATH
We accept any of the following as proof of death:
1. A certified copy of a death certificate;
2. A certified copy of a decree of a court of
competent jurisdiction as to the finding of
death; or
3. Any other proof satisfactory to us.
J. PROTECTION OF PROCEEDS
Payments we make under this contract:
1. May not be assigned before they are due; and
2. Except as permitted by law, are not subject to
claims of creditors or legal process.
K. TAX WITHHOLDING
We will withhold taxes from any payment made when
required by law or regulation.
L. YEARLY STATEMENT
At least once each Contract Year, we will send you a
report showing the Contract Value.
SECTION 10 PAYMENTS AT DEATH
- --------------------------------------------------------------------------------
A. GENERAL
At the Beneficiary's election, distribution of all or
part of the death benefit may be deferred to the extent
allowed by state or federal law or IRS regulation.
When an Owner dies before the Start Date, the
individual entitled to the death benefit is the first
person in priority order, among the following, who is
alive on the date of Owner's death:
Form No. 13077 7-99 25
<PAGE>
SECTION 10 PAYMENTS AT DEATH (CONTINUED)
- --------------------------------------------------------------------------------
1. Joint Owner, if any; or
2. Primary Beneficiary; or
3. Contingent Beneficiary.
If none of the persons above are alive on the date of
Owner's death, the death benefit will then be paid to
Owner's estate.
If the designated Beneficiary, as determined above, is
the Owner's surviving legal spouse, the legal spouse
has the additional option to continue the contract as
the Owner.
Your surviving legal spouse would then have all
ownership rights described in the contract.
If the legal spouse elects to continue the contract,
he/she may not later decide to receive the death
benefit.
B. DEFINITION OF TERMS
1. ADJUSTED PURCHASE
PAYMENT TOTAL
The initial Adjusted Purchase Payment Total is equal to
the amount of the first Purchase Payment we receive.
The Adjusted Purchase Payment Total is increased by the
amount of each subsequent Purchase Payment. The
Adjusted Purchase Payment Total is decreased by each
Annual Contract Charge. For each partial withdrawal,
the Adjusted Purchase Payment Total is reduced by
multiplying it by the fraction A divided by B, (A/B),
where:
1. A is the Contract Value immediately after a
partial withdrawal; and
2. B is the Contract Value immediately before a
partial withdrawal.
2. RESET CONTRACT
ANNIVERSARY
The last consecutive six-year anniversary date measured
from the Issue Date.
3. RESET DEATH BENEFIT
On the Reset Contract Anniversary, the Reset Death
Benefit is equal to the Contract Value.
The Reset Death Benefit is increased by the amount of
each Purchase Payment made after the Reset Contract
Anniversary.
Form No. 13077 7-99 26
<PAGE>
SECTION 10 PAYMENTS AT DEATH (CONTINUED)
- --------------------------------------------------------------------------------
For each partial withdrawal taken after the Reset
Contract Anniversary, the Reset Death Benefit is
reduced by multiplying it by the fraction A divided by
B, (A/B), where:
1. A is the Contract Value immediately after the
partial withdrawal; and
2. B is the Contract Value immediately before the
partial withdrawal.
C. DEATH BENEFIT
BEFORE THE START DATE
If the first Owner listed on the contract is living and
the Annuitant dies before the Start Date, we will
automatically name the first Owner as the successor
Annuitant. There will be no change in status if there
is only one Owner and one of the Annuitants dies.
You may also surrender the contract. However, if you
surrender the contract, withdrawal charges may apply.
If the Owner is a non-natural person and the Annuitant
dies before the Start Date, the Contract Value will be
paid to the Beneficiary.
The amount of the death benefit is defined as follows:
1. If you die on or before the first day of the
month following your 80th birthday, the death
benefit is the greater of A, B, or C where:
a. A is the Contract Value on the Death Benefit
Valuation Date; or
b. B is the Adjusted Purchase Payment Total; or
c. C is the Reset Death Benefit.
2. If you die after the first day of the month
following your 80th birthday, the death benefit
is the greater of A or B where:
a. A is the Contract Value on the Death Benefit
Valuation Date; or
b. B is the Adjusted Purchase Payment.
D. DEATH BENEFIT VALUATION DATE
The Death Benefit Valuation Date is the Valuation Date
following the date we receive the later of:
1. Proof of your death; or
2. The Beneficiary's written request in a form
which we approve for:
a. A single sum payment; or
b. An annuity payout permitted by Code Section
408(b)(3).
Form No. 13077 7-99 27
<PAGE>
SECTION 10 PAYMENTS AT DEATH (CONTINUED)
- --------------------------------------------------------------------------------
E. PAYMENT OF DEATH BENEFIT
If the Beneficiary elects a single sum payment, we will
make payment within seven days after the Death Benefit
Valuation Date.
If an annuity payout is requested, it may be any
annuity payout:
1. That could have been selected under Section 8;
and
2. Which is permitted by Code Sections 401(a)(9),
408(b)(3), and the regulations thereunder.
F. DEATH BENEFIT ON OR
AFTER THE START DATE
On or after the Start Date, the amount of the death
benefit, if any, is governed by the annuity payout in
effect on the date of your death.
SECTION 11 AMENDMENT AND DISCLAIMER
- --------------------------------------------------------------------------------
A. AMENDMENT
We reserve the right to amend this contract in order to
include any future changes relating to this contract's
remaining qualified for treatment as an annuity
contract under the following:
1. The Code;
2. IRS rulings and regulations; and
3. Any requirements imposed by the Internal Revenue
Service.
B. DISCLAIMER
We will be under no obligation for any of the
following:
1. To determine whether a Purchase Payment,
distribution or transfer under the contract
complies with the provisions, terms and
conditions of each plan or with applicable law;
2. To administer any such plan, including, without
limitation, any provisions required by the
Retirement Equity Act of 1984; or
3. For any tax penalties owed by any party
resulting from failure to comply with the Code
and IRS rulings, regulations, and requirements
applicable to this contract.
Form No. 13077 7-99 28
<PAGE>
SECTION 12 TERMINATION
- --------------------------------------------------------------------------------
A. TERMINATION
This contract will end on the earliest of the
following:
1. When the entire withdrawal value is withdrawn on
or before the Start Date; or
2. When the Contract Value is paid in a lump sum as
the death benefit before the Start Date.
In addition, if:
1. You have not made any Purchase Payments for a
period of two full years; and
2. The guaranteed monthly benefit under the life
annuity with payments for 10 or 20 years would
be less than $20 per month when you reach age
71, or at the end of Contract Year 12, whichever
is later;
Then, we may terminate the contract by payment of the
current withdrawal value.
This payment may be made to you, or, if you request, to
another annuity or IRA.
SECTION 13 IF YOUR CONTRACT IS AN IRA
- --------------------------------------------------------------------------------
A. GENERAL
If you purchased this contract as an Individual
Retirement Annuity (IRA), this Section restricts how a
Purchase Payment and any withdrawals may be made under
the contract both before and after your death.
It refers to Code Sections 401(a)(9), and 408(b)(3),
408(k), including the incidental death benefit
provisions of Proposed Treasury Regulation Section
1.401(a)(9)-2.
This Section modifies any other provision in the
contract to the contrary when this contract is an IRA.
If you have questions about IRA requirements, consult
your personal tax adviser.
B. OWNER
For an IRA:
1. You must be the Annuitant.
2. Joint Ownership is not permitted.
3. You cannot name a different Owner for the
contract.
4. The contract is established for your exclusive
benefit and the exclusive benefit of your
Beneficiaries.
5. You may not borrow money from your contract.
6. Your interest in your contract is
non-transferable.
Form No. 13077 7-99 29
<PAGE>
SECTION 13 IF YOUR CONTRACT IS AN IRA (CONTINUED)
- --------------------------------------------------------------------------------
7. You cannot assign your interest in the contract
to another person.
8. Your entire interest in your contract is
nonforfeitable.
C. CONTRIBUTION
Any contribution must be in cash or a cash equivalent.
Only the following contribution may exceed $2,000 for
any taxable year:
1. A rollover contribution described in Code
Sections 402(c), 403(a)(4), 403(b)(8) and
408(d)(3);
2. An amount transferred from another individual
retirement account or annuity; or
3. A contribution made according to the terms of a
Simplified Employee Pension Plan as described in
Code Section 408(k).
No contribution may be made on your behalf for the tax
year you reach age 70 1/2 and any year thereafter.
You have the sole responsibility for determining
whether the contribution meets applicable income tax
requirements.
If we receive a Purchase Payment greater than that
permitted by law, you may make a written request to
withdraw the excess following the Code, subject to
applicable tax penalties.
D. IRA DISTRIBUTION REQUIREMENTS
You must elect to take a distribution under the
contract on or before the required beginning date. This
date commences no later than April 1 of the calendar
year following the calendar year in which you attain
age 70 1/2.
An exception to this rule is that you may tell us in
writing that you are using another acceptable source
under federal law to meet distribution requirements.
Distributions for each calendar year after the year you
become 70 1/2 (including the year of your required
beginning date) must be made by each December 31.
You have the sole responsibility for requesting a
distribution that complies with applicable law.
Such distribution will be payable in equal amounts, no
less frequently than annually.
Distributions will be made:
1. In a lump sum;
2. Over your life;
3. Over the lives of you and your Beneficiary;
Form No. 13077 7-99 30
<PAGE>
SECTION 13 IF YOUR CONTRACT IS AN IRA (CONTINUED)
- --------------------------------------------------------------------------------
4. Over a period certain not exceeding your life
expectancy; or
5. Over a period certain not exceeding the joint
and last survivor life expectancy of you and
your Beneficiary.
Distributions must be non-increasing or may increase
only as provided in Q&A F-3 of Proposed Treasury
Regulations Section 1.401 (a)(9)-1.
If your entire interest is to be distributed in other
than a single lump sum, the minimum amount to be
distributed each year will be determined according to
Code Section 408(b)(3). The distribution will start on
the required beginning date and will continue each year
thereafter.
E. WITHDRAWAL CHARGES
Withdrawal charges will be waived on the annual
withdrawal in any Contract Year made to comply with the
minimum distribution requirements.
However, the maximum amount available without applying
early withdrawal charges in any Contract Year under all
provisions of this contract is the greater of:
1. The amount needed for this contract to comply
with the minimum distribution requirements; or
2. Earnings or ten percent of Purchase Payments, as
of the last Contract Anniversary, subject to
withdrawal charges.
This waiver applies only to withdrawals needed for this
contract to meet the minimum distribution requirements
described in this Section.
F. DEATH BENEFIT BEFORE THE
REQUIRED START DATE
If you die before distribution has begun, the entire
interest must be distributed no later than December 31
of the calendar year in which the fifth anniversary of
your death occurs.
However, proceeds which are payable to a named
Beneficiary who is a natural person may be distributed
in equal installments over:
1. The lifetime of the Beneficiary; or
2. A period not exceeding the life expectancy of
the Beneficiary,
provided such distribution begins no later than
December 31 following the calendar year in which your
death occurred.
If the Beneficiary is your surviving legal spouse, he
or she may elect to receive equal or substantially
equal distributions over the life or life expectancy of
the surviving legal spouse.
Form No. 13077 7-99 31
<PAGE>
SECTION 13 IF YOUR CONTRACT IS AN IRA (CONTINUED)
- --------------------------------------------------------------------------------
The election must be made no later than December 31 of
the calendar year in which the fifth anniversary of
your death occurs.
Distributions must commence prior to the date on which
you would have attained age 70 1/2.
Minimum distributions will be calculated according to
Code Section 408(b)(3).
Alternatively, your surviving legal spouse may continue
the contract as Owner.
Under this requirement, any amount paid to any of your
children will be treated as if it had been paid to your
surviving legal spouse if the remainder of the interest
becomes payable to the surviving legal spouse when the
child reaches the age of majority.
G. DEATH BENEFIT ON OR AFTER THE
REQUIRED START DATE
If you die after distribution of your interest has
begun, 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.
H. DETERMINING LIFE EXPECTANCY
FOR DISTRIBUTIONS
As used in this document, life expectancy and joint and
last survivor life expectancy will be determined by use
of the expected return multiples in Tables V and VI of
Treasury Regulation Section 1.72-9 according to Code
Section 408(b)(3).
In the case of required distributions, life expectancy
of you and your Beneficiary will be initially
determined based on your attained ages in the year you
reach age 70 1/2.
In the case of the death benefit, the life expectancy
will be initially determined on the basis of your
Beneficiary's attained age in the year distributions
are required to commence.
Unless you (or your legal spouse) elect otherwise,
prior to the time distributions are required to
commence, your life expectancy (and, if applicable,
your legal spouse's life expectancy) will be
recalculated annually based on your attained ages in
the year for which the required distribution is being
determined.
The life expectancy of a non-legal spouse Beneficiary
will not be recalculated.
Form No. 13077 7-99 32
<PAGE>
SECTION 13 IF YOUR CONTRACT IS AN IRA (CONTINUED)
- --------------------------------------------------------------------------------
I. DISCLAIMER
We will be under no obligation for any of the
following:
1. For any tax or tax penalties an Owner,
Annuitant, or Beneficiary may owe resulting from
failure to comply with the requirements imposed
by the Codet or by any other applicable federal
or state law, rule or regulation;
2. To determine whether the Purchase Payment,
distribution, or transfer under the contract
complies with the provisions, terms, and
conditions of any plan or with applicable law;
3. To administer any plan, including, without
limitation, any provisions required by the
retirement Equity Act of 1984;
4. To provide any notifications or reports required
to be made by an employer or any other entity;
5. To verify or make provisions to ensure that the
contribution was received by us within any
deadlines prescribed by law or otherwise; or
6. To effect the correction of any excess
contribution.
Form No. 13077 7-99 33
<PAGE>
This page intentionally left blank
Form No. 13077 7-99
<PAGE>
- --------------------------------------------------------------------------------
INDIVIDUAL DEFERRED RETIREMENT ANNUITY CONTRACT
Nonparticipating+
VARIABLE AND/OR FIXED ACCUMULATION
VARIABLE AND/OR FIXED DOLLAR ANNUITY PAYOUTS
NOTICE: To make Purchase Payments, make a claim, or exercise your rights under
this contract, please write or call us at:
{Northern Life Insurance Company
P.O. Box 12530
Seattle, Washington 98111-4530
(800) 426-7050}
{Reliastar Service Center
P.O. Box 505
Minot, North Dakota 58702-5050
(877) 844-5050}
Please include your contract number in all correspondence.
{NORTHERN LIFE INSURANCE COMPANY
A Stock Company
1501 4th Avenue
Suite 1000
Seattle, WA 98101-3620}
{Reliastar Service Center
2000 21st Avenue NW
Minot, North Dakota 58703}
Form No. 13077 7-99
EXHIBIT 99.4q
[LOGO]
NORTHERN LIFE INSURANCE COMPANY
A Stock Company
HOME OFFICE: ADMINISTRATIVE OFFICE:
1501 4th Avenue, Suite 1000 {P.O. Box 12530
Seattle, WA 98101-3620 Seattle, WA 98111-4350}
{RELIASTAR SERVICE CENTER:
P.O. Box 5050
Minot, North Dakota 58702-5050}
ONE YEAR STEP UP DEATH BENEFIT ENDORSEMENT
This Endorsement is part of your Contract. The provisions of this Endorsement
supersede any conflicting provisions in your Contract or in any prior
endorsement.
"We" are the Northern Life Insurance Company.
"You" are the Owner of the Contract according to our records.
The following is added to the Section of your Contract called Payments at Death:
A. GENERAL
At the Beneficiary's election, distribution
of all or part of the death benefit may be
deferred to the extent allowed by state or
federal law or IRS regulation.
B. DEFINITION OF TERMS
1. DEATH BENEFIT FEE
The Death Benefit Fee is the fee charged for
this Endorsement. It is equal to an annual
rate of {0.15%} of your average daily
Variable Account Contract Value. The Death
Benefit Fee is charged monthly.
The Death Benefit Fee is deducted from the
Variable Account Sub-Accounts in proportion
to each account's proportionate percentage
of Variable Account Contract Value as of the
Valuation Date immediately preceding the
date of deduction.
If there is no Variable Account Contract
Value as of the date of the deduction, the
deduction will be made from the Fixed
Account Contract Value in proportion to each
account's proportionate percentage of Fixed
Account Contract Value.
If there is no Variable Account Contract
Value during the entire month prior to the
date of the deduction, no Death Benefit Fee
will be deducted for that month.
Form No. 13083 7-99 One Year Step Up Benefit Endorsement 1
<PAGE>
ONE YEAR STEP UP DEATH BENEFIT ENDORSEMENT (CONTINUED)
2. ADJUSTED PURCHASE
PAYMENT TOTAL
The initial Adjusted Purchase Payment Total
is equal to the amount of the first Purchase
Payment we receive. The Adjusted Purchase
Payment Total is increased by the amount of
each subsequent Purchase Payment. The
Adjusted Purchase Payment Total is decreased
by each Annual Contract Charge. For each
partial withdrawal, the Adjusted Purchase
Payment Total is reduced by multiplying it
by the fraction A divided by B, (A/B),
where:
1. A is the Contract Value
immediately after a partial
withdrawal; and
2. B is the Contract Value
immediately before a partial
withdrawal.
3. RESET CONTRACT
ANNIVERSARY
The Reset Contract Anniversary is the
Contract Value on the first Contract
Anniversary immediately preceding your
death.
4. RESET DEATH
BENEFIT
On the Reset Contract Anniversary, the Reset
Death Benefit is equal to the Contract
Value.
The Reset Death Benefit is increased by the
amount of each Purchase Payment made after
the Reset Contract Anniversary.
For each partial withdrawal taken after the
Reset Contract Anniversary, the Reset Death
Benefit is reduced by multiplying it by the
fraction A divided by B, (A/B), where:
1. A is the Contract Value
immediately after the partial
withdrawal; and
2. B is the Contract Value
immediately before the partial
withdrawal.
C. DEATH BENEFIT
BEFORE THE START DATE
The amount of the death benefit is defined
as follows:
1. If you die on or before the
first day of the month following
your 80th birthday, the death
benefit is the greater of A, B,
or C, less any Outstanding Loan
Balance where:
a. A is the Contract
Value on the Death
Benefit Valuation
Date; or
b. B is the Adjusted
Purchase Payment
Total; or
c. C is the Reset Death
Benefit.
Form No. 13083 7-99 One Year Step Up Benefit Endorsement 2
<PAGE>
ONE YEAR STEP UP DEATH BENEFIT ENDORSEMENT (CONTINUED)
2. If you die after the first day
of the month following your 80th
birthday, the death benefit is
the greater of A or B, less any
Outstanding Loan Balance, where:
a. A is the Contract
Value on the Death
Benefit Valuation
Date; or
b. B is the Adjusted
Purchase Payment.
D. DEATH BENEFIT VALUATION DATE
The Death Benefit Valuation Date is the
Valuation Date following the date we receive
the later of:
1. Proof of your death; or
2. The Beneficiary's written
request in a form which we
approve for:
a. A single sum
payment; or
b. An annuity payout
permitted by Code
Section 401(a)(9).
E. PAYMENT OF DEATH BENEFIT
If the Beneficiary elects a single sum
payment of the death benefit, we will make
payment within seven days after the Death
Benefit Valuation Date.
If an annuity payout is requested, it may be
any annuity payout:
1. That could have been selected
under Section 8; and
2. Which is permitted by Code
Sections 401(a)(9), 408(b)(10),
and the regulations thereunder.
F. DEATH BENEFIT ON OR
AFTER THE START DATE
On or after the Start Date, the amount of
the death benefit, if any, is governed by
the annuity payout in effect on the date of
your death.
The amount of the death benefit, if any, following the Start Date, is governed
by the annuity payout in effect on the date of your death.
Notwithstanding anything else in your Contract, the provisions of this
Endorsement are controlling.
All other terms and conditions as defined in this Contract remain unchanged,
unless otherwise defined in this Endorsement.
/s/ Susan M. Bergen
Secretary
Form No. 13083 7-99 One Year Step Up Benefit Endorsement 3
EXHIBIT 99.5b
NORTHERN LIFE VARIABLE ANNUITY APPLICATION
A RELIASTAR COMPANY
Northern Life Insurance Company
{ Home Office: P.O. Box 12530, Seattle WA 98111-4530 }
{ ReliaStar Service Center: P.O. Box 5050, Minot, ND 58702-5050 }
- --------------------------------------------------------------------------------
ER GROUP POLICY NO. EFFECTIVE DATE BILLING NO. CONTRACT NO.
- -------------------- -------------------- ----------------- -----------------
PLAN
================================================================================
[ ] Retail Series [ ] Plus Series [ ] RIA Only
[ ] One Year Step-up [ ] One Year Step-up
Death Benefit Death Benefit
- --------------------------------------------------------------------------------
ISSUE WITH QUALIFICATION TYPE
[ ] IRA [ ] Roth [ ] Nonqualified [ ] 457
[ ] SEP [ ] TSA/403(b) [ ] Other: ___________________________
- --------------------------------------------------------------------------------
ANNUITANT
================================================================================
NAME TAX ID NO.
- ----------------------------------------------- -------------------------------
ADDRESS
- --------------------------------------------------------------------------------
CITY STATE ZIP
- --------------------------------------------------------------------------------
DATE OF BIRTH SEX TELEPHONE NO.
[ ] M [ ] F
- --------------------------------- ------------- ------------------------------
OWNER
(IF OTHER THAN ANNUITANT)
- --------------------------------------------------------------------------------
NAME TAX ID NO.
- ----------------------------------------------- -------------------------------
ADDRESS
- --------------------------------------------------------------------------------
CITY STATE ZIP
- --------------------------------------------------------------------------------
DATE OF BIRTH SEX TELEPHONE NO.
[ ] M [ ] F
- --------------------------------- ------------- ------------------------------
JOINT ANNUITANT
================================================================================
NAME TAX ID NO.
- ----------------------------------------------- -------------------------------
ADDRESS
- --------------------------------------------------------------------------------
CITY STATE ZIP
- --------------------------------------------------------------------------------
DATE OF BIRTH SEX TELEPHONE NO.
[ ] M [ ] F
- --------------------------------- ------------- ------------------------------
JOINT OWNER
(IF OTHER THAN ANNUITANT)
- --------------------------------------------------------------------------------
NAME TAX ID NO.
- ----------------------------------------------- -------------------------------
ADDRESS
- --------------------------------------------------------------------------------
CITY STATE ZIP
- --------------------------------------------------------------------------------
DATE OF BIRTH SEX TELEPHONE NO.
[ ] M [ ] F
- --------------------------------- ------------- ------------------------------
EMPLOYER
================================================================================
NAME CONTACT NAME TELEPHONE NO.
- ---------------------------------- --------------------------------------------
MAILING ADDRESS CITY STATE ZIP
- ---------------------------------- --------------------------------------------
BENEFICIARY
================================================================================
If additional beneficiary designations are needed, please include on an
attachment to the application. Contingent beneficiaries do not receive proceeds
unless all primary beneficiaries are deceased when proceeds become due.
- --------------------------------------------------------------------------------
PRIMARY CONTINGENT
- --------------------------------------- ---------------------------------------
ADDRESS ADDRESS
- --------------------------------------- ---------------------------------------
CITY STATE ZIP CITY STATE ZIP
- --------------------------------------- ---------------------------------------
TAX ID NO. RELATIONSHIP TO OWNER TAX ID NO. RELATIONSHIP TO OWNER
- --------------------------------------- ---------------------------------------
PAYMENT SCHEDULE
================================================================================
INITIAL PURCHASE PAYMENT
[ ] Check Attached $ _____________
[ ] Transfer/Rollover Request Tax Year_______
[ ] Fixed Account C (Dollar Cost Average
request form must accompany payment) $ _____________ (184)
Optional Contribution Mode: _______ $ _____________
- --------------------------------------------------------------------------------
[ ] PERIODIC PAYMENT PAYMENT AMOUNT # PYMNTS ANNUAL PREMIUM
- ----------------------------- ------------------- -------------- ---------------
SALARY REDUCTION [ ] EE
AGREEMENT OR [ ] ER $ X = $
AMENDMENT TO ------- ------------------- -------------- ---------------
EMPLOYMENT CONTRACT [ ] EE
REQUIRED FOR TSA. [ ] ER $ X = $
- ---------------------------------------------------------------- ---------------
TOTAL ANNUAL PREMIUM
(FOR 12-MONTH PERIOD ONLY) $
- --------------------------------------------------------------------------------
1ST REMITTANCE DATE [ ] Monthly Electronic Funds Transfer (EFT)
- -------------------------- (Does not apply to TSA: attach PAC form)
- -------------------------- BILLING MODE OTHER
[1] [2] [4] [9] [10] [12] [20] [22] [24] [26] [ ]
- --------------------------
\/ NON-BILLING MONTHS
/\ [J] [F] [M] [A] [M] [J] [J] [A] [S] [O] [N] [D]
- -------------------------------------------- -----------------------------------
[ ] ROLLOVER/TRANSFER PAYMENT POLICY NUMBER AMOUNT PAYOR
- --------------- --------------------- ------------- ------------ -----------
CHECK ENCLOSED ACCEPTANCE LETTER
[ ] YES [ ] NO REQ'D [ ] YES [ ] NO
- --------------- --------------------- ------------- ------------ -----------
CHECK ENCLOSED ACCEPTANCE LETTER
[ ] YES [ ] NO REQ'D [ ] YES [ ] NO
- --------------- --------------------- ------------- ------------ -----------
SPECIAL INSTRUCTIONS (IF NECESSARY, ATTACH A SEPARATE SHEET.)
- --------------------------------------------------------------------------------
REPLACEMENT
================================================================================
Will the annuity applied for replace any existing life insurance or annuity?
[ ] Yes [ ] No If Yes, complete this section.
- --------------------------------------------------------------------------------
COMPANY POLICY NO. POLICY TYPE POLICY AMOUNT REASON FOR REPLACEMENT
- ------------ ------------ ------------- ------------- ----------------------
$
- ------------ ------------ ------------- ------------- ----------------------
$
- ------------ ------------ ------------- ------------- ----------------------
AGREEMENTS
================================================================================
I hereby authorize and direct Northern Life to act upon telephone
instructions, when proper identification is furnished, either from myself, or my
broker/dealer and his or her agent, only after discussion with me and with my
authorization (non-discretionary authority) to exchange/reallocate from any
sub-account (with the exception of Fixed Account C) to any other Sub-Account or
to the Fixed Accounts and to change the allocation of future deposits. All
telephone exchanges and/or allocation changes are subject to the terms described
in the Prospectus for the Variable Annuity Contract. The undersigned agrees that
Northern Life is not liable for any loss arising from any exchange or change in
allocation of future deposits by acting in accordance with telephone
instructions. __________________ (Owner(s) initials)
Does the proposed Owner consent to eliminate duplicate mailings of identical
documents to the same household if the persons in the household have more than
one Northern Life contract? [ ] Yes [ ] No
- --------------------------------------------------------------------------------
FORM NO. 13083 7-99 Page 1 of 2
<PAGE>
PURCHASE PAYMENT ALLOCATION
<TABLE>
<CAPTION>
==================================================================================================================
{NORTHSTAR GALAXY TRUST} {FIDELITY VARIABLE INSURANCE {NEUBERGER BERMAN ADVISERS
PRODUCT FUND III} MANAGEMENT TRUST}
<S> <C> <C>
____ % {020 Emerging Growth ____ % {079 VIP III Growth ____ % {031 Partners Portfolio}
Portfolio} Opportunities Portfolio} ____ % {032 Limited Maturity Bond
____ % {021 Research Enhanced Portfolio}
Index Portfolio} {THE ALGER AMERICAN FUND} ____ % {095 Socially Responsive
____ % {022 Growth + Value ____ % {190 ALGER AMERICAN Small Portfolio}
Portfolio} Capitalization
____ % {023 High Yield Bond Portfolio} {FIXED ACCOUNT}
Portfolio} ____ % {191 ALGER AMERICAN Growth ____ % {180 Fixed Account A}
____ % {024 International Value Portfolio} ____ % {181 Fixed Account B is not
Portfolio} ____ % {192 ALGER AMERICAN MidCap available on Plus Series}
Growth Portfolio}
{FIDELITY VARIABLE INSURANCE ____ % {193 ALGER AMERICAN Leveraged Fixed Account C is not available for
PRODUCT FUND} AllCap Portfolio} regular allocations.
____ % {070 VIP Money Market
Portfolio} {JANUS ASPEN SERIES} OTHER:
____ % {071 VIP Growth Portfolio} ____ % {006 Aggressive Growth ____ % _______________________
____ % {072 VIP Equity-Income Portfolio} ____ % TOTAL (Must equal 100%)
Portfolio} ____ % {007 Growth Portfolio} The proposed Owner understands that
____ % {008 International Growth if he/she is entitled to a refund
{FIDELITY VARIABLE INSURANCE Portfolio} of the purchase payments made upon
PRODUCT FUND II} ____ % {009 Worldwide Growth the revocation of a contract during
____ % {074 VIP II Investment Grade Portfolio} the free look period, then all
Bond Portfolio} purchase payments made until five
____ % {081 VIP II Asset Manager: {OCC ACCUMULATION TRUST} days after the end of the free look
Growth Portfolio} ____ % {015 Managed Portfolio} period will be allocated to the
____ % {082 VIP II Index 500 ____ % {016 Small Cap Portfolio} Fidelity VIP Money Market
Portfolio} ____ % {017 Equity Portfolio} Sub-Account, and then transferred
____ % {083 VIP II Contrafund ____ % {018 Global Equity to the Fixed Account(s) and/or the
Portfolio} Portfolio} Sub-Accounts as designated above.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION
================================================================================
Does the Proposed Owner(s) consent to delivery of prospectuses, prospectus
supplements, statements of additional information, transactional confirmation
and periodic statements in one or more of the following forms? (CHECK ALL THAT
APPLY.) If none are selected, paper copies will be provided.
[ ] 3.5" Floppy Disk [ ] CD rom [ ] Internet Website
[ ] E-Mail, and my e-mail address is _________________________________
This consent is valid until revoked by the Proposed Owner(s) in writing. The
Proposed Owner(s) understands that Northern Life may choose to discontinue
delivery of the above types at any time and may choose to deliver a paper
version.
- --------------------------------------------------------------------------------
AGREEMENTS
================================================================================
I certify that I have read the statements and that my answers to the questions
on this application are true and complete to the best of my knowledge. I certify
that: 1) the taxpayer Identification Number(s) [TAX ID No.] shown on this form
are correct; and 2) the IRS has not notified me that I am currently subject to
back-up withholding.
I UNDERSTAND THAT ANNUITY PAYMENTS AND WITHDRAWAL VALUES, WHEN BASED UPON
INVESTMENT EXPERIENCE OF A SUB-ACCOUNT OF A SEPARATE ACCOUNT, ARE VARIABLE AND
ARE NOT GUARANTEED AS TO A FIXED DOLLAR AMOUNT. I HEREBY ACKNOWLEDGE RECEIPT OF
A VARIABLE ANNUITY PROSPECTUS DATED ____________________.
- --------------------------------------------------------------------------------
SIGN
================================================================================
ANNUITANT OWNER
- -------------------------------------- ----------------------------------------
JOINT ANNUITANT JOINT OWNER
- -------------------------------------- ----------------------------------------
STATE OF APPLICATION DATE
- --------------------------------------------------------------------------------
AGENT INFORMATION
================================================================================
Agent(s) Do you have knowledge or reason to believe that replacement of an
Report: existing life insurance or annuity policy may be involved?
[ ] Yes [ ] No (If yes, provide details in Replacement Section.
Complete the required state replacement form, if any.)
- ------------------------- ------------------------- --------------------------
LICENSED AGENT'S LICENSED AGENT'S LICENSED AGENT'S
SIGNATURE SIGNATURE SIGNATURE
- ------------------------- ------------------------- --------------------------
AGENT NAME (PRINTED) AGENT NAME (PRINTED) AGENT NAME (PRINTED)
- ------------------------- ------------------------- --------------------------
AGENT NO. SPLIT % AGENT NO. SPLIT % AGENT NO. SPLIT %
- ------------------------- ------------------------- --------------------------
AGENT STATE LICENSE ID NO. AGENT STATE LICENSE ID NO. AGENT STATE LICENSE ID NO.
- --------------------------------------------------------------------------------
AGENT OPTIONS: [ ] A [ ] B [ ] C [ ] D [ ] E [ ] OTHER ___________________
- --------------------------------------------------------------------------------
AGENT REMARKS:
- --------------------------------------------------------------------------------
DEALER ONLY
================================================================================
DEALER NAME BRANCH OFFICE DEALER SYMBOL
- ------------------------- ------------------------- --------------------------
AUTHORIZED SIGNATURE
- --------------------------------------------------------------------------------
DEALER:
Make check payable to: NORTHERN LIFE INSURANCE COMPANY
and mail check and application to: {ReliaStar Service Center, P.O. Box 5050,
Minot, ND 58702-5050}
{Variable Payment Processing Department,
P.O. Box 12530, Seattle, WA 98111-4530}
- --------------------------------------------------------------------------------
Page 2 of 2
EXHIBIT 99.9
RELIASTAR
[LETTERHEAD]
September 10, 1999
Northern Life Insurance Company
1501 4th Avenue
Seattle, WA 98101
Dear Madam/Sir:
In connection with the proposed registration under the Securities Act of 1933,
as amended, of variable/fixed annuity contracts ("the Contract") and interests
in Separate Account One (the "Variable Account") I have examined documents
relating to the establishment of the Variable Account by the Board of Directors
of Northern Life Insurance Company (the "Company") as a separate account for
assets applicable to variable contracts, pursuant to RCW 48.18A.010 et seq., as
amended, and the Registration Statement, on Form N-4, amended by Post-Effective
Amendment No. 8 thereto, File No. 33-90474 (the "Registration Statement"), and I
have examined such other documents and have reviewed such matters of law as I
deemed necessary for this opinion, and I advise you that in my opinion:
1. The Variable Account is a separate account of the Company duly created
and validly existing pursuant to the laws of the State of Washington.
2. The Contracts, when issued in accordance with the Prospectus
constituting a part of the Registration Statement and upon compliance
with applicable local law, will be legal and binding obligations of the
Company in accordance with their respective terms.
3. The portion of the assets held in the Variable Account equal to
reserves and other contract liabilities with respect to the Variable
Account are not chargeable with liabilities arising out of any other
business the Company might conduct.
I consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ James M. Odland
James M. Odland
Counsel
EXHIBIT 99.10
INDEPENDENT AUDITORS' CONSENT
Board of Directors and Contract Holders
Northern Life Separate Account One
We consent to the incorporation by reference in this Post-Effective Amendment
No. 8 to Registration Statement on Form N-4 (File No. 33-90474) of the Northern
Life Separate Account One filed under the Securities Act of 1933 and Amendment
No. 9 to the Registration Statement filed under the Investment Company Act of
1940, respectively, of our report dated February 19, 1999 on the audit of the
financial statements of Northern Life Separate Account One as of December 31,
1998 and for each of the two years in the period then ended, and our report
dated February 5, 1999 on the audit of the consolidated statutory-basis
financial statements of Northern Life Insurance Company as of and for the years
ended December 31, 1998 and 1997 incorporated by reference in the Statement of
Additional Information of such Registration Statement, and to the references to
us under the heading "Financial Statements and Experts" appearing in the
Prospectus and under the headings "Independent Auditors" and "Financial
Statements" appearing in the Statement of Additional Information, all of which
are part of such Registration Statement.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
September 10, 1999
