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EXHIBIT C
Item 16(a)(4)
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AMENDATORY ENDORSEMENT
The Contract to which this Amendatory Endorsement is attached and made a part of
is hereby modified with the addition of the provisions specified below. Nothing
contained herein shall be construed as superseding any provisions of the
Contract to which this Amendatory Endorsement is attached, unless
specifically indicated to the contrary.
COVER PAGE
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The bold-lettered paragraph, beginning with "ANNUITY PAYMENTS, DEATH
BENEFITS, AND OTHER CONTRACT VALUES...," is modified as follows:
ANNUITY PAYMENTS, DEATH BENEFITS, SURRENDER VALUES OR OTHER CONTRACT
VALUES PROVIDED UNDER THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, OR WHEN SUBJECT TO A MARKET VALUE
ADJUSTMENT, ARE VARIABLE, MAY INCREASE OR DECREASE IN ACCORDANCE WITH
FLUCTUATIONS IN THE NET INVESTMENT FACTOR OR APPLICATION OF A MARKET VALUE
ADJUSTMENT, AS APPLICABLE, AND ARE NOT GUARANTEED AS TO FIXED DOLLAR
AMOUNT, UNLESS OTHERWISE SPECIFIED.
DEFINITIONS
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The definition of "Contract Value" is modified as follows:
Contract Value - The Contract Value is the sum of the value of all
Variable Account Accumulation Units attributable to the Contract, plus any
amount held in the Fixed Account, plus any amount held in the contract
under a Guaranteed Term Option (GTO) which may be subject to a Market
Value Adjustment.
The following definitions are added to the Contract:
Constant Maturity Treasury Rates ("CMT Rates") or CMT Rate(s) - The
formula (the "MVA Formula") for deriving the MVA Factor is based on
Constant Maturity Treasury ("CMT") Rates which are published by the
Federal Reserve Board on a regular basis. The Company utilizes CMT Rates
in its MVA Formula because they represent a readily available and
consistently reliable interest rate benchmark in financial markets. CMT
Rates for 1, 2, 3, 5, 7 and 10 years are published by the Federal
Reserve Board on a regular basis.
Guaranteed Term - A Guaranteed Term is the three, five, seven or ten year
period corresponding respectively to a three, five, seven or ten year
Guaranteed Term Option (GTO). Amounts allocated to a GTO shall be credited
with a Specified Interest Rate over the corresponding Guaranteed Term, so
long as such amounts are not distributed from the GTO prior to the
Maturity Date.
Because every Guaranteed Term will end on the final day of a calendar
quarter, the Guaranteed Term may last for up to 3 months beyond the 3, 5,
7, or 10 year anniversary of the allocation to the GTO.
Guaranteed Term Option ("GTO") - A GTO is a funding option offered under
this Contract which provides a guaranteed interest rate (the Specified
Interest Rate), paid over certain maturity durations (the Guaranteed
Term), so long as certain conditions are met. Three, five, seven and ten
year GTOs are offered. If amounts allocated to a GTO are not distributed
from the GTO for the duration of its Guaranteed Term, the value of the
amounts allocated under the GTO will reflect the amount of the allocation
plus interest accrued at the Specified Interest Rate, and will be
available for distribution with no Market Value Adjustment during the
Maturity Period. Prior to the Maturity Period for the GTO selected,
amounts allocated to such GTO will be subject, upon distribution, to
fluctuations in value in accordance with a Market Value Adjustment. GTOs
are only available prior to annuitization.
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Investment Period - The period of time beginning with a declaration by the
Company of new GTO interest rates (the different Specified Interest Rates for
each of the GTOs) and ending with the subsequent declaration of new Specified
Interest Rates by the Company. The interest rates in effect during any
particular Investment Period will be guaranteed for GTO allocations (made
during the Investment Period) for the duration of the Guaranteed Term
associated with the GTO.
Market Value Adjustment ("MVA") - A Market Value Adjustment is the upward or
downward adjustment in value, of amounts allocated to a GTO which prior to the
Maturity Period for the GTO are: 1) distributed pursuant to a surrender; 2)
reallocated to another investment option available under this Contract; or 3)
distributed pursuant to the death of the Owner or Annuitant. A Market Value
Adjustment generally reflects the relationship between the prevailing interest
rates at the time of investment, prevailing interest rates at the time of
distribution, and the amount of time remaining in the Guaranteed Term of the
GTO selected. Generally, if the Specified Interest Rate is lower than
prevailing interest rates, application of the Market Value Adjustment will
result in a downward adjustment of amounts allocated to a GTO. If the Specified
Interest Rate is higher than prevailing interest rates, application of the
Market Value Adjustment will result in an upward adjustment of amounts
allocated to a GTO. The Market Value Adjustment is applied only when amounts
allocated to a GTO are distributed from the GTO prior to a Maturity Period.
MVA Factor - The MVA Factor is the value multiplied by the Specified Value, or
that portion of the Specified Value being distributed from a GTO in order to
effect a Market Value Adjustment. The MVA Factor will either be less than 1 (in
which case the amount distributed will be decreased) or greater than 1 (in
which case the amount distributed will be increased). If the MVA Factor is
exactly 1, the amount distributed will neither be increased or decreased. The
MVA Factor is derived from the MVA Formula.
MVA Formula - The MVA Formula is utilized when a distribution is made from a
GTO during the Guaranteed Term which is subject to a Market Value Adjustment.
The MVA Formula is a calculation expressing the relationship between three
factors: (1) the CMT Rate for a period equivalent to the Guaranteed Term at the
time of deposit in the GTO; (2) the CMT Rate at the time of distribution for
a period of time equivalent to the time remaining in the GTO; and (3) the
number of days remaining until the Maturity Date of the GTO. The result of the
MVA Formula is the MVA Factor.
Maturity Date - The Maturity Date is the date on which a particular GTO
matures. Such date will be the last day of a calendar quarter on which the
third, fifth, seventh and tenth anniversary of the date on which amounts are
allocated to a three, five, seven or ten year GTO, respectively.
Maturity Period - The Maturity Period is the period of time during which the
value of amounts allocated under a GTO, may be distributed without any Market
Value Adjustment. The Maturity Period shall begin on the day following the
Maturity Date and will end on the thirtieth day thereafter.
Multiple Maturity Account - The Multiple Maturity Account is a separate
account of the Company established for the purpose of facilitating accounting
and investment processes associated with the offering of GTO's under the
Contracts.
Specified Interest Rate - The Specified Interest Rate is the interest rate
guaranteed to be credited to amounts allocated under a selected GTO so long as
such allocations are not distributed from the GTO prior to the GTO Maturity
Period or Maturity Date for any reason. Each GTO in the same Investment Period
has its own Specified Interest Rate for the Guaranteed Term relating to the
selected GTO. The Company, however, reserves the right to change the Specified
Interest Rate at any time for prospective allocations to GTOs.
Specified Value - The Specified Value is the amount of a GTO allocation minus
withdrawals and transfers out of the GTO, plus interest accrued at the
Specified Interest Rate. The Specified Value is subject to a MVA at all times
other than during the Maturity Period.
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GENERAL PROVISIONS
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To the extent that any Charge section under the GENERAL PROVISIONS are
inconsistent with the provisions set forth below, such provisions are hereby
modified in accordance with the following:
Charges
The variable annuity Contracts under which GTOs are made available have
various fees and charges, some of which may be assessed against
allocations made to GTOs.
Contingent deferred sales charges, if applicable, will be assessed against
full or partial surrenders from the GTOs. If any such surrender occurs
prior to the Maturity Date for any particular GTO, the amount surrendered
will be subject to an MVA in addition to contingent deferred sales
charges.
Mortality and expense risk charges, administrative charges and Contract
Maintenance Charges which may be assessed under variable annuity Contracts
will not be assessed against any allocation to a GTO. Such charges apply
only to the variable account funding (underlying mutual fund)
options.
ACCUMULATION PROVISIONS
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To the extent that the "Surrender," "Withdrawals Without Charge," "Allocation
of Purchase Payments" and "Contract Value" sections under the ACCUMULATION
PROVISIONS are inconsistent with the provisions set forth below, such
provisions are hereby modified in accordance with the following:
"Surrender" Provisions
If a partial surrender is requested, unless the Owner has instructed
otherwise, the surrender will be made as follows: (a) from the Variable
Account Contract Value; (b) from the Fixed Account Contract Value; and (c)
from the GTOs under the Multiple Maturity Account. The amounts surrendered
from each of the foregoing shall be in the same proportion that the
Owner's Interest in the Variable Account, Fixed Account and GTOs bear
to the total Contract Value.
"Withdrawals Without Charge" Provisions
CDSC will not be assessed against the withdrawal of amounts transferred
among the Sub-Accounts or between or among the Variable Account, the Fixed
Account and the GTOs under the Mutliple Maturity Account.
"Allocation of Purchase Payments" Provisions
The Owner elects to have the Purchase Payments allocated among the Fixed
Account, the Sub-Accounts of the Variable Account and the GTOs under the
Multiple Maturity Account at the time of application. The allocation of
future purchase payments may be changed by the Owner by a written request
that is received and recorded by the Company.
"Contract Value" Provisions
The Contrct Value at any time will be the sum of: (1) the Variable Account
Contract Value, (2) the Fixed Account Contract Value, and (3) the value of
amounts allocated to GTOs under the Multiple Maturity Account which may be
subject to a Market Value Adjustment.
The following sections are added to the ACCUMULATION PROVISIONS:
The Multiple Maturity Account
The Multiple Maturity Account is a separate account of the Company
established for the purpose of facilitating accounting and investment
processes undertaken by the Company in offering GTOs under the Contract.
The Company will purchase and account for Multiple Maturity Account assets
in a manner which will support the crediting of Specified Interest Rates
under the various GTOs and the satisfaction of obligations incurred by
the Company in the form of GTOs.
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Guaranteed Term Options (GTOs)
At any particular time under this Contract, four GTOs will be available: a
three year GTO, a five year GTO, a seven year GTO and a ten year GTO.
Amounts allocated to a three year GTO will have a Guaranteed Term of three
years, a five year GTO will have a Guaranteed Term of five years, and so
on.
GTOs are not available as funding options if the Contract is annuitized.
If a variable annuity Contract is annuitized while a GTO is in effect, and
prior to the Maturity Date of the GTO, an MVA will apply to amounts
transferred to other investment options under the Contract which may
be used during annuitization.
For the duration of the Guaranteed Term of a GTO, the Company will credit
a Specified Interest Rate on amounts remaining allocated under the GTO. A
Market Value Adjustment will apply against all amounts which are
transferred or surrendered from allocations under a GTO prior to the
Maturity Period for the particular GTO. During the Maturity Period,
allocations under a GTO may be transferred, surrendered, or distributed
for any other reason without any Market Value Adjustment (CDSC may apply on
amounts surrendered). At all times other than during a Maturity Period, a
Market Value Adjustment will apply to amounts distributed from
allocations under a GTO.
At least 15 days and at most 30 days prior to the end of each calendar
quarter, variable annuity contract holders having GTOs with Maturity Dates
coinciding with the end of the calendar quarter will be notified of the
impending expiration of the GTO. Contract holders will then have the
option of directing the withdrawal or transfer of the GTO without
application of any MVA during the Maturity Period. Withdrawals or
transfers during the Maturity period, beginning the day after the Maturity
Date and ending thirty days after the Maturity Date, will not be
subject to an MVA.
If no such direction is received by the thirtieth day following the
Maturity Date, amounts in the GTO will be automatically transferred to the
Money Market sub-account of the variable annuity. For the period
commencing with the first day after the Maturity Date and ending on the
thirtieth day following the Maturity Date, the GTO will be credited with
the same Specified Interest Rate in effect before the Maturity Date.
The Company reserves the right to restrict transfers into and out of the
Multiple Maturity Account to 1 per calendar year at all times other than
during a Maturity Period.
MARKET VALUE ADJUSTMENT FORMULA
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The formula for determining the MVA Factor is:
---- ---- t
| [(1 + a)] |
| ----------------------- |
| [(1 + b + .0025)] |
---- ----
Where:
a = the CMT Rate for a period equivalent to the Guaranteed Term at the
time of deposit in the GTO;
b = the CMT rate at the time of distribution for a period of time
equivalent to the time remaining in the Guaranteed Term;
t = the number of days until the Maturity Date, divided by 365.25.
In the case of a above, CMT Rate utilized will be the rate published by the
Federal Reserve Board, immediately before the Investment Period during which
the allocation to the GTO was made.
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In the case of b above, the CMT Rate utilized will be the rate published
immediately preceding the withdrawal, transfer or other distribution giving
rise to the MVA.
The MVA Factor will be equal to 1 during the Investment Period. That is, for
the period of time following a GTO allocation during which the Specified
Interest Rate for GTOs of the same duration is not changed, the MVA Factor will
be equal to 1.
The MVA Formula shown above also accounts for some of the administrative and
processing expenses incurred when fixed-interest investments are liquidated.
This is represented in the addition of .0025 in the MVA Formula.
The result of the MVA Formula shown above is the MVA Factor. The MVA Factor
will either be greater, less than or equal to 1 and will be multipled by the
Specified Value or that portion of the Specified Value being withdrawn,
transferred or distributed for any other reason. If the result is greater than
1, a gain will be realized by the Contract Owner; if less than 1, a loss will
be realized. If the MVA Factor is exactly 1, no gain or loss will be realized.
If the Federal Reserve Board halts publication of CMT Rates, or if, for any
other reason, CMT Rates are not available to be relied upon, the Company will
use appropriate rates based on treasury bond yields.
APO-2865
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