497 1 d497.txt 497 Genworth Life & Annuity VA Separate Account 1 Prospectus For Flexible Premium Variable Deferred Annuity Contracts Form P1151 1/99 Issued by: Genworth Life and Annuity Insurance Company Home Office: 6610 West Broad Street Richmond, Virginia 23230 Telephone: (800) 352-9910 -------------------------------------------------------------------------------- This prospectus, dated May 1, 2008, describes an individual flexible premium variable deferred annuity contract (the "contract" or "contracts") for individuals and qualified and non-qualified retirement plans. Genworth Life and Annuity Insurance Company (the "Company," "we," "us," or "our") issues the contract. This contract may be referred to as "Commonwealth Freedom" in our marketing materials. This prospectus gives details about the contract, the Genworth Life & Annuity VA Separate Account 1 (the "Separate Account") and the Guarantee Account you should know before investing. (The Guarantee Account is not available for contracts issued on or after May 1, 2003.) Please read this prospectus carefully and keep it for future reference. The contract offers you the opportunity to accumulate Contract Value and provides for the payment of periodic annuity benefits. We may pay these annuity benefits on a variable or fixed basis. The minimum amount you need to purchase this contract is $25,000. You may allocate your premium payments to the Separate Account. Each Subaccount of the Separate Account invests in shares of Portfolios of the Funds listed below. (If your contract was issued prior to May 1, 2003, you may allocate your premium payments to the Separate Account, the Guarantee Account or both.) The Alger American Fund: Alger American Growth Portfolio -- Class O Shares Alger American SmallCap Growth Portfolio (formerly, Alger American Small Capitalization Portfolio) -- Class O Shares AllianceBernstein Variable Products Series Fund, Inc.: AllianceBernstein Growth and Income Portfolio -- Class B Federated Insurance Series: Federated American Leaders Fund II -- Primary Shares Federated Capital Income Fund II Federated High Income Bond Fund II -- Primary Shares Fidelity Variable Insurance Products Fund: VIP Asset Manager/SM/ Portfolio -- Initial Class VIP Contrafund(R) Portfolio -- Initial Class VIP Equity-Income Portfolio -- Initial Class VIP Growth Portfolio -- Initial Class VIP Growth & Income Portfolio -- Initial Class VIP Growth Opportunities Portfolio -- Initial Class VIP Mid Cap Portfolio -- Service Class 2 VIP Overseas Portfolio -- Initial Class Franklin Templeton Variable Insurance Products Trust: Templeton Foreign Securities Fund -- Class 1 Shares GE Investments Funds, Inc.: Income Fund -- Class 1 Shares International Equity Fund -- Class 1 Shares Mid-Cap Equity Fund -- Class 1 Shares Money Market Fund Premier Growth Equity Fund -- Class 1 Shares Real Estate Securities Fund -- Class 1 Shares S&P 500(R) Index Fund Small-Cap Equity Fund -- Class 1 Shares Total Return Fund -- Class 1 Shares U.S. Equity Fund -- Class 1 Shares Goldman Sachs Variable Insurance Trust: Goldman Sachs Growth and Income Fund Goldman Sachs Mid Cap Value Fund Janus Aspen Series: Balanced Portfolio -- Institutional Shares Flexible Bond Portfolio -- Institutional Shares Forty Portfolio -- Institutional Shares Global Life Sciences Portfolio -- Service Shares Global Technology Portfolio -- Service Shares International Growth Portfolio -- Institutional Shares 1 Large Cap Growth Portfolio -- Institutional Shares Mid Cap Growth Portfolio -- Institutional Shares Worldwide Growth Portfolio -- Institutional Shares Legg Mason Partners Variable Equity Trust: Legg Mason Partners Variable Capital and Income Portfolio -- Class I Legg Mason Partners Variable Investors Portfolio -- Class I Legg Mason Partners Variable Income Trust: Legg Mason Partners Variable Strategic Bond Portfolio -- Class I MFS(R) Variable Insurance Trust: MFS(R) New Discovery Series -- Service Class Shares Oppenheimer Variable Account Funds: Oppenheimer Balanced Fund/VA Oppenheimer Capital Appreciation Fund/VA Oppenheimer Core Bond Fund/VA Oppenheimer High Income Fund/VA Oppenheimer MidCap Fund/VA PIMCO Variable Insurance Trust: Total Return Portfolio -- Administrative Class Shares Not all of these Portfolios may be available in all states or in all markets. The Securities and Exchange Commission ("SEC") has not approved or disapproved these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. Your contract: . Is NOT a bank deposit . Is NOT FDIC insured . Is NOT insured or endorsed by a bank or any federal government agency . Is NOT available in every state . MAY go down in value. Except for amounts in the Guarantee Account, both the value of a contract before the Maturity Date and the amount of monthly income afterwards will depend upon the investment performance of the Portfolios(s) you select. You bear the investment risk of investing in the Portfolios. We may offer other contracts with features that are substantially similar to those offered in this contract and in this prospectus. These other contracts may be priced differently and may be offered exclusively to customers of one or more particular financial institutions or brokerage firms. These contract is also offered to customers of various financial institutions and brokerage firms. No financial institution or brokerage firm is responsible for the guarantees under the contract. Guarantees under the contract are the sole responsibility of the Company. In the future, additional portfolios managed by certain financial institutions or brokerage firms may be added to the Separate Account. These portfolios may be offered exclusively to purchasing customers of the financial institution or brokerage firm. This contract may be used with certain tax qualified retirement plans. The contract includes attributes such as tax deferral on accumulated earnings. Qualified retirement plans provide their own tax deferral benefit; the purchase of this contract does not provide additional tax deferral benefits beyond those provided in the qualified retirement plan. Accordingly, if you are purchasing this contract as a Qualified Contract, you should consider purchasing this contract for its death benefit, income benefits, and other non-tax-related benefits. Please consult a tax adviser for information specific to your circumstances in order to determine whether this contract is an appropriate investment for you. A Statement of Additional Information, dated May 1, 2008, which contains additional information about the contract has been filed with the SEC and is incorporated by reference into this prospectus. A table of contents for the Statement of Additional Information appears on the last page of this prospectus. If you would like a free copy of the Statement of Additional Information, call us at: (800) 352-9910; or write us at: 6610 West Broad Street Richmond, VA 23230 The Statement of Additional Information and other material incorporated by reference can be found on the SEC's website at: www.sec.gov This prospectus does not constitute an offering in any jurisdiction in which such offering may not lawfully be made. 2 Table of Contents Definitions................................................................ 5 Fee Tables................................................................. 6 Examples................................................................ 7 Synopsis................................................................... 7 Condensed Financial Information............................................ 9 Financial Statements....................................................... 9 The Company................................................................ 9 The Separate Account....................................................... 10 The Portfolios.......................................................... 10 Subaccounts............................................................. 11 Voting Rights........................................................... 15 Charges and Other Deductions............................................... 16 Deductions from the Separate Account.................................... 16 Other Charges........................................................... 16 The Contract............................................................... 17 Purchase of the Contract................................................ 17 Ownership............................................................... 17 Assignment.............................................................. 18 Premium Payments........................................................ 18 Valuation Day and Valuation Period...................................... 18 Allocation of Premium Payments.......................................... 18 Valuation of Accumulation Units......................................... 19 Transfers.................................................................. 19 Transfers Before the Maturity Date...................................... 19 Transfers from the Guarantee Account to the Subaccounts................. 19 Transfers from the Subaccounts to the Guarantee Account................. 20 Transfers Among the Subaccounts......................................... 20 Telephone/Internet Transactions......................................... 21 Confirmation of Transactions............................................ 21 Special Note on Reliability............................................. 21 Transfers By Third Parties.............................................. 21 Special Note on Frequent Transfers...................................... 22 Dollar Cost Averaging Program........................................... 23 Portfolio Rebalancing Program........................................... 24 Guarantee Account Interest Sweep Program................................ 24 Surrenders and Partial Surrenders.......................................... 25 Surrenders and Partial Surrenders....................................... 25 Restrictions on Distributions from Certain Contracts.................... 25 Systematic Withdrawal Program........................................... 26 Death of Owner and/or Annuitant............................................ 26 Death Benefit At Death of Any Annuitant Before the Maturity Date........ 26 When We Calculate the Death Benefit..................................... 28
3 Death of An Owner, Joint Owner or Annuitant Before the Maturity Date.... 28 Death of An Owner, Joint Owner or Annuitant On or After the Maturity Date.................................................................. 30 Income Payments............................................................ 30 Optional Payment Plans.................................................. 32 Variable Income Payments................................................ 33 Transfers After the Maturity Date....................................... 33 Tax Matters................................................................ 33 Introduction............................................................ 33 Taxation of Non-Qualified Contracts..................................... 33 Section 1035 Exchanges.................................................. 35 Qualified Retirement Plans.............................................. 36 Federal Income Tax Withholding.......................................... 38 State Income Tax Withholding............................................ 39 Tax Status of the Company............................................... 39 Federal Estate Taxes.................................................... 39 Generation-Skipping Transfer Tax........................................ 39 Annuity Purchases by Residents of Puerto Rico........................... 39 Annuity Purchases by Nonresident Aliens and Foreign Corporations........ 39 Foreign Tax Credits..................................................... 39 Changes in the Law...................................................... 39 Requesting Payments........................................................ 39 Sale of the Contracts...................................................... 40 Additional Information..................................................... 41 Owner Questions......................................................... 41 Return Privilege........................................................ 41 State Regulation........................................................ 42 Evidence of Death, Age, Gender, Marital Status or Survival.............. 42 Records and Reports..................................................... 42 Other Information....................................................... 42 Legal Proceedings....................................................... 42 Appendix A................................................................. A-1 Examples of the Available Death Benefits................................ A-1 Appendix B................................................................. B-1 Condensed Financial Information......................................... B-1 Appendix C................................................................. C-1 The Guarantee Account................................................... C-1 Table of Contents for Statement of Additional Information
4 DEFINITIONS The following terms are used throughout the prospectus: Accumulation Unit -- An accounting unit of measure we use to calculate the value in the Separate Account before income payments commence. Annuitant -- The person named in the contract upon whose age and, where appropriate, gender, we use to determine monthly income benefits. Annuity Unit -- An accounting unit of measure we use to calculate the amount of the second and each subsequent variable income payment. Code -- The Internal Revenue Code of 1986, as amended. Contract Date -- The date we issue your contract and your contract becomes effective. Your Contract Date is shown in your contract. We use the Contract Date to determine contract years and anniversaries. Contract Value -- The total value of all your Accumulation Units in the Subaccounts and any amounts you hold in the Guarantee Account, if available. Fund -- Any open-end management investment company or any unit investment trust in which the Separate Account invests. General Account -- Assets of the Company other than those allocated to the Separate Account or any other segregated asset account of the Company. Guarantee Account -- Part of our General Account that provides a guaranteed interest rate for a specified interest rate guarantee period. The General Account is not part of and does not depend on the investment performance of the Separate Account. Home Office -- Our office located at 6610 West Broad Street, Richmond, Virginia 23230. Maturity Date -- The date on which your income payments will commence, if any Annuitant is living on that date. The Maturity Date is stated in your contract, unless changed by you in writing in a form acceptable to us. Portfolio -- A division of a Fund, the assets of which are separate from other Portfolios that may be available in the Fund. Each Portfolio has its own investment objective. Not all Portfolios may be available in all states or markets. Separate Account -- Genworth Life & Annuity VA Separate Account 1, a separate account we established to receive Subaccount allocations. The Separate Account is divided into Subaccounts, each of which invests in shares of a separate Portfolio. Subaccount -- A division of the Separate Account which invests exclusively in shares of a designated Portfolio. Not all Subaccounts may be available in all states or markets. A Subaccount may be referred to as an Investment Subdivision in the contract and/or marketing materials. Surrender Value -- The value of the contract as of the date we receive your written request to surrender at our Home Office, less any applicable premium tax, contract maintenance charge, and any optional benefit charge if applicable. Valuation Day -- Any day on which the New York Stock Exchange is open for regular trading, except for days on which a Portfolio does not value its shares. Valuation Period -- The period that starts at the close of regular trading on the New York Stock Exchange on any Valuation Day and ends at the close of regular trading on the next succeeding Valuation Day. 5 FEE TABLES The following tables describe fees and expenses that you will pay when buying, owning or partially surrendering assets or fully surrendering the contract. The first table describes the fees and expenses that you will pay when you buy the contract, take a partial surrender, fully surrender your contract or transfer assets among the investment options. State premium taxes may also be deducted.
Contract Owner Transaction Expenses ------------------------------------------------------------ Surrender Charge None ------------------------------------------------------------ Transfer Charge $10.00/1/ ------------------------------------------------------------
/1/We currently do not assess a transfer charge. However, we reserve the right to assess a transfer charge for each transfer among the Subaccounts. The next table describes the fees and expenses that you will pay periodically during the time you own the contract, not including Portfolio fees and expenses.
Periodic Charges Other Than Portfolio Expenses ------------------------------------------------------------------------------------- Annual Contract Maintenance Charge $25.00/1/ ------------------------------------------------------------------------------------- Separate Account Annual Expenses (as a percentage of your average daily net assets in the Separate Account) ------------------------------------------------------------------------------------- Mortality and Expense Risk Charge 1.35% ------------------------------------------------------------------------------------- Administrative Expense Charge 0.25% ------------------------------------------------------------------------------------- Maximum Total Separate Account Annual Expenses 1.60%/3/ -------------------------------------------------------------------------------------
/1/This charge is taken on each contract anniversary and at the time the contract is surrendered. We will not assess this charge if your Contract Value is $25,000 or more at the time the charge is assessed. For information concerning compensation paid for the sale of the contract, see the "Sale of the Contracts" provision of the prospectus. The next item shows the minimum and maximum total annual operating expenses charged by the Portfolios that you may pay periodically during the time that you own the contract. These are expenses that are deducted from Portfolio assets, which may include management fees, distribution and/or service (12b-1) fees, and other expenses. More detail concerning each Portfolio's fees and expenses appears in the prospectus for each Portfolio.
Annual Portfolio Expenses/1/ Minimum Maximum ------------------------------------------------------------------------------------------------ Total Annual Portfolio Operating Expenses (before fee waivers or reimbursements) 0.40% 1.69% ------------------------------------------------------------------------------------------------
/1/The Portfolio expenses used to prepare this table were provided to the Company by the Funds. The Company has not independently verified such information. The expenses shown are those incurred for the year ended December 31, 2007. Current or future expenses may be greater or less than those shown. The range of expenses above does not show the effect of any fee waiver or expense reimbursement arrangements. The advisers and/or other service providers of certain Portfolios have agreed to waive their fees and/or reimburse the Portfolios' expenses in order to keep the Portfolios' expenses below specified limits. In some cases, these expense limitations are contractual. In other cases, these expense limitations are voluntary and may be terminated at any time. The minimum and maximum Total Annual Portfolio Operating Expenses for all the Portfolios after all fee waivers and expense reimbursements (whether voluntary or contractual) are 0.40% and 1.26%, respectively. Please see the prospectus for each Portfolio for information regarding the expenses for each Portfolio, including fee reduction and/or expense reimbursement arrangements, if applicable. 6 Examples This Example is intended to help you compare the costs of investing in the contract with the costs of investing in other variable annuity contracts. These costs include contract owner transaction expenses, contract and optional rider charges, and Portfolio fees and expenses. The Example shows the dollar amount of expenses you would bear directly or indirectly if you: . invested $10,000 in the contract for the time periods indicated; . earned a 5% annual return on your investment; . elected the Optional Enhanced Death Benefit Rider; and . surrendered, annuitized, did not surrender or did not annuitize your contract at the end of the stated period. The Example assumes that the maximum fees and expenses of any of the Portfolios are charged. Your actual expenses may be higher or lower than those shown below. The Example does not include any taxes or tax penalties that may be assessed upon surrender of the contract.
Costs Based on Maximum Annual Portfolio Expenses ------------------------------------------------ 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- $357 $1,087 $1,839 $3,816
The next Example uses the same assumptions as the prior Example, except that it assumes you decide to annuitize your contract or that you decide not to surrender your contract at the end of the stated time period.
Costs Based on Maximum Annual Portfolio Expenses ------------------------------------------------ 1 Year 3 Years 5 Years 10 Years ------ ------- ------- -------- $332 $1,061 $1,812 $3,787
Please remember that you are looking at an Example and not a representation of past or future expenses. Your rate of return may be higher or lower than 5%, which is not guaranteed. The Example does not assume that any Portfolio expense waivers or fee reimbursement arrangements are in effect for the periods presented. The above Example assumes: . total Separate Account charges of 1.60% (deducted daily at an annual effective rate of assets in the Separate Account); and . an annual contract maintenance charge of $25 (assumed to be equivalent to 0.25% of the Contract Value). SYNOPSIS What type of contract am I buying? The contract is an individual flexible premium variable deferred annuity contract. We may issue it as a contract qualified ("Qualified Contract") under the Code, or as a contract that is not qualified under the Code ("Non-Qualified Contract"). Because this contract may be used with certain tax qualified retirement plans that offer their own tax deferral benefit, you should consider purchasing the contract for a reason other than tax deferral if you are purchasing this contract as a Qualified Contract. This prospectus only provides disclosure about the contract. Certain features described in this prospectus may vary from your contract. See "The Contract" provision of this prospectus. How does the contract work? Once we approve your application, we will issue a contract to you. During the accumulation period, you can use your premium payments to buy Accumulation Units under the Separate Account or the Guarantee Account. Should you decide to receive income payments (annuitize the contract or a portion thereof) we will convert all or a portion of the contract being annuitized from Accumulation Units to Annuity Units. You can choose fixed or variable income payments. If you choose variable income payments, we will base each periodic income payment upon the number of Annuity Units to which you became entitled at the time you decided to annuitize and the value of each unit on the date the payment is determined. See "The Contract" provision of this prospectus. What is the Separate Account? The Separate Account is a segregated asset account established under Virginia insurance law, and registered with the SEC as a unit investment trust. We allocate the assets of the Separate Account to one or more Subaccounts in accordance with your instructions. We do not charge the assets in the Separate Account with liabilities arising out of any other business we may conduct. Amounts you allocate to the Separate Account will reflect the investment performance of the Portfolios you select. You bear the risk of investment gain or loss with respect to amounts allocated to the Separate Account. See "The Separate Account" provision of this prospectus. What are my variable investment choices? Through its Subaccounts, the Separate Account uses your premium payments to purchase shares, at your direction, in one or more of the Portfolios. In turn, each Portfolio holds securities consistent with its own particular investment objective. See "The Separate Account" provision of this prospectus. What is the Guarantee Account? We offer fixed investment choices through our Guarantee Account. The Guarantee Account is part of our General Account and pays interest at declared rates we guarantee for selected periods of time. We 7 also guarantee the principal, after any deductions of applicable contract charges. Since the Guarantee Account is part of the General Account, we assume the risk of investment gain or loss on amounts allocated to it. The Guarantee Account is not part of and does not depend on the investment performance of the Separate Account. You may transfer assets between the Guarantee Account and the Separate Account subject to certain restrictions. The Guarantee Account may not be available in all states or markets. See "Appendix C -- The Guarantee Account" and the "Transfers" provisions of this prospectus. What charges are associated with this contract? We assess annual charges in the aggregate at an effective annual rate of 1.60% against the daily net asset value of the Separate Account. These charges consist of an administrative expense charge of 0.25% and a mortality and expense risk charge of 1.35%. There is also a $25 annual contract maintenance charge which we will waive if the Contract Value is $25,000 or more at the time the charge is assessed. For a complete discussion of the charges associated with the contract, see the "Charges and Other Deductions" provision of this prospectus. If your state assesses a premium tax with respect to your contract, then at the time we incur the tax (or at such other time as we may choose), we will deduct these amounts from premium payments or the Contract Value, as applicable. See the "Charges and Other Deductions" and the "Deductions for Premium Taxes" provisions of this prospectus. There are expenses associated with the Portfolios. These include management fees and other expenses associated with the daily operation of each Portfolio as well as 12b-1 fees or service share fees, if applicable. See the "Fee Tables" provision of this prospectus. A Portfolio may also impose a redemption charge on Subaccount assets that are redeemed from the Portfolio in connection with a transfer. Portfolio expenses, including any redemption charges, are more fully described in the prospectus for each Portfolio. We pay compensation to broker-dealers who sell the contracts. For a discussion of this compensation, see the "Sale of the Contracts" provision of this prospectus. We also offer other variable annuity contracts through the Separate Account (and our other separate accounts) that also invest in the same Portfolios (or many of the same) offered under the contract. These other contracts have different and may offer different benefits more suitable to your needs. To obtain more information about these contracts, including a prospectus, contact your registered representative, or call (800) 352-9910. How much must I pay and how often? Subject to certain minimum and maximum payments, the amount and frequency of your premium payments are flexible. See "The Contract -- Premium Payments" provision of this prospectus. How will my income payments be calculated? We will pay you a monthly income beginning on the Maturity Date provided any Annuitant is still living on that date. You may also decide to take income payments under one of the Optional Payment Plans. We will base your initial payment on the Contract Value and other factors. See the "Income Payments" provision of this prospectus. What happens if I die before the Maturity Date? Before the Maturity Date, if an owner, joint owner, or Annuitant dies while the contract is in force, we will treat the designated beneficiary as the sole owner of the contract, subject to certain distribution rules. We may pay a death benefit to the designated beneficiary. See "The Death of Owner and/or Annuitant" provision of this prospectus. May I transfer assets among the investment options? Yes, however, there are limitations imposed by your contract on both the number of transfers that may be made per calendar year, as well as limitations on allocations. The minimum transfer amount is currently $100 or the entire balance in the Subaccount if the transfer will leave a balance of less than $100. You may make transfers among the Subaccounts, as well as to and from the Guarantee Account, subject to certain restrictions. See the "Transfers," "Income Payments -- Transfers After the Maturity Date," and "Appendix C -- The Guarantee Account" provisions of this prospectus. May I surrender the contract or take partial surrenders? Yes, subject to contract requirements and restrictions imposed under certain retirement plans. When taking a full or partial surrender, you may be subject to income tax and, if you are younger than age 59 1/2 at the time of the surrender or partial surrender, a 10% IRS penalty tax. A total surrender or a partial surrender may also be subject to tax withholding. See the "Tax Matters" provision of this prospectus. A partial surrender may reduce the death benefit by the proportion that the partial surrender (including any premium tax assessed) reduces your Contract Value. See the "Death of Owner and/or Annuitant" provision of this prospectus for more information. Do I get a free look at this contract? Yes. You have the right to return the contract to us at our Home Office at the address listed on page 1 of this prospectus, and have us cancel the contract within a certain number of days (usually 10 days from the date you receive the contract, but some states require different periods). 8 If you exercise this right, we will cancel the contract as of the Valuation Day we receive it and send you a refund equal to your Contract Value plus any charges we have deducted from premium payments prior to their allocation to the Separate Account (excluding any charges the Portfolios may have deducted) on or before the Valuation Day we received the returned contract at our Home Office. Or, if required by the law of your state, we will refund your premium payments (less any partial surrenders previously taken). See the "Return Privilege" provision of this prospectus for more information. When are my allocations effective when purchasing this contract? Within two business days after we receive all the information necessary to process your purchase order, we will allocate your initial premium payment directly to the Subaccounts that correspond to the Portfolios you choose. See the "The Contract -- Allocation of Premium Payments" provision of this prospectus. What are the Federal tax implications of my investment in the contract? Generally, all investment earnings under the contract are tax-deferred until withdrawn or until income payments begin. A distribution from the contract, which includes a full or partial surrender or payment of a death benefit, will generally result in taxable income if there has been an increase in the Contract Value. In certain circumstances, a 10% penalty tax may also apply. All amounts includable in income with respect to the contract are taxed as ordinary income; no amounts are taxed at the special lower rates applicable to long term capital gains and corporate dividends. See the "Federal Tax Matters" provision of this prospectus. CONDENSED FINANCIAL INFORMATION The value of an Accumulation Unit is determined on the basis of changes in the per share value of the Portfolios and the assessment of Separate Account charges which may vary from contract to contract. Please refer to the Statement of Additional Information for more information on the calculation of Accumulation Unit values. Please see Appendix B of this prospectus for tables of Accumulation Unit values. FINANCIAL STATEMENTS The consolidated financial statements for Genworth Life and Annuity Insurance Company and subsidiaries, as well as the financial statements for the Separate Account, are located in the Statement of Additional Information. If you would like a free copy of the Statement of Additional Information, call (800) 352-9910 or write to our Home Office at the address listed on page 1 of this prospectus. In addition, the Statement of Additional Information is available on the SEC's website at http://www.sec.gov. THE COMPANY We are a stock life insurance company operating under a charter granted by the Commonwealth of Virginia on March 21, 1871. We principally offer life insurance policies and annuity contacts. We do business in 49 states and the District of Columbia. Our principal offices are at 6610 West Broad Street, Richmond, Virginia 23230. We are obligated to pay all amounts promised under the contract. Capital Brokerage Corporation serves as principal underwriter for the contracts and is a broker/dealer registered with the SEC. Genworth North America Corporation (formerly, GNA Corporation) directly owns the stock of Capital Brokerage Corporation and the Company. Genworth North America Corporation is directly owned by Genworth Financial, Inc., a public company. We are a charter member of the Insurance Marketplace Standards Association ("IMSA"). We may use the IMSA membership logo and language in our advertisements, as outlined in IMSA's Marketing and Graphics Guidelines. Companies that belong to IMSA subscribe to a set of ethical standards covering the various aspects of sales and service for individually sold life insurance and annuities. 9 THE SEPARATE ACCOUNT We established the Separate Account as a separate investment account on August 19, 1987. The Separate Account may invest in mutual funds, unit investment trusts, managed separate account, and other portfolios. We use the Separate Account to support the contract as well as for other purposes permitted by law. Currently, there are multiple Subaccounts of the Separate Account available under the contract. Each Subaccount invests exclusively in shares representing an interest in a separate corresponding Portfolio of the Funds. The assets of the Separate Account belong to us. Nonetheless, we do not charge the assets in the Separate Account attributable to the contracts with liabilities arising out of any other business which we may conduct. The assets of the Separate Account will, however, be available to cover the liabilities of our General Account to the extent that the assets of the Separate Account exceed its liabilities arising under the contracts supported by it. Income and both realized and unrealized gains or losses from the assets of the Separate Account are credited to or charged against the Separate Account without regard to the income, gains or losses arising out of any other business we may conduct. Guarantees made under the contract, including any rider options, are based on the claims paying ability of the Company to the extent that the amount of the guarantee exceeds the assets available in the Separate Account. We registered the Separate Account with the SEC as a unit investment trust under the Investment Company Act of 1940 ("1940 Act"). The Separate Account meets the definition of a separate account under the Federal securities laws. Registration with the SEC does not involve supervision of the management or investment practices or policies of the Separate Account by the SEC. You assume the full investment risk for all amounts you allocate to the Separate Account. If permitted by law, we may deregister the Separate Account under the 1940 Act in the event registration is no longer required, manage the Separate Account under the direction of a committee, or combine the Separate Account with one of our other separate accounts. Further, to the extent permitted by applicable law, we may transfer the assets of the Separate Account to another separate account. The Portfolios There is a separate Subaccount which corresponds to each Portfolio of a Fund offered in this contract. You select the Subaccounts to which you allocate premium payments. You currently may change your future premium payment allocation without penalty or charges. However, there are limitations on the number of transfers that may be made each calendar year. See the "Transfers" provision of this prospectus for additional information. Each Fund is registered with the SEC as an open-end management investment company under the 1940 Act. The assets of each Portfolio are separate from other portfolios of a Fund and each Portfolio has separate investment objectives and policies. As a result, each Portfolio operates as a separate Portfolio and the investment performance of one Portfolio has no effect on the investment performance of any other Portfolio. Before choosing a Subaccount to allocate your premium payments and assets, carefully read the prospectus for each Portfolio, along with this prospectus. You may obtain the most recent prospectus for each Portfolio by calling us at (800) 352-9910, or writing us at 6610 West Broad Street, Richmond, Virginia 23230. You may also obtain copies of the prospectus for each Portfolio on our website at www.gefinancialpro.com. We summarize the investment objectives of each Portfolio below. There is no assurance that any Portfolio will meet its objective. We do not guarantee any minimum value for the amounts you allocate to the Separate Account. You bear the investment risk of investing in the Subaccounts. The investment objectives and policies of certain Portfolios are similar to the investment objectives and policies of other portfolios that may be managed by the same investment adviser or manager. The investment results of the Portfolios, however, may be higher or lower than the results of such other portfolios. There can be no assurance, and no representation is made, that the investment results of any of the Portfolios will be comparable to the investment results of any other portfolio, even if the other portfolio has the same investment adviser or manager, or if the other portfolio has a similar name. 10 Subaccounts You may invest in the Subaccounts of the Portfolios listed below in addition to the Guarantee Account (if available) at any one time.
Subaccount Investment Objective ---------------------------------------------------------------------------- THE ALGER AMERICAN Alger American Growth Portfolio Seeks long-term capital appreciation. FUND -- Class O Shares ---------------------------------------------------------------------------- Alger American SmallCap Growth Seeks long-term capital appreciation. Portfolio (formerly, Alger American Small Capitalization Portfolio) -- Class O Shares ---------------------------------------------------------------------------- ALLIANCEBERNSTEIN AllianceBernstein Growth and Long-term growth of capital. VARIABLE PRODUCTS Income Portfolio -- Class B SERIES FUND, INC. ---------------------------------------------------------------------------- FEDERATED INSURANCE Federated American Leaders Seeks long-term growth of capital. SERIES Fund II -- Primary Shares Providing income is a secondary objective. ---------------------------------------------------------------------------- Federated Capital Income Fund II Seeks high current income and moderate capital appreciation. ---------------------------------------------------------------------------- Federated High Income Bond Seeks high current income by Fund II -- Primary Shares investing in lower-rated corporate debt obligations commonly referred to as "junk bonds." ---------------------------------------------------------------------------- FIDELITY(R) VARIABLE VIP Asset Manager/SM/ Portfolio -- Seeks to obtain high total return with INSURANCE PRODUCTS Initial Class reduced risk over the long term by FUND allocating its assets among stocks, bonds, and short-term instruments. ---------------------------------------------------------------------------- VIP Contrafund(R) Portfolio Seeks long-term capital appreciation. -- Initial Class ---------------------------------------------------------------------------- VIP Equity-Income Portfolio Seeks reasonable income. The fund -- Initial Class will also consider the potential for capital appreciation. The fund's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500/SM/ Index. (S&P 500(R)). ---------------------------------------------------------------------------- VIP Growth Portfolio -- Initial Seeks to achieve capital appreciation. Class ---------------------------------------------------------------------------- VIP Growth & Income Seeks high total return through a Portfolio -- Initial Class combination of current income and capital appreciation. ---------------------------------------------------------------------------- VIP Growth Opportunities Seeks to provide capital growth. Portfolio -- Initial Class ----------------------------------------------------------------------------
Adviser (and Sub-Adviser(s), Investment Objective as applicable) ---------------------------------------------------------------------------- Seeks long-term capital appreciation. Fred Alger Management, Inc. ---------------------------------------------------------------------------- Seeks long-term capital appreciation. Fred Alger Management, Inc. ---------------------------------------------------------------------------- Long-term growth of capital. AllianceBernstein, L.P. ---------------------------------------------------------------------------- Seeks long-term growth of capital. Federated Equity Management Providing income is a secondary Company of Pennsylvania objective. ---------------------------------------------------------------------------- Seeks high current income and Federated Equity Management moderate capital appreciation. Company of Pennsylvania ---------------------------------------------------------------------------- Seeks high current income by Federated Investment Management investing in lower-rated corporate debt Company obligations commonly referred to as "junk bonds." ---------------------------------------------------------------------------- Seeks to obtain high total return with Fidelity Management & Research reduced risk over the long term by Company (FMR) (subadvised by allocating its assets among stocks, Fidelity Investments Money bonds, and short-term instruments. Management, Inc. (FIMM), FMR Co., Inc. (FMRC), Fidelity Research & Analysis Company (FRAC), Fidelity Management & Research (U.K.) Inc. (FMR U.K.), Fidelity International Investment Advisors (FIIA), Fidelity International Investment Advisors (U.K.) Limited (FIIA(U.K.)L), and Fidelity Investments Japan Limited (FIJ)) ---------------------------------------------------------------------------- Seeks long-term capital appreciation. FMR (subadvised by FMRC, FRAC, FMR U.K., FIIA, FIIA(U.K.)L, and FIJ) ---------------------------------------------------------------------------- Seeks reasonable income. The fund FMR (subadvised by FMRC, FRAC, will also consider the potential for FMR U.K., FIIA, FIIA(U.K.)L, and capital appreciation. The fund's goal is FIJ) to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500/SM/ Index. (S&P 500(R)). ---------------------------------------------------------------------------- Seeks to achieve capital appreciation. FMR (subadvised by FMRC, FRAC, FMR U.K., FIIA, FIIA(U.K.)L, and FIJ) ---------------------------------------------------------------------------- Seeks high total return through a FMR (subadvised by FMRC, FRAC, combination of current income and FMR U.K., FIIA, FIIA(U.K.)L, and capital appreciation. FIJ) ---------------------------------------------------------------------------- Seeks to provide capital growth. FMR (subadvised by FMRC, FRAC, FMR U.K., FIIA, FIIA(U.K.)L, and FIJ) ----------------------------------------------------------------------------
11
Adviser (and Sub-Adviser(s), Subaccount Investment Objective as applicable) ------------------------------------------------------------------------------------------------------------ VIP Mid Cap Portfolio -- Service Seeks long-term growth of capital. FMR (subadvised by FMRC, FRAC, Class 2 FMR U.K., FIIA, FIIA(U.K.)L, and FIJ) ------------------------------------------------------------------------------------------------------------ VIP Overseas Portfolio -- Initial Seeks long-term growth of capital. FMR (subadvised by FMRC, FMR Class (U.K.), FRAC, FIIA, FIIA(U.K.)L, and FIJ) ------------------------------------------------------------------------------------------------------------ FRANKLIN TEMPLETON Templeton Foreign Securities Seeks long-term capital growth. The Templeton Investment Counsel, LLC VARIABLE INSURANCE Fund -- Class 1 Shares fund normally invests at least 80% of PRODUCTS TRUST its net assets in investments of issuers located outside the U.S., including those in emerging markets, and normally invests predominantly in equity securities. ------------------------------------------------------------------------------------------------------------ GE INVESTMENTS Income Fund -- Class 1 Shares Seeks maximum income consistent GE Asset Management Incorporated FUNDS, INC. with prudent investment management and the preservation of capital. ------------------------------------------------------------------------------------------------------------ International Equity Fund -- Seeks long-term growth of capital. GE Asset Management Incorporated Class 1 Shares ------------------------------------------------------------------------------------------------------------ Mid-Cap Equity Fund -- Class 1 Seeks long-term growth of capital and GE Asset Management Incorporated Shares future income. ------------------------------------------------------------------------------------------------------------ Money Market Fund/1/ Seeks a high level of current income GE Asset Management Incorporated consistent with the preservation of capital and the maintenance of liquidity. ------------------------------------------------------------------------------------------------------------ Premier Growth Equity Fund -- Seeks long-term growth of capital and GE Asset Management Incorporated Class 1 Shares future income rather than current income. ------------------------------------------------------------------------------------------------------------ Real Estate Securities Fund -- Seeks maximum total return through GE Asset Management Incorporated Class 1 Shares current income and capital (subadvised by Urdang Securities appreciation. Management, Inc.) ------------------------------------------------------------------------------------------------------------ S&P 500(R) Index Fund/2/ Seeks growth of capital and GE Asset Management Incorporated accumulation of income that (subadvised by SSgA Funds corresponds to the investment return of Management, Inc.) the S&P's 500 Composite Stock Index. ------------------------------------------------------------------------------------------------------------ Small-Cap Equity Fund -- Class 1 Seeks long-term growth of capital. GE Asset Management Incorporated Shares (subadvised by Palisade Capital Management LLC) ------------------------------------------------------------------------------------------------------------ Total Return Fund -- Class 1 Seeks the highest total return GE Asset Management Incorporated Shares composed of current income and capital appreciation, as is consistent with prudent investment risk. ------------------------------------------------------------------------------------------------------------ U.S. Equity Fund -- Class 1 Seeks long-term growth of capital. GE Asset Management Shares Incorporated ------------------------------------------------------------------------------------------------------------ GOLDMAN SACHS Goldman Sachs Growth and Seeks long-term growth of capital and Goldman Sachs Asset Management, VARIABLE INSURANCE Income Fund growth of income. L.P. TRUST ------------------------------------------------------------------------------------------------------------
/1/ During extended periods of low interest rates, the yields of the Money Market Fund may become extremely low and possibly negative. /2/ "Standard & Poor's," "S&P," and "S&P 500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by GE Asset Management Incorporated. The S&P 500(R) Index Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's, and Standard & Poor's makes no representation or warranty, express or implied, regarding the advisability of investing in this portfolio or the contract. 12
Subaccount Investment Objective ------------------------------------------------------------------------------ Goldman Sachs Mid Cap Value Seeks long-term capital appreciation. Fund ------------------------------------------------------------------------------ JANUS ASPEN SERIES Balanced Portfolio -- Institutional Seeks long-term capital growth, Shares consistent with preservation of capital and balanced by current income. ------------------------------------------------------------------------------ Flexible Bond Portfolio -- Seeks to obtain maximum total return, Institutional Shares consistent with preservation of capital. ------------------------------------------------------------------------------ Forty Portfolio -- Institutional A non-diversified portfolio/1/ that seeks Shares long-term growth of capital. ------------------------------------------------------------------------------ Global Life Sciences Portfolio -- Seeks long-term growth of capital. Service Shares ------------------------------------------------------------------------------ Global Technology Seeks long-term growth of capital. Portfolio -- Service Shares ------------------------------------------------------------------------------ International Growth Portfolio -- Seeks long-term growth of capital. Institutional Shares ------------------------------------------------------------------------------ Large Cap Growth Portfolio -- Seeks long-term growth of capital in a Institutional Shares manner consistent with the preservation of capital. ------------------------------------------------------------------------------ Mid Cap Growth Portfolio -- Seeks long-term growth of capital. Institutional Shares ------------------------------------------------------------------------------ Worldwide Growth Portfolio -- Seeks long-term growth of capital in a Institutional Shares manner consistent with preservation of capital. ------------------------------------------------------------------------------ LEGG MASON PARTNERS Legg Mason Partners Variable Seeks total return (a combination of VARIABLE EQUITY TRUST Capital and Income Portfolio -- income and long-term capital Class I appreciation). This objective may be changed without shareholder approval. ------------------------------------------------------------------------------ Legg Mason Partners Variable Seeks long-term growth of capital with Investors Portfolio -- Class I current income as a secondary objective. ------------------------------------------------------------------------------ LEGG MASON PARTNERS Legg Mason Partners Variable Seeks to maximize total return, VARIABLE INCOME TRUST Strategic Bond Portfolio -- Class I consistent with the preservation of capital. ------------------------------------------------------------------------------ MFS(R) VARIABLE MFS(R) New Discovery Series -- The fund's investment objective is to INSURANCE TRUST Service Class Shares seek capital appreciation. The fund's objective may be changed without shareholder approval. ------------------------------------------------------------------------------ OPPENHEIMER VARIABLE Oppenheimer Balanced Fund/VA Seeks a high total investment return, ACCOUNT FUNDS which includes current income and capital appreciation in the values of its shares. ------------------------------------------------------------------------------ Oppenheimer Capital Seeks capital appreciation by investing Appreciation Fund/VA in securities of well-known, established companies. ------------------------------------------------------------------------------
Adviser (and Sub-Adviser(s), Investment Objective as applicable) --------------------------------------------------------------------------- Seeks long-term capital appreciation. Goldman Sachs Asset Management, L.P. --------------------------------------------------------------------------- Seeks long-term capital growth, Janus Capital Management LLC consistent with preservation of capital and balanced by current income. --------------------------------------------------------------------------- Seeks to obtain maximum total return, Janus Capital Management LLC consistent with preservation of capital. --------------------------------------------------------------------------- A non-diversified portfolio/1/ that seeks Janus Capital Management LLC long-term growth of capital. --------------------------------------------------------------------------- Seeks long-term growth of capital. Janus Capital Management LLC --------------------------------------------------------------------------- Seeks long-term growth of capital. Janus Capital Management LLC --------------------------------------------------------------------------- Seeks long-term growth of capital. Janus Capital Management LLC --------------------------------------------------------------------------- Seeks long-term growth of capital in a Janus Capital Management LLC manner consistent with the preservation of capital. --------------------------------------------------------------------------- Seeks long-term growth of capital. Janus Capital Management LLC --------------------------------------------------------------------------- Seeks long-term growth of capital in a Janus Capital Management LLC manner consistent with preservation of capital. --------------------------------------------------------------------------- Seeks total return (a combination of Legg Mason Partners Fund Advisor, income and long-term capital LLC (subadvised by ClearBridge appreciation). This objective may be Advisors, LLC, Western Asset changed without shareholder approval. Management Company Limited and Western Asset Management Company) --------------------------------------------------------------------------- Seeks long-term growth of capital with Legg Mason Partners Fund Advisor, current income as a secondary LLC (subadvised by ClearBridge objective. Advisors, LLC) --------------------------------------------------------------------------- Seeks to maximize total return, Legg Mason Partners Fund Advisor, consistent with the preservation of LLC (subadvised by Western Asset capital. Management Company and Western Asset Management Company Limited) --------------------------------------------------------------------------- The fund's investment objective is to Massachusetts Financial Services seek capital appreciation. The fund's Company objective may be changed without shareholder approval. --------------------------------------------------------------------------- Seeks a high total investment return, OppenheimerFunds, Inc. which includes current income and capital appreciation in the values of its shares. --------------------------------------------------------------------------- Seeks capital appreciation by investing OppenheimerFunds, Inc. in securities of well-known, established companies. ---------------------------------------------------------------------------
/1/ A non-diversified portfolio is a portfolio that may hold a larger position in a smaller number of securities than a diversified portfolio. This means that a single security's increase or decrease in value may have a greater impact on the return and net asset value of a non-diversified portfolio than a diversified portfolio. 13
Adviser (and Sub-Adviser(s), Subaccount Investment Objective as applicable) -------------------------------------------------------------------------------------------------- Oppenheimer Core Bond Seeks a high level of current income. OppenheimerFunds, Inc. Fund/VA As a secondary objective, this portfolio seeks capital appreciation when consistent with its primary objective. -------------------------------------------------------------------------------------------------- Oppenheimer High Income Seeks a high level of current income OppenheimerFunds, Inc. Fund/VA from investment in high-yield fixed- income securities. -------------------------------------------------------------------------------------------------- Oppenheimer MidCap Fund/VA Seeks capital appreciation by investing OppenheimerFunds, Inc. in "growth type" companies. -------------------------------------------------------------------------------------------------- PIMCO VARIABLE Total Return Portfolio -- Seeks maximum total return, Pacific Investment Management INSURANCE TRUST Administrative Class Shares consistent with preservation of capital Company LLC and prudent investment management. --------------------------------------------------------------------------------------------------
Not all of these Portfolios may be available in all states or in all markets. We will purchase shares of the Portfolios at net asset value and direct them to the appropriate Subaccounts. We will redeem sufficient shares of the appropriate Portfolios at net asset value to pay death benefits and surrender or partial surrender proceeds; to make income payments; or for other purposes described in the contract. We automatically reinvest all dividend and capital gain distributions of the Portfolios in shares of the distributing Portfolios at their net asset value on the date of distribution. In other words, we do not pay Portfolio dividends or Portfolio distributions out to owners as additional units, but instead reflect them in unit values. Shares of the Portfolios are not sold directly to the general public. They are sold to us, and they may also be sold to other insurance companies that issue variable annuity contracts and variable life insurance policies. In addition, they may be sold to retirement plans. When a Fund sells shares in any of its Portfolios both to variable annuity and to variable life insurance separate accounts, it engages in mixed funding. When a Fund sells shares in any of its Portfolios to separate accounts of unaffiliated life insurance companies, it engages in shared funding. Each Fund may engage in mixed and shared funding. Therefore, due to differences in redemption rates or tax treatment, or other considerations, the interests of various shareholders participating in a Fund could conflict. A Fund's Board of Directors will monitor for the existence of any material conflicts, and determine what action, if any, should be taken. See the prospectuses for the Portfolios for additional information. We reserve the right, within the law, to make additions, deletions and substitutions for the Portfolios. We may substitute shares of other portfolios for shares already purchased, or to be purchased in the future, under the contract. This substitution might occur if shares of a Portfolio should no longer be available, or if investment in any Portfolio's shares should become inappropriate for the purposes of the contract, in the judgment of our management. The new Portfolios may have higher fees and charges than the ones they replaced. No substitution or deletion will be made without prior notice to you in accordance with the 1940 Act. We also reserve the right to establish additional Subaccounts, each of which would invest in a separate Portfolio of a Fund, or in shares of another investment company, with a specified investment objective. We may also eliminate one or more Subaccounts if, in our sole discretion, marketing, tax, or investment conditions warrant. We will not eliminate a Subaccount without prior notice to you and, if required, before approval of the SEC. Not all Subaccounts may be available to all classes of contracts. There are a number of factors that are considered when deciding what Portfolios are made available in your variable annuity contract. Such factors include: (1) the investment objective of the Portfolio; (2) the Portfolio's performance history; (3) the Portfolio's holdings and strategies it uses to try and meet its objectives; and (4) the Portfolio's servicing agreement. The investment objective is critical because we want to have an array of Portfolios with diverse objectives so that an investor may diversify his or her investment holdings from a conservative to an aggressive investment portfolio depending on the advice of his or her investment adviser and risk assessment. When selecting a Portfolio for our products, we also want to make sure that the Portfolio has a strong performance history in comparison with its peers and that its holdings and strategies are consistent with its objectives. Finally, it is important for us to be able to provide you with a 14 wide array of the services that facilitate your investment program relating to your allocation in Subaccounts that invest in the underlying Portfolios. We have entered into agreements with either the investment adviser or distributor of each of the Funds and/or in certain cases, a Portfolio, under which the Portfolio, the adviser or distributor may make payments to us and/or to certain of our affiliates. These payments may be made in connection with certain administrative and other services we provide relating to the Portfolios. Such administrative services we provide include but are not limited to: accounting transactions for variable owners and then providing one daily purchase and sale order on behalf of each Portfolio; providing copies of Portfolio prospectuses, Statements of Additional Information and any supplements thereto; forwarding proxy voting information, gathering the information and providing vote totals to the Portfolio on behalf of our owners; and providing customer service on behalf of the Portfolios. The amount of the payments is based upon a percentage of the average annual aggregate net amount we have invested in the Portfolio on behalf of the Separate Account and other separate accounts funding certain variable insurance contracts that we and our affiliates issue. These percentages differ, and some Portfolios, investment advisers or distributors pay us a greater percentage than other advisers or distributors based on the level of administrative and other services provided. We will not realize a profit from payments received directly from a Portfolio, but we may realize a profit from payments received from the adviser and/or the distributor. If we do, we may use such profit for any corporate purpose, including payment of expenses (i) that we and/or our affiliates incur in promoting, marketing and administering the contracts, and (ii) that we incur, in our role as intermediary, in promoting, marketing and administering the Fund Portfolios. The amount received from certain Portfolios for the assets allocated to the Portfolios from the Separate Account during 2007 ranged from 0.15% to 0.20%. The Portfolios that pay a service fee to us are GE Investments Funds, Inc. -- Total Return Fund -- Class 1 Shares and PIMCO Variable Insurance Trust -- Total Return Portfolio -- Administrative Class Shares. As noted above, an investment adviser or sub-adviser of a Portfolio, or its affiliates, may make payments to us and/or certain of our affiliates. These payments may be derived, in whole or in part, from the profits the investment adviser or sub-adviser receives on the advisory fee deducted from Portfolio assets. Contract owners, through their indirect investment in the Portfolios, bear the costs of these advisory fees (see the prospectuses for the Portfolios for more information). The amount received from the adviser and/or the distributor for the assets allocated to the Portfolios from the Separate Account during 2007 ranged from 0.076% to 0.35%. Payment of these amounts is not an additional charge to you by the Funds or by us, but comes from the Fund's investment adviser or distributor. In addition to the asset-based payments for administrative and other services described above, the investment adviser or the distributor of the Fund may also pay us, or our affiliate Capital Brokerage Corporation, to participate in periodic sales meetings, for expenses relating to the production of promotional sales literature and for other expenses or services. The amount paid to us, or our affiliate Capital Brokerage Corporation, may be significant. Payments to participate in sales meetings may provide a Fund's investment adviser or distributor with greater access to our internal and external wholesalers to provide training, marketing support and educational presentations. In consideration of services provided and expenses incurred by Capital Brokerage Corporation in distributing shares of the Funds, Capital Brokerage Corporation also receives 12b-1 fees from AllianceBernstein Variable Products Series Fund, Inc., Fidelity Variable Insurance Products Fund, Janus Aspen Series and MFS(R) Variable Insurance Trust. See the "Fee Tables" provision of this prospectus and the Fund prospectuses. These payments range up to 0.25% of Separate Account assets invested in the particular Portfolio. Voting Rights As required by law, we will vote the shares of the Portfolios held in the Separate Account at special shareholder meetings based on instructions from you. However, if the law changes and we are permitted to vote in our own right, we may elect to do so. Whenever a Fund calls a shareholder meeting, owners with voting interests in a Portfolio will be notified of issues requiring the shareholders' vote as soon as possible before the shareholder meeting. Persons having a voting interest in the Portfolio will be provided with proxy voting materials, reports, other materials, and a form with which to give voting instructions. We will determine the number of votes which you have the right to cast by applying your percentage interest in a Subaccount to the total number of votes attributable to the Subaccount. In determining the number of votes, we will recognize fractional shares. We will vote Portfolio shares for which no instructions are received (or instructions are not received timely) in the same proportion to those that are received. Therefore, because of proportional voting, a small number of contract owners may control the outcome of a vote. We will apply voting instructions to abstain on any item to be voted on a pro-rata basis to reduce the number of votes eligible to be cast. 15 CHARGES AND OTHER DEDUCTIONS We sell the contracts through registered representatives of broker-dealers. These registered representatives are also appointed and licensed as insurance agents of the Company. We pay commissions to the broker-dealers for selling the contracts. We intend to recover commissions, marketing, administrative and other costs of contract benefits, and other incentives we pay, through fees and charges imposed under the contracts and other corporate revenue. See the "Sale of the Contracts" provision of this prospectus. All of the charges described in this section apply to assets allocated to the Separate Account. If the Guarantee Account is available, all assets in the Guarantee Account are subject to all of the charges described in this section except for the mortality and expense risk charge and the administrative expense charge. We will deduct the charges described below to cover our costs and expenses, services provided and risks assumed under the contracts. We incur certain costs and expenses for the distribution and administration of the contracts and for providing the benefits payable thereunder. Our administrative services include: . processing applications for and issuing the contracts; . maintaining records; . administering income payments; . furnishing accounting and valuation services (including the calculation and monitoring of daily Subaccount values); . reconciling and depositing cash receipts; . providing contract confirmations and periodic statements; . providing toll-free inquiry services; and . furnishing telephone and internet transaction services. The risks we assume include: . the risk that the death benefit will be greater than the Surrender Value; . the risk that the actual life-span of persons receiving income payments under contract will exceed the assumptions reflected in our guaranteed rates (these rates are incorporated in the contract and cannot be changed); and . the risk that our costs in providing the services will exceed our revenues from contract charges (which cannot be changed by us). The amount of a charge may not necessarily correspond to the costs associated with providing the services or benefits indicated by the designation of the charge. We may also realize a profit on one or more of the charges. We may use any such profits for any corporate purpose, including the payment of sales expenses. Deductions from the Separate Account We deduct from the Separate Account an amount, computed daily, equal to an annual rate of 1.60% of the daily net assets of the Separate Account. The charge consists of an administrative expense charge at an effective annual rate of 0.25% and a mortality and expense risk charge at an effective annual rate of 1.35%. These deductions from the Separate Account are reflected in your Contract Value. Other Charges Annual Contract Maintenance Charge We will deduct an annual contract maintenance charge of $25 from your Contract Value to compensate us for certain administrative expenses incurred in connection with the contract. We will deduct the charge at each contract anniversary and at full surrender. We will waive this charge if your Contract Value at the time of deduction is $25,000 or more. We will allocate the annual contract maintenance charge among the Subaccounts in the same proportion that your assets in each Subaccount bear to your total assets in the Separate Account at the time the charge is taken. If the Guarantee Account is available, and there are insufficient assets allocated to the Separate Account, we will deduct any remaining portion of the charge from the Guarantee Account proportionally from all assets in the Guarantee Account. Deductions for Premium Taxes We will deduct charges for any premium tax or other tax levied by any governmental entity from premium payments or Contract Value when the premium tax is incurred or when we pay proceeds under the contract (proceeds include surrenders, partial surrenders, income payments and death benefit payments). The applicable premium tax rates that states and other governmental entities impose on the purchase of an annuity are subject to change by legislation, by administrative interpretation or by judicial action. These premium taxes generally depend upon the law of your state of residence. The tax generally ranges from 0.0% to 3.5%. 16 Other Charges and Deductions Each Portfolio incurs certain fees and expenses. To pay for these expenses, the Portfolio makes deductions from its assets. The deductions are described more fully in each Portfolio's prospectus. In addition, we reserve the right to impose a charge of up to $10 per transfer. This charge is at our cost with no profit to us. THE CONTRACT The contract is an individual flexible premium variable deferred annuity contract. We describe your rights and benefits below and in the contract. There may be differences in your contract (such as differences in fees, charges and benefits) because of requirements of the state where we issued your contract. We will include any such differences in your contract. Purchase of the Contract If you wish to purchase a contract, you must apply for it through an authorized sales representative. The sales representative will send your completed application to us, and we will decide whether to accept or reject it. If we accept your application, our legally authorized officers prepare and execute a contract. We then send the contract to you either directly or through your sales representative. See the "Sale of the Contracts" provision of this prospectus. If we receive a completed application and all other information necessary for processing a purchase order, we will apply your initial premium payment no later than two Valuation Days after we receive the order. While attempting to finish an incomplete application, we may hold the initial premium payment for no more than five Valuation Days. If the incomplete application cannot be completed within five days, we will inform you of the reasons, and will return your premium payment immediately, unless you specifically authorize us to keep it until the application is complete. Once you complete your application, we must apply the initial premium payment within two Valuation Days. We apply any additional premium payments you make on the Valuation Day we receive them at our Home Office. There may be delays in our receipt of an application that are outside of our control (for example, because of the failure of the selling broker-dealer or authorized sales representative to forward the application to us promptly). Any such delays will affect when your contract can be issued and your premium payment applied. To apply for a contract, you must be of legal age in a state where we may lawfully sell the contracts and, if part of a plan, you must also be eligible to participate in any of the qualified or non-qualified retirement plans for which we designed the contracts. The Annuitant(s) cannot be older than age 85 at the time of application, unless we approve a different age. Various firms and financial institutions that sell our products have their own guidelines on when certain products are suitable and may impose issue age restrictions that are younger than those stated in our contracts and/or riders. We neither influence, nor agree or disagree with the age restrictions imposed by firms and financial institutions. This contract may be used with certain tax qualified retirement plans. The contract includes attributes such as tax deferral on accumulated earnings. Qualified retirement plans provide their own tax deferral benefit; the purchase of this contract does not provide additional tax deferral benefits beyond those provided in the qualified retirement plan. Accordingly, if you are purchasing this contract as a Qualified Contract, you should consider purchasing this contract for its death benefit, income benefits, and other non-tax-related benefits. Please consult a tax adviser for information specific to your circumstances in order to determine whether this contract is an appropriate investment for you. Purchasing the contract through a tax-free "Section 1035" exchange. Section 1035 of the Code generally permits you to exchange one annuity contract for another in a "tax-free exchange." Therefore, you can use the proceeds from another annuity contract to make premium payments for this contract. Before making an exchange to acquire this contract, you should carefully compare this contract to your current contract. You may have to pay a surrender charge under your current contract to exchange it for this contract. The fees and charges under this contract may be higher (or lower), and the benefits may be different, than those of your current contract. In addition, you may have to pay Federal income and penalty taxes on the exchange if it does not qualify for Section 1035 treatment. You should not exchange another contract for this contract unless you determine, after evaluating all of the facts, that the exchange is in your best interest. Please note that the person who sells you this contract generally will earn a commission on the sale. Ownership As owner, you have all rights under the contract, subject to the rights of any irrevocable beneficiary. Two persons may apply as joint owners for a Non-Qualified Contract. Joint owners have equal undivided interests in their contract. That means that each may exercise any ownership rights on behalf of the other, except ownership changes. Joint owners also have the right of survivorship. This means if a joint owner dies, his or her interest in the contract passes to the surviving owner. You must have our approval to add a joint owner after we issue the contract. We may require additional information, if joint ownership is requested after the contract is issued. 17 Subject to certain restrictions imposed by electable rider options and as otherwise stated below, before the Maturity Date, you may change: . your Maturity Date (your Maturity Date must be a date at least 12 months from the date the contract is issued); . your Optional Payment Plan; . the allocation of your investments among the Subaccounts and/or the Guarantee Account, if available (subject to certain restrictions listed in your contract as in the "Transfers" provision); and . the owner, joint owner, primary beneficiary, contingent beneficiary (unless the primary beneficiary or contingent beneficiary is named as an irrevocable beneficiary), and contingent Annuitant upon written notice to our Home Office, provided the Annuitant is living at the time of the request. If you change a beneficiary, your plan selection will no longer be in effect unless you request that it continue. In addition, during the Annuitant's life, you can change any non-natural owner to another non-natural owner. Changing the owner or joint owner may have tax consequences and you should consult a tax adviser before doing so. Neither the Annuitant nor the Joint Annuitant can be changed. We must receive your request for a change at our Home Office and in a form satisfactory to us. The change will take effect as of the date you sign the request. The change will be subject to any payment made before we recorded the change. Assignment An owner of a Non-Qualified Contract may assign some or all of his or her rights under the contract. An assignment must occur before any income payments begin and while the Annuitant is still living. Once proper notice of the assignment is recorded by our Home Office, the assignment will become effective as of the date the written request was signed. Qualified Contracts, IRAs and Tax Sheltered Annuity Contracts may not be assigned, pledged or otherwise transferred except where allowed by law. We are not responsible for the validity or tax consequences of any assignment. We are not liable for any payment or settlement made before the assignment is recorded. Assignments will not be recorded until our Home Office receives sufficient direction from the owner and the assignee regarding the proper allocation of contract rights. Amounts pledged or assigned will be treated as distributions and will be included in gross income to the extent that the Contract Value exceeds the investment in the contract for the taxable year in which it was pledged or assigned. Assignment of the entire Contract Value may cause the portion of the contract exceeding the total investment in the contract and previously taxed amounts to be included in gross income for federal income tax purposes each year that the assignment is in effect. Amounts assigned may be subject to an IRS tax penalty equal to 10% of the amount included in gross income. Premium Payments You may make premium payments to us at any frequency and in the amount you select, subject to certain restrictions, including restrictions that may be imposed by terms of elected riders. You must obtain our prior approval before you make total premium payments for an Annuitant age 79 or younger that exceed $2,000,000 in the aggregate in any variable annuity contracts issued by the Company or any of its affiliates. If any Annuitant is age 80 or older at the time of payment, the total amount not subject to prior approval is $1,000,000 in the aggregate in any variable annuity contracts issued by the Company or any of its affiliates. Premium payments may be made at any time prior the Maturity Date, the surrender of the contract, or the death of the owner (or joint owner, if applicable), whichever comes first. We reserve the right to refuse to accept a premium payment for any lawful reason and in a manner that does not unfairly discriminate against similarly situated purchasers. The minimum initial premium payment is $25,000. We may accept a lower initial premium payment in the case of certain group sales. Each additional premium payment must be at least $1,000 for Non-Qualified Contracts ($200 if paid by electronic fund transfers), $50 for IRA contracts, and $100 for other Qualified Contracts. Valuation Day and Valuation Period We will value Accumulation and Annuity Units once daily at the close of regular trading (currently 4:00 p.m. Eastern Time) on each day the New York Stock Exchange is open except for days on which a Portfolio does not value its shares. If a Valuation Period contains more than one day, the unit values will be the same for each day in the Valuation Period. Allocation of Premium Payments We place premium payments into the Subaccounts, each of which invests in shares of a corresponding Portfolio and/or the Guarantee Account (if available), according to your 18 instructions. You may allocate premium payments to the Subaccounts plus the Guarantee Account (if available) at any one time. The percentage of any premium payment that you can put into any one Subaccount or guarantee period must equal a whole percentage and cannot be less than $100. Upon allocation to the appropriate Subaccounts, we convert premium payments into Accumulation Units. We determine the number of Accumulation Units credited by dividing the amount allocated to each Subaccount by the value of an Accumulation Unit for that Subaccount on the Valuation Day on which we receive any additional premium payment at our Home Office. The number of Accumulation Units determined in this way is not changed by any subsequent change in the value of an Accumulation Unit. However, the dollar value of an Accumulation Unit will vary depending not only upon how well the Portfolio's investments perform, but also upon the expenses of the Separate Account and the Portfolios. You may change the allocation of subsequent premium payments at any time, without charge, by sending us acceptable notice in writing or over the phone. The new allocation will apply to any premium payments made after we receive notice of the change at our Home Office. Valuation of Accumulation Units Partial surrenders, surrenders and/or payment of a death benefit all result in the cancellation of an appropriate number of Accumulation Units. We cancel Accumulation Units as of the end of the Valuation Period in which we receive notice or instructions with regard to the partial surrender, surrender or payment of a death benefit. The Accumulation Unit value at the end of every Valuation Day equals the Accumulation Unit value at the end of the preceding Valuation Day multiplied by the net investment factor (described below). We arbitrarily set the Accumulation Unit value at the inception of the Subaccount at $10. On any Valuation Day, we determine your Subaccount value by multiplying the number of Accumulation Units attributable to your contract by the Accumulation Unit value for that day. The net investment factor is an index used to measure the investment performance of a Subaccount from one Valuation Period to the next. The net investment factor for any Subaccount for any Valuation Period reflects the change in the net asset value per share of the Portfolio held in the Subaccount from one Valuation Period to the next, adjusted for the daily deduction of the administrative expense charges and mortality and expense risk charges from assets in the Subaccount. If any "ex-dividend" date occurs during the Valuation Period, we take into account the per share amount of any dividend or capital gain distribution so that the unit value is not impacted. Also, if we need to reserve money for taxes, we take into account a per share charge or credit for any taxes reserved for which we determine to have resulted from the operations of the Subaccount. The value of an Accumulation Unit may increase or decrease based on the net investment factor. Changes in the net investment factor may not be directly proportional to changes in the net asset value of the Portfolio because of the deduction of Separate Account charges. Though the number of Accumulation Units will not change as a result of investment experience, the value of an Accumulation Unit may increase or decrease from Valuation Period to Valuation Period. See the Statement of Additional Information for more details. TRANSFERS Transfers Before the Maturity Date All owners may transfer all or a portion of their assets between and among the Subaccounts of the Separate Account and the Guarantee Account, on any Valuation Day prior to the Maturity Date, subject to certain conditions imposed by the contract and as stated below. Owners may not transfer assets in the Guarantee Account from one interest rate guarantee period to another interest rate guarantee period. We process transfers among the Subaccounts and between the Subaccounts and the Guarantee Account as of the end of the Valuation Period that we receive the transfer request in good order at our Home Office. There may be limitations placed on multiple transfer requests made at different times during the same Valuation Period involving the same Subaccounts or the Guarantee Account. We may postpone transfers to, from or among the Subaccounts and/or the Guarantee Account under certain circumstances. See the "Requesting Payments" provision of this prospectus. Transfers from the Guarantee Account to the Subaccounts Where the Guarantee Account is available, we may limit and/or restrict transfers from the Guarantee Account to the Subaccounts. For any allocation from the Guarantee Account to the Subaccounts, the limited amount will not be less than any accrued interest on that allocation plus 25% of the original amount of that allocation. Unless you are participating in a Dollar Cost Averaging program (see the "Dollar Cost Averaging Program" provision) you may make such transfers only during the 30 day period beginning with the end of the 19 preceding interest rate guarantee period applicable to that particular allocation. We also may limit the amount that you may transfer to the Subaccounts. Transfers from the Subaccounts to the Guarantee Account We may also restrict certain transfers from the Subaccounts to the Guarantee Account (if available). We reserve the right to prohibit or limit transfers from a Subaccount to the Guarantee Account during the six-month period following the transfer of any amount from the Guarantee Account to any Subaccount. Transfers Among the Subaccounts All owners may submit 12 Subaccount transfers each calendar year by voice response, Internet, telephone, facsimile, U.S. Mail or overnight delivery service. Once such 12 Subaccount transfers have been executed, a letter will be sent notifying owners that they may submit additional transfers only in writing by U.S. Mail or by overnight delivery service. Transfer requests sent by same day mail, courier service, Internet, telephone or facsimile will not be accepted under any circumstances. Once we receive your mailed transfer request at our Home Office, such transfer cannot be cancelled. We also will not cancel transfer requests that have not yet been received, i.e., you may not call to cancel a transfer request sent by U.S. Mail or overnight delivery service. If you wish to change a transfer request sent by U.S. Mail or overnight delivery service, such change must also be sent in writing by U.S. Mail or by overnight delivery service. We will process that transfer request as of the Valuation Day the new transfer request is received at our Home Office. Currently, we do not charge for transfers. However, we reserve the right to assess a charge of up to $10 for each transfer. The minimum transfer amount is $100 or the entire balance in the Subaccount or interest rate guarantee period if the transfer will leave a balance of less than $100. We also reserve the right to not honor your transfer request if your transfer is a result of more than one trade involving the same Subaccount within a 30 day period. We will generally invoke this right when either the Portfolio(s) or we see a pattern of frequent transfers between the same Portfolios within a short period of time (i.e., transfers among the same Subaccounts occur within five to 15 days of each other). In addition, we may not honor transfers made by third parties. See the "Transfers by Third Parties" provision of this prospectus. If a transfer request is not processed, a letter will be sent notifying you that your transfer request was not honored. If we do not honor a transfer request, we will not count that request as a transfer for purposes of the 12 transfers allowed each calendar year as described in the previous paragraphs. When thinking about a transfer of assets, you should consider the inherent risks involved. Frequent transfers based on short-term expectations may increase the risk that you will make a transfer at an inopportune time. Also, because certain restrictions on transfers are applied at the discretion of the Portfolios in which the Subaccount invests, it is possible that owners will be treated differently and there could be inequitable treatment among owners if a Portfolio does not apply equal treatment to all shareholders. See the "Special Note on Frequent Transfers" provision of this prospectus. These restrictions will apply to all owners and their designated third party(ies), unless such transfer is being made pursuant to: (1) a Dollar Cost Averaging program; (2) a Portfolio Rebalancing program; (3) the terms of an approved Fund substitution or Fund liquidation; or (4) a Portfolio's refusal to allow the purchase of shares, either on behalf of an individual owner or the entire Separate Account, in which case, the Portfolio's refusal to allow the purchase of shares will not be considered a transfer for calculation of the 12 transfers allowed per calendar year by voice response, Internet, telephone, facsimile, U.S. Mail or overnight delivery service. Sometimes, we will not honor transfer requests. We will not honor a transfer request if: (1) any Subaccount that would be affected by the transfer is unable to purchase or to redeem shares of the Portfolio in which the Subaccount invests; or (2) the transfer would adversely affect unit values. The affected Portfolio(s) determine whether these items apply. We will treat all owners equally with respect to transfer requests. 20 Telephone/Internet Transactions All owners may make their first 12 transfers in any calendar year among the Subaccounts or between the Subaccounts and the Guarantee Account, by calling or electronically contacting us. Transactions that can be conducted over the telephone and Internet include, but are not limited to: (1) the first 12 transfers of assets among the Subaccounts or between the Subaccounts and the Guarantee Account in any calendar year (this includes any changes in premium payment allocations when such changes include a transfer of assets); (2) Dollar Cost Averaging; and (3) Portfolio Rebalancing. We employ reasonable procedures to confirm that instructions we receive are genuine. Such procedures may include, but are not limited to: (1) requiring you or a third party to provide some form of personal identification before we act on the telephone/Internet instructions; (2) confirming the telephone/Internet transaction in writing to you or a third party you authorized; and/or (3) tape recording telephone instructions or retaining a record of your electronic request. We reserve the right to limit or prohibit telephone and Internet transactions. We will delay making a payment or processing a transfer request if: (1) the disposal or valuation of the Separate Account's assets is not reasonably practicable because the New York Stock Exchange is closed; (2) on nationally recognized holidays, trading is restricted by the New York Stock Exchange; (3) an emergency exists making the disposal or valuation of securities held in the Separate Account impracticable; or (4) the SEC by order permits postponement to protect our owners. Rules and regulations of the SEC will govern as to when the conditions described in (3) and (4) above exist. If we are closed on days when the New York Stock Exchange is open, Contract Value may be affected since owners will not have access to their account. Confirmation of Transactions We will not be liable for following instructions that we reasonably determine to be genuine. We will send you a confirmation of any transfer we process. You are responsible for verifying transfer confirmations and notifying us of any errors within 30 days of receiving the confirmation statement. Special Note on Reliability Please note that the Internet or our telephone system may not always be available. Any computer or telephone system, whether it is ours, yours, your Internet service provider's, or your registered representative's, can experience unscheduled outages or slowdowns for a variety of reasons. These outages or slowdowns may delay or prevent our processing your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you can make your transaction request by writing our Home Office. Transfers By Third Parties As a general rule and as a convenience to you, we allow you to give third parties the right to conduct transfers on your behalf. However, when the same third party possesses this ability on behalf of many owners, the result can be simultaneous transfers involving large amounts of assets. Such transfers can disrupt the orderly management of the Portfolios underlying the contract, can result in higher costs to owners, and are generally not compatible with the long-range goals of owners. We believe that such simultaneous transfers effected by such third parties are not in the best interests of all beneficial shareholders of the Portfolios, and the management of the Portfolios share this position. We have procedures to assure that the transfer requests that we receive have, in fact, been made by the owners in whose names they are submitted. Consequently, we may refuse transfers made by third parties on behalf of an owner in a number of circumstances, which include but are not limited to: (1) transfers made on behalf of many owners by one third party (or several third parties who belong to the same firm) where the transfer involves the same Subaccounts and large amounts of assets; (2) when we have not received adequate authorization from the owner allowing a third party to make transfers on his or her behalf; and (3) when we believe, under all facts and circumstances received, that the owner or his or her authorized agent is not making the transfer. 21 We require documentation to provide sufficient proof that the third party making the trade is in fact duly authorized by the owner. This information includes, but is not limited to: (1) documentation signed by the owner or a court authorizing a third party to act on the owner's behalf; (2) passwords and encrypted information; (3) additional owner verification when appropriate; and (4) recorded conversations. We will not be held liable for refusing a transfer made by a third party when we have a reasonable basis for believing such third party is not authorized to make a transfer on the owner's behalf or we have a reasonable basis for believing the third party is acting in a fraudulent manner. Special Note on Frequent Transfers The Separate Account does not accommodate frequent transfers of Contract Value among Subaccounts. When owners or someone on their behalf submit requests to transfer all or a portion of their assets between Subaccounts, the requests result in the purchase and redemption of shares of the Portfolios in which the Subaccounts invest. Frequent Subaccount transfers, therefore, cause corresponding frequent purchases and redemptions of shares of the Portfolios. Frequent purchases and redemptions of shares of the Portfolios can dilute the value of a Portfolio's shares, disrupt the management of the Portfolio's investment portfolio, and increase brokerage and administrative costs. Accordingly, when an owner or someone on their behalf engages in frequent Subaccount transfers, other owners and persons with rights under the contracts (such as the beneficiaries) may be harmed. The Separate Account discourages frequent transfers, purchases and redemptions. To discourage frequent Subaccount transfers, we adopted the policy described in the "Transfers Among the Subaccounts" section. This policy requires owners who request more than 12 Subaccount transfers in a calendar year to submit such requests in writing by U.S. Mail or by overnight delivery service (the "U.S. Mail requirement"). The U.S. Mail requirement creates a delay of at least one day between the time transfer decisions are made and the time such transfers are processed. This delay is intended to discourage frequent Subaccount transfers by limiting the effectiveness of abusive "market timing" strategies (in particular, "time-zone" arbitrage) that rely on "same-day" processing of transfer requests. In addition, we will not honor transfer requests if any Subaccount that would be affected by the transfer is unable to purchase or redeem shares of the Portfolio in which the Subaccount invests or if the transfer would adversely affect Accumulation Unit values. Whether these restrictions apply is determined by the affected Portfolio(s), and although we apply the restrictions uniformly when we receive information from the Portfolio(s), we cannot guarantee that the Portfolio(s) will apply their policies and procedures in a uniform basis. There can be no assurance that the U.S. Mail requirement will be effective in limiting frequent Subaccount transfers or that we can prevent all frequent Subaccount transfer activity that may adversely affect owners, other persons with material rights under the contracts, or Portfolio shareholders generally. For instance, imposing the U.S. Mail requirement after 12 Subaccount transfers may not be restrictive enough to deter owners seeking to engage in abusing market timing strategies. We may revise our frequent Subaccount transfer policy and related procedures, at our sole discretion, at any time and without prior notice, as we deem necessary or appropriate to better detect and deter frequent transfer activity that may adversely affect owners, other persons with material rights under the contracts, or Portfolio shareholders generally, to comply with state or federal regulatory requirements, or to impose additional or alternative restrictions on owners engaging in frequent Subaccount transfers. For example, we may invoke our right to refuse transfers if the transfer involves the same Subaccount within a 30 day period and/or we may change our procedures to monitor for a different number of transfers within a specified time period or to impose a minimum time period between each transfer. There are inherent risks that changing our policies and procedures in the future may not be effective in limiting frequent Subaccount transfers. We will not implement any policy and procedure at the contract level that discriminates among owners; however, we may be compelled to adopt policies and procedures adopted by the Portfolios on behalf of the Portfolios and we will do so unless we cannot service such policies and procedures or we believe such policies and procedures contradict state or federal regulations or such policies and procedures contradict with the terms of your contract. As stated in the previous paragraph, each of the Portfolios in which the Subaccounts invest may have its own policies and procedures with respect to frequent purchases and redemption of Portfolio shares. The prospectuses for the Portfolios describe any such policies and procedures. For example, a Portfolio may assess redemption fees (which we reserve the right to collect) on shares held for a relatively short period of time. The frequent trading policies and procedures of a Portfolio may be different, and more or less restrictive, than the frequent trading policies 22 and procedures of other Portfolios and the policies and procedures we have adopted to discourage frequent Subaccount transfers. Owners should be aware that we may not have the operational capability to monitor owners' Subaccount transfer requests and apply the frequent trading policies and procedures of the respective Portfolios that would be affected by the transfers. Accordingly, owners and other persons who have material rights under the contracts should assume that the sole protection they may have against potential harm from frequent Subaccount transfers is the protection, if any, provided by the policies and procedures we have adopted to discourage frequent Subaccount transfers. Under rules recently adopted by the SEC, we are required to enter into a written agreement with each Portfolio or its principal underwriter that will obligate us to provide promptly, upon request by the Portfolio, certain information to the Portfolio about the trading activity of individual contract owners. We must then execute any instructions from the Portfolio to restrict or prohibit further purchases or transfers by a specific contract owner of Accumulation Units or Annuity Units of the Subaccount that invests in that Portfolio, where such contract owner has been identified by the Portfolio as having engaged in transactions (indirectly through such Subaccount) that violate policies established by the Portfolio for the purpose of eliminating or reducing any dilution of the value of the outstanding shares of the Portfolio. We will inform any contract owners whose future purchases and transfers of a Subaccount's units have been restricted or prohibited by a Portfolio. Owners and other persons with material rights under the contracts also should be aware that the purchase and redemption orders received by the Portfolios generally are "omnibus" orders from intermediaries such as retirement plans or separate accounts funding variable insurance contracts. These omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and/or individual owners of variable insurance contracts. The omnibus nature of these orders may limit the Portfolios' ability to apply their respective frequent trading policies and procedures. We cannot guarantee that the Portfolios will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may invest in the Portfolios. In addition, if a Portfolio believes an omnibus order we submit may reflect one or more Subaccount transfer requests from owners engaged in frequent transfer activity, the Portfolio may reject a portion of or the entire omnibus order. If a Portfolio rejects part of an omnibus order it believes is attributable to transfers that exceed its market timing policies and procedures, it will return the amount to us, and we will credit the amount to the owner as of the Valuation Day of our receipt of the amount. You may realize a loss if the unit value on the Valuation Day we credit the amount back to your account has increased since the original date of your transfer. We apply our policies and procedures without exception, waiver, or special arrangement. Dollar Cost Averaging Program Dollar Cost Averaging permits you to systematically transfer on a monthly or quarterly basis a set dollar amount from the Subaccount investing in the GE Investments Funds, Inc. -- Money Market Fund and/or the Guarantee Account, to any combination of other Subaccounts (as long as the total number of Subaccounts used does not exceed the maximum number allowed under the contract). The Dollar Cost Averaging method of investment is designed to reduce the risk of making purchases only when the price of units is high, but you should carefully consider your financial ability to continue the program over a long enough period of time to purchase Accumulation Units when their value is low as well as when it is high. Dollar Cost Averaging does not assure a profit or protect against a loss. You may participate in the Dollar Cost Averaging program by: (1) electing it on your application; (2) contacting an authorized sales representative; or (3) contacting us at (800) 352-9910. To use the program, you must transfer at least $100 from the Subaccount investing in the GE Investments Funds, Inc. -- Money Market Fund and/or interest rate guarantee period with each transfer. The Dollar Cost Averaging program will begin 30-days after we receive all required forms with your instructions and any necessary premium payment unless we allow an earlier date. We will discontinue your participation in the Dollar Cost Averaging program: . on the business day we receive your request to discontinue the program in writing or by telephone (assuming we have your telephone authorization form on file); or . when the assets in the Subaccount investing in the GE Investments Funds, Inc. -- Money Market Fund and/or interest rate guarantee period from which transfers are being made are depleted. If you Dollar Cost Average from the Guarantee Account, we reserve the right to determine the amount of each automatic transfer. We reserve the right to transfer any remaining portion of an allocation used for Dollar Cost Averaging to a new 23 guarantee period upon termination of the Dollar Cost Averaging program for that allocation. You may not transfer from one interest rate guarantee period to another interest rate guarantee period. We also reserve the right to credit a higher rate of interest on premium payments allocated to the Guarantee Account that participate in the Dollar Cost Averaging program. We refer to this higher rate of interest as Enhanced Dollar Cost Averaging. The Dollar Cost Averaging program and/or the Enhanced Dollar Cost Averaging program may not be available in all states and in all markets or through all broker-dealers who sell the contracts. If you terminate the Enhanced Dollar Cost Averaging program prior to the depletion of assets from the Guarantee Account, we have the right to credit the remaining assets in the Guarantee Account the current interest rate being credited to all other Guarantee Account assets not participating in Enhanced Dollar Cost Averaging as of that Valuation Day. There is no additional charge for Dollar Cost Averaging. A transfer under this program is not a transfer for purposes of assessing a transfer charge or calculating the minimum number of transfers we may allow in a calendar year. We may, from time to time, offer various Dollar Cost Averaging programs. We reserve the right to discontinue new Dollar Cost Averaging programs or to modify such programs at any time and for any reason. We also reserve the right to prohibit simultaneous participation in the Dollar Cost Averaging program and Systematic Withdrawals program. Owners considering participating in a Dollar Cost Averaging program should call (800) 352-9910 or an authorized sales representative to verify the availability of Dollar Cost Averaging. Portfolio Rebalancing Program Once your premium payment has been allocated among the Subaccounts, the performance of each Subaccount may cause your allocation to shift. You may instruct us to automatically rebalance on a quarterly, semi-annual or annual basis your assets among the Subaccounts to return to the percentages specified in your allocation instructions. Your percentage allocations must be in whole percentages. The program does not include allocations to the Guarantee Account. You may elect to participate in the Portfolio Rebalancing program at any time by submitting the completed Portfolio Rebalancing form to our Home Office. Subsequent changes to your percentage allocations may be made at any time by written or telephone instructions to the Home Office. Once elected, Portfolio Rebalancing remains in effect from the date we receive your written request until you instruct us to discontinue Portfolio Rebalancing. There is no additional charge for using Portfolio Rebalancing, and we do not consider Portfolio Rebalancing a transfer for purposes of assessing a transfer charge or calculating the maximum number of transfers permitted in a calendar year. We reserve the right to discontinue offering or modify the Portfolio Rebalancing program at any time and for any reason. We also reserve the right to exclude specific Subaccounts from Portfolio Rebalancing. Portfolio Rebalancing does not guarantee a profit or protect against a loss. Guarantee Account Interest Sweep Program You may instruct us to transfer interest earned on your assets in the Guarantee Account to the Subaccounts to which you are allocating premium payments, in accordance with your allocation instructions in effect on the date of the transfer any time before the Maturity Date. You must specify the frequency of the transfers (either quarterly, semi-annually, or annually). The minimum amount in the Guarantee Account required to elect this option is $1,000, but may be reduced at our discretion. The transfers under this program will take place on the last calendar day of each period. You may participate in the interest sweep program at the same time you participate in either the Dollar Cost Averaging program or the Portfolio Rebalancing program. If any interest sweep transfer is scheduled for the same day as a Portfolio Rebalancing transfer, we will process the interest sweep transfer first. We limit the amount you may transfer from the Guarantee Account to the Subaccounts for any particular allocation. See the "Transfers" provision of this prospectus. We will not process an interest sweep transfer if that transfer would exceed the amount permitted to be transferred. You may cancel your participation in the interest sweep program at any time by writing or calling our Home Office at the address or telephone number listed on page 1 of this prospectus. We will automatically cancel your participation in the program if your assets in the Guarantee Account are less than $1,000 or such lower amount as we may determine. There is no additional charge for the interest sweep program. We do not consider interest sweep transfers a transfer for purposes of assessing a transfer charge or for calculating the maximum number of transfers permitted in a calendar year. The interest sweep program does not assure a profit or protect against a loss. 24 SURRENDERS AND PARTIAL SURRENDERS Surrenders and Partial Surrenders We will allow you to totally surrender your contract or surrender of a portion of your Contract Value at any time before the Maturity Date upon your written request, subject to the conditions discussed below. We will not permit a partial surrender that is less than $100 or a partial surrender which would reduce your Contract Value to less than $1,000. If your partial surrender request would reduce your Contract Value to less than $1,000, we will surrender your contract in full. Different limits and other restrictions may apply to Qualified Contracts. The amount payable on surrender of the contract is the Surrender Value at the end of the Valuation Period during which we receive the request. The Surrender Value equals: (1) the Contract Value (after deduction of the annual contract maintenance charge, if applicable, and any optional rider charge(s)) on the Valuation Day we receive a request for surrender; less (2) any applicable premium tax. We may pay the Surrender Value in a lump sum or under one of the Optional Payment Plans specified in the contract, based on your instructions. If you are taking a partial surrender, you may indicate, in writing, electronically, or by calling our Home Office, from which Subaccounts or interest rate guarantee periods we are to take your partial surrender. If you do not so specify, we will deduct the amount of the partial surrender first from the Subaccounts on a pro-rata basis, in proportion to your assets allocated to the Separate Account. We will deduct any remaining amount from the Guarantee Account. We will take deductions from the Guarantee Account from the amounts (including any interest credited to such amounts) which have been in the Guarantee Account for the longest period of time. A Portfolio may impose a redemption charge. The charge is retained by or paid to the Portfolio. The charge is not retained by or paid to us. The redemption charge may affect the number and/or value of Accumulation Units withdrawn from the Subaccount that invests in that Portfolio and may affect Contract Value. When taking a partial surrender, any applicable surrender charges and/or applicable premium tax will be taken from the amount surrendered, unless otherwise requested. We will delay making a payment if: (1) the disposal or valuation of the Separate Account's assets is not reasonably practicable because the New York Stock Exchange is closed; (2) on nationally recognized holidays, trading is restricted by the New York Stock Exchange; (3) an emergency exists making the disposal or valuation of securities held in the Separate Account impracticable; or (4) the SEC by order permits postponement of payment to protect our owners. Rules and regulations of the SEC will govern as to when the conditions described in (3) and (4) above exist. If we are closed on days when the New York Stock Exchange is open, Contract Value may be affected since owners will not have access to their account. Please remember that partial surrenders will reduce your death benefit by the proportion that the partial surrender (including any applicable premium tax assessed) reduces your Contract Value. See the "Death of Owner and/or Annuitant" provision of this prospectus. Partial surrenders and surrenders may also be subject to income tax and, if taken prior to age 59 1/2, an additional 10% IRS penalty tax. See the "Tax Matters" provision of this prospectus. Restrictions on Distributions from Certain Contracts Section 830.105 of the Texas Government Code permits participants in the Texas Optional Retirement Program to surrender their interest in a variable annuity contract issued under the Texas Optional Retirement Program only upon: (1) termination of employment in the Texas public institutions of higher education; (2) retirement; (3) death; or (4) the participant's attainment of age 70 1/2. If your contract is issued to a Texas Optional Retirement Program, you must furnish us proof that one of these four events has occurred before we distribute any amounts from your contract. 25 Systematic Withdrawal Program The Systematic Withdrawal program allows you to take Systematic Withdrawals of a specified dollar amount (in equal installments of at least $100) on a monthly, quarterly, semi-annual or annual basis. Your payments can begin at any time after 30 days from the date your contract is issued (unless we allow an earlier date). To participate in the program, your Contract Value must initially be at least $25,000 and you must submit a completed Systematic Withdrawal form to our Home Office. You can obtain the form from an authorized sales representative or our Home Office. We will deduct the Systematic Withdrawal amounts first from any gain in the contract and then from premiums paid. You may provide specific instructions as to which Subaccounts and/or interest rate guarantee periods from which we are to take Systematic Withdrawals. If you have not provided specific instructions, or if your specific instructions cannot be carried out, we will process the withdrawals by cancelling Accumulation Units on a pro-rata basis from all of the Subaccounts in which you have an interest. To the extent that your assets in the Separate Account are not sufficient to accomplish this withdrawal, we will take the remaining amount of the withdrawal from any assets you have in the Guarantee Account. We will take deductions from the Guarantee Account from the amounts (including any interest credited to such amounts) that have been in the Guarantee Account for the longest period of time. After your Systematic Withdrawals begin, you may change the frequency and/or amount of your payments subject to the following: . you may request only one such change in a calendar quarter; and . if you did not elect the maximum amount you could withdraw under this program at the time you elected the current series of Systematic Withdrawals, then you may increase the remaining payments up to the maximum amount. A Systematic Withdrawal program will terminate automatically when a Systematic Withdrawal would cause the remaining Contract Value to be less than $1,000. If a Systematic Withdrawal would cause the Contract Value to be less than $1,000, then we will not process that Systematic Withdrawal transaction. If any of your Systematic Withdrawals would be or become less than $100, we reserve the right to reduce the frequency of payments to an interval that would result in each payment being at least $100. You may discontinue Systematic Withdrawals at any time by notifying us in writing at our Home Office or by telephone. You may request that we pay any remaining payments in a lump sum. In addition, your Systematic Withdrawal amount may be affected if you take an additional partial surrender. See the "Requesting Payments" provision of this prospectus. Each Systematic Withdrawal is subject to Federal income taxes on the taxable portion considered gain for tax purposes. In addition, you may be assessed a 10% IRS penalty tax on Systematic Withdrawals if you are under age 59 1/2 at the time of the withdrawal. Systematic Withdrawals will reduce your death benefit by the proportion that each Systematic Withdrawal (including any premium tax assessed) reduces your Contract Value. See the "Death of Owner and/or Annuitant" provision of this prospectus. There is no charge for participation in the Systematic Withdrawal program, however, we reserve the right to prohibit participation in Systematic Withdrawals and Dollar Cost Averaging programs at the same time. We also reserve the right to discontinue and/or modify the Systematic Withdrawal program upon 30-days written notice to owners. DEATH OF OWNER AND/OR ANNUITANT For contracts issued prior to May 1, 2003, or prior to the date on which state insurance authorities approve applicable contract modifications, the following provisions apply: Death Benefit at Death of Any Annuitant Before the Maturity Date If the Annuitant dies before the Maturity Date, regardless of whether the Annuitant is also an owner or joint owner of the contract, the amount of proceeds available for the designated beneficiary (as defined below) is the death benefit. (This death benefit may be referred to as the "Annual EstateProtector/SM/" in our marketing materials.) Upon receipt of due proof of the Annuitant's death (generally, due proof is a certified copy of the death certificate or a certified copy of the decree of a court of competent jurisdiction as to the finding of death), a death benefit will be paid in accordance with your instructions, subject to distribution rules and termination of contract provisions discussed in the contract and elsewhere in this prospectus. The death benefit varies based on: (1) the Annuitant's age on the date the contract was issued; (2) the Annuitant's age on the date of his or her death; 26 (3) the number of contract years that elapse from the date the contract is issued until the date of the Annuitant's death; and (4) whether any premium taxes are due at the time the death benefit is paid. For contracts issued on or after the later of May 15, 2001, or the date on which state insurance authorities approve applicable contract modifications, but prior to May 1, 2003, or prior to the date on which state insurance authorities approve applicable contract modifications the Basic Death Benefit will be as follows: If the Annuitant is age 80 or younger on the date the contract is issued and he or she dies before his or her first contract anniversary, the death benefit will be equal to the greater of: (1) the Contract Value as of the date we receive due proof of death; and (2) premium payments received, reduced for an adjustment due to any partial surrenders. If the Annuitant is age 80 or younger on the date the contract is issued and he or she dies after his or her first contract anniversary, the death benefit will be equal to the greatest of: (1) the greatest sum of (a) and (b), where: (a) is the Contract Value on any contract anniversary occurring prior to the Annuitant's 80th birthday; and (b) is premium payments received after such contract anniversary. The sum of (a) and (b) above is reduced for an adjustment due to any partial surrenders taken since the applicable contract anniversary. (2) the Contract Value as of the date we receive due proof of death; and (3) premium payments received, reduced for an adjustment due to any partial surrenders. If the Annuitant is age 81 or older on the date the contract is issued, the death benefit will be equal to the greater of: (1) the Contract Value as of the date we receive due proof of death; and (2) premium payments received, reduced for an adjustment due to partial surrenders. We will adjust the death benefit for partial surrenders (including partial surrenders immediately allocated to a Scheduled Purchase Payment Variable Deferred Annuity through an approved Annuity Cross Funding Program) in the same proportion as the percentage that the partial surrender reduces your Contract Value. Premium tax may be taken on any death benefit. If premium tax is taken, the amount of the death benefit will be reduced by the amount of the premium tax. Please refer to Appendix A in this prospectus for an example of the Basic Death Benefit calculation. For contracts issued prior to May 15, 2001, or the date on which state insurance authorities approve applicable contract modifications, the Basic Death Benefit will be as follows: The death benefit equals the sum of (a) and (b) where: (a) the Contract Value as of the date we receive due proof of death; and (b) is the excess, if any, of the unadjusted death benefit as of the date of the Annuitant's death over the Contract Value as of the date of the Annuitant's death, with interest credited on that excess from the date of the Annuitant's death to the date of distribution. The rate credited may depend on applicable law or regulation. Otherwise, we will set it. The unadjusted death benefit varies based on the Annuitant's age at the time we issued the contract and on the Annuitant's age at the time of death. If the Annuitant is age 80 or younger on the date the contract is issued and he or she dies before his or her first contract anniversary, the unadjusted death benefit will be equal to the greater of: (1) the Contract Value as of the date of death; and (2) premium payments received, reduced for an adjustment due to any partial surrenders. If the Annuitant is age 80 or younger on the date the contract is issued and he or she dies after his or her first contract anniversary, the unadjusted death benefit will be equal to the greatest of: (1) the greatest sum of (a) and (b), where: (a) is the Contract Value on any contract anniversary occurring prior to the Annuitant's 80th birthday; and (b) is premium payments received after such contract anniversary. The sum of (a) and (b) above is reduced for an adjustment for any partial surrenders taken since the applicable contract anniversary. 27 (2) the Contract Value as of the date of death; and (3) premium payments received, reduced for an adjustment due to any partial surrenders. If the Annuitant is age 81 or older on the date the contract is issued, the unadjusted death benefit will be equal to the greater of: (1) the Contract Value as of the date of death; and (2) premium payments received, reduced for an adjustment due to any partial surrenders. We will adjust the death benefit for partial surrenders in the same proportion as the percentage that the partial surrender reduces your Contract Value. Premium tax may be taken on any death benefit. If premium tax is taken, the amount of the death benefit will be reduced by the amount of the premium tax. Please refer to Appendix A in this prospectus for an example of the Basic Death Benefit calculation. When We Calculate the Death Benefit We will calculate the Basic Death Benefit and Optional Enhanced Death Benefit on the date we receive due proof of death at our Home Office. Until we receive complete written instructions satisfactory to us from the beneficiary(ies), assets will remain allocated to the Subaccounts and/or the Guarantee Account, according to your last instructions. This means that the calculated death benefit will fluctuate with the performance of the Subaccounts in which you are invested. Death of an Owner, Joint Owner, or Annuitant Before the Maturity Date In certain circumstances, Federal tax law requires that distributions be made under this contract upon the first death of: . an owner or joint owner; or . the Annuitant or Joint Annuitant (if any owner is a non-natural entity). The discussion below describes the methods available for distributing the value of the contract upon death. At the death of any owner (or Annuitant, if the owner is a non-natural entity), the person or entity first listed below who is alive or in existence on the date of that death will become the designated beneficiary: (1) owner or joint owners; (2) primary beneficiary; (3) contingent beneficiary; or (4) owner's estate. The designated beneficiary will then be treated as the sole owner of the contract. If there is more than one designated beneficiary, each one will be treated separately in applying the tax law's rules described below. Distribution Rules: Distributions required by Federal tax law differ depending on whether the designated beneficiary is the spouse of the deceased owner (or the spouse of the deceased Annuitant, if the contract is owned by a non-natural entity). . Spouses -- If the designated beneficiary is the spouse of the deceased, the spouse may continue the contract as the new owner. If the deceased was the Annuitant and there is no surviving contingent Annuitant, the spouse will automatically become the new Annuitant. At the death of the spouse, this provision may not be used again, even if the spouse remarries. In such case, the entire interest in the contract will be paid within 5 years of such spouse's death to the beneficiary named by the spouse. If no beneficiary is named, such payment will be made to the spouse's estate. The amount payable will be equal to the death benefit on the date we receive due proof of the Annuitant's death. Any increase in the Contract Value will be allocated to the Subaccounts and/or the Guarantee Account (if available) using the premium payment allocation in effect at that time. Any death benefit payable subsequently (at the death of the new Annuitant) will be calculated as if the spouse had purchased a contract for the new Contract Value on the date we received due proof of death. Any death benefit will be based on the new Annuitant's age as of the date we receive due proof of death of the original owner rather than the age of the previously deceased Annuitant. All other provisions will continue as if the spouse had purchased the contract on the original Contract Date. . Non-Spouses -- If the designated beneficiary is not the spouse of the deceased person, this contract cannot be continued in force indefinitely. Instead, upon the death of any owner (or Annuitant, if any owner is a non- natural entity), payments must be made to (or for the benefit of) the designated beneficiary under one of the following payment choices: (1) receive the Surrender Value in one lump sum payment upon receipt of due proof of death (see the "Requesting Payments" provision of this prospectus); 28 (2) receive the Surrender Value at any time during the five year period following the date of death. At the end of the five year period, we will pay in a lump sum payment any Surrender Value still remaining; or (3) apply the Surrender Value to provide a monthly income benefit under Optional Payment Plan 1 or 2 (for a period of 5 or more years.) The first monthly income benefit payment must be made no later than one year after the date of death. In addition, if Optional Payment Plan 1 is chosen, the period certain cannot exceed the designated beneficiary's life expectancy, and if Optional Payment Plan 2 is chosen, the fixed period cannot exceed the designated beneficiary's life expectancy. The following payment choice is available to designated beneficiaries of Non-Qualified Contracts: A designated beneficiary of a Non-Qualified Contract may apply the death proceeds of the contract to provide for an annual payment equal to the Minimum Annual Income, described below, for the life expectancy of the designated beneficiary. The first income payment must be made no later than 350 days after the original owner's date of death. The income payment period must be a period not exceeding the designated beneficiary's life expectancy. Payments will continue annually on the distribution date until the death of the designated beneficiary or the Contract Value is reduced to $0. Upon death of the designated beneficiary, the person or entity named by the designated beneficiary or, if no one is named, the designated beneficiary's estate may receive the remaining Contract Value. The recipient may take the Contract Value as a lump sum or continue to receive the annual payment on the distribution date equal to the Minimum Annual Income, or until the Contract Value is reduced to $0. The Minimum Annual Income is the amount withdrawn each year to satisfy Section 72(s)(2)(B) of the Code. The Minimum Annual Income will be re-determined each year for the designated beneficiary's life expectancy using the Single Life Table in Section 1.401(a)(9)-9 A-1 of the Income Tax Regulations, as amended. After death, the Minimum Annual Income is calculated using the designated beneficiary's remaining life expectancy. We may offer alternative calculations of Minimum Annual Income based on amortization or annuitization calculations methods described in guidance published by the Internal Revenue Service. Special rules for this payment choice only: . This payment choice cannot be selected if the Minimum Annual Income would be less than $100. . The designated beneficiary must elect a distribution date on which payments will be made. The first distribution date must be no later than 350 days after the owner's date of death. . Optional living benefit and death benefit riders are not available with this payment choice. . Additional premium payments may not be added with this payment choice. Under this payment choice, the contract will terminate upon payment of the entire Contract Value. The following payment choice is available to designated beneficiaries of Qualified Contracts or any beneficiary receiving death proceeds from any other individual retirement plan: An inherited owner may apply death proceeds to provide for an annual payment equal to the Minimum Annual Income, described below. For purposes of this provision, an inherited owner is any designated beneficiary receiving death proceeds from a Qualified Contract or any beneficiary receiving death proceeds from any other individual retirement plan. A surviving spouse may elect to be treated as an inherited owner in lieu of exercising spousal continuation. The inherited owner will be named the Annuitant at election of the payment choice. Payments under this payment choice will continue annually on the distribution date selected by the inherited owner, subject to the special rules stated below, until the death of the inherited owner or the Contract Value is reduced to $0. Upon death of the inherited owner, the person or entity named by the inherited owner or, if no one is named, the inherited owner's estate may receive the remaining Contract Value. The recipient may take the Contract Value as a lump sum or continue to receive the annual payment on the distribution date equal to the Minimum Annual Income until the Contract Value is reduced to $0. The Minimum Annual Income is the amount withdrawn each year to satisfy Section 408(b)(3) of the Code. The Minimum Annual Income will be based on the applicable distribution period for required minimum distributions after death, as provided in Section 1.401(a)(9)-5 A-5 of the Income Tax Regulations. Special rules for this payment choice only: . This payment choice cannot be selected if the Minimum Annual Income would be less than $100. . The inherited owner must elect a distribution date on which payments will be made. If the inherited owner is the surviving spouse of the original IRA owner within the meaning of Section 401(a)(9)(B)(iv) of the Code, then the first distribution date elected must be the later 29 of either: (i) December 15th of the year in which the deceased would have been age 70 1/2 or (ii) December 15th of the year following the original IRA owner's death. If the inherited owner is not the surviving spouse of the original IRA owner, then the first distribution date elected must be within 350 days from the date of death. If the surviving spouse dies before the first distribution date, the first distribution date under this rider will be determined by treating death of the surviving spouse as death of the original IRA owner and the surviving spouse's designated beneficiary as the inherited owner. . Optional living benefit and death benefit riders are not available with this payment choice. . Additional premium payments may not be added with this payment choice Under this payment choice, the contract will terminate upon payment of the entire Contract Value. If no choice is made by the designated beneficiary within 30 days following receipt of due proof of death, we will pay the Surrender Value within 5 years of the date of death. Due proof of death must be provided within 90 days of the date of death. We will not accept any premium payments after the non-spouse's death. If the designated beneficiary dies before the entire Surrender Value has been distributed, we will pay in a lump sum payment any Surrender Value still remaining to the person named by the designated beneficiary. If no person is so named, payment will be made to the designated beneficiary's estate. Under payment choices 1 or 2, the contract will terminate upon payment of the entire Surrender Value. Under payment choice 3, this contract will terminate when the Surrender Value is applied to provide a monthly income benefit. Spendthrift Provision. An owner may, by providing written notice to our Home Office in a manner acceptable to the Company, choose the method of payment of death proceeds under the contract by selecting any payment choice, including any Optional Payment Plan, that a designated beneficiary may have chosen. A designated beneficiary cannot change the payment choice that the owner has selected. If the owner makes a payment choice for the surviving spouse, the spouse may not continue the contract in accordance with the "Distribution Rules" provision of the prospectus. The owner may also specify at the time of electing an income payment option that any payments remaining to be made at the owner's death cannot be commuted or assigned. While living, the owner may revoke any such limitations on the rights of the designated beneficiary by providing written notice of such revocation to our Home Office in a manner acceptable to the Company. If the payment choice selected by the owner does not apply to a designated beneficiary, the limitations imposed by this paragraph shall not apply to such designated beneficiary. For example, a payment choice based on an individual's life does not apply to the owner's estate and the estate would be free to make its own payment choice as designated beneficiary after the owner's death. Amount of the proceeds: The proceeds we pay will vary, in part, based on the person who dies, as shown below: Amount of Person who died Proceeds Paid ----------------------------------------- Owner or Joint Owner Surrender Value (who is not an Annuitant) ----------------------------------------- Owner or Joint Owner Death Benefit (who is an Annuitant) ----------------------------------------- Annuitant Death Benefit ----------------------------------------- Upon receipt of due proof of death, the designated beneficiary will instruct us how to treat the proceeds subject to the distribution rules discussed above. Death of an Owner, Joint Owner, or Annuitant On or After the Maturity Date On or after the Maturity Date, if an owner, joint owner, Annuitant, or designated beneficiary dies while the contract is in force, payments that are already being made under the contract will be made at least as rapidly as under the method of distribution in effect at the time of death, notwithstanding any other provision of the contract. INCOME PAYMENTS The Maturity Date is the date income payments begin under the contract, provided the Annuitant is still living on that date. The Maturity Date must be a date at least thirteen months from the date the contract is issued. The owner selects the contract's initial Maturity Date at issue. Thereafter, until income payments begin, the owner may elect to extend the Maturity Date in one-year increments, so long as the new Maturity Date is not a date beyond the latest permitted Maturity Date. The latest Maturity Date we currently permit may not be a date beyond the younger Annuitant's 90th birthday, unless we consent to a later date. We reserve the right to discontinue to allow the deferral of the Maturity Date at any time and without prior notice. Any consent for a new Maturity Date will be provided on a non-discriminatory basis. 30 An owner may request to change the Maturity Date by sending written notice to our Home Office prior to the Maturity Date then in effect. If you change the Maturity Date, the Maturity Date will mean the new Maturity Date selected, provided such Maturity Date is not a date beyond the latest permitted Maturity Date. If income payments have not commenced upon reaching the latest permitted Maturity Date, we will begin making payments to the named payee. Income payments will be made in the form of a Life Income with a 10 Year Period Certain. A Maturity Date that occurs or is scheduled to occur at an advanced age (e.g., past age 85) may, in certain circumstances, have adverse income tax consequences. See the "Tax Matters" provision of this prospectus. Contracts issued to qualified retirement plans provide for income payments to start on the date and under the option specified by the plan. We will pay a monthly income benefit to the owner beginning on the Maturity Date, provided the Annuitant(s) is still living. We will pay the monthly income benefit in the form of a Life Income with 10 Years Certain plan or a Joint Life and Survivor Income with 10 years certain plan, both with variable income payments, using the gender (where appropriate) and settlement age of the Annuitant instead of the payee, unless you make another election as described below. As described in your contract, the settlement age may be less than the Annuitant's age. This means payments may be lower than they would have been without the adjustment. You may also choose to receive the Surrender Value of your contract on the date immediately preceding the Maturity Date in a lump sum in which case, we will cancel the contract. See the "Requesting Payments" provision of this prospectus. Payments will continue for the life of the Annuitant under the Life Income with 10 Years Certain plan, if he or she lives longer than 10 years. If the Annuitant dies before the end of 10 years, we will discount the remaining payments for the 10 year period at the same rate used to calculate the monthly income payment. If the remaining payments are variable income payments, we will assume the amount of each payment that we discount equals the payment amount on the date we receive due proof of death. We will pay this discounted amount in a lump sum. Payments will continue for the life of the surviving Annuitant under the Joint Life and Survivor Income with 10 Years Certain plan, if any Annuitant lives longer than 10 years. If both Annuitants die before the end of 10 years, the remaining payments for the 10 year period will be discounted at the same rate used to calculate the monthly income payment. If the remaining payments are variable income payments, we will assume the amount of each payment that we discount equals the payment amount on the date we receive due proof of death. We will pay the discounted amount in a lump sum. The contract also provides optional forms of income payments ("Optional Payment Plans"), each of which is payable on a fixed basis. Optional Payment Plans 1 and 5 also are available on a variable basis. If you elect fixed income payments, the guaranteed amount payable will earn interest at a minimum rate of 3% compounded yearly. We may increase the interest rate which will increase the amount paid to you or the payee. If you elect variable income payments, the dollar amount of the first variable income payment will depend on the annuity purchase rates described in your contract for the Optional Payment Plan you choose. These rates vary based on the Annuitant(s)' settlement age and gender, and upon the settlement age and gender of a second person you designate (if applicable). Under such tables, the longer the life expectancy of the Annuitant(s) or the longer the period for which we guarantee to make payments under the option, the smaller the amount the first variable income payment will be. After your first income payment, the dollar amount of your income payments will vary based on the investment performance of the Subaccount(s) in which you invest and the contract's assumed interest rate. The assumed interest rate is an assumption we make regarding the investment performance of the Portfolios you select. This rate is simply the total return, after expenses, you need to keep your variable income payments level. We assume an effective annual rate of 3%. This means that if the annualized investment performance, after expenses, of your Subaccounts measured between the day that the last payment was made, and the day on which we are calculating the new payment, is less than 3%, then the dollar amount of your variable income payment will decrease. Conversely, if the annualized investment performance, after expenses, of your Subaccounts measured between the day that the last payment was made, and the day on which we are calculating the new payment, is greater than 3%, then the dollar amount of your income payment will increase. We will make income payments monthly unless you elect to receive payments quarterly, semi-annually, or annually. Under the monthly income benefit and all of the Optional Payment Plans, if any payment made more frequently than annually would be or becomes less than $100, we reserve the right to reduce the frequency of payments to an interval that would result in each payment being at least $100. If the annual payment payable at maturity is less than $20, we will pay the Surrender Value in a lump sum. See the "Requesting Payments" provision of this prospectus. Upon making such a payment, we will have no future obligation under the contract. 31 The amount of your income payments will depend on four things: (1) the Surrender Value on the Valuation Day immediately preceding your Maturity Date; (2) the settlement age on the Maturity Date, and if applicable, the gender of the Annuitant(s); (3) the specific payment plan you choose; and (4) if you elect variable income payments, the investment performance of the Portfolios selected. As provided in your contract, we may adjust the age used to determine income payments, and we may deduct premium taxes from your payments. Optional Payment Plans The following Optional Payment Plans are available under the contract: Optional Payment Plan 1 -- Life Income with Period Certain. This option guarantees periodic monthly payments for the lifetime of the payee with a minimum number of years of payments. If the payee lives longer than the minimum period, payments will continue for his or her life. The minimum period can be 10, 15, or 20 years. The payee selects the designated period. If the payee dies during the minimum period, we will discount the amount of the remaining guaranteed payments at the same rate used in calculating income payments. We will pay the discounted amount in a lump sum to the payee's estate, unless otherwise provided. Optional Payment Plan 2 -- Income for a Fixed Period. This option provides for periodic payments to be made for a fixed period not longer than 30 years. Payments can be made annually, semi-annually, quarterly, or monthly. If the payee dies, we will discount the amount of the remaining guaranteed payments to the date of the payee's death at the same rate used in calculating income payments. We will pay the discounted amount in a lump sum to the payee's estate, unless otherwise provided. Optional Payment Plan 3 -- Income of a Definite Amount. This option provides periodic payments of a definite amount to be paid. Payments can be made annually, semi-annually, quarterly, or monthly. The amount paid each year must be at least $120 for each $1,000 of proceeds. Payments will continue until the proceeds are exhausted. The last payment will equal the amount of any unpaid proceeds. If the payee dies, we will pay the amount of the remaining proceeds with earned interest in a lump sum to the payee's estate, unless otherwise provided. Optional Payment Plan 4 -- Interest Income. This option provides for periodic payments of interest earned from the proceeds left with us. Payments can be made annually, semi-annually, quarterly, or monthly. If the payee dies, we will pay the amount of remaining proceeds and any earned but unpaid interest in a lump sum to the payee's estate, unless otherwise provided. This plan is not available to contracts issued as Qualified Contracts. Optional Payment Plan 5 -- Joint Life and Survivor Income. This option provides for monthly payments to be made to two payees for a guaranteed minimum of 10 years. Each payee must be at least 35 years old when payments begin. Payments will continue as long as either payee is living. If both payees die before the end of the minimum period, we will discount the amount of the remaining payments for the 10 year period at the same rate used in calculating income payments. We will pay the discounted amount in a lump sum to the survivor's estate, unless otherwise provided. If the payee is not a natural person, our consent must be obtained before selecting an Optional Payment Plan. Fixed income payments, if selected, will begin on the date we receive due proof of the Annuitant's death or on the Maturity Date. Variable income payments will begin within seven days after the date payments would begin under the corresponding fixed option. Payments under Optional Payment Plan 4 (Interest Income) will begin at the end of the first interest period after the date proceeds are otherwise payable. All payments under Optional Payment Plan 2 (Income for a Fixed Period), Optional Payment Plan 3 (Income of a Definite Amount) and Optional Payment Plan 4 (Interest Income) may be redeemed by the payee upon written request to our Home Office. Payments made under Optional Payment Plan 1 (Life Income with Period Certain) and Optional Payment Plan 5 (Joint Life and Survivor Income) are not redeemable. If a request for redemption is received for Optional Payment Plans 2, 3 or 4 in good order, the payment will generally be made within seven days, however, some states require us to reserve the right to defer payments from the Guarantee Account for up to six months from the date we receive the request for payment. If your contract is a Qualified Contract, Optional Payment Plans 2, 3, and 4 may not satisfy minimum required distribution rules. Consult a tax adviser before electing one of these options. 32 Variable Income Payments The monthly amount of your first variable income payment will equal your Surrender Value on the Valuation Day immediately preceding your Maturity Date, multiplied by the monthly payment rate for the payment plan you choose (at an assumed interest rate of 3%), divided by 1,000. We determine subsequent payments based on Annuity Units. On the Maturity Date, we determine the number of Annuity Units for each Subaccount. This number will not change unless you make a transfer. On the Maturity Date, the number of Annuity Units for a Subaccount is the portion of the first payment from that Subaccount divided by the Annuity Unit value for that Subaccount on the day the first payment is due. Each subsequent variable income payment will equal the sum of payments for each Subaccount. The payment for a Subaccount is the number of Annuity Units for that Subaccount multiplied by the Annuity Unit value for that Subaccount seven days before the monthly anniversary of the Maturity Date. Following the Maturity Date, the Annuity Unit value of each Subaccount for any Valuation Period will equal the Annuity Unit value for the preceding Valuation Period multiplied by the product of (a) and (b), where: (a) is the net investment factor for the Valuation Period for which we are calculating the Annuity Unit value; and (b) is an assumed interest rate factor equal to .99991902 raised to a power equal to the number of days in the Valuation Period. The assumed interest rate factor in (b) above is the daily equivalent of dividing by one plus the assumed investment interest rate of 3%. We may offer a plan that has a different assumed investment interest rate. If we do, the assumed interest rate factor we use in (b) above would change. Transfers After the Maturity Date If we are making variable income payments, the payee may change the Subaccounts from which we are making the payments once each calendar year. The transfer will be effective as of the end of the Valuation Period during which we receive the written transfer request at our Home Office. We reserve the right to refuse to execute any transfer if any of the Subaccounts that would be affected by the transfer is unable to purchase or redeem shares of the Portfolio in which the Subaccount invests or if the transfer would adversely affect Annuity Unit values. If the number of Annuity Units remaining in a Subaccount after a transfer is less than 1, we will transfer the remaining balance in addition to the amount requested for the transfer. We will not allow a transfer into any Subaccount unless the number of Annuity Units of that Subaccount after the transfer is at least 1. The amount of the income payment as of the date of the transfer will not be affected by the transfer. We will not charge for transfers made after the Maturity Date. We do not permit transfers between the Subaccounts and the Guarantee Account after the Maturity Date. We also do not permit transfers in the Guarantee Account from one interest rate guarantee period to another interest rate guarantee period. TAX MATTERS Introduction This part of the prospectus discusses the Federal income tax treatment of the contract. The Federal income tax treatment of the contract is complex and sometimes uncertain. The Federal income tax rules may vary with your particular circumstances. This discussion does not address all of the Federal income tax rules that may affect you and your contract. This discussion also does not address other Federal tax consequences, or state or local tax consequences, associated with a contract. As a result, you should always consult a tax adviser about the application of tax rules to your individual situation. Taxation of Non-Qualified Contracts This part of the discussion describes some of the Federal income tax rules applicable to Non-Qualified Contracts. A Non-Qualified Contract is a contract not issued in connection with a qualified retirement plan receiving special tax treatment under the Code, such as an individual retirement annuity or a Section 401(k) plan. Tax deferral on earnings. The Federal income tax law does generally not tax any increase in an owner's Contract Value until there is a distribution from the contract. However, certain requirements must be satisfied in order for this general rule to apply, including: . an individual must own the contract (or the tax law must treat the contract as owned by an individual); . the investments of the Separate Account must be "adequately diversified" in accordance with Internal Revenue Service ("IRS") regulations; . the owner's right to choose particular investments for a contract must be limited; and . the contract's Maturity Date must not occur near the end of the Annuitant's life expectancy. 33 Contracts not owned by an individual -- no tax deferral and loss of interest deduction. As a general rule, the Code does not treat a contract that is owned by an entity (rather than an individual) as an annuity contract for Federal income tax purposes. The entity owning the contract pays tax each year on the annual increase in Contract Value. Contracts issued to a corporation or a trust are examples of contracts where the owner is currently taxed on the contract's earnings. There are several exceptions to this rule. For example, the Code treats a contract as owned by an individual if the nominal owner is a trust or other entity that holds the contract as an agent for an individual. However, this exception does not apply in the case of any employer that owns a contract to provide non-qualified deferred compensation for its employees. In the case of a contract issued after June 8, 1997 to a taxpayer that is not an individual, or a contract held for the benefit of an entity, the entity will lose its deduction for a portion of its otherwise deductible interest expenses. This disallowance does not apply if the nonnatural owner pays tax on the annual increase in the Contract Value. Entities that are considering purchasing the contract, or entities that will benefit from someone else's ownership of a contract, should consult a tax adviser. Investments in the Separate Account must be diversified. For a contract to be treated as an annuity contract for Federal income tax purposes, the investments of the Separate Account must be "adequately diversified." The IRS has issued regulations that prescribe standards for determining whether the investments of the Separate Account, including the assets of each Portfolio in which the Separate Account invests, are adequately diversified. If the Separate Account fails to comply with these diversification standards, the owner could be required to pay tax for the year of such failure and each subsequent year on the untaxed income accumulated in the contract. Although we do not control the investments of all of the Funds, we expect that the Funds will comply with the IRS regulations so that the Separate Account will be considered "adequately diversified." Restrictions on the extent to which an owner can direct the investment of assets. In some circumstances, owners of variable contracts who possess excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax on income produced by those assets. Although published guidance in this area does not address certain aspects of the contract, we believe that the owner of a contract should not be treated as the owner of the Separate Account assets. We reserve the right to modify the contract to bring it into conformity with applicable standards should such modifications be necessary to prevent an owner of the contract from being treated as the owner of the underlying Separate Account assets. However, there is no assurance such efforts would be successful. Age at which income payments must begin. Federal income tax rules do not expressly identify a particular age by which income payments must begin. However, those rules do require that an annuity contract provide for amortization, through income payments of the contract's premiums paid and earnings. If income payments begin or are scheduled to begin at a date that the IRS determines does not satisfy these rules, interest and gains under the contract could be taxable each year as they accrue. No guarantees regarding tax treatment. We make no guarantees regarding the tax treatment of any contract or of any transaction involving a contract. However, the remainder of this discussion assumes that your contract will be treated as an annuity contract for Federal income tax purposes and that the tax law will not impose tax on any increase in your Contract Value until there is a distribution from your contract. Partial and total surrenders. A partial surrender occurs when you receive less than the total amount of the contract's Surrender Value. In the case of a partial surrender, you will pay tax on the amount you receive to the extent your Contract Value before the partial surrender exceeds your "investment in the contract." (This term is explained below.) This income (and all other income from your contract) is ordinary income. The Code imposes a higher rate of tax on ordinary income than it does on capital gains. A surrender occurs when you receive the total amount of the contract's Surrender Value. In the case of a surrender, you will pay tax on the amount you receive to the extent it exceeds your "investment in the contract." Your "investment in the contract" generally equals the total of your premium payments under the contract, reduced by any amounts you previously received from the contract that you did not include in your income. In the case of Systematic Withdrawals, the amount of each Systematic Withdrawal should be considered a distribution and taxed in the same manner as a partial surrender from the contract. Assignments and pledges. The Code treats any assignment or pledge of (or agreement to assign or pledge) any portion of your Contract Value as a partial surrender of such amount or portion. 34 Gifting a contract. If you transfer ownership of your contract -- without receiving full and adequate consideration -- to a person other than your spouse (or to your former spouse incident to divorce), you will pay tax on your Contract Value to the extent it exceeds your "investment in the contract." In such a case, the new owner's "investment in the contract" will be increased to reflect the amount included in your income. Taxation of income payments. The Code imposes tax on a portion of each income payment (at ordinary income tax rates) and treats a portion as a nontaxable return of your "investment in the contract." We will notify you annually of the taxable amount of your income payment. Pursuant to the Code, you will pay tax on the full amount of your income payments once you have recovered the total amount of the "investment in the contract." If income payments cease because of the death of the Annuitant(s) and before the total amount of the investment in the contract has been recovered, the unrecovered amount generally will be deductible. If proceeds are left with us (Optional Payment Plan 4), they are taxed in the same manner as a surrender. The owner must pay tax currently on the interest credited on these proceeds. This treatment could also apply to Optional Payment Plan 3 depending on the relationship of the amount of the periodic payments to the period over which they are paid. Taxation of death benefit. We may distribute amounts from your contract because of the death of an owner, a joint owner, or an Annuitant. The tax treatment of these amounts depends on whether the owner, joint owner, or Annuitant (or Joint Annuitant, if applicable) dies before or after the Maturity Date. Taxation of death benefit if paid before the Maturity Date: . The death benefit is taxed in the same manner as an income annuity payment if received under an Optional Payment Plan. . If not received under an Optional Payment Plan, the death benefit is taxed in the same manner as a surrender or a partial surrender, depending on the manner in which the death benefit is paid. Taxation of death benefit if paid after the Maturity Date: . The death benefit is includible in income to the extent it exceeds the unrecovered "investment in the contract." Penalty taxes payable on surrenders, partial surrenders or income payments. The Code may impose a penalty tax equal to 10% of the amount of any payment from your contract that is included in your gross income. The Code does not impose the 10% penalty tax if one of several exceptions applies. These exceptions include partial and total surrenders or income payments that: . you receive on or after you reach age 59 1/2; . you receive because you became disabled (as defined in the tax law); . are received on or after the death of an owner; or . you receive as a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer. It is uncertain whether Systematic Withdrawals will qualify for this last exception. If they do, any modification of the Systematic Withdrawals, including additional partial surrenders apart from the Systematic Withdrawals, could result in certain adverse tax consequences. In addition, transfers among the Subaccounts may result in payments not qualifying for this exception. Special rules if you own more than one contract. In certain circumstances, you may have to combine some or all of the Non-Qualified Contracts you own in order to determine the amount of an income payment, a total surrender, or a partial surrender that you must include in income. For example: . if you purchase a contract described by this prospectus and also purchase at approximately the same time an immediate annuity, the IRS may treat the two contracts as one contract; . if you purchase two or more deferred annuity contracts from the same life insurance company (or its affiliates) during any calendar year, the Code treats all such contracts as one contract for certain purposes. The effects of such aggregation are not clear. However, it could affect: . the amount of a surrender, a partial surrender or an income payment that you must include in income; and . the amount that might be subject to a penalty tax. Section 1035 Exchanges Under Section 1035 of the Code, the exchange of one annuity contract for another annuity contract generally is not taxed (unless cash is distributed). To qualify as a nontaxable exchange however, certain conditions must be satisfied, e.g., the obligee(s) under the new annuity contract must be the same obligee(s) as under the original contract. Upon the death of a non-spousal joint owner, the contract provides the surviving joint owner with the option of using the proceeds of this contract to purchase a separate annuity contract 35 with terms and values that are substantially similar to those of this contract. Exercise of this option will not qualify as a tax-free exchange under Section 1035. Qualified Retirement Plans We also designed the contracts for use in connection with certain types of retirement plans that receive favorable treatment under the Code. Contracts issued to or in connection with retirement plans that receive special tax treatment are called a "Qualified Contracts." We may not offer all of the types of Qualified Contracts described herein in the future. Prospective purchasers should contact our Home Office for information on the availability of Qualified Contracts at any given time. The Federal income tax rules applicable to qualified retirement plans are complex and varied. As a result, this prospectus makes no attempt to provide more than general information about use of the contract with the various types of qualified retirement plans and individual retirement arrangements. Persons intending to use the contract in connection with a qualified retirement plan should obtain advice from a tax adviser. The contract includes attributes such as tax deferral on accumulated earnings. Qualified retirement plans provide their own tax deferral benefit. The purchase of this contract as an investment of a qualified retirement plan does not provide additional tax deferral benefits beyond those provided in the qualified retirement plan. If you are purchasing this contract as a Qualified Contract, you should consider purchasing this contract for its death benefits, income benefits and other non-tax benefits. Please consult a tax adviser for information specific to your circumstances in order to determine whether this contract is an appropriate investment for you. Types of Qualified Contracts. The types of Qualified Contracts currently being offered include: . Traditional Individual Retirement Annuities (IRAs) permit individuals to make annual contributions of up to the lesser of a specified dollar amount for the year or the amount of compensation includible in the individual's gross income for the year. Certain employers may establish Simplified Employee Pensions (SEPs), which have higher contribution limits, on behalf of their employees. The Internal Revenue Service has not reviewed the contract for qualification as an IRA, and has not addressed in a ruling of general applicability whether death benefits such as those in the contract comport with IRA qualification requirements. . Roth IRAs permit certain eligible individuals to make non-deductible contributions to a Roth IRA. Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% IRS penalty tax may apply to distributions made: (1) before age 591/2 (subject to certain exceptions); or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA. A 10% IRS penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning with the year in which the conversion was made. . Corporate pension and profit-sharing plans under Section 401(a) of the Code allow corporate employers to establish various types of retirement plans for employees, and self-employed individuals to establish qualified plans ("H.R. 10 or Keough plans") for themselves and their employees. . 403(b) Plans allow employees of certain tax-exempt organizations and public schools to exclude from their gross income the premium payments made, within certain limits, to a contract that will provide an annuity for the employee's retirement. Distributions of: (1) salary reduction contributions made in years beginning after December 31, 1988; (2) earnings on those contributions; and (3) earnings on amounts held as of the last year beginning before January 1, 1989, are not allowed prior to age 591/2, severance from employment, death or disability. Salary reduction contributions (but not earnings) may also be distributed upon hardship, but would generally be subject to a 10% penalty tax. Terms of qualified retirement plans and Qualified Contracts. The terms of a qualified retirement plan may affect your rights under a Qualified Contract. When issued in connection with a qualified retirement plan, we will amend a contract as generally necessary to conform to the requirements of the type of plan. However, the rights of any person to any benefits under qualified retirement plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the contract. In addition, we are not bound by the terms and conditions of qualified retirement plans to the extent such terms and conditions contradict the contract, unless we consent. Employer qualified plans. Qualified plans sponsored by an employer or employee organization are governed by the provisions of the Code and the Employee Retirement Income Security Act, as amended ("ERISA"). ERISA is administered primarily by the U.S. Department of Labor. The Code and ERISA include requirements that various features be contained in an employer qualified plan with respect to: participation; vesting; funding; nondiscrimination; limits on contributions and 36 benefits; distributions; penalties; duties of fiduciaries; prohibited transactions; withholding; reporting and disclosure. In the case of certain qualified plans, if a participant is married at the time benefits become payable, unless the participant elects otherwise with written consent of the spouse, the benefits must be paid in the form of a qualified joint and survivor annuity. A qualified joint and survivor annuity is an annuity payable for the life of the participant with a survivor annuity for the life of the spouse in an amount that is not less than one-half of the amount payable to the participant during his or her lifetime. In addition, a married participant's beneficiary must be the spouse, unless the spouse consents in writing to the designation of a different beneficiary. If this contract is purchased as an investment of a qualified plan, the owner will be either an employee benefit trust or the plan sponsor. Plan participants and beneficiaries will have no ownership rights in the contract. Only the owner, acting through its authorized representative(s) may exercise contract rights. Participants and beneficiaries must look to the plan fiduciaries for satisfaction of their rights to benefits under the terms of the qualified plan. Where a contract is purchased by an employer-qualified plan, we assume no responsibility regarding whether the contract's terms and benefits are consistent with the requirements of the Code and ERISA. It is the responsibility of the employer, plan trustee, plan administrator and/or other plan fiduciaries to satisfy the requirements of the Code and ERISA applicable to the qualified plan. This prospectus does not provide detailed tax or ERISA information. Various tax disadvantages, including penalties, may result from actions that conflict with requirements of the Code or ERISA, and the regulations pertaining to those laws. Federal tax laws and ERISA are continually under review by Congress. Any changes in the laws or in the regulations pertaining to the laws may affect the tax treatment of amounts contributed to employer qualified plans and the fiduciary actions required by ERISA. IRAs and Roth IRAs. The Code permits individuals to make annual contributions to IRAs of up to the lesser of a specified dollar amount for the year or the amount of compensation includible in the individual's gross income for the year. The contributions may be deductible in whole or in part, depending on the individual's income. The Code also permits certain eligible individuals to make non-deductible contributions to a Roth IRA in cash or as a rollover or transfer from another Roth IRA or other IRA. A rollover from or conversion of an IRA to a Roth IRA is generally subject to tax and other special rules apply. You should consult a tax adviser before combining any converted amounts with any other Roth IRA contributions, including any other conversion amounts from other tax years. The Internal Revenue Service has not reviewed the contract for qualification as an IRA, and has not addressed in a ruling of general applicability whether a death benefit provision such as the provision in this contract comports with IRA qualification requirements. You will be the owner of a contract issued as an IRA or Roth IRA, and will be responsible for exercising your rights as owner in accordance with applicable tax rules, including limitations for contributions and distributions. The death benefit and Qualified Contracts. Pursuant to IRS regulations, IRAs and 403(b) plans may not invest in life insurance contracts. We do not believe that these regulations prohibit the death benefit, including that provided by any death benefit rider option, from being provided under the contracts when we issue the contracts as Traditional IRAs, Roth IRAs, SEPs or 403(b) plans. However, the law is unclear and it is possible that the presence of the death benefit under a contract issued as a Traditional IRA, Roth IRA or a SEP could disqualify a contract and result in increased taxes to the owner. It is also possible that the death benefit could be characterized as an incidental death benefit. If the death benefit were so characterized, this could result in currently taxable income to purchasers. In addition, there are limitations on the amount of incidental death benefits that may be provided under qualified retirement plans, such as in connection with a Section 403(b) plan. Even if the death benefit under the contract were characterized as an incidental death benefit, it is unlikely to violate those limits unless the purchaser also purchases a life insurance contract in connection with such plan. Treatment of Qualified Contracts compared with Non-Qualified Contracts. Although some of the Federal income tax rules are the same for both Qualified and Non-Qualified Contracts, many of the rules are different. For example: . the Code generally does not impose tax on the earnings under either Qualified or Non-Qualified Contracts until the earnings are distributed; . the Code does not limit the amount of premium payments and the time at which premium payments can be made under Non-Qualified Contracts. However, the Code does limit both the amount and frequency of premium payments made to Qualified Contracts; . the Code does not allow a deduction for premium payments made for Non-Qualified Contracts, but sometimes allows a deduction or exclusion from income for premium payments made to a Qualified Contract; . Under most qualified retirement plans, the owner must begin receiving payments from the contract in certain minimum amounts by a certain date, generally April 1 37 of the calendar year following the calendar year in which the owner attains age 701/2 for Traditional IRAs and SEPs and April 1 of the calendar year following the later of the calendar year in which the employee (except for a 5 percent owner) retires or attains age 70 1/2 for other Qualified Contracts. Roth IRAs do not require any distributions during the owner's lifetime. The death benefit under your contract and certain other benefits provided by the living benefit riders may increase the amount of the minimum required distribution that must be taken from your contract. The Federal income tax rules applicable to qualified retirement plans and Qualified Contracts vary with the type of plan and contract. For example, Federal tax rules limit the amount of premium payments that can be made, and the tax deduction or exclusion that may be allowed for the premium payments. These limits vary depending on the type of qualified retirement plan and the circumstances of the plan participant, e.g., the participant's compensation. Amounts received under Qualified Contracts. Federal income tax rules generally include distributions from a Qualified Contract in your income as ordinary income. Premium payments that are deductible or excludible from income do not create "investment in the contract." Thus, under many Qualified Contracts there will be no "investment in the contract" and you include the total amount you receive in your income. There are exceptions. For example, you do not include amounts received from a Roth IRA if certain conditions are satisfied. In addition, failure to comply with the minimum distribution rules applicable to certain qualified retirement plans will result in the imposition of an excise tax. This excise tax generally equals 50% of the amount by which a minimum required distribution exceeds the actual distribution from the qualified retirement plan. Federal penalty taxes payable on distributions. The Code may impose a penalty tax equal to 10% of the amount of any payment from your Qualified Contract that is includible in your income. The Code does not impose the penalty tax if one of several exceptions apply. The exceptions vary depending on the type of Qualified Contract you purchase. For example, in the case of an IRA, exceptions provide that the penalty tax does not apply to a partial surrender, surrender, or income payment: . received on or after the owner reaches age 59 1/2; . received on or after the owner's death or because of the owner's disability (as defined in the tax law); . received as a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the taxpayer; or . received as reimbursement for certain amounts paid for medical care. These exceptions, as well as certain others not described here, generally apply to taxable distributions from other qualified retirement plans. However, the specific requirements of the exception may vary. Moving money from one Qualified Contract or qualified retirement plan to another. Rollovers and transfers: In many circumstances you may move money between Qualified Contracts and qualified retirement plans by means of a rollover or a transfer. Recent legislation has expanded these rollover options, including permitting the rollover of your after-tax contributions. Special rules apply to such rollovers and transfers. If you do not follow the applicable rules, you may suffer adverse Federal income tax consequences, including paying taxes which you might not otherwise have had to pay. You should always consult a qualified tax adviser before you move or attempt to move assets between any Qualified Contract or plan and another Qualified Contract or plan. Direct rollovers: The direct rollover rules apply to certain payments (called "eligible rollover distributions") from Section 401(a) plans, Section 403(b) plans, H.R. 10 plans, and Qualified Contracts used in connection with these types of plans. The direct rollover rules do not apply to distributions from IRAs. The direct rollover rules require Federal income tax equal to 20% of the taxable portion of an eligible rollover distribution to be withheld from the amount of the distribution, unless the owner elects to have the amount directly transferred to certain Qualified Contracts or plans. Certain restrictions apply to the ability to rollover any after-tax amounts. Prior to receiving an eligible rollover distribution from us, we will provide you with a notice explaining these requirements and the procedure for avoiding 20% withholding by electing a direct rollover. Federal Income Tax Withholding We will withhold and remit to the IRS a part of the taxable portion of each distribution made under a contract unless the distributee notifies us at or before the time of the distribution that he or she elects not to have any amounts withheld. In certain circumstances, Federal income tax rules may require us to withhold tax. At the time you request a partial or total surrender, or income payment, we will send you forms that explain the withholding requirements. 38 State Income Tax Withholding If required by the law of your state, we will also withhold state income tax from the taxable portion of each distribution made under the contract, unless you make an available election to avoid withholding. If permitted under state law, we will honor your request for voluntary state withholding. Tax Status of the Company Under existing Federal income tax laws, we do not pay tax on investment income and realized capital gains of the Separate Account. We do not anticipate that we will incur any Federal income tax liability on the income and gains earned by the Separate Account. We, therefore, do not impose a charge for Federal income taxes. If Federal income tax law changes and we must pay tax on some or all of the income and gains earned by the Separate Account, we may impose a charge against the Separate Account to pay the taxes. Federal Estate Taxes While no attempt is being made to discuss the Federal estate tax implications of the Contract, a purchaser should keep in mind that the value of an annuity contract owned by a decedent and payable to a beneficiary by virtue of surviving the decedent is included in the decedent's gross estate. Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated beneficiary or the actuarial value of the payments to be received by the beneficiary. Consult an estate planning adviser for more information. Generation-Skipping Transfer Tax Under certain circumstances, the Code may impose a "generation skipping transfer tax" when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the owner. Regulations issued under the Code may require us to deduct the tax from your contract, or from any applicable payment, and pay it directly to the IRS. Annuity Purchases by Residents of Puerto Rico The IRS recently announced that income received by residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States Federal income tax. Annuity Purchases by Nonresident Aliens and Foreign Corporations The discussion above provides general information regarding U.S. Federal income tax consequences to annuity purchasers that are U.S. citizens or residents. Purchasers that are not U.S. citizens or residents will generally be subject to U.S. Federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. In addition, purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser's country of citizenship or residence. Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract purchase. Foreign Tax Credits We may benefit from any foreign tax credits attributable to taxes paid by certain funds to foreign jurisdictions to the extent permitted under Federal tax law. Changes in the Law This discussion is based on the Code, IRS regulations, and interpretations existing on the date of this prospectus. Congress, the IRS, and the courts may modify these authorities, however, sometimes retroactively. REQUESTING PAYMENTS To request a payment, you must provide us with notice in a form satisfactory to us. We will ordinarily pay any partial surrender or total surrender proceeds from the Separate Account within seven days after receipt at our Home Office of a request in good order. We also will ordinarily make payment of lump sum death benefit proceeds from the Separate Account within seven days from the receipt of due proof of death and all required forms. We will determine payment amount as of the end of the Valuation Period during which our Home Office receives the payment request or due proof of death and all required forms. In most cases, when we pay death benefit proceeds in a lump sum, we will pay these proceeds either: (1) to your designated beneficiary directly in the form of a check; or (2) by establishing an interest bearing draft account, called the "Secure Access Account," for the designated beneficiary, in the amount of the death benefit. 39 When establishing the Secure Access Account we will send the designated beneficiary a draftbook within seven days after we receive all the required documents, and the designated beneficiary will have immediate access to the account simply by writing a draft for all or any part of the amount of the death benefit payment. The Secure Access Account is part of our General Account. It is not a bank account and it is not insured by the FDIC or any other government agency. As part of our General Account, it is subject to the claims of our creditors. We receive a benefit from all amounts left in the Secure Access Account. If we do not receive instructions from the designated beneficiary with regard to the form of death benefit payment, we will automatically establish the Secure Access Account for proceeds of $10,000 or more, unless state law requires a positive election. The Secure Access Account is not available in all states. We will delay making a payment from the Subaccount or applying Subaccount value to a payment plan if: (1) the disposal or valuation of the Subaccount is not reasonably practicable because: . the SEC declares that an emergency exists (due to the emergency the disposal or valuation of the Separate Account's assets is not reasonably practicable); . the New York Stock Exchange is closed for other than a regular holiday or weekend; . trading is restricted by the SEC; or (2) the SEC, by order, permits postponement of payment to protect our owners. State law requires that we reserve the right to defer payments from the Guarantee Account for a partial surrender or total surrender for up to six months from the date we receive your payment request. We also may defer making any payments attributable to a check or draft that has not cleared until we are satisfied that the check or draft has been paid by the bank on which it is drawn. If mandated under applicable law, we may be required to reject a premium payment and/or block an owner's account and thereby refuse any requests for transfers, partial withdrawals, surrenders, or death benefits until instructions are received from the appropriate regulators. We also may be required to provide additional information about you or your account to government regulators. SALE OF THE CONTRACTS We have entered into an underwriting agreement with Capital Brokerage Corporation (doing business in Indiana as Genworth Financial Brokerage Corporation) (collectively, "Capital Brokerage Corporation") for the distribution and sale of the contracts. Pursuant to this agreement, Capital Brokerage Corporation serves as principal underwriter for the contracts, offering them on a continuous basis. Capital Brokerage Corporation is located at 6620 West Broad Street, Building 2, Richmond, Virginia 23230. Capital Brokerage Corporation will use its best efforts to sell the contracts, but is not required to sell any specific number or dollar amount of contracts. Capital Brokerage Corporation was organized as a corporation under the laws of the state of Washington in 1981 and is an affiliate of ours. Capital Brokerage Corporation is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as well as with the securities commissions in the states in which it operates, and is a member of the Financial Industry Regulatory Authority ("FINRA") (formerly, NASD, Inc.). Capital Brokerage Corporation offers the contracts through its registered representatives who are registered with FINRA and with the states in which they do business. More information about Capital Brokerage Corporation and the registered representatives is available at http://www.finra.org or by calling (800) 289-9999. You also can obtain an investor brochure from FINRA describing its Public Disclosure Program. Registered representatives with Capital Brokerage Corporation are also licensed as insurance agents in the states in which they do business and are appointed with the Company. Capital Brokerage Corporation also enters into selling agreements with an affiliated broker-dealer and unaffiliated broker-dealers to sell the contracts. The registered representatives of these selling firms are registered with FINRA and with the states in which they do business, are licensed as insurance agents in the states in which they do business and are appointed with us. We pay compensation to Capital Brokerage Corporation for promotion and sales of the contracts by its registered representatives as well as by affiliated and unaffiliated selling firms. This compensation consists of sales commissions and other cash and non-cash compensation. The maximum commission we may pay for the sale of a contract is 7.5% of a contract owner's aggregate premium payments. The maximum commission consists of three parts -- commissions paid to internal and external wholesalers of Capital Brokerage Corporation ("wholesalers" are individuals 40 employed by the Company and registered with Capital Brokerage Corporation that promote the offer and sale of the contracts), commissions paid to the affiliated and unaffiliated brokerage firm ("selling firms") that employs the registered representative who sold your contract, and an amount paid to the selling firm for marketing allowance and other payments related to the sale of the contract. Wholesalers with Capital Brokerage Corporation each may receive a maximum commission of 1.4% of premium payments. After commission is paid to the wholesalers of Capital Brokerage Corporation, a commission is then paid to the selling firm. A maximum commission of 5.1% of premium payments is paid to the selling firm. The exact amount of commission paid to the registered representative who sold you your contract is determined by the brokerage firm that employs the representative. All selling firms receive commissions as described above based on the sale of, and receipt of premium payments, on the contract. Unaffiliated selling firms receive additional compensation, including marketing allowances and other payments. The maximum marketing allowance paid to a selling firm on the sale of a contract is 1.0% of premium payments. At times, Capital Brokerage Corporation may make other cash and non-cash payments to selling firms, as well as receive payments from selling firms, for expenses relating to the recruitment and training of personnel, periodic sales meetings, the production of promotional sales literature and similar expenses. These expenses may also relate to the synchronization of technology between the Company, Capital Brokerage Corporation and the selling firm in order to coordinate data for the sale and maintenance of the contract. In addition, registered representatives may be eligible for non-cash compensation programs offered by Capital Brokerage Corporation or an affiliated company, such as conferences, trips, prizes and awards. The amount of other cash and non-cash compensation paid by Capital Brokerage Corporation or its affiliated companies ranges significantly among the selling firms. Likewise, the amount received by Capital Brokerage Corporation from the selling firms ranges significantly. The commissions listed above are maximum commissions paid, and reflect situations where we pay a higher commission for a short period of time for a special promotion. No specific charge is assessed directly to contract owners or the Separate Account to cover commissions and other incentives or payments described above. We do, however, intend to recoup commissions and other sales expenses and incentives we pay through fees and charges deducted under the contract and any other corporate revenue. All commissions, special marketing allowances and other payments made or received by Capital Brokerage Corporation to or from selling firms come from or are allocated to the general assets of Capital Brokerage Corporation or one of its affiliated companies. Therefore, regardless of the amount paid or received by Capital Brokerage Corporation or one of its affiliated companies, the amount of expenses you pay under the contract do not vary because of such payments to or from such selling firms. Even though your contract costs are not determined based on amounts paid to or received from Capital Brokerage Corporation or the selling firm, the prospect of receiving, or the receipt of, additional compensation as described above may create an incentive for selling firms and/or their registered representative to sell you this product versus another product with respect with which a selling firm does not receive additional compensation, or a lower level of additional compensation. You may wish to take such compensation arrangements into account when considering and evaluating any recommendation relating to the contracts. During 2007, 2006 and 2005, $140.1 million, $110.5 million and $62.0 million, respectively, was paid to Capital Brokerage Corporation for the sale of contracts in the Separate Account and any new premium received. In 2007, 2006 and 2005, no underwriting commissions were paid to Capital Brokerage Corporation. Although neither we nor Capital Brokerage Corporation anticipate discontinuing the offering of the contracts, we do reserve the right to discontinue offering the contracts at any time. ADDITIONAL INFORMATION Owner Questions The obligations to owners under the contracts are ours. Please direct your questions and concerns to us at our Home Office. Return Privilege Within 10 days after you receive the contract (or such longer period as may be required by applicable law), you may cancel it for any reason by delivering or mailing it postage prepaid to: Genworth Life and Annuity Insurance Company Annuity New Business 6610 West Broad Street Richmond, Virginia 23230 If you cancel your contract, it will be void. Unless state law requires otherwise, the amount of the refund you receive will equal your Contract Value as of the Valuation Day our Home 41 Office receives the returned contract plus any adjustments required by applicable law or regulation as of the date we receive the contract. If state law requires that we return your premium payments, the amount of the refund will equal the premium payments made less any partial surrenders you have previously taken. In certain states you may have more than 10 days to return the contract for a refund. State Regulation As a life insurance company organized and operated under the laws of the Commonwealth of Virginia, we are subject to provisions governing life insurers and to regulation by the Virginia Commissioner of Insurance. Our books and accounts are subject to review and examination by the State Corporation Commission of the Commonwealth of Virginia at all times. That Commission conducts a full examination of our operations at least every five years. Evidence of Death, Age, Gender, Marital Status or Survival We may require proof of the age, gender, marital status or survival of any person or persons before acting on any applicable contract provision. Records and Reports As presently required by the 1940 Act and applicable regulations, we are responsible for maintaining all records and accounts relating to the Separate Account. At least once each year, we will send you a report showing information about your contract for the period covered by the report. The report will show the total Contract Value and a breakdown of the assets in each Subaccount and, if applicable, the Guarantee Account. The report also will show premium payments and charges made during the statement period. We also will send you an annual and a semi-annual report for each Portfolio to which you have allocated assets to a corresponding Subaccount, as required by the 1940 Act. In addition, you will receive a written confirmation when you make premium payments, transfers, or take partial surrenders. Other Information We have filed a Registration Statement with the SEC, under the Securities Act of 1933 as amended, for the contracts being offered by this prospectus. This prospectus does not contain all the information in the Registration Statement, its amendments and exhibits. Please refer to the Registration Statement for further information about the Separate Account, the Company, and the contracts offered. Statements in this prospectus about the content of contracts and other legal instruments are summaries. For the complete text of those contracts and instruments, please refer to those documents as filed with the SEC and available on the SEC's website at http://www.sec.gov. Legal Proceedings We face a significant risk of litigation and regulatory investigations and actions in the ordinary course of operating our businesses, including the risk of class action lawsuits. Our pending legal and regulatory actions include proceedings specific to us and others generally applicable to business practices in the industries in which we operate. In our insurance operations, we are, have been, or may become subject to class actions and individual suits alleging, among other things, issues relating to sales or underwriting practices, payment of contingent or other sales commissions, claims payments and procedures, product design, product disclosure, administration, additional premium charges for premiums paid on a periodic basis, denial or delay of benefits, charging excessive or impermissible fees on products, recommending unsuitable products to customers and breaching fiduciary or other duties to customers. Plaintiffs in class action and other lawsuits against us may seek very large or indeterminate amounts, including punitive and treble damages, which may remain unknown for substantial periods of time. In our investment-related operations, we are subject to litigation involving commercial disputes with counterparties. We are also subject to litigation arising out of our general business activities such as our contractual and employment relationships. We are also subject to various regulatory inquiries, such as information requests, subpoenas, books and record examinations and market conduct and financial examinations, from state and federal regulators and other authorities. A substantial legal liability or a significant regulatory action against us could have an adverse effect on our business, financial condition and results of operations. Moreover, even if we ultimately prevail in the litigation, regulatory action or investigation, we could suffer significant reputational harm, which could have an adverse effect on our business, financial condition and results of operations. We cannot ensure that the current investigations and proceedings will not have a material adverse effect on our business, financial condition or results of operations. In addition, it is possible that related investigations and proceedings may be commenced in the future, and we could become subject to further investigations and have lawsuits filed against us. In addition, increased regulatory scrutiny and any resulting investigations or proceedings could result in new legal precedents and industry-wide regulations or practices that could 42 adversely affect our business, financial condition and results of operations. The Company shall, and may through insurance coverage, indemnify any directors or officers who are a party to any proceeding by reason of the fact that he or she was or is a director or officer of the Company against any liability incurred by him or her in connection with such proceeding unless he or she engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law. Such indemnification covers all judgments , settlements, penalties, fines and reasonable expenses incurred with respect to such proceeding. If the person involved is not a director or officer of the Company, the board of directors may cause the Company to indemnify, or contract to indemnify, to the same extent allowed for its directors and officers, such person who was, is or may become a party to any proceeding, by reason of the fact that he or she is or was an employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the depositor pursuant to the foregoing provisions, or otherwise, the depositor has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the depositor of expenses incurred or paid by a director, officer or controlling person of the depositor in successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the depositor will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Capital Brokerage Corporation is not in any pending or threatened lawsuits that are reasonably likely to have a material adverse impact on us or on the Separate Account. Although it is not anticipated that these developments will have an adverse impact on us, the Separate Account, or on the ability of Capital Brokerage Corporation to perform under its principal underwriting agreement, there can be no assurance at this time. 43 APPENDIX A Examples of the Available Death Benefits Basic Death Benefit The purpose of this example is to show how the Basic Death Benefit works based on purely hypothetical values and is not intended to depict investment performance of the contract. Example: Assuming an owner: (1) purchases a contract for $100,000; (2) makes no additional premium payments and takes no partial surrenders; (3) is not subject to premium taxes; and (4) the Annuitant's age is 70 on the Contract Date then:
Annuitant's End of Contract Basic Age Year Value Death Benefit ----------------------------------------- 71 1 $103,000 $103,000 72 2 110,000 110,000 73 3 80,000 110,000 74 4 120,000 120,000 75 5 130,000 130,000 76 6 150,000 150,000 77 7 160,000 160,000 78 8 130,000 160,000 -----------------------------------------
Partial surrenders will reduce the Basic Death Benefit by the proportion that the partial surrender (including any applicable premium tax assessed) reduces your Contract Value. For example:
Premium Contract Basic Date Payment Value Death Benefit -------------------------------------- 3/31/08 $25,000 $25,000 $25,000 3/31/16 50,000 50,000 3/31/17 35,000 50,000 --------------------------------------
If a partial surrender of $17,500 is taken on March 31, 2017, the Basic Death Benefit immediately after the partial surrender will be $25,000 (50% of $50,000) since the Contract Value ($35,000) is reduced by 50% by the partial surrender ($17,500). This is true only if the Basic Death Benefit immediately prior to the partial surrender (as calculated above) is not the Contract Value on the date we receive due proof of death of the Annuitant's death. It also assumes that the Annuitant is younger than age 80 at the time of death, and that no premium tax applies to the partial surrender. This example is based on purely hypothetical values and is not intended to depict investment performance of the contract. A-1 APPENDIX B Condensed Financial Information The value of an Accumulation Unit is determined on the basis of changes in the per share value of the Portfolios and the assessment of Separate Account charges. The Accumulation Unit values and the number of Accumulation Units outstanding for each Subaccount for the periods shown are as follows:
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year --------------------------------------------------------------------------------------------------------------------------- The Alger American Fund --------------------------------------------------------------------------------------------------------------------------- Alger American Growth Portfolio -- Class O Shares $ 8.97 $10.59 308,373 2007 8.67 8.97 347,835 2006 7.87 8.67 521,326 2005 7.58 7.87 617,972 2004 5.70 7.58 817,059 2003 8.64 5.70 936,757 2002 9.96 8.64 1,392,133 2001 11.87 9.96 1,392,041 2000 10.00 11.87 231,761 1999 --------------------------------------------------------------------------------------------------------------------------- Alger American SmallCap Growth Portfolio (formerly, Alger American 10.79 12.45 158,233 2007 Small Capitalization Portfolio) -- Class O Shares 9.14 10.79 228,272 2006 7.94 9.14 288,311 2005 6.93 7.94 356,920 2004 4.94 6.93 430,824 2003 6.81 4.94 368,144 2002 9.82 6.81 528,445 2001 13.71 9.82 537,277 2000 10.00 13.71 97,659 1999 --------------------------------------------------------------------------------------------------------------------------- AllianceBernstein Variable Products Series Fund Inc. --------------------------------------------------------------------------------------------------------------------------- AllianceBernstein Growth and Income Portfolio -- Class B 13.55 13.98 373,509 2007 11.77 13.55 411,644 2006 11.44 11.77 453,906 2005 10.45 11.44 516,553 2004 8.03 10.45 564,379 2003 10.5 8.03 471,081 2002 10.66 10.50 340,210 2001 10.00 10.66 -- 2000 --------------------------------------------------------------------------------------------------------------------------- Federated Insurance Series --------------------------------------------------------------------------------------------------------------------------- Federated American Leaders Fund II -- Primary Shares 11.32 10.07 81,807 2007 9.85 11.32 100,706 2006 9.53 9.85 155,192 2005 8.82 9.53 190,248 2004 7.02 8.82 219,699 2003 8.94 7.02 218,794 2002 9.49 8.94 397,695 2001 9.42 9.49 243,347 2000 10.00 9.42 85,187 1999 --------------------------------------------------------------------------------------------------------------------------- Federated Capital Income Fund II 8.68 8.89 29,026 2007 7.63 8.68 31,938 2006 7.30 7.63 68,196 2005 6.74 7.30 102,417 2004 5.68 6.74 68,122 2003 7.59 5.68 100,284 2002 8.94 7.59 129,702 2001 9.98 8.94 107,356 2000 10.00 9.98 36,259 1999 ---------------------------------------------------------------------------------------------------------------------------
B-1
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year ------------------------------------------------------------------------------------------------------------- Federated High Income Bond Fund II -- Primary Shares $12.33 $12.55 54,039 2007 11.31 12.33 81,420 2006 11.20 11.31 119,946 2005 10.30 11.20 142,391 2004 8.57 10.30 399,719 2003 8.59 8.57 141,307 2002 8.61 8.59 197,752 2001 9.61 8.61 124,964 2000 10.00 9.61 55,873 1999 ------------------------------------------------------------------------------------------------------------- Fidelity(R) Variable Insurance Products Fund ("VIP") ------------------------------------------------------------------------------------------------------------- VIP Asset Manager/SM/ Portfolio -- Initial Class 11.03 12.63 68,570 2007 10.45 11.03 87,579 2006 10.20 10.45 97,691 2005 9.83 10.20 120,489 2004 8.47 9.83 126,958 2003 9.43 8.47 150,830 2002 9.99 9.43 220,652 2001 10.57 9.99 212,496 2000 10.00 10.57 44,890 1999 ------------------------------------------------------------------------------------------------------------- VIP Contrafund(R) Portfolio -- Initial Class 14.53 16.81 625,538 2007 13.21 14.53 857,833 2006 11.48 13.21 1,042,451 2005 10.10 11.48 1,074,204 2004 7.99 10.10 1,083,766 2003 8.96 7.99 985,297 2002 10.38 8.96 1,229,421 2001 11.29 10.38 1,214,744 2000 10.00 11.29 336,615 1999 ------------------------------------------------------------------------------------------------------------- VIP Equity-Income Portfolio -- Initial Class 13.18 13.66 403,582 2007 11.15 13.18 500,997 2006 10.70 11.15 565,704 2005 9.75 10.70 708,367 2004 7.60 9.75 757,822 2003 9.30 7.60 835,392 2002 9.95 9.30 917,825 2001 9.32 9.95 557,714 2000 10.00 9.32 242,696 1999 ------------------------------------------------------------------------------------------------------------- VIP Growth Portfolio -- Initial Class 8.77 11.97 86,202 2007 8.34 8.77 349,554 2006 8.01 8.34 453,898 2005 7.87 8.01 559,315 2004 6.02 7.87 687,007 2003 8.76 6.02 697,045 2002 10.81 8.76 1,048,860 2001 12.34 10.81 1,122,676 2000 10.00 12.34 333,735 1999 ------------------------------------------------------------------------------------------------------------- VIP Growth & Income Portfolio -- Initial Class 10.49 10.95 263,199 2007 9.42 10.49 247,108 2006 8.89 9.42 312,942 2005 8.54 8.89 449,962 2004 7.01 8.54 515,611 2003 8.54 7.01 458,068 2002 9.52 8.54 607,616 2001 10.03 9.52 513,093 2000 10.00 10.03 150,665 1999 -------------------------------------------------------------------------------------------------------------
B-2
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year ------------------------------------------------------------------------------------------------------------ VIP Growth Opportunities Portfolio -- Initial Class $ 7.83 $ 9.49 59,450 2007 7.55 7.83 91,458 2006 7.04 7.55 194,184 2005 6.68 7.04 165,420 2004 5.22 6.68 190,777 2003 6.79 5.22 204,162 2002 8.07 6.79 268,664 2001 9.89 8.07 236,293 2000 10.00 9.89 92,620 1999 ------------------------------------------------------------------------------------------------------------ VIP Mid Cap Portfolio -- Service Class 2 19.47 22.10 270,223 2007 17.60 19.47 309,614 2006 15.16 17.60 317,534 2005 12.36 15.16 288,283 2004 9.08 12.36 345,059 2003 10.26 9.08 184,618 2002 10.81 10.26 82,604 2001 10.00 10.81 -- 2000 ------------------------------------------------------------------------------------------------------------ VIP Overseas Portfolio -- Initial Class 13.60 15.70 117,659 2007 11.71 13.60 149,487 2006 9.99 11.71 183,086 2005 8.94 9.99 183,458 2004 6.33 8.94 150,134 2003 8.07 6.33 87,301 2002 10.41 8.07 179,907 2001 13.08 10.41 167,898 2000 10.00 13.08 28,190 1999 ------------------------------------------------------------------------------------------------------------ Franklin Templeton Variable Insurance Products Trust ------------------------------------------------------------------------------------------------------------ Templeton Foreign Securities Fund -- Class I Shares 13.31 15.17 53,945 2007 11.12 13.31 53,882 2006 10.23 11.12 43,428 2005 10.00 10.23 -- 2004 ------------------------------------------------------------------------------------------------------------ GE Investments Funds, Inc. ------------------------------------------------------------------------------------------------------------ Income Fund -- Class 1 Shares 13.04 13.45 237,031 2007 12.70 13.04 276,325 2006 12.64 12.70 297,231 2005 12.43 12.64 361,084 2004 12.19 12.43 529,614 2003 11.27 12.19 814,908 2002 10.66 11.27 257,747 2001 9.78 10.66 165,406 2000 10.00 9.78 67,078 1999 ------------------------------------------------------------------------------------------------------------ International Equity Fund -- Class 1 Shares 13.42 16.23 80,393 2007 10.93 13.42 105,177 2006 9.40 10.93 121,557 2005 8.25 9.40 118,767 2004 6.08 8.25 136,373 2003 8.11 6.08 103,984 2002 10.41 8.11 121,898 2001 12.12 10.41 96,984 2000 10.00 12.12 15,200 1999 ------------------------------------------------------------------------------------------------------------
B-3
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year ------------------------------------------------------------------------------------------------------ Mid-Cap Equity Fund -- Class 1 Shares $15.20 $16.84 295,319 2007 14.25 15.20 359,597 2006 12.96 14.25 476,280 2005 11.35 12.96 562,643 2004 8.68 11.35 582,397 2003 10.22 8.68 524,430 2002 10.36 10.22 532,256 2001 9.72 10.36 330,352 2000 10.00 9.72 147,340 1999 ------------------------------------------------------------------------------------------------------ Money Market Fund 11.21 11.57 1,167,862 2007 10.89 11.21 1,064,182 2006 10.76 10.89 1,183,264 2005 10.83 10.76 1,150,922 2004 10.92 10.83 2,170,916 2003 10.94 10.92 3,714,284 2002 10.69 10.94 4,564,152 2001 10.23 10.69 3,819,606 2000 10.00 10.23 1,214,273 1999 ------------------------------------------------------------------------------------------------------ Premier Growth Equity Fund -- Class 1 Shares 10.87 11.26 300,691 2007 10.12 10.87 407,142 2006 10.16 10.12 468,133 2005 9.64 10.16 573,363 2004 7.60 9.64 727,014 2003 9.78 7.60 482,041 2002 10.94 9.78 419,925 2001 11.73 10.94 294,786 2000 10.00 11.73 96,385 1999 ------------------------------------------------------------------------------------------------------ Real Estate Securities Fund -- Class 1 Shares 32.24 27.01 77,263 2007 24.63 32.24 94,542 2006 22.39 24.63 108,845 2005 17.19 22.39 134,621 2004 12.71 17.19 160,984 2003 13.10 12.71 103,220 2002 11.90 13.10 93,831 2001 9.12 11.90 70,076 2000 10.00 9.12 10,487 1999 ------------------------------------------------------------------------------------------------------ S&P 500(R) Index Fund 10.18 10.53 1,116,935 2007 8.96 10.18 1,212,829 2006 8.72 8.96 1,361,455 2005 8.02 8.72 1,751,256 2004 6.35 8.02 2,033,863 2003 8.32 6.35 1,905,073 2002 9.63 8.32 2,084,126 2001 10.81 9.63 1,753,549 2000 10.00 10.81 543,614 1999 ------------------------------------------------------------------------------------------------------ Small-Cap Equity Fund -- Class 1 Shares 16.99 17.12 158,526 2007 15.24 16.99 196,622 2006 14.14 15.24 227,994 2005 12.48 14.14 241,293 2004 10.22 12.48 205,028 2003 12.05 10.22 192,153 2002 10.00 12.05 108,992 2001 ------------------------------------------------------------------------------------------------------
B-4
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year -------------------------------------------------------------------------------------------------------- Total Return Fund -- Class 1 Shares $13.31 $14.63 782,063 2007 11.89 13.31 898,252 2006 11.66 11.89 981,004 2005 10.95 11.66 847,637 2004 9.25 10.95 499,190 2003 10.36 9.25 298,082 2002 10.85 10.36 372,552 2001 10.50 10.85 283,441 2000 10.00 10.50 78,079 1999 -------------------------------------------------------------------------------------------------------- U.S. Equity Fund -- Class 1 Shares 10.99 11.68 173,764 2007 9.62 10.99 202,160 2006 9.53 9.62 247,392 2005 8.96 9.53 291,877 2004 7.38 8.96 342,666 2003 9.29 7.38 425,255 2002 10.32 9.29 313,046 2001 10.55 10.32 254,245 2000 10.00 10.55 100,906 1999 -------------------------------------------------------------------------------------------------------- Goldman Sachs Variable Insurance Trust -------------------------------------------------------------------------------------------------------- Goldman Sachs Growth and Income Fund 12.28 12.26 129,849 2007 10.18 12.28 177,101 2006 9.95 10.18 196,415 2005 8.51 9.95 210,870 2004 6.95 8.51 134,861 2003 7.97 6.95 142,990 2002 8.94 7.97 173,565 2001 9.53 8.94 86,719 2000 10.00 9.53 15,109 1999 -------------------------------------------------------------------------------------------------------- Goldman Sachs Mid Cap Value Fund 23.55 23.91 251,199 2007 20.60 23.55 302,139 2006 18.55 20.60 386,726 2005 14.98 18.55 396,090 2004 11.85 14.98 393,875 2003 12.64 11.85 411,894 2002 11.46 12.64 436,048 2001 8.89 11.46 237,882 2000 10.00 8.89 42,809 1999 -------------------------------------------------------------------------------------------------------- Janus Aspen Series -------------------------------------------------------------------------------------------------------- Balanced Portfolio -- Institutional Shares 13.04 14.18 453,770 2007 11.96 13.04 496,080 2006 11.26 11.96 554,323 2005 10.55 11.26 694,462 2004 9.40 10.55 856,023 2003 10.21 9.40 1,087,532 2002 10.88 10.21 1,591,602 2001 11.31 10.88 1,437,590 2000 10.00 11.31 347,91 1999 -------------------------------------------------------------------------------------------------------- Flexible Bond Portfolio -- Institutional Shares 13.16 13.86 56,736 2007 12.83 13.16 67,346 2006 12.78 12.83 75,559 2005 12.50 12.78 105,913 2004 11.94 12.50 138,865 2003 10.98 11.94 265,752 2002 10.36 10.98 200,610 2001 9.90 10.36 191,005 2000 10.00 9.90 89,213 1999 --------------------------------------------------------------------------------------------------------
B-5
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year --------------------------------------------------------------------------------------------------------------- Forty Portfolio -- Institutional Shares $11.22 $15.12 260,545 2007 10.43 11.22 318,385 2006 9.39 10.43 424,306 2005 8.07 9.39 538,884 2004 6.80 8.07 633,901 2003 8.20 6.80 839,663 2002 10.64 8.20 1,245,067 2001 13.22 10.64 1,575,700 2000 10.00 13.22 428,091 1999 --------------------------------------------------------------------------------------------------------------- Global Life Sciences Portfolio -- Service Shares 10.46 12.53 14,802 2007 10.00 10.46 24,737 2006 9.04 10.00 37,181 2005 8.05 9.04 34,597 2004 6.48 8.05 58,090 2003 9.35 6.48 64,305 2002 11.41 9.35 154,798 2001 10.00 11.41 97,759 2000 --------------------------------------------------------------------------------------------------------------- Global Technology Portfolio -- Service Shares 4.05 4.85 69,780 2007 3.82 4.05 100,444 2006 3.48 3.82 88,885 2005 3.51 3.48 128,287 2004 2.44 3.51 266,513 2003 4.19 2.44 291,205 2002 6.80 4.19 275,684 2001 10.00 6.80 222,133 2000 --------------------------------------------------------------------------------------------------------------- International Growth Portfolio -- Institutional Shares 22.71 28.67 211,470 2007 15.70 22.71 244,914 2006 12.06 15.70 272,663 2005 10.30 12.06 339,786 2004 7.76 10.30 403,108 2003 10.60 7.76 565,435 2002 14.03 10.60 784,857 2001 16.96 14.03 885,554 2000 10.00 16.96 102,381 1999 --------------------------------------------------------------------------------------------------------------- Large Cap Growth Portfolio -- Institutional Shares 8.63 9.77 372,118 2007 7.87 8.63 482,111 2006 7.67 7.87 584,753 2005 7.46 7.67 727,653 2004 5.75 7.46 944,140 2003 7.96 5.75 1,174,963 2002 10.74 7.96 1,819,775 2001 12.77 10.74 2,092,272 2000 10.00 12.77 500,424 1999 --------------------------------------------------------------------------------------------------------------- Mid Cap Growth Portfolio -- Institutional Shares 10.00 12.01 255,202 2007 8.94 10.00 339,933 2006 8.09 8.94 460,102 2005 6.81 8.09 600,545 2004 5.12 6.81 742,675 2003 7.22 5.12 867,195 2002 12.12 7.22 1,217,251 2001 18.07 12.12 1,417,961 2000 10.00 18.07 513,109 1999 ---------------------------------------------------------------------------------------------------------------
B-6
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year ----------------------------------------------------------------------------------------------------------------------------- Worldwide Growth Portfolio -- Institutional Shares $10.60 $11.43 325,604 2007 9.11 10.60 396,800 2006 8.74 9.11 490,481 2005 8.48 8.74 610,217 2004 6.95 8.48 784,140 2003 9.48 6.95 1,045,267 2002 12.42 9.48 1,487,500 2001 14.97 12.42 1,684,062 2000 10.00 14.97 406,948 1999 ----------------------------------------------------------------------------------------------------------------------------- Legg Mason Partners Variable Equity Trust ----------------------------------------------------------------------------------------------------------------------------- Legg Mason Partners Variable Capital and Income Portfolio -- Class I 12.53 10.00 63,480 2007 11.31 12.53 75,424 2006 11.12 11.31 60,728 2005 10.39 11.12 68,621 2004 9.11 10.39 61,672 2003 9.94 9.11 65,454 2002 10.19 9.94 49,020 2001 9.59 10.19 33,720 2000 10.00 9.59 16,292 1999 ----------------------------------------------------------------------------------------------------------------------------- Legg Mason Partners Variable Investors Portfolio -- Class 1 13.92 14.23 81,069 2007 11.96 13.92 113,129 2006 11.41 11.96 148,053 2005 10.51 11.41 183,361 2004 8.07 10.51 213,912 2003 10.65 8.07 219,643 2002 11.30 10.65 239,512 2001 9.96 11.30 100,680 2000 10.00 9.96 2,865 1999 ----------------------------------------------------------------------------------------------------------------------------- Legg Mason Partners Variable Income Trust ----------------------------------------------------------------------------------------------------------------------------- Legg Mason Partners Variable Strategic Bond Portfolio -- Class I 14.23 14.28 111,111 2007 13.77 14.23 131,375 2006 13.66 13.77 154,005 2005 13.01 13.66 164,387 2004 11.68 13.01 175,980 2003 10.90 11.68 208,102 2002 10.36 10.90 118,221 2001 9.81 10.36 108,469 2000 10.00 9.81 15,296 1999 ----------------------------------------------------------------------------------------------------------------------------- MFS(R) Variable Insurance Trust ----------------------------------------------------------------------------------------------------------------------------- MFS(R) New Discovery Series -- Service Class Shares 10.47 10.53 60,347 2007 9.42 10.47 80,467 2006 9.12 9.42 73,656 2005 8.72 9.12 167,991 2004 6.64 8.72 284,319 2003 9.90 6.64 61,553 2002 10.00 9.90 67,674 2001 ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Funds ----------------------------------------------------------------------------------------------------------------------------- Oppenheimer Balanced Fund/VA 14.15 16.37 5,229 2007 12.94 14.15 139,451 2006 12.66 12.94 150,629 2005 11.68 12.66 151,282 2004 9.50 11.68 125,354 2003 10.77 9.50 128,522 2002 10.71 10.77 190,985 2001 10.23 10.71 116,683 2000 10.00 10.23 10,366 1999 -----------------------------------------------------------------------------------------------------------------------------
B-7
Number of Accumulation Accumulation Accumulation Unit Values at Unit Values at Units at Subaccounts Beginning of Period End of Period End of Period Year -------------------------------------------------------------------------------------------------------------- Oppenheimer Capital Appreciation Fund/VA $11.56 $12.40 92,838 2007 10.88 11.56 264,647 2006 10.52 10.88 309,092 2005 10.00 10.52 482,642 2004 7.76 10.00 537,049 2003 10.78 7.76 575,596 2002 12.54 10.78 735,051 2001 12.77 12.54 634,278 2000 10.00 12.77 81,428 1999 -------------------------------------------------------------------------------------------------------------- Oppenheimer Core Bond Fund/VA 13.20 13.56 98,764 2007 12.74 13.20 81,858 2006 12.62 12.74 104,082 2005 12.16 12.62 138,047 2004 11.57 12.16 174,744 2003 10.78 11.57 244,092 2002 10.16 10.78 290,069 2001 9.73 10.16 167,312 2000 10.00 9.73 41,749 1999 -------------------------------------------------------------------------------------------------------------- Oppenheimer High Income Fund/VA 12.64 12.99 188,968 2007 11.74 12.64 88,481 2006 11.66 11.74 106,278 2005 10.88 11.66 151,071 2004 8.92 10.88 465,002 2003 9.28 8.92 194,552 2002 9.25 9.28 178,281 2001 9.77 9.25 141,624 2000 10.00 9.77 35,858 1999 -------------------------------------------------------------------------------------------------------------- Oppenheimer MidCap Fund/VA 11.01 11.34 160,922 2007 10.87 11.01 117,206 2006 9.83 10.87 142,556 2005 8.34 9.83 197,116 2004 6.75 8.34 226,559 2003 9.50 6.75 246,315 2002 14.05 9.50 337,019 2001 16.08 14.05 459,900 2000 10.00 16.08 24,750 1999 -------------------------------------------------------------------------------------------------------------- PIMCO Variable Insurance Trust -------------------------------------------------------------------------------------------------------------- Total Return Portfolio -- Administrative Class Shares 12.83 13.73 949,936 2007 12.56 12.83 1,005,438 2006 12.46 12.56 895,378 2005 12.07 12.46 966,981 2004 11.68 12.07 983,366 2003 10.88 11.68 807,952 2002 10.20 10.88 397,634 2001 10.00 10.20 -- 2000 --------------------------------------------------------------------------------------------------------------
B-8 APPENDIX C The Guarantee Account Amounts in the Guarantee Account are held in, and are part of, our General Account. The General Account consists of our assets other than those allocated to this and other Separate Accounts. Subject to statutory authority, we have sole discretion over the investment of assets of the General Account. The assets of the General Account are chargeable with liabilities arising out of any business we may conduct. Due to certain exemptive and exclusionary provisions, of the Federal securities laws, we have not registered interests in the Guarantee Account under the Securities Act of 1933 (the "1933 Act"), and we have not registered either the Guarantee Account or our General Account as an investment company under the 1940 Act. Accordingly, neither the interests in the Guarantee Account nor our General Account are generally subject to regulation under the 1933 Act and the 1940 Act. Disclosures relating to the interests in the Guarantee Account and the General Account, may however, be subject to certain generally applicable provisions of the Federal securities laws relating to the accuracy of statements made in a registration statement. The Guarantee Account may not be available in all states or markets. You may allocate some or all of your premium payments and transfer some or all of your assets to the Guarantee Account. We credit the portion of the assets allocated to the Guarantee Account with interest (as described below). Assets in the Guarantee Account are subject to some, but not all, of the charges we assess in connection with your contract. See the "Charges and Other Deductions" provision of this prospectus. Each time you allocate premium payments or transfer assets to the Guarantee Account, we establish an interest rate guarantee period. For each interest rate guarantee period, we guarantee an interest rate for a specified period of time. At the end of an interest rate guarantee period, a new interest rate will become effective, and a new interest rate guarantee period will commence for the remaining portion of that particular allocation. We determine interest rates at our sole discretion. The determination made will be influenced by, but not necessarily correspond to, interest rates available on fixed income investments which we may acquire with the amounts we receive as premium payments or transfers of assets under the contracts. You will have no direct or indirect interest in these investments. We also will consider other factors in determining interest rates for a guarantee period including, but not limited to, regulatory and tax requirements, sales commissions, and administrative expenses borne by us, general economic trends, and competitive factors. Amounts you allocate to the Guarantee Account will not share in the investment performance of our General Account. We cannot predict or guarantee the level of interest rates in future guarantee periods. However, the interest rates for any interest rate guarantee period will be at least the guaranteed interest rate shown in your contract. We will notify you in writing at least 5 days before the expiration date of any interest rate guarantee period about the then currently available interest rate guarantee periods and the guaranteed interest rates applicable to such interest rate guarantee periods. A new one year guarantee period will commence automatically unless we receive written notice prior to the end of the 30-day period following the expiration of the interest rate guarantee period ("30-day window") of your election of a different interest rate guarantee period from among those being offered by us at that time, or instructions to transfer all or a portion of the remaining amount to one or more Subaccounts subject to certain restrictions. See the "Transfers" provision of this prospectus. During the 30-day window, the allocation will accrue interest at the new guarantee period's interest rate. To the extent permitted by law, we reserve the right at any time to offer interest rate guarantee periods that differ from those available when we issued the contract, and to credit a higher rate of interest on premium payments allocated to the Guarantee Account participating in a Dollar Cost Averaging program than would otherwise be credited if not participating in a Dollar Cost Averaging program. See the "Dollar Cost Averaging Program" provision. Such a program may not be available to all contracts. We also reserve the right, at any time, to stop accepting premium payments or transfers of assets to a particular interest rate guarantee period. Since the specific interest rate guarantee periods available may change periodically, please contact our Home Office to determine the interest rate guarantee periods currently being offered. C-1 TABLE OF CONTENTS Statement of Additional Information
Page The Company.................................................................... B-3 The Separate Account........................................................... B-3 Additional Information About the Guarantee Account............................. B-3 The Contracts.................................................................. B-4 Transfer of Annuity Units................................................... B-4 Net Investment Factor....................................................... B-4 Termination of Participation Agreements........................................ B-4 Calculation of Performance Data................................................ B-5 Subaccount Investing in the GE Investments Funds, Inc. -- Money Market Fund. B-5 Other Subaccounts........................................................... B-6 Other Performance Data...................................................... B-7 Tax Matters.................................................................... B-7 Taxation of Genworth Life and Annuity Insurance Company..................... B-7 IRS Required Distributions.................................................. B-7 General Provisions............................................................. B-8 Using the Contracts as Collateral........................................... B-8 The Beneficiary............................................................. B-8 Non-Participating........................................................... B-8 Misstatement of Age or Gender............................................... B-8 Incontestability............................................................ B-8 Statement of Values......................................................... B-8 Trust as Owner or Beneficiary............................................... B-8 Written Notice.............................................................. B-8 Legal Developments Regarding Employment-Related Benefit Plans.................. B-8 Regulation of Genworth Life and Annuity Insurance Company...................... B-9 Experts........................................................................ B-9 Financial Statements........................................................... B-9
Genworth Life and Annuity Insurance Company 6610 West Broad Street Richmond, Virginia 23230 A Statement of Additional Information containing more detailed information about the contract and the Separate Account is available free by writing us at the address below or by calling (800) 352-9910. Genworth Life and Annuity Insurance Company Annuity New Business 6610 West Broad Street Richmond, Virginia 23230 Please mail a copy of the Statement of Additional Information for the Separate Account, Form P1151 1/99 (RetireReady/SM /Freedom/Commonwealth Freedom) to: Name ___________________________________________________________________________ Address ________________________________________________________________________ Street ________________________________________________________________________________ City State Zip Signature of Requestor _________________________________________________________