NON-QUALIFIED ANNUITY

Funds going into a non-qualified annuity are not limited to earned income.

The income tax treatment of an annuity is special.

A. All funds deposited into a non-qualified annuity are after-tax funds.

B. No tax is due on the gain (interest) until funds are paid out (tax-deferred).

1. The gain is taxed as ordinary income at the tax rate at time of distribution.

2. Prior to annuitization, any gains will be dis tributed and taxed first. After annuitization, distributions are taxed pro-rata.

Special provisions for the Hermann Sons Life Annuity:

1. An annuity will confer membership.

2. Should the accumulation account balance become less than $500, the annuity will be closed and account balance paid.

3. The Hermann Sons Life surrender charge for a five-year annuity is determined by the age of the annuity:

4. Up to 3 withdrawals per contract year may be made without annuitizing the annuity.

5. No surrender charge is incurred on a withdrawal in years 2-5 of the annuity if the total withdrawal amount does not exceed 10% of the accumulation account balance as of the last anniversary.

6. No partial withdrawals may be made in the first contract year.

7. The withdrawal year is from anniversary to anniversary.

8. The withdrawal must be at least $100.

9. Loans will not be available.

10. Do not confuse the surrender charge with the IRS early withdrawal penalty. Note: It is possible that the surrender charge and the early withdrawal penalty can be applied to a withdrawal.

11. The surrender charge does not apply in the event of death. The death benefit is the Accumulation Value determined as of the date of death.

12. Interest paid on the accumulation account is set by the Hermann Sons Life Executive Commitee and generally reflects market conditions.

A. The current interest rate will be adjusted each year on the anniversary date of the annuity.

B. A guaranteed minimum interest rate is set by the Hermann Sons Life Executive Commitee and cannot be changed once the contract is issued.

C. Interest is compounded daily to arrive at the annualized rate stated.

The Hermann Sons Life Annuity has maximum and minimum deposit amounts.

A. The maximum total deposit amounts in the first year for the 5-year products is $300,000 and $50,000 in subsequent years per the contract. The maximum total deposit amounts in the first year for the 9-year products is $250,000 and $150,000 in subsequent years per the contract.

B. The minimum deposit to open a non-qualified annuity is $2,500.

Note: Maturity Date - The date an annuity settlement option must be selected. The Hermann Sons Life Maturity Date is annuitant age 70 if the annuitant was under age 50 when the annuity was orginally issued. If the annuitant was age 50 or over at the time the annuity was issued, the maturity date is 20 years from the issue date.

Current tax laws, which may or may not be applicable at future dates, provide that any distributions are includable in taxable income to the extent of earnings in the contract. Further, a 10% penalty tax may be applicable to premature distributions of an annuity to the extent the payment is includable in taxable income. Under current law, any distribution before age 59 1/2 will generally be subject to the penalty tax. The tax situation of an individual will be effected to the extent that taxes and penalties are payable. The individual should consult his or her tax adviser.