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NY SPINNAKER File Nos.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. [ ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No.
(Check appropriate box or boxes.)
FIRST SAFECO SEPARATE ACCOUNT S
(Exact Name of Registrant)
First SAFECO National Life Insurance Company of New York
(Name of Depositor)
6700 Old Collamer Road, East Syracuse, NY 13057
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (315) 463-2041
Name and Address of Agent for Service
WILLIAM E. CRAWFORD
15411 N.E. 51st Street
Redmond, Washington 98052
(206) 867-8257
Approximate date of Proposed Public Offering . . . . . . . . . . As Soon as
Practicable after Effective Date
It is proposed that this filing will become effective:
____ immediately upon filing pursuant to paragraph (b) of Rule 485
____ on _______, 1995 pursuant to paragraph (b) of Rule 485
____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
____ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
____ this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has declared that it has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
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FIRST SAFECO SEPARATE ACCOUNT S
REGISTRATION STATEMENT ON FORM N-4
CROSS REFERENCE SHEET
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Item No. Location
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PART A
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Item 1. Cover Page............................................... Cover Page
Item 2. Definitions.............................................. Definitions
Item 3. Synopsis or Highlights Expense Table;
Highlights
Item 4. Condensed Financial Information Schedule of
Accumulation Unit
Values & Accumulation
Units Outstanding;
Performance
Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies....................... First SAFECO; The
Separate Account;
SAFECO Resource
Series Trust;
Federated Insurance
Series;
Lexington Emerging
Markets Fund, Inc.;
Lexington Natural
Resources Trust;
Item 6. Deductions and Expenses.................................. Charges and
Deductions; Expense
Table
Item 7. General Description of Variable Annuity Contracts........ Cover Page;
Rights under the
Contract;
Purchasing a Contract
Item 8. Annuity Period Annuity and Death
Benefit Provisions
Item 9. Distribution Requirements Annuity and Death
Benefit Provisions
Item 10. Purchases and Contract Value Purchasing a Contract
Item 11. Redemptions Withdrawals and
Transfers
Item 12. Taxes Tax Status
Item 13. Legal Proceedings Legal Proceedings
Item 14. Table of Contents of the Statement of
Additional Information Table of Contents
of Statement of
Additional Information
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<TABLE>
<CAPTION>
Item No. Location
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PART B
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Item 15. Cover Page Cover Page
Item 16. Table of Contents Table of Contents
Item 17. General Information and History General Information
Item 18. Services Not Applicable
Item 19. Purchase of Securities Being Offered Not Applicable
Item 20. Underwriters General Information/
Distributor
Item 21. Calculation of Performance Data Additional Performance
Information
Item 22. Annuity Payments Annuity Provisions
Item 23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
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PART A
PROSPECTUS
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1996 FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY OF NEW YORK
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INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE ANNUITY CONTRACTS
issued by
FIRST SAFECO SEPARATE ACCOUNT S
and
FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY OF NEW YORK
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Home Office: Annuity Service Office:
First SAFECO National Life Insurance First SAFECO National Life Insurance
Company of New York Company of New York
6700 Old Collamer Road 6700 Old Collamer Road
East Syracuse, NY 13057 East Syracuse, NY, 13057
Telephone: 1-800-878-2041 Fax: (315) 463-2128 Telephone: 1-800-878-2041 Fax: (315) 463-2128
</TABLE>
The Individual Flexible Purchase Payment Deferred Variable Annuity Contracts
(the Contracts) described in this Prospectus provide for accumulation of
Contract Values and payment of monthly annuity payments on a fixed and variable
basis. The Contracts are designed for use by individuals in conjunction with
retirement plans on a Qualified or Non-Qualified basis.
At the Owner's direction, Purchase Payments for the Contracts will be allocated
to a segregated investment account of First SAFECO National Life Insurance
Company of New York (First SAFECO) which has been designated First SAFECO
Separate Account S (the Separate Account) or to First SAFECO's Fixed Account.
Under certain circumstances, however, Purchase Payments may initially be
allocated to the SAFECO Resource Money Market Sub-Account of the Separate
Account. (See "Highlights.") The Separate Account invests in shares of SAFECO
Resource Series Trust (see "SAFECO Resource Series Trust"), Federated Insurance
Series (see "Federated Insurance Series"), Lexington Emerging Markets Fund, Inc.
(see "Lexington Emerging Markets Fund, Inc."), and Lexington Natural Resources
Trust (see "Lexington Natural Resources Trust").SAFECO Resource Series Trust
currently consists of the SAFECO Resource Equity, Growth, Northwest, Bond and
Money Market Portfolios. Federated Insurance Series consists of seven
Portfolios, three of which are offered hereunder; the Federated High Income Bond
Fund II ("Federated High Income Bond Portfolio"), the Federated International
Equity Fund II ("Federated International Equity Portfolio") and the Federated
Utility Fund II ("Federated Utility Portfolio"). Lexington Emerging Markets
Fund, Inc. ("Lexington Emerging Markets Fund") and Lexington Natural Resources
Trust each currently consist of only one Portfolio which are offered hereunder;
the Lexington Emerging Markets Portfolio and the Lexington Natural Resources
Portfolio, respectively. See "Highlights" and "Tax Status - Diversification" for
a discussion of owner control of the underlying investments in a variable
annuity contract.
This Prospectus concisely sets forth the information a prospective investor
should know before investing. Additional information about the Contracts is
contained in the Statement of Additional Information which is available at no
charge. The Table of Contents of the Statement of Additional Information can be
found on page of this Prospectus. Some of the discussions contained in this
Prospectus will refer to the more detailed description contained in the
Statement of Additional Information which is incorporated by reference in this
Prospectus. For the Statement of Additional Information, call l-800-878-2041 or
write to the Annuity Service Office address above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SPINNAKER IS NOT INSURED BY THE FDIC. SPINNAKER IS NOT A DEPOSIT OR OTHER
OBLIGATION OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION THROUGH WHICH IT MAY
BE SOLD. SPINNAKER IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED.
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THIS PROSPECTUS SHOULD BE RETAINED FOR FUTURE REFERENCE.
This Prospectus and the Statement of Additional Information are dated
______________ ____, 1996.
INQUIRIES: Any inquiries should be made by telephone to the number listed on the
cover page of the Prospectus or the representative from whom this Prospectus was
obtained. All other questions should be directed to the Annuity Service Office,
1-800-878-2041 listed on the cover page of this Prospectus.
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TABLE OF CONTENTS
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Page
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Definitions ...............................................................................
Highlights ................................................................................
Expense Table .............................................................................
Schedule of Accumulation Unit Values and Accumulation Units Outstanding ...................
Financial Statements ......................................................................
Performance Information ...................................................................
All Sub-Accounts (Other than SAFECO Resource Money Market Sub-Account)............
SAFECO Resource Money Market Sub-Account..........................................
Rankings..........................................................................
First SAFECO ..............................................................................
The Separate Account ......................................................................
SAFECO Resource Equity Sub-Account................................................
SAFECO Resource Growth Sub-Account................................................
SAFECO Resource Northwest Sub-Account.............................................
SAFECO Resource Bond Sub-Account..................................................
SAFECO Resource Money Market Sub-Account..........................................
Federated High Income Bond Sub-Account............................................
Federated International Equity Sub-Account........................................
Federated Utility Sub-Account.....................................................
Lexington Emerging Markets Sub-Account............................................
Lexington Natural Resources Sub-Account...........................................
SAFECO Resource Series Trust ..............................................................
Federated Insurance Series ................................................................
Lexington Emerging Markets Fund, Inc. .....................................................
Lexington Natural Resources Trust .........................................................
Voting Rights .............................................................................
Substitution of Securities ................................................................
</TABLE>
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<TABLE>
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Purchasing a Contract
Purchase Payments....................................................................
Allocation of Purchase Payments......................................................
Accumulation Unit....................................................................
Principal Underwriter................................................................
Charges and Deductions
Deduction for Premium and Other Taxes................................................
Deduction for Mortality and Expense Risk Charge......................................
Deduction for Contingent Deferred Sales Charge.......................................
Reduction or Elimination of the Contingent Deferred Sales Charge.....................
Deduction for Withdrawal Charge......................................................
Deduction for Asset Related Administration Charge....................................
Deduction for Annual Administration Maintenance Charge...............................
Deduction for Transfer Charge........................................................
Other Expenses.......................................................................
Rights Under the Contract
Owner, Annuitant and Beneficiary.....................................................
Misstatement of Age..................................................................
Evidence of Survival.................................................................
Contract Date........................................................................
Contract Settlement..................................................................
Substitute Payee.....................................................................
Assignment...........................................................................
Modification of the Contracts........................................................
Termination of Contract..............................................................
Annuity and Death Benefit Provisions
Selection and Change of Settlement Options...........................................
Payment of Benefits..................................................................
Frequency and Amount of Annuity Payments.............................................
Death of Owner Prior to Annuity Date.................................................
Death of Annuitant...................................................................
Death of Owner After Annuity Date....................................................
Settlement Options...................................................................
Mortality and Expense Guarantee......................................................
Withdrawals and Transfers
Withdrawals..........................................................................
Transfers............................................................................
Transfers by Written Request.........................................................
Suspension of Payments or Transfers..................................................
Other Services
The Programs.........................................................................
Dollar Cost Averaging Program........................................................
Automatic Transfer Program...........................................................
Appreciation or Interest Sweep Program...............................................
Sub-Account Rebalancing Program......................................................
Systematic Investment Program........................................................
Periodic Withdrawal Program..........................................................
</TABLE>
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Tax Status ...................................................................................
Note.................................................................................
General..............................................................................
Diversification......................................................................
Multiple Contracts...................................................................
Tax Treatment of Assignments.........................................................
Income Tax Withholding...............................................................
Tax Treatment of Withdrawals - Non-Qualified Contracts...............................
Qualified Plans......................................................................
Tax Treatment of Withdrawals - Qualified Contracts...................................
Tax Sheltered Annuities - Withdrawal Limitations.....................................
Contract Owned by Other than Natural Persons.........................................
Legal Proceedings ............................................................................
Table of Contents of the Statement of Additional Information .................................
</TABLE>
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DEFINITIONS
ACCUMULATION UNIT - An accounting unit of measure used to calculate the value of
a Sub-Account prior to the Annuity Date.
ANNUITANT - The natural person on whose life Annuity payments are payable. The
Contract will not be issued if the Annuitant is 76 years of age or older on the
Contract Date.
ANNUITY - Any series of payments starting on the Annuity Date.
ANNUITY DATE - The date selected by the Owner for commencing Annuity payments
under the Contract. The day of the month on which the payments will be made will
be determined by First SAFECO. The Annuity Date cannot be later than the date
the Annuitant attains age 85.
ANNUITY UNIT - An accounting unit of measure used to calculate Annuity payments
after the Annuity Date.
BENEFICIARY - The person or persons entitled to receive benefits under the
Contract upon the death of the Owner.
CONTRACT ANNIVERSARY - Any anniversary of the Contract Date.
CONTRACT DATE - For all Contracts issued prior to June 1, 1994, Contract Date
shall mean the earlier of the date on which the initial Purchase Payment is
allocated to the Separate Account or the Fixed Account. For Contracts issued on
or after June 1, 1994, see "Rights under the Contract - Contract Date."
CONTRACT VALUE - The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and the Fixed Account.
CONTRACT YEAR - The twelve month period which commences on the Contract Date and
each succeeding twelve month period thereafter.
ELIGIBLE INVESTMENT(S) - An investment entity in which a Sub-Account invests as
an underlying investment of the Contract.
FIRST SAFECO - First SAFECO National Life Insurance Company of New York at its
Annuity Service Office shown on the cover page of this Prospectus.
FIXED ACCOUNT -First SAFECO's General Account, referred to in the Contract as
the "Fixed Account," consists of the total Purchase Payments received by First
SAFECO under a Fixed Account within the Contract and not previously withdrawn,
plus interest on each such Purchase Payment, less any applicable charges and
deductions. Purchase Payments allocated to the Fixed Account will become part of
the general corporate fund of First SAFECO to be so used and invested consistent
with state insurance laws and will not be segregated from First SAFECO's other
assets.
FUNDS - The funding vehicles for the Separate Account, other than the Trust:
Certain portfolios of Federated Insurance Series; Lexington Emerging Markets
Fund, Inc.; and Lexington Natural Resources Trust.
NET PURCHASE PAYMENT - Purchase Payment less premium taxes.
NON-QUALIFIED CONTRACTS - Contracts issued under Non-Qualified Plans which do
not receive favorable tax treatment under Sections 403(b) or 408 of the Internal
Revenue Code.
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OWNER - The person(s) or entity named in the Application who/which has all
rights under the Contract. Joint Owners are allowed only if the joint Owners are
spouses. Each joint Owner shall have equal ownership rights and must jointly
exercise those rights. On the date the Application is signed, the Owner must not
be older than age 75 (if joint Owners, neither may be older than 75).
PORTFOLIO - A segment of an Eligible Investment which constitutes a separate and
distinct class of shares.
PURCHASE PAYMENTS - Payments made to purchase Accumulation Units or which are
allocated to the Fixed Account.
QUALIFIED CONTRACTS - Contracts issued under Qualified Plans which receive
favorable tax treatment under Sections 403(b) or 408 of the Internal Revenue
Code.
SEPARATE ACCOUNT - A separate investment account of First SAFECO, designated as
First SAFECO Separate Account S, into which Purchase Payments or Contract Values
may be allocated. The Separate Account is divided into Sub-Accounts.
TRUST - SAFECO Resource Series Trust, one of the Eligible Investments for the
Separate Account.
VALUATION DATE - Each day that the New York Stock Exchange is open for business,
which is Monday through Friday, except for New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
VALUATION PERIOD - The period commencing at the close of business on each
Valuation Date and ending at the close of business for the next succeeding
Valuation Date.
WITHDRAWAL - Any payment, including Contract charges and deductions, from the
Contracts.
HIGHLIGHTS
The Contracts described in this Prospectus provide for accumulation of Contract
Values and payment of monthly annuity payments on a fixed and variable basis.
At the Owner's direction, Purchase Payments for the Contracts are allocated to a
segregated investment account of First SAFECO, which account has been designated
First SAFECO Separate Account S, or to the Fixed Account. (See "Definitions -
Fixed Account.") Under certain circumstances, however, Purchase Payments may
initially be allocated to the SAFECO Resource Money Market Sub-Account of the
Separate Account (see below). The assets of the Separate Account are the
property of First SAFECO and obligations arising under the Contracts are First
SAFECO's general corporate obligations.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one Portfolio of the Trust or the Funds. The Trust and
the Funds are open-end management investment companies. There are currently five
Portfolios available to the Separate Account under the Trust: the SAFECO
Resource Equity, Growth, Northwest, Bond and Money Market Portfolios. There are
currently three Portfolios available to the Separate Account under the Federated
Insurance Series: the Federated High Income Bond Portfolio, the Federated
International Equity Portfolio and the Federated Utility Portfolio. The
Lexington Emerging Markets Portfolio is currently the only Portfolio of the
Emerging Markets Fund available to the Separate Account. The Lexington Natural
Resources Portfolio is currently the only Portfolio of the Lexington Natural
Resources Trust available to the Separate Account. Each Portfolio of the Trust
and the Funds has different investment objectives. Owners bear the investment
risk for all amounts allocated to the Separate Account. For more
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information on the Trust and each of the Funds and their respective Portfolios,
please see "SAFECO Resource Series Trust," "Federated Insurance Series,"
"Lexington Emerging Markets Fund, Inc.," and "Lexington Natural Resources
Trust," and the Prospectuses for the Trust and the Funds which accompany and
should be read with this Prospectus.
Within ten (10) days of the date of receipt of the Contract by the Owner, or a
longer period as may be required by the state of issuance, it may be returned by
delivering or mailing it to First SAFECO at its Annuity Service Office or to the
agent through whom it was purchased. When the Contract is received by First
SAFECO, it will be voided as if it had never been in force and First SAFECO will
refund the Contract Value (which may be more or less than the Purchase Payments)
computed at the end of the Valuation Period during which the Contract is
received by First SAFECO. However, in states where required and in the case of
Contracts purchased pursuant to an Individual Retirement Annuity, First SAFECO
will refund the Purchase Payments rather than the Contract Value. Initial
Purchase Payments are allocated to the appropriate Sub-Account(s) in accordance
with the election made by the Owner in the Application. First SAFECO reserves
the right, however, to allocate all initial Purchase Payments to the SAFECO
Resource Money Market Sub-Account until the expiration of fifteen (15) days from
the date the first Purchase Payment is received (except for any Purchase Payment
to be allocated to the Fixed Account as elected by the Owner). If First SAFECO
chooses to automatically allocate Purchase Payments to the SAFECO Resource Money
Market Sub-Account, First SAFECO will refund the greater of Purchase Payments or
the Contract Value. Upon the expiration of the fifteen day period, the
Sub-Account Value of the SAFECO Resource Money Market Sub-Account will be
allocated to the appropriate Sub-Account(s) in accordance with the election made
by the Owner in the Application.
Various charges and deductions from Purchase Payments and the Separate Account
are described below.
A Contingent Deferred Sales Charge (sales load) may be deducted in the event of
a Withdrawal of all or a portion of the Contract Value. The Contingent Deferred
Sales Charge is imposed on Withdrawals made in the first eight (8) Contract
Years and is assessed as a percentage of the amount withdrawn. The maximum
Contingent Deferred Sales Charge is 8% of the amount withdrawn. An Owner may
make Withdrawals in any Contract Year of up to 10% of the Contract Value free
from the Contingent Deferred Sales Charge. There are certain other additional
instances in which this Charge is not applied. (See "Charges and Deductions -
Deduction for Contingent Deferred Sales Charge.") First SAFECO deducts a
Withdrawal Charge which is equal to the lesser of $25 or 2% of the amount
withdrawn for each Withdrawal after the first in any Contract Year. (See
"Charges and Deductions - Deduction for Withdrawal Charge.")
There is a deduction made for the Mortality and Expense Risk Charge computed on
a daily basis which is equal, on an annual basis, to 1.25% of the average daily
net asset value of the Separate Account. This charge compensates First SAFECO
for assuming the mortality and expense risks under the Contracts. (See "Charges
and Deductions - Deduction for Mortality and Expense Risk Charge.")
There is an Asset Related Administration Charge computed on a daily basis which
is equal, on an annual basis, to .15% of the average daily net asset value of
the Separate Account. This Charge compensates First SAFECO for costs associated
with the administration of the Contracts and the Separate Account. (See "Charges
and Deductions - Deduction for Asset Related Administration Charge.")
First SAFECO deducts an Annual Administration Maintenance Charge of $30 from the
Contract Value on the last day of each Contract Year and in the event of a
complete Withdrawal. This Charge is only deducted from Contracts where the
Contract Value is less than $50,000. (See "Charges and Deductions - Deduction
for Annual Administration Maintenance Charge.")
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Under certain circumstances, a Transfer Charge may be assessed when an Owner
transfers Contract Values from one Sub-Account to another Sub-Account or to or
from the Fixed Account. (See "Charges and Deductions - Deduction for Transfer
Charge.")
Premium taxes or other taxes payable to a state or other governmental entity
will be charged against the Contract Values with respect to Non-Qualified
Contracts. First SAFECO reserves the right to deduct these taxes from Contract
Values with respect to Qualified Contracts. (See "Charges and Deductions -
Deduction for Premium and Other Taxes.")
There are deductions from and expenses paid out of the assets of the Trust and
the Funds. See the accompanying Trust and Funds Prospectuses.
There is a ten percent (10%) federal income tax penalty applied to the income
portion of any premature distribution from Non-Qualified Contracts. However, the
penalty is not imposed on amounts received: (a) after the taxpayer reaches age
59 1/2; (b) after the death of the Owner; (c) if the taxpayer is totally
disabled (for this purpose disability is as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, as amended (the "Code")); (d) in a series of
substantially equal periodic payments made not less frequently than annually for
the life (or life expectancy) of the taxpayer or for the joint lives (or joint
life expectancies) of the taxpayer and his or her Beneficiary; (e) under an
immediate annuity; or (f) which are allocable to purchase payments made prior to
August 14, 1982. For federal income tax purposes, withdrawals are deemed to be
on a last-in, first-out basis. Separate tax withdrawal penalties and
restrictions apply to Qualified Contracts. (See "Tax Status - Tax Treatment of
Withdrawals - Qualified Contracts.") For a further discussion of the taxation of
the Contracts see "Tax Status."
Withdrawals of amounts attributable to contributions made pursuant to a salary
reduction agreement (as defined in Section 403(b)(11) of the Code) are limited
to circumstances only when the Owner attains age 59 1/2, separates from service,
dies, becomes disabled (within the meaning of Section 72(m)(7) of the Code) or
in the case of hardship. Withdrawals for hardship are restricted to the portion
of the Owner's Contract Value which represents contributions made by the Owner
and does not include any investment results. The limitations on withdrawals
became effective on January 1, 1989, and apply only to: (1) salary reduction
contributions made after December 31, 1988; (2) income attributable to such
contributions; and (3) income attributable to amounts held as of December 31,
1988. The limitations on withdrawals do not affect rollovers or transfers
between certain Qualified Plans. Tax penalties may also apply. (See "Tax Status
- - Tax Treatment of Withdrawals - Qualified Contracts.") Owners should consult
their own tax counsel or other tax adviser regarding any distributions. (See
"Tax Status - Tax Sheltered Annuities - Withdrawal Limitations.")
The Treasury Department has indicated that guidelines may be forthcoming under
which a variable annuity contract will not be treated as an annuity contract for
tax purposes if the owner of the contract has excessive control over the
investments underlying the contract. The issuance of such guidelines may require
First SAFECO to impose limitations on an Owner's right to control the
investment. It is not known whether any such guidelines would have a retroactive
effect (See "Tax Status - Diversification").
Because of certain exemptive and exclusionary provisions, interests in the Fixed
Account are not registered under the Securities Act of 1933 and the Fixed
Account is not registered as an investment company under the Investment Company
Act of 1940, as amended. Accordingly, neither the Fixed Account nor any
interests therein are subject to the provisions of these Acts, and First SAFECO
has been advised that the staff of the Securities and Exchange Commission has
not reviewed the disclosures in the Prospectus relating to the Fixed Account.
Disclosures regarding the Fixed Account may, however, be subject to certain
generally applicable provisions of the federal securities laws relating to the
accuracy and completeness of statements made in prospectuses.
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E X P E N S E T A B L E
FIRST SAFECO SEPARATE ACCOUNT S
The non-SAFECO Fund information in this Expense Table set forth below with
respect to the Portfolios was provided to the Separate Account by the Portfolios
and such information was not independently verified by the Separate Account.
CONTRACT OWNER TRANSACTION EXPENSES:
DEFERRED SALES LOAD: Contingent Deferred Sales Charge (as a percentage of amount
withdrawn)*: This charge applies to Withdrawals in any Contract Year which
exceed 10% of the Owner's Contract Value:
Contract Year 1 8% of amount withdrawn
Contract Year 2 7% of amount withdrawn
Contract Year 3 6% of amount withdrawn
Contract Year 4 5% of amount withdrawn
Contract Year 5 4% of amount withdrawn
Contract Year 6 3% of amount withdrawn
Contract Year 7 2% of amount withdrawn
Contract Year 8 1% of amount withdrawn
After Contract Year 8 0% of amount withdrawn
*While the Contingent Deferred Sales Charge assesses a percentage of the amount
withdrawn according to the stated schedule, total Contingent Deferred Sales
Charges collected by First SAFECO will not exceed 8.5% of the Purchase Payments
made under the Contract.
WITHDRAWAL CHARGE: Equal to the lesser of $25 or 2% of the amount withdrawn for
each Withdrawal after the first in any Contract Year. Not deducted where the
Owner is exercising a Settlement Option.
TRANSFER CHARGE: First 12 Transfers in a Contract Year are free. Thereafter,
First SAFECO reserves the right to assess a Transfer Charge which will be equal
to the lesser of $10 or 2% of the amount transferred. The charge is not imposed
under the Programs, subject to certain requirements.
ANNUAL ADMINISTRATION CHARGE
$30 per Contract per Contract Year.* Waived if Contract Value is $50,000 or more
SEPARATE ACCOUNT ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
Mortality and Expense Risk Fees 1.25%
Asset Related Administration Charge 0.15%
Total Separate Account Annual Expenses 1.40%
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SAFECO RESOURCE SERIES TRUST ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
SAFECO Resource Equity Portfolio .72%
SAFECO Resource Growth Portfolio .72%
SAFECO Resource Northwest Portfolio .71%
SAFECO Resource Bond Portfolio .72%
SAFECO Resource Money Market Portfolio .62%
Other Expenses
SAFECO Resource Equity Portfolio .03%
SAFECO Resource Growth Portfolio** .07%
SAFECO Resource Northwest Portfolio** .00%
SAFECO Resource Bond Portfolio** .00%
SAFECO Resource Money Market Portfolio** .00%
Total Trust Annual Expenses (After Reimbursement, if applicable)
SAFECO Resource Equity Portfolio .75%
SAFECO Resource Growth Portfolio .79%
SAFECO Resource Northwest Portfolio .71%
SAFECO Resource Bond Portfolio .72%
SAFECO Resource Money Market Portfolio .62%
FEDERATED INSURANCE SERIES ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees
Federated High Income Bond Portfolio .00%
Federated International Equity Portfolio .00%
Federated Utility Portfolio .00%
Other Expenses***
Federated High Income Bond Portfolio .80%
Federated International Equity Portfolio 1.25%
Federated Utility Portfolio .85%
Total Fund Annual Expenses*** (After Reimbursement, if applicable)
Federated High Income Bond Portfolio .80%
Federated International Equity Portfolio 1.25%
Federated Utility Portfolio .85%
LEXINGTON EMERGING MARKETS FUND, INC. ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .85%
Other Expenses**** .47%
Total Fund Annual Expenses**** (After Reimbursement, if applicable) 1.32%
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LEXINGTON NATURAL RESOURCES TRUST ANNUAL EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees 1.00%
Other Expenses***** .47%
Total Fund Annual Expenses***** (After Reimbursement, if applicable) 1.47%
* For purposes of the Examples, the Annual Administration Maintenance
Charge is calculated as a ratio of total Annual Administration Maintenance
Charges collected during the year to the total average net assets of all
Sub-Accounts. The Annual Administration Maintenance Charge percentage will
change each year because of changes in total Annual Administration Maintenance
Charges collected during the year and the total average net assets of all
Sub-Accounts. This will result in variations in the Expense Table each year.
** SAFECO pays all Other Expenses of each Portfolio until a Portfolio's
assets reach $20 million. Once a Portfolio's assets exceed $20 million, the
Other Expenses of the Portfolio will be paid by such Portfolio.
The Growth Portfolio began paying Other Expenses in August 1995.
During the year ended December 31, 1995 SAFECO paid for or reimbursed a portion
of the Other Expenses of the Growth Portfolio and all of the Other Expenses of
the Northwest, Bond and Money Market Portfolios. Expenses before such
reimbursement as a percentage of net assets were as follows:
SAFECO Resource Growth Portfolio .84%
SAFECO Resource Northwest Portfolio 1.18%
SAFECO Resource Bond Portfolio .94%
SAFECO Resource Money Market Portfolio .87%
*** First SAFECO has entered into a Participation Agreement with the
Federated Insurance Series in connection with the Separate Account's investment
in the shares of the Federated Insurance Series. Other Participating Insurance
Companies have entered into similar Participation Agreements with the Federated
Insurance Series. For the one year ended December 31, 1995, the adviser
voluntarily waived or reimbursed expenses, as follows: Federated High Income
Bond Fund II $62,198, absent reimbursement $325,185; Federated Utility Fund II
$102,171, absent reimbursement $369,765; Federated International Equity Fund II
$15,171, absent reimbursement $157,668.
**** First SAFECO has entered into a Participation Agreement with the
Lexington Emerging Markets Fund in connection with the Separate Account's
investment in the shares of the Lexington Emerging Markets Fund. Other
Participating Insurance Companies have entered into similar Participation
Agreements with the Lexington Emerging Markets Fund. For 1995 the adviser
voluntarily waived management and operating expenses in excess of 1.30%. In 1996
these expenses will be waived to the extent they exceed 1.75%. For the one year
ended December 31, 1995, the adviser voluntarily waived or reimbursed expenses,
as follows: Lexington Emerging Markets Fund $173,670, absent reimbursement
$255,918.
***** First SAFECO has entered into a Participation Agreement with the
Lexington Natural Resources Trust in connection with the Separate Account's
investment in the shares of the Lexington Natural Resources Trust. Other
Participating Insurance Companies have entered into similar Participation
Agreements with the Lexington Natural Resources Trust.
<TABLE>
<CAPTION>
Examples for SAFECO Resource Equity Sub-Account Year 1 Year 3 Year 5 Year 10
- ----------------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
</TABLE>
11
<PAGE> 16
<TABLE>
<CAPTION>
the following expenses on a $l,000 investment:
<S> <C> <C> <C> <C>
Assuming withdrawal at end of period ........... $ 97 $130 $164 $263
Assuming annuitization at end of period ........ $ 23 $ 72 $123 $263
Assuming no withdrawal ......................... $ 23 $ 72 $123 $263
Examples for SAFECO Resource Growth Sub-Account Year 1 Year 3 Year 5 Year 10
- ----------------------------------------------- ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period ........... $ 98 $131 $166 $267
Assuming annuitization at end of period ........ $ 24 $ 73 $125 $267
Assuming no withdrawal ......................... $ 24 $ 73 $125 $267
</TABLE>
12
<PAGE> 17
<TABLE>
<CAPTION>
Examples for SAFECO Resource Money Market
- -----------------------------------------
Sub-Account ......................................... Year 1 Year 3 Year 5 Year 10
- ----------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ................ $ 96 $126 $157 $250
Assuming annuitization at end of period ............. $ 22 $ 68 $116 $250
Assuming no withdrawal .............................. $ 22 $ 68 $116 $250
Examples for SAFECO Resource Northwest
- --------------------------------------
Sub-Account ......................................... Year 1 Year 3 Year 5 Year 10
- ----------- ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period ................ $ 97 $129 $162 $259
Assuming annuitization at end of period ............. $ 23 $ 70 $121 $259
Assuming no withdrawal .............................. $ 23 $ 70 $121 $259
Examples for SAFECO Resource Bond Sub-Account Year 1 Year 3 Year 5 Year 10
- --------------------------------------------- ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period ................ $ 97 $129 $162 $260
Assuming annuitization at end of period ............. $ 23 $ 71 $121 $260
Assuming no withdrawal .............................. $ 23 $ 71 $121 $260
Examples for Federated High Income
- ----------------------------------
Bond Sub-Account .................................... Year 1 Year 3 Year 5 Year 10
- ---------------- ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period $ 98 $132 $166 $268
Assuming annuitization at end of period $ 24 $ 73 $125 $268
Assuming no withdrawal $ 24 $ 73 $125 $268
Examples for Federated International
- ------------------------------------
Equity Sub-Account .................................. Year 1 Year 3 Year 5 Year 10
- ------------------ ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ................ $102 $144 $188 $312
Assuming annuitization at end of period ............. $ 28 $ 87 $148 $312
Assuming no withdrawal .............................. $ 28 $ 87 $148 $312
Examples for Federated Utility Sub-Account .......... Year 1 Year 3 Year 5 Year 10
- ------------------------------------------ ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $1,000 investment:
Assuming withdrawal at end of period ................ $ 98 $133 $169 $273
Assuming annuitization at end of period ............. $ 24 $ 75 $128 $273
Assuming no withdrawal .............................. $ 24 $ 75 $128 $273
Examples for Lexington Emerging Markets Sub-Account Year 1 Year 3 Year 5 Year 10
- --------------------------------------------------- ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period ................ $102 $146 $191 $319
Assuming annuitization at end of period ............. $ 29 $ 89 $151 $319
Assuming no withdrawal .............................. $ 29 $ 89 $151 $319
Examples for Lexington Natural Resources Sub-Account Year 1 Year 3 Year 5 Year 10
- ---------------------------------------------------- ------ ------ ------ -------
Assuming a 5% return on assets, you would pay
</TABLE>
13
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
the following expenses on a $l,000 investment:
Assuming withdrawal at end of period ................ $104 $150 $198 $333
Assuming annuitization at end of period ............. $ 30 $ 93 $158 $333
Assuming no withdrawal .............................. $ 30 $ 93 $158 $333
</TABLE>
The information in the "Examples" is estimated and provided to assist the
potential Owner in understanding the various costs and expenses charged to an
Owner's Contract Value either directly or indirectly and reflects expenses of
the Separate Account, the Trust and the Funds. The Examples do not reflect
premium taxes which may be applicable. Contingent Deferred Sales Charges may be
waived in certain circumstances. For additional information, see "Charges and
Deductions" in this Prospectus for the Separate Account, "Management of the
Trust" in the Prospectus for the Trust, "Federated Insurance Series Information"
in the Prospectus for the Federated Insurance Series, "Management of the Fund"
in the Prospectus for the Lexington Emerging Markets Fund, and "Investment
Adviser, and Sub-Adviser and Distributor" in the Prospectus for the Lexington
Natural Resources Trust.
THE INFORMATION ABOVE IS NOT INTENDED TO BE REPRESENTATIVE OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
14
<PAGE> 19
SCHEDULE OF ACCUMULATION UNIT VALUES
FIRST SAFECO SEPARATE ACCOUNT S
As this is the initial registration for First SAFECO Separate Account S, there
is no schedule of accumulation unit values.
15
<PAGE> 20
FINANCIAL STATEMENTS
The financial statements for First SAFECO are contained in the Statement of
Additional Information which is available at no charge by calling 1-800-878-2041
or writing to the Annuity Service Office address on the cover.
PERFORMANCE INFORMATION
In advertisements, the "yield," "effective yield," "total return" and "average
annual total return" of the Sub-Accounts may be quoted.
ALL SUB-ACCOUNTS (OTHER THAN SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT)
"Yield" is the annualization on a 360-day basis of net income per unit over a
30-day period divided by the accumulation unit value on the last day of the
period. Yield figures are calculated by determining the income generated by an
investment in the Sub-Account over a 30-day period. The income is then
annualized by assuming that the income generated during the 30-day period
continues to be generated each month for a 12-month period and is shown as a
percentage of the investment. Yield figures will reflect deduction of the Annual
Administration Maintenance Charge which is assessed on an annual basis to Owners
whose Contract Value is less than $50,000, but will not include any applicable
Contingent Deferred Sales Charge.
"Total return" is the total percentage change in the unit value of an investment
over a stated period of time. "Average annual total return" is the annual
percentage change in the unit value of an investment over a stated period of
time. Both total return and average annual total return assume the reinvestment
of dividend and capital gains distributions.
Standardized total return figures which appear in advertisements or sales
literature will be calculated for required time periods based on a set initial
investment amount and include the Annual Administration Maintenance Charge and
the Contingent Deferred Sales Charge. From time to time, nonstandardized total
return figures may accompany the standardized figures. Although certain
Sub-Accounts may be new and therefore have no investment performance history in
the Separate Account, hypothetical performance may be calculated based on the
respective portfolios' historical performance prior to its availability in the
Separate Account. Non-standardized total return figures may be calculated in a
variety of ways including but not necessarily limited to different time periods,
different initial investment amounts, additions of periodic payments, use of
time weighted average annual returns which take into consideration the length of
time each investment has been on deposit, and without the Annual Administration
Maintenance Charge and/or with or without the Contingent Deferred Sales Charge.
Non-standardized figures may cause the performance of the Sub-Accounts to appear
higher than performance calculated using standard parameters.
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
"Yield" is the annualization on a 365-day basis of the SAFECO Resource Money
Market Sub-Account's net income over a 7-day period. Yield figures are
calculated by determining the income generated by an investment in the
Sub-Account over a 7-day period. The income is then annualized by assuming that
the income generated during the 7-day period continues to be generated each week
for a 52-week period and is shown as a percentage of the investment.
"Effective yield" is the annualization, on a 365-day basis, of the Sub-Account's
net income over a 7-day period with dividends reinvested. The effective yield
will be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
16
<PAGE> 21
As explained above, yield figures will reflect deduction of the Annual
Administration Maintenance Charge which is assessed on an annual basis to Owners
whose Contract Value is less than $50,000, but will not include any applicable
Contingent Deferred Sales Charge.
For the SAFECO Resource Money Market Portfolio, total return and average annual
total return are non-standardized performance figures which may accompany the
standardized yield and effective yield. "Total return" is the total percentage
change in the unit value of an investment over a stated period of time and
"average annual total return" is the annual percentage change in the unit value
of an investment over a stated period of time. Non-standardized total return and
average annual total return figures for the SAFECO Resource Money Market
Portfolio may be calculated in a variety of ways, as described above.
RANKINGS
In addition to these performance figures, the Sub-Accounts may advertise
rankings as provided by the Lipper Variable Insurance Products Performance
Analysis Service published by Lipper Analytical Services, Inc. which monitors
separate account performance for variable annuity products such as the
Contracts, the VARDS Report which is a monthly variable annuity industry
analysis compiled by Variable Annuity Research & Data Service of Roswell,
Georgia and published by Financial Planning Resources, Inc. or the Variable
Annuity Performance Report published by Morningstar, Inc. which is also a
monthly analysis of variable annuity performance. Rankings provided by these
sources may or may not include all applicable charges.
Performance figures and quoted rankings are indicative only of past performance
and are not intended to represent future investment results.
FIRST SAFECO
First SAFECO is a stock life insurance company which was organized under the
laws of the state of New York on April 23, 1987. First SAFECO is approved to
write individual and group life, accident and health insurance and annuities.
First SAFECO is licensed to do business in the state of New York. First SAFECO
is a wholly-owned subsidiary of SAFECO Life Insurance Company which is a part of
SAFECO Corporation, a holding company whose subsidiaries are engaged primarily
in insurance and financial service businesses. The home office of First SAFECO
is located at 6700 Old Collamer Road, East Syracuse, New York 13057.
THE SEPARATE ACCOUNT
The Board of Directors of First SAFECO adopted a resolution to establish a
segregated asset account pursuant to New York insurance law on February 2, 1995.
This segregated asset account has been designated First SAFECO Separate Account
S. First SAFECO has caused the Separate Account to be registered with the
Securities and Exchange Commission as a unit investment trust pursuant to the
provisions of the Investment Company Act of 1940. The Separate Account meets the
definition of a "separate account" under the federal securities laws.
17
<PAGE> 22
The assets of the Separate Account are the property of First SAFECO. However,
the assets of the Separate Account, equal to the reserves and other contract
liabilities with respect to the Separate Account, are not chargeable with
liabilities arising out of any other business First SAFECO may conduct. Income,
gains and losses, whether or not realized, are in accordance with the Contracts
credited to or charged against the Separate Account without regard to other
income, gains or losses of First SAFECO. First SAFECO's obligations arising
under the Contracts are general corporate obligations. The investments of the
Separate Account will be valued at their fair market value in accordance with
the procedures approved by the Board of Directors of First SAFECO and the
Separate Account committee.
The Separate Account is divided into Sub-Accounts, with the assets of each
Sub-Account invested in one of the Portfolio(s) of the Trust or the Funds.
Currently there are five SAFECO Resource Portfolios available under the Trust:
the SAFECO Resource Equity Portfolio, SAFECO Resource Growth Portfolio, SAFECO
Resource Northwest Portfolio, SAFECO Resource Bond Portfolio and SAFECO Resource
Money Market Portfolio. Currently there are three Portfolios available under the
Federated Insurance Series: the Federated High Income Bond Portfolio, the
Federated International Equity Portfolio and the Federated Utility Portfolio.
The Lexington Emerging Markets Portfolio is currently the only Portfolio of the
Emerging Markets Fund available to the Separate Account. The Lexington Natural
Resources Portfolio is currently the only Portfolio of the Lexington Natural
Resources Trust available to the Separate Account. There is no assurance that
the investment objective of any of the Portfolios will be met. Owners bear the
complete investment risk for Purchase Payments allocated to a Sub-Account.
Contract Values will fluctuate in accordance with the investment performance of
the Sub-Account(s) to which Purchase Payments are allocated, and in accordance
with the imposition of the fees and charges assessed under the Contracts.
SAFECO RESOURCE EQUITY SUB-ACCOUNT
The investment objective of the SAFECO Resource Equity Sub-Account is to seek
long-term growth of capital and reasonable current income.
The SAFECO Resource Equity Sub-Account invests in the SAFECO Resource Equity
Portfolio. To pursue its investment objective, the SAFECO Resource Equity
Portfolio ordinarily invests principally in common stocks or securities
convertible into common stocks. Fixed-Income securities may be purchased in
accordance with business and financial conditions.
SAFECO RESOURCE GROWTH SUB-ACCOUNT
The investment objective of the SAFECO Resource Growth Sub-Account is to seek
growth of capital and the increased income that ordinarily follows from such
growth.
The SAFECO Resource Growth Sub-Account invests in the SAFECO Resource Growth
Portfolio. To pursue its investment objective, the SAFECO Resource Growth
Portfolio will ordinarily invest a preponderance of its assets in common stocks
selected primarily for potential appreciation. To determine those common stocks
which have the potential for long-term growth, SAFECO Asset Management Company,
the Trust's investment adviser, will evaluate the issuer's financial strength,
quality of management and earnings power.
18
<PAGE> 23
SAFECO RESOURCE NORTHWEST SUB-ACCOUNT
The investment objective of the SAFECO Resource Northwest Sub-Account is to seek
long-term growth of capital through investing primarily in Northwest companies.
The SAFECO Resource Northwest Sub-Account invests in the SAFECO Resource
Northwest Portfolio. To pursue its investment objective, the SAFECO Resource
Northwest Portfolio will invest at least 65% of its total assets in securities
issued by companies with their principal executive offices located in
Washington, Alaska, Idaho, Oregon or Montana.
The SAFECO Resource Northwest Portfolio will ordinarily invest its assets in
shares of common stock selected primarily for potential long-term appreciation.
The SAFECO Resource Northwest Portfolio may also occasionally invest in
securities convertible into common stock.
SAFECO RESOURCE BOND SUB-ACCOUNT
The investment objective of the SAFECO Resource Bond Sub-Account is to seek as
high a level of current income as is consistent with the relative stability of
capital.
The SAFECO Resource Bond Sub-Account invests in the SAFECO Resource Bond
Portfolio. To pursue its investment objective, the SAFECO Resource Bond
Portfolio invests primarily in medium-term debt securities. Although the SAFECO
Resource Bond Portfolio does not intend to purchase below investment grade bonds
during the coming year, it may hold up to 20% of total assets in bonds which are
downgraded after purchase to below investment grade quality by Standard & Poor's
Corporation or Moody's Investors Service, Inc. Below investment grade bonds are
commonly referred to as high-yield or "junk" bonds and have special risks
associated with them. See the Trust's Prospectus and Statement of Additional
Information for more information.
SAFECO RESOURCE MONEY MARKET SUB-ACCOUNT
The investment objective of the SAFECO Resource Money Market Sub-Account is to
seek as high a level of current income as is consistent with the preservation of
capital and liquidity through investments in high-quality money market
investments maturing in thirteen months or less.
The SAFECO Resource Money Market Sub-Account invests in the SAFECO Resource
Money Market Portfolio which seeks to maintain a net asset value per share of
$1.00. SHARES OF THE SAFECO RESOURCE MONEY MARKET PORTFOLIO ARE NEITHER INSURED,
NOR GUARANTEED, BY THE U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE SAFECO
RESOURCE MONEY MARKET PORTFOLIO WILL MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
FEDERATED HIGH INCOME BOND SUB-ACCOUNT
The investment objective of the Federated High Income Bond Sub-Account is to
seek high current income.
The Federated High Income Bond Sub-Account invests in the Federated High Income
Bond Portfolio. To pursue its investment objective, the Federated High Income
Bond Portfolio invests primarily in a diversified portfolio of professionally
managed fixed-income securities. The fixed-income securities in which the
Federated High Income Bond Portfolio intends to invest are lower-rated corporate
debt obligations, which are commonly referred to as "junk bonds." Some of these
fixed-income securities may involve equity features. Capital growth will be
considered, but only when consistent with the investment objective of high
current income.
19
<PAGE> 24
FEDERATED INTERNATIONAL EQUITY SUB-ACCOUNT
The investment objective of the Federated International Equity Sub-Account is to
seek to obtain a total return on its assets.
The Federated International Equity Sub-Account invests in the Federated
International Equity Portfolio. To pursue its investment objective, the
Federated International Equity Portfolio invests in a diversified portfolio of
equity securities issued by non-U.S. issuers. The Federated International Equity
Portfolio will invest at least 65% of its total assets, and under normal market
conditions substantially all of its assets, in equity securities of issuers
located in at least three different countries outside of the United States. The
equity securities will be selected primarily for superior growth potential and
to reduce portfolio volatility. The Federated International Equity Portfolio may
purchase sponsored or unsponsored American Depository Receipts, Global
Depository Receipts, and European Depository Receipts; corporate and government
fixed income securities of issuers outside of the United States; convertible
securities; and options and financial futures contracts. While the Federated
International Equity Portfolio primarily invests in dividend-paying equity
securities of established companies that appear to have growth potential, it may
as a temporary defensive position, shift its emphasis to such other securities
if such investments appear to offer potential higher return.
FEDERATED UTILITY SUB-ACCOUNT
The investment objective of the Federated Utility Sub-Account is to seek high
current income and moderate capital appreciation.
The Federated Utility Sub-Account invests in the Federated Utility Portfolio. To
pursue its investment objective, the Federated Utility Portfolio invests
primarily in a professionally managed and diversified portfolio of equity and
debt securities of utility companies that produce, transmit, or distribute gas
and electric energy as well as those companies that provide communications
facilities, such as telephone and telegraph companies. Under normal market
conditions, the Federated Utility Portfolio invests at least 65% of its total
assets in securities of utility companies.
LEXINGTON EMERGING MARKETS SUB-ACCOUNT
The investment objective of the Lexington Emerging Markets Sub-Account is to
seek long-term growth of capital primarily through investment in equity
securities and equivalents of companies domiciled in, or doing business in,
emerging countries and emerging markets.
The Lexington Emerging Markets Sub-Account invests in the Lexington Emerging
Markets Portfolio. To pursue its investment objective, the Lexington Emerging
Markets Portfolio invests primarily in emerging country and emerging market
equity securities of all types of common stocks and equivalents (the following
constitute equivalents: convertible debt securities and warrants), although the
Portfolio also may invest in preferred stocks, bonds, and money market
instruments of foreign and domestic companies, the U.S. government, and its
agencies. The Lexington Emerging Markets Portfolio, under normal conditions,
will invest at least 65% of its total assets in emerging country and emerging
market equity securities in at least three countries outside of the U.S. and at
all times will invest in a minimum of three countries outside of the U.S.
Investments in emerging country equity securities are not subject to a maximum
limit, and it is the intention of the Lexington Emerging Markets Portfolio's
adviser to invest substantially all of the Portfolio's assets in such
securities. For purposes of its investment objective, the Lexington Emerging
Markets Portfolio considers emerging country equity securities to be any country
whose economy and market the World Bank or United Nations considers to be
emerging or developing, and the Portfolio also may invest in equity securities
and equivalents, traded in any market, of companies that derive 50% or more of
their total revenue from either goods or services produced in such emerging
countries and emerging markets or sales made in such countries.
20
<PAGE> 25
LEXINGTON NATURAL RESOURCES SUB-ACCOUNT
The investment objective of the Lexington Natural Resources Sub-Account is to
seek long-term growth of capital through investing primarily in common stocks of
companies that own or develop natural resources and other basic commodities, or
supply goods and services to such companies.
The Lexington Natural Resources Sub-Account invests in the Lexington Natural
Resources Portfolio. To pursue its investment objective, the Lexington Natural
Resources Portfolio seeks to identify securities of companies that, in its
management's opinion, are undervalued relative to the value of natural resource
holdings of such companies in light of current and anticipated economic or
financial conditions. The Lexington Natural Resources Portfolio will consider a
company to have substantial natural resource assets when, in its management's
opinion, the company's holdings of the assets are of such magnitude, when
compared to the capitalization, revenues or operating profits of the company,
that changes in the economic value of the assets will affect the market price of
the equity securities of such company, which, generally, is when at least 50% of
the non-current assets, capitalization, gross revenues or operating profits of
the company in the most recent or current fiscal year are involved in or result
from, directly or indirectly through subsidiaries, exploring, mining, refining,
processing, fabricating, dealing in or owning natural resource assets. Up to 25%
of the Lexington Natural Resources Portfolio's total assets may be invested in
securities principally traded in markets outside the U.S.
SAFECO RESOURCE SERIES TRUST
The Trust has been established to act as one of the funding vehicles for the
Contracts offered. The investment adviser to the Trust is SAFECO Asset
Management Company, SAFECO Plaza, Seattle, Washington. The Trust is an open-end,
diversified, management investment company.
FEDERATED INSURANCE SERIES
The Federated Insurance Series is one of the funding vehicles for the Contracts
offered. The investment adviser to the Federated Insurance Series is Federated
Advisers, Federated Investors Tower, Pittsburgh, Pennsylvania. The Federated
Insurance Series is an open-end, diversified management investment company.
LEXINGTON EMERGING MARKETS FUND, INC.
The Lexington Emerging Markets Fund is one of the funding vehicles for the
Contracts offered. The investment adviser to the Lexington Emerging Markets Fund
is Lexington Management Corporation, P.O. Box 1515/Park 80 West Plaza Two,
Saddle Brook, New Jersey. The Lexington Emerging Markets Fund is an open-end,
diversified management investment company.
LEXINGTON NATURAL RESOURCES TRUST
The Lexington Natural Resources Trust is one of the funding vehicles for the
Contracts offered. The investment adviser to the Lexington Natural Resources
Trust is Lexington Management Corporation, P.O. Box 1515/Park 80 West Plaza Two,
Saddle Brook, New Jersey. The Lexington Natural Resources Trust is an open-end,
non-diversified management investment company.
21
<PAGE> 26
WHILE A BRIEF SUMMARY OF THE INVESTMENT OBJECTIVES OF EACH PORTFOLIO IS SET
FORTH ABOVE, MORE COMPREHENSIVE INFORMATION IS FOUND IN THE CURRENT RESPECTIVE
TRUST OR FUND PROSPECTUS. THE TRUST AND FUNDS' PROSPECTUSES ARE ATTACHED AND
ACCOMPANY THIS PROSPECTUS. ALL DOCUMENTS SHOULD BE READ TOGETHER AND CAREFULLY
BEFORE INVESTING. AN ADDITIONAL PROSPECTUS AND THE STATEMENT OF ADDITIONAL
INFORMATION FOR THE TRUST AND ANY OF THE FUNDS CAN BE OBTAINED BY CALLING THE
NUMBER ON THE COVER PAGE OF THIS PROSPECTUS OR WRITING TO THE ADDRESS OF THE
ANNUITY SERVICE OFFICE LISTED THERE. ADDITIONAL PORTFOLIOS MAY BE ESTABLISHED BY
THE TRUST AND THE FUNDS FROM TIME TO TIME AND MAY BE MADE AVAILABLE TO OWNERS.
IN ADDITION, CERTAIN EXISTING PORTFOLIOS OF THE FUNDS, WHICH ARE NOT CURRENTLY
BEING MADE AVAILABLE, MAY BE MADE AVAILABLE TO OWNERS IN THE FUTURE.
VOTING RIGHTS
In accordance with its view of present applicable law, First SAFECO will vote
the shares of the Trust and the Funds held in the Separate Account at special
meetings of the shareholders in accordance with instructions received from
persons having the voting interest in the Separate Account. First SAFECO will
vote shares it owns for which it has not received instructions, as well as
shares attributable to it, in the same proportion as it votes shares for which
it has received instructions. Neither the Trust nor the Funds hold regular
meetings of shareholders.
The number of shares which a person has a right to vote will be determined as of
a date to be chosen by First SAFECO not more than sixty (60) days prior to the
meeting of the Trust or the Funds. Voting instructions will be solicited by
written communication at least fourteen (14) days prior to such meeting with
respect to the Trust and at least ten (10) days prior to such meeting with
respect to the Funds.
The Funds are intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies which may or may not be affiliated and in
compliance with certain regulatory requirements. The Funds currently do not
foresee any disadvantages to the Owners arising from the fact that the interests
of the holders of the variable annuity contracts and the variable life insurance
policies may differ. Nevertheless, the Funds' Directors and Trustees intend to
monitor events in order to identify any material irreconcilable conflicts which
may possibly arise and to determine what action, if any, should be taken in
response thereto.
SUBSTITUTION OF SECURITIES
If the shares of the Trust or the Funds (or any Portfolio within the Trust or
the Funds) should no longer be available for investment by the Separate Account
or, if in the judgment of First SAFECO, further investment in such shares should
become inappropriate in view of the purpose of the Contracts, First SAFECO may
substitute shares of another mutual fund (or Portfolio within the Trust or the
Funds) for fund shares already purchased or to be purchased in the future by
Purchase Payments under the Contracts. No substitution of securities may take
place without prior approval of the Securities and Exchange Commission and under
such requirements as it may impose.
22
<PAGE> 27
PURCHASING A CONTRACT
PURCHASE PAYMENTS
The Contracts are purchased under a flexible purchase payment plan. The initial
Purchase Payment is due on the Contract Date. The minimum initial Purchase
Payment for Non-Qualified Contracts is $2,000 and the minimum subsequent
Purchase Payment is $250. For Qualified Contracts, the minimum initial and
subsequent Purchase Payments must be at least $30. Subject to these minimums,
the Owner may increase or decrease or change the frequency of subsequent
Purchase Payments. First SAFECO reserves the right to reject any Application or
Purchase Payment.
ALLOCATION OF PURCHASE PAYMENTS
The allocation of the initial Purchase Payment is elected by the Owner in the
Application. Unless the Owner elects otherwise, subsequent Purchase Payments are
allocated in the same manner as the initial Purchase Payment. Allocation of the
Purchase Payments is subject to the terms and conditions imposed by First
SAFECO. Under certain circumstances, Purchase Payments which have been
designated by prospective purchasers to be allocated to Sub-Accounts other than
the SAFECO Resource Money Market Sub-Account, may be initially allocated to the
SAFECO Resource Money Market Sub-Account. (See "Highlights.") For each
Sub-Account, Purchase Payments are converted into Accumulation Units. The number
of Accumulation Units in a Sub-Account credited to the Contract is determined by
dividing each Net Purchase Payment by the value of an Accumulation Unit for that
Sub-Account. Purchase Payments allocated to the Fixed Account are credited in
dollars.
If the Application for a Contract is in good order, First SAFECO will apply the
Purchase Payment to the Separate Account and credit the Contract with
Accumulation Units and/or to the Fixed Account and credit the Contract with
dollars within two business days of receipt. If the Application for a Contract
is not in good order, First SAFECO will attempt to get it in good order or First
SAFECO will return the Application and the Purchase Payment within five (5)
business days. First SAFECO will not retain a Purchase Payment for more than
five (5) business days while processing an incomplete Application unless it has
been so authorized by the purchaser. For subsequent Purchase Payments in good
order, First SAFECO will apply the Net Purchase Payment to the Separate Account
and credit the Owner's Contract with Accumulation Units during the next
Valuation Period after the Purchase Payment was received.
ACCUMULATION UNIT
Purchase Payments allocated to the Separate Account and amounts transferred to
or within the Separate Account are converted into Accumulation Units. This is
done by dividing each Net Purchase Payment by the value of an Accumulation Unit
for the Valuation Period during which the Purchase Payment is allocated to the
Sub-Account or the transfer is made. Accumulation Units for each Sub-Account are
valued separately. The Accumulation Unit value is determined by multiplying the
Accumulation Unit value for the Sub-Account, as of the immediately preceding
Valuation Period, by the Net Investment Factor for the current Valuation Period.
The Net Investment Factor for any Sub-Account for any Valuation Period is
determined by dividing (a) by (b) and subtracting (c) and (d) from the result,
where:
(a) is the net result of:
(i) The net asset value per share of the Portfolio,
determined as of the current Valuation Period, plus
(ii) The per share amount of any dividend or capital-gain
distribution made by the Portfolio if the
"ex-dividend" date occurs during the current
Valuation Period, plus or minus
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<PAGE> 28
(iii) A per share credit or charge, which is determined by
First SAFECO, for changes in tax reserves resulting
from investment operations of the Sub-Account.
(b) is the net result of:
(i) The net asset value per share of the Portfolio
determined as of the immediately preceding Valuation
Period, plus or minus
(ii) The per share credit or charge for any changes in tax
reserves for the immediately preceding Valuation
Period.
(c) is the percentage factor equal to the Mortality and Expense
Risk Charge. Such factor is equal on an annual basis to a
percentage of the average daily net asset value of the
Sub-Account.
(d) is the percentage factor equal to the Asset Related
Administration Charge. Such factor is equal on an annual basis
to a percentage of the average daily net asset value of the
Sub-Account.
The Net Investment Factor may be greater or less than one. Therefore, the
Accumulation Unit value may increase or decrease.
PRINCIPAL UNDERWRITER
Currently, SAFECO Securities, Inc. (SSI) acts as the principal underwriter of
the Contracts. SSI has its business address at SAFECO Plaza, Seattle, Washington
98185. Prior to April 29, 1994, PNMR Securities, Inc. (PNMR), 15411 N.E. 51st
Street, Redmond, Washington, acted as the principal underwriter of the
Contracts. SSI and PNMR are wholly-owned subsidiaries of SAFECO Corporation and
therefore are affiliates of First SAFECO. The Contracts are offered on a
continuous basis.
CHARGES AND DEDUCTIONS
Various charges and deductions are made from Purchase Payments, Contract Values,
the Separate Account and the Fixed Account. These charges and deductions are:
DEDUCTION FOR PREMIUM AND OTHER TAXES
Any premium taxes or other taxes levied by any governmental entity which First
SAFECO, in its sole discretion, determines have resulted from the establishment
or maintenance of the Contract or any portion of the Contract, or from the
investment experience of the Separate Account, or from the receipt by First
SAFECO of Purchase Payments or from the commencement of annuity payments will be
deducted from the Contract Value with respect to Non-Qualified Contracts. First
SAFECO reserves the right to deduct these taxes from Contract Values with
respect to Qualified Contracts. Premium taxes currently imposed by certain
states on the type of Contracts offered hereby range from 0% to 4%. Some states
assess their premium taxes at the time Purchase Payments are made; others assess
their premium taxes at the time annuity payments commence. Premium taxes are
subject to change or amendment by state legislatures, administrative
interpretations or judicial acts. Such premium taxes will depend on, among other
things, the classification of the Contract by the states, the status of First
SAFECO within such state and the insurance tax laws of such state. These taxes
are deducted first from the SAFECO Resource Money Market Sub-Account. In the
event there are no Accumulation Units in the SAFECO Resource Money Market
Sub-Account or not enough in value to pay for these
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<PAGE> 29
taxes, the balance of deductions necessary is then taken from the SAFECO
Resource Bond Sub-Account, the Federated Utility Sub-Account, the Federated High
Income Bond Sub-Account, the Lexington Natural Resources Sub-Account,the
Federated International Equity Sub-Account, the Lexington Emerging Markets
Sub-Account, the SAFECO Resource Equity Sub-Account, the SAFECO Resource
Northwest Sub-Account, the SAFECO Resource Growth Sub-Account, and finally from
the Fixed Account.
DEDUCTION FOR MORTALITY AND EXPENSE RISK CHARGE
First SAFECO deducts on each Valuation Date a Mortality and Expense Risk Charge
which is equal on an annual basis to 1.25% of the average daily net asset value
of the Separate Account. The mortality risks assumed by First SAFECO arise from
its contractual obligation to make annuity payments after the Annuity Date for
the life of the Owner, to waive Contingent Deferred Sales Charges in the event
of the death of the Owner and to guarantee to pay the greater of the Guaranteed
Minimum Death Benefit or the Contract Value upon the death of the Owner. The
expense risk assumed by First SAFECO is that the costs of administering the
Contracts and the Separate Account will exceed the amount received from the
Annual Administration Maintenance Charge and the Asset Related Administration
Charge.
If the Mortality and Expense Risk Charge is insufficient to cover the actual
costs, the loss will be borne by First SAFECO. Conversely, if the amount
deducted proves more than sufficient, the excess will be profit to First SAFECO.
First SAFECO expects a profit from this charge.
The Mortality and Expense Risk Charge is guaranteed by First SAFECO and cannot
be increased.
DEDUCTION FOR CONTINGENT DEFERRED SALES CHARGE
In certain situations where an Owner withdraws all or a portion of his or her
Contract Value, a Contingent Deferred Sales Charge (sales load) is deducted from
the Withdrawal. This charge reimburses First SAFECO for expenses incurred in
connection with the promotion, sale and distribution of the Contracts. The
Contingent Deferred Sales Charge is imposed on Withdrawals made in the first
eight (8) Contract Years. The Contract describes the situations where the
Contingent Deferred Sales Charge does not apply. Some of these situations are:
(i) on Transfers between Sub-Accounts, (ii) on the sum of Withdrawals taken in
any Contact Year which does not exceed 10% of the Contract Value, (iii) on
Withdrawals made under a Settlement Option, (iv) on Systematic Withdrawals over
the life expectancy of the Owner or the joint life expectancy of the Owner and
Beneficiary, (v) on Withdrawals made pursuant to the death of the Owner, (vi) on
Withdrawals for payment of the Annual Administration Maintenance Charge, or
(vii) on Transfers from a Sub-Account to the Fixed Account or on certain
Transfers from the Fixed Account to a Sub-Account. (See "Withdrawals and
Transfers" and "The Programs.")
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The amount of the Contingent Deferred Sales Charge will be based on the
following:
<TABLE>
<CAPTION>
Contingent Deferred Sales Charge
Contract Year as a Percentage of Amount Withdrawn
------------- -----------------------------------
<S> <C>
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After Contract Year 8 0% of amount withdrawn
</TABLE>
The Contingent Deferred Sales Charge assesses a percentage of the amount
withdrawn according to the stated schedule. However, total Contingent Deferred
Sales Charges collected by First SAFECO will not exceed 8.5% of the Purchase
Payments made under a Contract.
The commissions paid to registered representatives on the sale of Contracts are
not more than 5.8% of the Purchase Payments. Noncash compensation may include
accrual of conference travel credits and prizes. To the extent that the
Contingent Deferred Sales Charge is insufficient to cover the actual cost of
distribution, First SAFECO may use any of its corporate assets, including
potential profit which may arise from the Mortality and Expense Risk Premium, to
make up any difference.
REDUCTION OR ELIMINATION OF THE CONTINGENT DEFERRED SALES CHARGE
The amount of the Contingent Deferred Sales Charge on the Contracts may be
reduced or eliminated when sales of the Contracts are made to individuals in a
manner that results in savings of sales expenses. The entitlement to reduction
of the Contingent Deferred Sales Charge will be determined by First SAFECO after
examination of all the relevant factors such as:
1. The total amount of Purchase Payments to be received. Per
Contract sales expenses are likely to be less on larger
Purchase Payments than on smaller ones.
2. Any prior or existing relationship with First SAFECO. Per
Contract sales expenses are likely to be less when there is a
prior existing relationship because of the likelihood of
implementing the Contract with fewer sales contacts.
3. There may be other circumstances, of which First SAFECO is not
presently aware, which could result in reduced sales expenses.
If, after consideration of the foregoing factors, First SAFECO determines that
there will be a reduction in sales expenses, First SAFECO may provide for a
reduction or elimination of the Contingent Deferred Sales Charge.
The Contingent Deferred Sales Charge may be eliminated when the Contracts are
issued to an officer, director or employee of First SAFECO or any of its
affiliates. In no event will reductions or elimination of the Contingent
Deferred Sales Charge be permitted where reductions or elimination will be
unfairly discriminatory to any person.
DEDUCTION FOR WITHDRAWAL CHARGE
First SAFECO deducts a Withdrawal Charge which is equal to the lesser of $25 or
2% of the amount withdrawn for each Withdrawal (whether it be a partial
Withdrawal or a complete Withdrawal) after
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the first in any Contract Year. No Withdrawal Charge is deducted where the Owner
is participating in the Periodic Withdrawal Program subject to certain
limitations (see "The Program") or is exercising a Settlement Option.
DEDUCTION FOR ASSET RELATED ADMINISTRATION CHARGE
First SAFECO deducts on each Valuation Date an amount which is equal on an
annual basis to .15% of the average daily net asset value of the Separate
Account for costs associated with the administration of the Sub-Accounts. Since
this Charge is an asset-based charge, the amount of the Charge attributable to a
particular Contract may have no relationship to the administrative costs
actually incurred by that Contract. First SAFECO does not intend to profit from
this Charge. This Charge will be reduced to the extent that the amount of this
Charge is in excess of that necessary to reimburse First SAFECO for its
administrative expenses. Should this Charge prove to be insufficient, First
SAFECO will not increase this Charge and will incur the loss.
DEDUCTION FOR ANNUAL ADMINISTRATION MAINTENANCE CHARGE
First SAFECO deducts an Annual Administration Maintenance Charge of $30 from the
Contract Value on the last day of each Contract Year and in the event of a
complete Withdrawal. This Charge is deducted from Contracts only if the Contract
Value is less than $50,000. This Charge, which is for general administrative
expenses, is deducted first from the SAFECO Resource Money Market Sub-Account.
In the event there are no Accumulation Units in the SAFECO Resource Money Market
Sub-Account or not enough in value to pay for this Charge, the balance of
deductions necessary is then taken from the SAFECO Resource Bond Sub-Account,
the Federated Utility Sub-Account, the Federated High Income Bond Sub-Account,
the Lexington Natural Resources Sub-Account, the Federated International Equity
Sub-Account, the Lexington Emerging Markets Sub-Account, the SAFECO Resource
Equity Sub-Account, the SAFECO Resource Northwest Sub-Account, the SAFECO
Resource Growth Sub-Account, and finally from the Fixed Account.
Prior to the Annuity Date, this Charge is not guaranteed and may be changed for
future years. However, this Charge may never exceed $35 per Contract Year. First
SAFECO has set this Charge at a level so that, when considered in conjunction
with the Asset Related Administration Charge, it will not make a profit from the
charges assessed for administration. First SAFECO may receive compensation from
the investment advisers or administrators of the Available Funds consistent with
the administrative services and cost savings rendered to such entities.
DEDUCTION FOR TRANSFER CHARGE
An Owner may make up to twelve (12) Transfers annually without the imposition of
any fee or charge. If more than twelve (12) Transfers have been made in a
Contract Year, First SAFECO reserves the right to assess a Transfer Charge which
will be equal to the lesser of $10 or 2% of the amount transferred. Specific
requirements may apply to transfers under the Programs. (See "The Programs.")
OTHER EXPENSES
There are other deductions from and expenses paid out of the assets of the Trust
and the Funds which are described in the accompanying Trust and Funds
Prospectuses. First SAFECO may receive compensation from the investment advisers
or administrators of the Available Funds consistent with the administrative
services rendered to such entities.
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<PAGE> 32
RIGHTS UNDER THE CONTRACT
OWNER, ANNUITANT AND BENEFICIARY
The Owner has all rights and may receive all benefits under the Contract. Prior
to the Annuity Date, the Owner is the person designated in the Application,
unless changed. On and after the Annuity Date, the Annuitant is the Owner. The
Annuitant is the person on whose life Annuity payments are based and is the
person designated in the Application, unless changed.
The Owner may designate a Beneficiary in the Application to receive any proceeds
payable due to the death of the Owner. Unless the Owner provides otherwise, the
death benefit will be paid in equal shares to all surviving primary
Beneficiaries. If the Owner has not provided otherwise and there are no
surviving primary Beneficiaries, the death benefit will be paid in equal shares
to all surviving contingent Beneficiaries. If the Owner has not provided
otherwise and there are no surviving primary or contingent Beneficiaries, the
death benefit will be paid to the estate of the Owner.
If the Owner has made an irrevocable Beneficiary designation, no change of
Beneficiary is permitted. If the Owner has not made an irrevocable Beneficiary
designation, the Owner may file a signed request with First SAFECO to change the
Beneficiary designation. The change of Beneficiary will be effective upon
recording by First SAFECO at its Home Office. First SAFECO shall not be liable
for any payments made or other action taken by First SAFECO before the change in
Beneficiary was recorded by First SAFECO at its Home Office. A recorded change
of Beneficiary will revoke any prior Beneficiary designations. First SAFECO will
pay any death proceeds to the most recently recorded Beneficiary.
MISSTATEMENT OF AGE
First SAFECO may require proof of the age of the Annuitant before making any
Life Annuity payment provided for by the Contract. If the age of the Annuitant
has been misstated, the amount payable will be the amount that the Contract
Value would have provided at the correct age. Once Annuity payments have begun,
any underpayments will be made up in one sum with the next Annuity payment. Any
overpayment will be deducted from future Annuity payments until the total is
repaid.
EVIDENCE OF SURVIVAL
If any benefits under the Contracts are contingent upon the Annuitant being
alive on a given date, First SAFECO may require evidence satisfactory to First
SAFECO that such condition continues to be met.
CONTRACT DATE
The Contract Date is defined as follows:
(a) The Contract Date with respect to transfers from a Contract
qualified under Section 401(a) to a Contract qualified under Section 408 of the
Code, shall be the earlier of the date on which the initial Purchase Payment is
invested and the second certificate anniversary of a First SAFECO Qualified
Pension Annuity Series III, or III Plus, from which funds are being transferred
to this Contract. The Contract Issue Date shall be the earlier of the date on
which the initial Purchase Payment is allocated to the Separate Account or the
Fixed Account.
(b) The Contract Date with respect to transfers to a Contract qualified
under Section 408 of the Code, shall be the earlier of the date on which the
initial Purchase Payment is invested and the second certificate anniversary of
an existing First SAFECO Qualified Pension Annuity Series V or V Plus contract,
if the entire contract value is being transferred to this Contract. The Contract
Issue
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<PAGE> 33
Date shall be the earlier of the date on which the initial Purchase Payment is
allocated to the Separate Account or the Fixed Account.
(c) The Contract Date with respect to transfers to a Contract qualified
under Section 403 of the Code, shall be the earlier of the date on which the
initial Purchase Payment is invested, and the second certificate anniversary of
an existing First SAFECO Qualified Pension Annuity Series III Plus certificate,
if the entire certificate value is being transferred to this Contract. The
Contract Issue Date shall be the earlier of the date on which the initial
Purchase Payment is allocated to the Separate Account or the Fixed Account.
(d) The Contract Date with respect to all transfers to Non-qualified
Contracts, transfers to Contracts qualified under Section 408 of the Code other
than from First SAFECO's Qualified Pension Annuity Series III, III Plus, V, or V
Plus, and transfers to Contracts qualified under Section 403 of the Code other
than from First SAFECO's Qualified Pension Annuity Series III Plus shall be the
earlier of the date on which the initial Purchase Payment is allocated to the
Separate Account or the Fixed Account.
CONTRACT SETTLEMENT
Unless otherwise designated in writing by First SAFECO, all sums payable under
the Contracts are payable at First SAFECO's Home Office. The Contract must be
returned to First SAFECO upon any settlement.
SUBSTITUTE PAYEE
If First SAFECO determines that any person is incapable of personally receiving
and giving a valid receipt for any payment due under the Contracts and no claim
has been made by a duly appointed guardian, First SAFECO may make such payment
to any person or institution that First SAFECO determines has assumed the care
and support of such person. Such payment shall completely discharge the
liability of First SAFECO with respect to the amount so paid.
ASSIGNMENT
To the extent permitted by law, the Contracts and the benefits or payments under
the Contracts are assignable or otherwise transferable.
MODIFICATION OF THE CONTRACTS
The terms and conditions of the Contracts may be amended by written agreement
between First SAFECO and the Owner by written endorsement or amendment. All
agreements made by First SAFECO will be signed by the President or one of the
Vice Presidents. No other person has power on behalf of First SAFECO to amend or
modify the Contract, extend any due date, or waive any proof required by the
Contract. First SAFECO may unilaterally amend the provisions of the Contract as
required to conform to any state or federal law which affects the Contract.
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<PAGE> 34
TERMINATION OF CONTRACT
All benefit provisions under the Contract continue in force until the Contract
Value is completely Withdrawn. Discontinuance of Purchase Payments will not
result in termination of the Contract.
ANNUITY AND DEATH BENEFIT PROVISIONS
SELECTION AND CHANGE OF SETTLEMENT OPTIONS
The Owner may select or change the Settlement Option or Annuity Date by written
notification to First SAFECO at its Home Office. In order to be effective, the
written notification must be received by First SAFECO prior to any Annuity Date
previously selected.
PAYMENT OF BENEFITS
First SAFECO will, upon the written direction of the Owner, issue an Annuity or
make a cash distribution to any person who is entitled to such benefits. First
SAFECO may rely on the written direction of the Owner and shall not be liable
because of any failure to question or challenge such direction regarding the
issuance of an Annuity or payment of a cash distribution.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Annuity payments will be paid as monthly installments, except as described
below. If the net amount available to apply under any Settlement Option is less
than $2,000, First SAFECO shall have the right to pay such amount in a lump sum
cash distribution. If Annuity payments would be or become less than $250, First
SAFECO shall have the right to change the frequency of payments to such
intervals as will result in payments of at least $250.
DEATH OF OWNER PRIOR TO ANNUITY DATE
The Contract provides for a minimum guaranteed death benefit, provided that
First SAFECO receives due proof of death in a satisfactory form and election of
a Settlement Option prior to six months from the date of the Owner's death. If
the due proof of death or the election of a Settlement Option is received later
than six months after the date of death of the Owner, First SAFECO provides a
death benefit that is subject to change based upon investment experience, as
discussed below.
On the Valuation Date following receipt at the Home Office of the due proof of
death and election of a Settlement Option before the Annuity Date and while the
Contract was in force, First SAFECO generally will pay to the designated
Beneficiary a minimum guaranteed death benefit that is the greater of: (i) the
Contract Value on the later of the date of receipt of due proof of death or the
election of a Settlement Option; or (ii) the last determined minimum guaranteed
death benefit.
The initial minimum guaranteed death benefit is equal to the initial Net
Purchase Payment. The minimum guaranteed death benefit is reset at each eighth
Contract Anniversary ("Eight Year Contract Anniversary") to equal the greater of
(i) the then current Contract Value or (ii) the current minimum guaranteed death
benefit. The greater of the two values becomes the new minimum guaranteed death
benefit. The minimum guaranteed death benefit is fixed for the remaining
duration of the Contract as of the last Eight Year Contract Anniversary
preceding the Owner's 72nd birthday.
If the Contract is owned by joint Owners, the minimum guaranteed death benefit,
or any other applicable death benefit, is payable only on the death of the elder
Owner. Moreover, following the death of the elder Owner, if the joint Owner
elects to continue the Contract, there is no minimum
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guaranteed death benefit. The death benefit will be the Contract Value, which
reflects Net Purchase Payments and withdrawals. Contract Value is subject to
change as a result of investment experience.
Each form of minimum guaranteed death benefit is adjusted to reflect Net
Purchase Payments and withdrawals. If an Owner makes withdrawals, the minimum
guaranteed death benefit is reset to equal the previous minimum guaranteed death
benefit multiplied by the ratio of the Contract Value after the withdrawal to
the Contract Value before the withdrawal. The recomputed minimum guaranteed
death benefit will be used in determining the new minimum guaranteed death
benefit at the next Eight Year Contract Anniversary. After the Owner's death,
the minimum guaranteed death benefit will be reduced dollar for dollar by any
withdrawals by the Beneficiary. The Beneficiary may only make withdrawals at the
time of or prior to the election of a Settlement Option.
If due proof of death or the election of a payment option (a Settlement Option
or lump sum payment) are made later than six months following the date of the
Owner's death, the value as of the six month anniversary of the date of death
will apply. Thus, for example, if notification of death is not received until
nine (9) months after the date of death, the death benefit under (i) will be
calculated as follows:
Upon notification of death, First SAFECO will determine what the Contract Value
was on the six-month anniversary of the date of death. Assuming that Contract
Value was $90,000 on that date and the last determined minimum guaranteed death
benefit was $100,000, First SAFECO will contribute $10,000 to Contract Value as
of that date and will guarantee the portion of the Contract Value attributable
to First SAFECO's contribution and pay interest thereon at the then prevailing
money market rate until the date of election of a payment option. First SAFECO
will then calculate the effects of investment experience on the portion of the
Contract Value existing on the six-month anniversary of the date of death, and
hence, the death benefit will consist of the combined value of the guaranteed
and nonguaranteed portions of the Contract Value from that six-month anniversary
date to the date of election of a payment option. If on the six-month
anniversary of the date of death the Contract Value exceeds the last determined
minimum guaranteed death benefit, the entire Contract Value will be subject to
market risk from that date to the date of election of a payment option and no
portion of the Contract Value will be guaranteed. Any withdrawals made by the
Beneficiary prior to electing a payment option will be deducted from the death
benefit. The Beneficiary bears the risk and enjoys the rewards of negative or
positive investment experience on any nonguaranteed portion of the Contract
Value during the period from the six-month anniversary of the date of death and
the date of election of a payment option. Beneficiaries should be encouraged to
promptly notify First SAFECO of the Owner's death.
In all cases, First SAFECO will pay the Beneficiary a lump sum payment of the
death benefit if the election of the Settlement Option is not made within sixty
(60) days of the receipt of due proof of death.
With respect to non-qualified Contracts if the Owner dies on or after the
Annuity Date and before the entire value of the Contract has been distributed,
any remaining value must be distributed at least as rapidly as the method of
distribution in effect at the time of the Owner's death. If the Owner dies
before the Annuity Date, generally the entire value under the Contract must be
distributed within five years after the date of the Owner's death or must be
distributed over the designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal or substantially
equal payments, with payments beginning within one year of the Owner's death.
DEATH OF ANNUITANT
In the event of the Annuitant's death prior to the Annuity Date, the Owner must
designate a new Annuitant. If no designation is made within thirty (30) days of
notification to First SAFECO of the death of the Annuitant, the Owner will
become the Annuitant. The election of a Settlement Option must be made by the
Beneficiary during the sixty (60) day
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period commencing with the date of First SAFECO's receipt of notice of the
Owner's death. If no election is made within the sixty (60) day period, then a
single lump sum payment will be made to the Beneficiary. In the event that the
Beneficiary is a surviving spouse, the Contract can be continued. Upon the death
of a co-Owner, the surviving Owner becomes the designated Beneficiary. Any other
named Beneficiary will be a contingent Beneficiary. If the Contract is owned by
a non-natural person, the death of the Annuitant will be treated as the death of
the Owner.
DEATH OF OWNER AFTER ANNUITY DATE
If the Owner dies on or after a Settlement Option has commenced, payments must
continue at least as rapidly as under the method of distribution in effect prior
to the Owner's death.
SETTLEMENT OPTIONS
An Annuity may be issued in any of the forms described below, or such other
forms which First SAFECO agrees to issue under the Contract. Options (a), (b),
and (c) are irrevocable once they have begun. Option (d) is irrevocable for the
first eight Contract Years, and then may be changed.
(a) Variable Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and the last
payment is that payment due immediately on or before the Annuitant's death. No
death benefit is payable under this option.
(b) Variable Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the Annuity Date. If at
the death of the Annuitant the guaranteed number of payments has not been
received by the Annuitant, payments will be made to the Beneficiary for the
remainder of the guarantee period. The Beneficiary may elect to have the present
value of the guaranteed Annuity remaining as of the date the notice of death is
received by First SAFECO commuted at the assumed investment rate of 4% and paid
in a single payment.
(c) Variable Joint and Survivor Life Annuity: Monthly payments are made
to the Annuitant commencing on the Annuity Date. After the death of the
Annuitant, payments will be continued to the co-annuitant for as long as he or
she lives. The written request for this option must specify the percentage value
of monthly payments to continue to the co-annuitant.
(d) Systematic Payment Annuity: A specified number of whole or partial
Accumulation Units are liquidated for payment to the Annuitant on a monthly,
quarterly, or annual basis. The number to be liquidated during a given year
shall be a sufficient number so as to be expected to deplete the Contract over
the life expectancy of the Annuitant or the joint life expectancy of the
Annuitant and Beneficiary, with at least 50% of the payments expected to be made
during the Annuitant's life. This Option will remain in effect unless the
Annuitant subsequently elects to receive payments under another Settlement
Option or elects to surrender the Contract after the eighth Contract Year.
If, as of the Annuity Date, a Settlement Option has not been selected, First
SAFECO will make payments under Option (b) above, with 120 payments.
Similar fixed annuity Settlement Options are available with respect to the
monies held in the Fixed Account.
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MORTALITY AND EXPENSE GUARANTEE
First SAFECO guarantees that the dollar amount of each Variable Annuity payment
made after the first payment will not be affected by variations in mortality
experience or expenses.
WITHDRAWALS AND TRANSFERS
WITHDRAWALS
First SAFECO, upon written request to it by the Owner, will allow the Withdrawal
of all or a portion of the Contract Value. Withdrawals will result in the
cancellation of Accumulation Units from each applicable Sub-Account of the
Separate Account or a reduction in the Fixed Account Value in the ratio that the
Sub-Account Value and/or the Fixed Account Value bears to the total Contract
Value. The Owner must specify in writing in advance which units are to be
canceled or values are to be reduced if other than the above-mentioned method of
cancellation is desired. First SAFECO will pay the amount of any Withdrawal
within seven (7) days of receipt of a request, unless the "Suspension of
Payments or Transfers" provision is in effect (see "Suspension of Payments or
Transfers" below). First SAFECO retains the right to defer the payment of
Withdrawals from the Fixed Account for a period of six (6) months after
receiving a Withdrawal request. (See also "The Programs.")
The minimum Withdrawal allowed is the lesser of $250 or the Contract Value. If
any Withdrawal reduces the remaining balance in a Sub-Account or the Fixed
Account to less than $500, the remaining balance will also be withdrawn.
Upon a Withdrawal, the number of Accumulation Units remaining under the Contract
will be reduced by the number of such units equal to the total of the
Withdrawal, including applicable charges and taxes, including income taxes
withheld.
Certain tax withdrawal penalties and restrictions may apply to withdrawals from
Contracts. (See "Tax Status.") For Contracts purchased in connection with 403(b)
plans, the Code limits the withdrawal of amounts attributable to contributions
made pursuant to a salary reduction agreement (as defined in Section 403(b)(11)
of the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship.
However, withdrawals for hardship are restricted to the portion of the Owner's
Contract Value which represents contributions made by the Owner and does not
include any investment results. The limitations on withdrawals became effective
on January 1, 1989 and apply only to salary reduction contributions made after
December 31, 1988, to income attributable to such contributions and to income
attributable to amounts held as of December 31, 1988. The limitations on
withdrawals do not affect rollovers or transfers between certain Qualified
Plans. Owners should consult their own tax counsel or other tax adviser
regarding any distributions.
TRANSFERS
An Owner may transfer Contract Values among Sub-Accounts up to twelve (12) times
annually without the imposition of any fee or charge. If more than twelve (12)
Transfers have been made in a Contract Year, First SAFECO reserves the right to
assess a Transfer Charge which will be equal to the lesser of $10 or 2% of the
amount transferred. The minimum Transfer from a Sub-Account must be at least
$500, except in the case of Automatic Transfers (described below). If the
Sub-Account from which the Transfer is being made contains less than $500, or is
reduced to less than $500 after a Transfer, the Owner's entire interest in the
Sub-Account will be transferred. The minimum Transfer into a Sub-Account must be
at least $50.
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Upon a Transfer from a Sub-Account, the number of Accumulation Units remaining
under that Sub-Account will be reduced by the number of such units equal to the
total of the requested Transfer, including applicable charges and taxes.
Transfers will be effected during the Valuation Period next following receipt by
First SAFECO of a written transfer request (or by telephone, if authorized)
containing all required information. (See "Transfers by Written Request" below.)
Transfers also may be effected under certain of the Programs and certain
specific limitations on transfers may apply under the Programs.
TRANSFERS BY WRITTEN REQUEST
Contract Values may be transferred by writing First SAFECO at the address on the
cover page of this Prospectus and specifying the Contract number, the amount to
be transferred, and the Sub-Accounts to be effected. The request must be signed
by the Owner or a third party to whom the Owner has given appropriate authority.
First SAFECO must have a copy of the document granting such authority. Transfers
will be effected during the Valuation Period next following receipt by First
SAFECO of the written transfer request.
SUSPENSION OF PAYMENTS OR TRANSFERS
First SAFECO reserves the right to suspend or postpone payments for a Withdrawal
or Transfer for any period when:
(i) The New York Stock Exchange is closed (other than customary
weekend and holiday closings);
(ii) Trading on the New York Stock Exchange is restricted, as
determined by the rules and regulations of the Securities and
Exchange Commission;
(iii) An emergency exists as a result of which disposal of
securities held in the Separate Account is not reasonably
practicable or it is not reasonably practicable to determine
the value of the Separate Account's net assets, as determined
by the rules and regulations of the Securities and Exchange
Commission; or
(iv) During any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners
provided that applicable rules and regulations of the
Securities and Exchange Commission will govern as to whether
the conditions described in (ii) and (iii) exist.
OTHER SERVICES
THE PROGRAMS
First SAFECO offers several investment related programs which are available only
prior to the Annuity Date: Dollar Cost Averaging; Automatic Transfers;
Appreciation or Interest Sweeps; Sub-Account Rebalancing; Systematic Investment;
and Periodic Withdrawal Programs. Certain of the Programs are alternatives with
respect to any one Sub-Account; other Programs may be combined. Thus, the Dollar
Cost Averaging Program, the Automatic Transfer Program and the Appreciation or
Interest Sweep Program are alternatives with respect to the selected
Sub-Account, and in all cases with respect to the Fixed Account. However, the
Sub-Account Rebalancing Program may be combined with each of the other Programs,
but it is not available with respect to the Fixed Account. Under each Program,
the related transfers between and among Sub-Accounts and the Fixed Account are
not counted as one of the twelve free transfers. However, if an Owner executes
an unrelated voluntary transfer from
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the Sub-Account participating in a Program, other than the Sub-Account
Rebalancing Program, the Program will be terminated for the remainder of the
Contract Year. In addition, if a Program is terminated before six Program
transfers have occurred, the six Program transfers are counted as part of the
twelve free transfers. If the balance in a Sub-Account would be less than $500
as a result of a transfer pursuant to one of these Programs, other than the
Appreciation or Interest Sweep and Sub-Account Rebalancing Programs, then the
entire balance in that Sub-Account will also be transferred. Each of the
Programs has its own requirements, as discussed below.
DOLLAR COST AVERAGING PROGRAM
First SAFECO offers a Dollar Cost Averaging Program during the Accumulation
Period whereby an Owner may predesignate a portion of any Sub-Account's Contract
Value or the Fixed Account's Contract Value to be automatically transferred on a
monthly or quarterly basis to one or more of the other Sub-Accounts or to the
Fixed Account. The amount to be transferred may be expressed as a set dollar
amount or as a percentage of the Contract Value in the selected Sub-Account or
the Fixed Account. Transfers from the Fixed Account are subject to a maximum of
1.33% monthly or 4% quarterly of the Contract Value in the Fixed Account at the
time of the initial transfer. Upon election of the Dollar Cost Averaging Program
the limitations on transfers from the Fixed Account will be calculated. The
resultant limitations will apply for the entire duration of participation in
this Program. Each Dollar Cost Averaging transfer is subject to a minimum
transfer of fifty dollars ($50).
The Dollar Cost Averaging Program is available for Purchase Payments and for
Contract Value transferred into any Sub-Account. An Owner may enroll in this
Program at the time the Contract is issued or anytime thereafter by properly
completing the Dollar Cost Averaging enrollment form and returning it to First
SAFECO at its Home Office at least ten (10) business days prior to the first
business day of the month, which is the date that all Program transfers will be
made ("Transfer Date"). This Program must be elected for at least a six (6)
month period.
If the Contract Value in the participating Sub-Account or the Fixed Account does
not equal or exceed the amount designated to be transferred on each Transfer
Date, Dollar Cost Averaging will cease automatically and the remaining amount
will be transferred.
Dollar Cost Averaging will terminate when (i) the designated monthly or
quarterly amounts of transfers have been completed, (ii) the Owner requests
termination in writing and such writing is received at the Home Office at least
ten (10) business days prior to the next Transfer Date in order to cancel the
transfer scheduled to take effect on such date, (iii) the Owner effects any
other transfer from the participating Sub-Account or the Fixed Account while the
Dollar Cost Averaging Program is in effect, or (iv) the Contract is surrendered.
In addition, if any transfer or withdrawal has been made from the Fixed Account
during the Contract Year, the Dollar Cost Averaging Program may not be
established through the Fixed Account for that Contract Year.
An Owner may initiate, reinstate or change the Dollar Cost Averaging terms by
properly completing a new enrollment form and returning it to the Home Office at
least ten (10) business days prior to the next Transfer Date such transfer is to
be made.
When utilizing Dollar Cost Averaging an Owner may be invested in either a
Sub-Account or the Fixed Account and may be invested in any other Sub-Accounts
or the Fixed Account at any given time.
AUTOMATIC TRANSFER PROGRAM
The Automatic Transfer Program is identical to the Dollar Cost Averaging Program
in all respects other than with regard to the limitations on transfers from the
Fixed Account. The limitations on transfers from the Fixed Account are
recalculated annually. Transfers from the Fixed Account are limited to 1.5%
monthly and 4.5% quarterly.
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APPRECIATION OR INTEREST SWEEP PROGRAM
An Owner may enroll in the Appreciation or Interest Sweep Program through either
or both the SAFECO Resource Money Market Sub-Account or the Fixed Account.
Enrollment is limited to Owners whose total Contract Value is greater than
$10,000. Under the Program, if appreciation on Contract Value in the SAFECO
Resource Money Market Sub-Account or credited interest earned on Contract Value
in the Fixed Account ("Earnings") is greater than 10%, the Earnings up to 10% of
the Contract Value in the Fixed Account or the SAFECO Resource Money Market
Sub-Account, respectively, will be transferred to any of the Sub-Accounts, other
than the SAFECO Resource Money Market Sub-Account. Earnings in the SAFECO
Resource Money Market Sub-Account may not be transferred to the Fixed Account.
In no event may the total Contract Value transferred from the Fixed Account in
each Contract Year exceed a total of 10% of the Contract Value for each such
Contract Year in the Fixed Account computed at the time of the transfer.
Moreover, the Program may not be instituted for the Fixed Account in any
Contract Year during which transfers or withdrawals have been made from the
Fixed Account. Transfers under this Program will be processed monthly, quarterly
or annually on the Transfer Date.
SUB-ACCOUNT REBALANCING PROGRAM
In accordance with the Owner's election of the relative purchase payments
percentage allocations, First SAFECO will automatically rebalance the Contract
Value of each Sub-Account either quarterly, semi-annually, or annually. First
SAFECO will automatically rebalance the Contract Value in each of the
Sub-Accounts to match the current purchase payments percentage allocations as of
the first Transfer Date during the period selected. Enrollment is limited to
Owners whose total Contract Value is greater than $10,000 at the time the
Program is selected. The Program may be terminated at any time and the
percentages may be altered by written authorization. The requested change must
be received at the Home Office ten (10) days prior to the Transfer Date. If the
Owner terminates the Program, a new Program may not be instituted until the next
Contract Year.
SYSTEMATIC INVESTMENT PROGRAM
Purchase Payments may be made by monthly draft against the bank account of any
Owner that has completed and returned to First SAFECO a Systematic Investment
Program application and authorization form. The application and authorization
form may be obtained from First SAFECO or from the sales representative. Each
Systematic Investment Program Purchase Payment is subject to a minimum of one
hundred dollars ($100).
PERIODIC WITHDRAWAL PROGRAM
First SAFECO will make monthly, quarterly or annual distributions of a
predetermined dollar amount to an Owner that has enrolled in the Periodic
Withdrawal Program. The Periodic Withdrawal Program is to be distinguished from
the Systematic Payment Annuity. (See "Settlement Options.") Under the Program,
all distributions will be made directly to the Owner and will be treated for
federal tax purposes as any other withdrawal or distribution of Contract Value.
(See "Tax Status.") An Owner may specify the amount of each withdrawal, subject
to a minimum of $250. In each Contract Year, up to 10% of Contract Value may be
withdrawn without the imposition of any Contingent Deferred Sales Charge. If
withdrawals pursuant to the Program are greater than 10% of Contract Value in
any Contract Year, the amount of the withdrawals greater than 10% will be
subject to the applicable Contingent Deferred Sales Charge. Any ad hoc
withdrawals an Owner makes during a Contract Year will be aggregated with
withdrawals pursuant to the Program to determine the applicability of any
Contingent Deferred Sales Charge. If the frequency of withdrawals under the
Program is greater than annual, First SAFECO will charge an annual fee of $25 to
compensate it for the added administrative costs.
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Unless the Owner specifies the Sub-Account or Sub-Accounts or the Fixed Account
from which withdrawals of Contract Value shall be made or if the amount in a
specified Sub-Account is less than the predetermined amount, First SAFECO will
make withdrawals under the Program from the Sub-Accounts and the Fixed Account
in amounts proportionate to the amounts in the Sub-Accounts and the Fixed
Account. Withdrawals are subject to the applicable minimum Sub-Account balances.
All withdrawals under the Program will be effected by canceling the number of
Accumulation Units equal in value to the amount to be distributed to the Owner
and any applicable Contingent Deferred Sales Charge.
The Program may be combined with all other Programs except those entailing
transfers or withdrawals from the Fixed Account. However, the Owner may
terminate such other program and may begin participation in the Program on the
first day of the next Contract Year.
It may not be advisable to participate in the Program and incur a Contingent
Deferred Sales Charge when making additional Purchase Payments under the
Contract.
TAX STATUS
NOTE: The following description is based upon First SAFECO's understanding of
current federal income tax law applicable to annuities in general. First SAFECO
cannot predict the probability that any changes in such laws will be made.
Purchasers are cautioned to seek competent tax advice regarding the possibility
of such changes. First SAFECO does not guarantee the tax status of the
Contracts. Purchasers bear the complete risk that the Contracts may not be
treated as "annuity contracts" under federal income tax laws. It should be
further understood that the following discussion is not exhaustive and that
special rules not described in this Prospectus may be applicable in certain
situations. Moreover, no attempt has been made to consider any applicable state
or other tax laws.
GENERAL
Section 72 of the Code governs taxation of annuities in general. An Owner is not
taxed on increases in the value of a Contract until distribution occurs, either
in the form of a lump sum payment, a withdrawal or as annuity payments under the
Settlement Option elected. For a lump sum payment received as a total surrender
(total redemption), the recipient is taxed on the portion of the payment that
exceeds the cost basis of the Contract. For Non-Qualified Contracts, this cost
basis is generally the Purchase Payments, while for Qualified Contracts there
may be no cost basis.
For annuity payments, a portion of each payment in excess of an exclusion amount
is includable in taxable income. The exclusion amount for payments based on a
fixed annuity is determined by multiplying the payment by the ratio that the
cost basis of the Contract (adjusted for any period certain or refund feature)
bears to the expected return under the Contract. The exclusion amount for
payments based on a variable annuity is determined by dividing the cost basis of
the Contract (adjusted for any period certain or refund guarantee) by the number
of years over which the annuity is expected to be paid. Payments received after
the investment in the Contract has been recovered (i.e. when the total of the
excludable amounts equals the investment in the Contract) are fully taxable. The
taxable portion is taxed at ordinary income tax rates. For certain types of
Qualified Plans there may be no cost basis in the Contract within the meaning of
Section 72 of the Code resulting in the annuity payments being fully includable
in taxable income. Owners, Annuitants and Beneficiaries under the Contracts
should seek competent financial advice about the tax consequences of any
distributions.
First SAFECO is taxed as a life insurance company under the Code. For federal
income tax purposes, the Separate Account is not a separate entity from First
SAFECO and its operations form a part of First SAFECO.
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DIVERSIFICATION
Section 817(h) of the Code imposes certain diversification standards on the
underlying assets of variable annuity contracts. The Code provides that a
variable annuity contract will not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the United States Treasury Department
("Treasury Department"), adequately diversified. Disqualification of the
Contract as an annuity contract would result in imposition of federal income tax
to the Owner with respect to earnings allocable to the Contract prior to the
receipt of payments under the Contract. The Code contains a safe harbor
provision which provides that annuity contracts such as the Contracts meet the
diversification requirements if, as of the end of each quarter, the underlying
assets meet the diversification standards for a regulated investment company and
no more than fifty-five percent (55%) of the total assets consist of cash, cash
items, U.S. Government securities and securities of other regulated investment
companies.
On March 2, 1989, the Treasury Department issued Regulations (Treas. Reg.
1.817-5), which established diversification requirements for the investment
portfolios underlying variable contracts such as the Contracts. The Regulations
amplify the diversification requirements for variable contracts set forth in the
Code and provide an alternative to the safe harbor provision described above.
Under the Regulations, an investment portfolio will be deemed adequately
diversified if: (1) no more than 55% of the value of the total assets of the
portfolio is represented by any one investment; (2) no more than 70% of the
value of the total assets of the portfolio is represented by any two
investments; (3) no more than 80% of the value of the total assets of the
portfolio is represented by any three investments; and (4) no more than 90% of
the value of the total assets of the portfolio is represented by any four
investments.
The Code provides that, for purposes of determining whether or not the
diversification standards imposed on the underlying assets of variable contracts
by Section 817(h) of the Code have been met, "each United States government
agency or instrumentality shall be treated as a separate issuer."
First SAFECO intends that all Portfolios of the Trust and the Funds underlying
the Contracts will be managed in such a manner as to comply with these
diversification requirements.
The Treasury Department has indicated that the diversification Regulations do
not provide guidance regarding the circumstances in which Owner control of the
investments of the Separate Account will cause the Owner to be treated as the
owner of the assets of the Separate Account, thereby resulting in the loss of
favorable tax treatment for the Contract. At this time it cannot be determined
whether additional guidance will be provided and what standards may be contained
in such guidance.
The amount of Owner control which may be exercised under the Contract is
different in some respects from the situations addressed in published rulings
issued by the Internal Revenue Service in which it was held that the policy
owner was not the owner of the assets of separate account. It is unknown whether
these differences, such as the Owner's ability to transfer among investment
choices or the number and type of investment choices available, would cause the
Owner to be considered as the owner of the assets of the Separate Account
resulting in the imposition of federal income tax to the Owner with respect to
earnings allocable to the Contract prior to receipt of payments under the
Contract.
In the event any forthcoming guidance or ruling is considered to set forth a new
position, such guidance or ruling will generally be applied only prospectively.
However, if such ruling or guidance was not considered to set forth a new
position, it may be applied retroactively resulting in the Owner being
retroactively determined to be the owner of the assets of the Separate Account.
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Due to the uncertainty in this area, First SAFECO reserves the right to modify
the Contract in an attempt to maintain favorable tax treatment.
MULTIPLE CONTRACTS
The Code provides that multiple non-qualified annuity contracts which are issued
within a calendar year to the same contract owner by one company or its
affiliates are treated as one annuity contract for purposes of determining the
tax consequences of any distribution. Such treatment may result in adverse tax
consequences including more rapid taxation of the distributed amounts from such
combination of contracts. Owners should consult a tax adviser prior to
purchasing more than one non-qualified annuity contract in any calendar year.
TAX TREATMENT OF ASSIGNMENTS
An assignment or pledge of a Contract may be a taxable event. Owners should
therefore consult competent tax advisers should they wish to assign or pledge
their Contracts.
INCOME TAX WITHHOLDING
All distributions or any portion(s) thereof which are includable in the gross
income of the Owner are subject to Federal income tax withholding. Generally,
amounts are withheld from periodic payments at the same rate as wages and at the
rate of 10% from non-periodic payments. However, the Owner, in most cases, may
elect not to have taxes withheld or to have withholding done at a different
rate.
Effective January 1, 1993, certain distributions from retirement plans qualified
under Section 401 or Section 403(b) of the Code, which are not directly rolled
over to another eligible retirement plan or individual retirement account or
individual retirement annuity, are subject to a mandatory 20% withholding for
Federal income tax. The 20% withholding requirement does not apply to: a)
distributions for the life or life expectancy of the participant or joint and
last survivor expectancy of the participant and a designated beneficiary; or b)
distributions for a specified period of 10 years or more; or c) distributions
which are required minimum distributions. Participants should consult their own
tax counsel or other tax advisor regarding withholding.
TAX TREATMENT OF WITHDRAWALS - NON-QUALIFIED CONTRACTS
Section 72 of the Code governs treatment of distributions from annuity
contracts. It provides that if the Contract Value exceeds the aggregate purchase
payments made, any amount withdrawn will be treated as coming first from the
earnings and then, only after the income portion is exhausted, as coming from
the principal. Withdrawn earnings are includable in gross income. It further
provides that a ten percent (10%) penalty will apply to the income portion of
any premature distribution. However, the penalty is not imposed on amounts
received: (a) after the taxpayer reaches age 59 1/2; (b) after the death of the
Owner; (c) if the taxpayer is totally disabled (for this purpose disability is
as defined in Section 72(m)(7) of the Code); (d) in a series of substantially
equal periodic payments made not less frequently than annually for the life (or
life expectancy) of the taxpayer or for the joint lives (or joint life
expectancies) of the taxpayer and his or her Beneficiary; (e) under an immediate
annuity; or (f) which are allocable to purchase payments made prior to August
14, 1982.
The above information does not apply to Qualified Contracts. However, separate
tax withdrawal penalties and restrictions may apply to such Qualified Contracts.
(See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
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QUALIFIED PLANS
The Contracts offered by this Prospectus are designed to be suitable for use
under various types of Qualified Plans. Taxation of participants in each
Qualified Plan varies with the type of plan and terms and conditions of each
specific plan. Owners, Annuitants and Beneficiaries are cautioned that benefits
under a Qualified Plan may be subject to the terms and conditions of the plan
regardless of the terms and conditions of the Contracts issued pursuant to the
plan. Some retirement plans are subject to distribution and other requirements
that are not incorporated into the Company's administrative procedures. Contract
Owners, participants and beneficiaries are responsible for determining that
contributions, distributions and other transactions with respect to the Contract
comply with applicable law. Following are general descriptions of the types of
Qualified Plans with which the Contracts may be used. Such descriptions are not
exhaustive and are for general informational purposes only. The tax rules
regarding Qualified Plans are very complex and will have differing applications
depending on individual facts and circumstances. Each purchaser should obtain
competent tax advice prior to purchasing a Contract issued under a Qualified
Plan.
Contracts issued pursuant to Qualified Plans include special provisions
restricting Contract provisions that may otherwise be available as described in
this Prospectus. Generally, Contracts issued pursuant to Qualified Plans are not
transferable except upon surrender or annuitization. Various penalty and excise
taxes may apply to contributions or distributions made in violation of
applicable limitations. Furthermore, certain withdrawal penalties and
restrictions may apply to surrenders from Qualified Contracts. (See "Tax
Treatment of Withdrawals - Qualified Contracts", below.)
On July 6, 1983, the Supreme Court decided in Arizona Governing Committee v.
Norris that optional annuity benefits provided under an employer's deferred
compensation plan could not, under Title VII of the Civil Rights Act of 1964,
vary between men and women. The Contracts sold by First SAFECO in connection
with Qualified Plans will utilize annuity tables which do not differentiate on
the basis of sex. Such annuity tables will also be available for use in
connection with certain non-qualified deferred compensation plans.
a. Tax Sheltered Annuities
Section 403(b) of the Code permits the purchase of "tax-sheltered
annuities" by public schools and certain charitable, educational and scientific
organizations described in Section 501(c)(3) of the Code. These qualifying
employers may make contributions to the Contracts for the benefit of their
employees. Such contributions are not includable in the gross income of the
employees until the employees receive distributions from the Contracts. The
amount of contributions to the tax-sheltered annuity is limited to certain
maximums imposed by the Code. Furthermore, the Code sets forth additional
restrictions governing such items as transferability, distributions,
nondiscrimination and withdrawals. (See "Tax Treatment of Withdrawals -
Qualified Contracts" below.) Any employee should obtain competent tax advice as
to the tax treatment and suitability of such an investment.
b. Individual Retirement Annuities
Section 408(b) of the Code permits eligible individuals to contribute to
an individual retirement program known as an "Individual Retirement Annuity"
("IRA"). Under applicable limitations, certain amounts may be contributed to an
IRA which will be deductible from the individual's gross income. These IRAs are
subject to limitations on eligibility, contributions, transferability and
distributions. (See "Tax Treatment of Withdrawals - Qualified Contracts" below.)
Under certain conditions, distributions from other IRAs and other Qualified
Plans may be rolled over or transferred on a tax-deferred basis into an IRA.
Sales of Contracts for use with IRAs are subject to special requirements imposed
by the Code, including the requirement that certain informational disclosure be
given to persons desiring to establish an IRA. Purchasers of Contracts to be
qualified as Individual Retirement Annuities should obtain competent tax advice
as to the tax treatment and suitability of such an investment.
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TAX TREATMENT OF WITHDRAWALS - QUALIFIED CONTRACTS
Section 72(t) of the Code imposes a 10% penalty tax on the taxable portion of
any distribution from qualified retirement plans, including Contracts issued and
qualified under Code Sections 403(b) (Tax Sheltered Annuities) and 408(b)
(Individual Retirement Annuities). To the extent amounts are not includable in
gross income because they have been rolled over to an IRA or to another eligible
Qualified Plan, no tax penalty will be imposed. The tax penalty will not apply
to the following distributions: (a) if distribution is made on or after the date
on which the Owner or Annuitant (as applicable) reaches age 59 1/2; (b)
distributions following the death or disability of the Owner or Annuitant (as
applicable) (for this purpose disability is as defined in Section 72(m)(7) of
the Code); (c) after separation from service, distributions that are part of
substantially equal periodic payments made not less frequently than annually for
the life (or life expectancy) of the Owner or Annuitant (as applicable) or the
joint lives (or joint life expectancies) of such Owner or Annuitant (as
applicable) and his or her designated Beneficiary; (d) distributions to an Owner
or Annuitant (as applicable) who has separated from service after he has
attained age 55; (e) distributions made to the Owner or Annuitant (as
applicable) to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the Owner or Annuitant (as applicable)
for amounts paid during the taxable year for medical care; and (f) distributions
made to an alternate payee pursuant to a qualified domestic relations order. The
exceptions stated in (d), (e) and (f) above do not apply in the case of an
Individual Retirement Annuity. The exception stated in (c) above applies to an
Individual Retirement Annuity without the requirement that there be a separation
from service.
Generally, distributions from a Qualified Plan must commence no later than April
1 of the calendar year, following the year in which the employee attains age 70
1/2. Required distributions must be over a period not exceeding the life
expectancy of the individual or the joint lives or life expectancies of the
individual and his or her designated beneficiary. If the required maximum
distributions are not made, a 50% penalty tax is imposed as to the amount not
distributed. In addition, distributions in excess of $150,000 per year in the
case of periodic distributions and in excess of $750,000 in the case of lump sum
distributions may be subject to an additional 15% excise tax unless an exemption
applies.
TAX SHELTERED ANNUITIES - WITHDRAWAL LIMITATIONS
The Code limits the withdrawal of amounts attributable to contributions made
pursuant to a salary reduction agreement (as defined in Section 403(b)(11) of
the Code) to circumstances only when the Owner: (1) attains age 59 1/2; (2)
separates from service; (3) dies; (4) becomes disabled (within the meaning of
Section 72(m)(7) of the Code); or (5) in the case of hardship. However,
withdrawals for hardship are restricted to the portion of the Owner's Contract
Value which represents contributions made by the Owner and does not include any
investment results. The limitations on withdrawals became effective on January
1, 1989 and apply only to salary reduction contributions made after December 31,
1988, to income attributable to such contributions and to income attributable to
amounts held as of December 31, 1988. The limitations on withdrawals do not
affect rollovers or transfers between certain Qualified Plans. Owners should
consult their own tax counsel or other tax adviser regarding any distributions.
CONTRACTS OWNED BY OTHER THAN NATURAL PERSONS
Generally, any gain in the Contract will be taxed currently to the Owner if the
Contract is not held for the benefit of a natural person. Such Contracts
generally will not be treated as annuities for federal income tax purposes.
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LEGAL PROCEEDINGS
There are no legal proceedings to which the Separate Account, SSI or PNMR is a
party. First SAFECO is engaged in various kinds of litigation which, in the
opinion of First SAFECO, is not of material importance in relation to the total
capital and surplus of First SAFECO.
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TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
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<S> <C>
ANNUITY PROVISIONS .....................................................................
General..............................................................................
Annuity Unit.........................................................................
Assumed Investment Factor............................................................
Variable Annuity Payment Calculation.................................................
ADDITIONAL PERFORMANCE INFORMATION .....................................................
Performance Comparisons..............................................................
Performance Information..............................................................
Yields............................................................................
Total Returns.....................................................................
EXPERTS ................................................................................
FINANCIAL STATEMENTS
First SAFECO Separate Account S......................................................
First SAFECO National Life Insurance Company of New York and Subsidiaries............
</TABLE>
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STATEMENT OF ADDITIONAL INFORMATION
FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY OF NEW YORK
GENERAL INFORMATION
FIRST SAFECO
First SAFECO National Life Insurance Company of New York ("First SAFECO") is a
wholly-owned subsidiary of SAFECO Life Insurance Company ("SAFECO"), which is a
wholly owned subsidiary of SAFECO Corporation which is a holding company whose
subsidiaries are engaged primarily in insurance and financial services
businesses.
At March 31, 1996, SAFECO Life Insurance Company owned 68% of the outstanding
shares of the Resource Series Trust ("RST") Northwest Portfolio and 100% of the
outstanding shares of each of the RST Equity, Growth, Bond and Money Market
Portfolios. At March 31, 1996, SAFECO Asset Management ("SAM"), which is the RST
investment advisor, owned 32% of the outstanding shares of the RST Northwest
Portfolio. SAFECO Life Insurance Company and SAM are wholly-owned subsidiaries
of SAFECO Corporation.
SAFEKEEPING OF THE ASSETS OF THE SEPARATE ACCOUNT
First SAFECO holds the assets of the Separate Account. The assets are kept
segregated and held separate and apart from the general account assets of First
SAFECO. First SAFECO maintains records of all Separate Account purchases and
redemptions of the shares of each Portfolio of SAFECO Resource Series Trust
(Trust), Federated Insurance Series, Lexington Emerging Markets Fund, Inc., and
Lexington Natural Resources Trust.
INDEPENDENT AUDITORS
Ernst & Young LLP, 999 Third Avenue, Suite 3500, Seattle, Washington 98104, is
the independent auditor of the financial statements of First SAFECO and
Subsidiaries and First SAFECO Separate Account S.
DISTRIBUTOR
SAFECO Securities, Inc. (SSI), acts as the principal underwriter for the
Contracts. The offering is on a continuous basis. As this is the initial
registration no contracts have been distributed and no commissions for
distributions have been paid or retained. It is not anticipated that PNMR will
retain any portion of commission payments made in conjunction with the
distribution of the Contracts.
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus for the Individual Flexible Purchase Payment
Deferred Variable Annuity Contracts.
The Prospectus concisely sets forth information that a prospective investor
should know before investing. For a copy of the Prospectus, call 1-800-878-2041
or write to First SAFECO National Life Insurance Company, Annuity Service
Office, 6700 Collamer Road, East Syracuse, New York 13057.
This Statement of Additional Information and the Prospectus are both dated
(pending registration effective date)
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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<S> <C>
ANNUITY PROVISIONS ................................................................................................
General.........................................................................................................
Annuity Unit....................................................................................................
Assumed Investment Factor.......................................................................................
Variable Annuity Payment Calculation............................................................................
ADDITIONAL PERFORMANCE INFORMATION ................................................................................
Performance Comparisons.........................................................................................
Performance Information.........................................................................................
Yields.....................................................................................................
Total Returns..............................................................................................
EXPERTS ...........................................................................................................
FINANCIAL STATEMENTS ..............................................................................................
First SAFECO Separate Account S(not applicable for initial registration)........................................
First SAFECO National Life Insurance Company of New York........................................................
</TABLE>
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ANNUITY PROVISIONS
GENERAL
The Settlement Options and related provisions are described in the Prospectus.
ANNUITY UNIT
The value of the Annuity Unit is determined by multiplying the value of the
Annuity Unit for the immediately preceding Valuation Period by the Net
Investment Factor for the Valuation Period for which the value is being
calculated, and dividing the result by the Assumed Investment Factor for such
Valuation Period.
ASSUMED INVESTMENT FACTOR
The Assumed Investment Factor for a one day Valuation Period is 1.00010746. This
factor neutralizes the assumed investment return of 4% in the Variable Annuity
purchase rate table in the Contract.
VARIABLE ANNUITY PAYMENT CALCULATION
A Variable Annuity is an Annuity with payments which are not predetermined as to
dollar amount. Payments will vary in accordance with the net investment results
of the Separate Account. The dollar amount of the first monthly Variable Annuity
payment under Settlement Options (a), (b) or (c), will be determined by applying
the Contract Value (after deduction for premium taxes, if applicable), as of the
15th day of the preceding month, to the Variable Annuity purchase rate table in
the Contract. The number of Annuity Units to be credited to the Annuitant will
be determined by dividing the first monthly payment by the Annuity Unit value
calculated as of the 15th day of the preceding month. This number of Annuity
Units remains fixed during the Annuity payment period. The dollar amount of each
Variable Annuity payment after the first shall be determined by multiplying the
number of Annuity Units credited to the Annuitant by the Annuity Unit value as
of the 15th day of the preceding month.
ADDITIONAL PERFORMANCE INFORMATION
STANDARDIZED COMPUTATION OF PERFORMANCE
PERFORMANCE COMPARISONS. Performance Information for a Sub-Account may be
compared, in reports and advertising, to: (i) Standard & Poor's Stock Index, Dow
Jones Industrial Averages, Donahue Money Market Institutional Averages, or other
unmanaged indices generally regarded as representative of the securities
markets; (ii) other Variable Annuity separate accounts or other investment
products traced by Lipper Analytical Services, Inc., the Variable Annuity
Research and Data Service, or Morningstar, Inc., which are widely used
independent research firms that rank mutual funds and other investment companies
by overall performance, investment objectives and assets; and (iii) the Consumer
Price Index (a measure of inflation) to assess the real rate of return from an
investment in a Contract. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for annuity charges,
investment management costs, brokerage costs and other transaction costs that
are normally paid when directly investing in securities.
Total returns, yields, and other performance information may be quoted
numerically or in a table, graph, or similar illustration. Reports and
advertising also may contain other information, including the ranking of any
Sub-Account derived from rankings of Variable Annuity separate accounts or other
investment products traced by Lipper Analytical Services, Inc. or by rating
services, companies, publications, or other persons which rank separate accounts
or other investment products on overall performance or other criteria.
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<PAGE> 51
PERFORMANCE INFORMATION.
YIELDS. Some Sub-Accounts may advertise yields. Yields quoted in advertising
reflect the change in value of a hypothetical investment in the Sub-Account over
a stated period of time, not taking in to account capital gains or losses or the
imposition of any Contingent Deferred Sales Charge. Yields are annualized and
stated as a percentage.
Current yield and effective yield are calculated for the SAFECO Resource Money
Market Sub-Account. Current Yield is based on the change in the value of a
hypothetical investment (exclusive of capital changes) over a particular seven
(7) day period, less a hypothetical charge reflecting deductions from values
during the period (the base period), and stated as a percentage of the
investment at the start of the base period (the base period return). The base
period return is then annualized by multiplying by 365/7, with the resulting
yield figure carried to at least the nearest hundredth of one percent. Effective
yield assumes that all dividends received during an annual period have been
reinvested. This compounding effect causes effective yield to be higher than
current yield. Calculation of effective yield begins with the same base period
return used in the calculation of current yield, which is then annualized to
reflect weekly compounding pursuant to the following formula:
Effective Yield = [(Base Period Return + 1)(365/7)] - 1
Yield for the SAFECO Resource Bond Sub-Account and Federated High Income Bond
Sub-Account is based on all investment income (including dividends and interest)
per accumulation unit earned during a particular thirty (30) day period, less
expenses accrued during the period (net investment income). Yield is computed by
dividing net investment income by the value of an accumulation unit on the last
day of the period, according to the following formula:
Yield = 2[((a-b)/cd + 1)(6) - 1]
where a = net investment income earned during the period by the corresponding
Available Fund portfolio, b = expenses accrued for the period (net of any
reimbursements), c = the average daily number of accumulation units outstanding
during the period, and d = the value (maximum offering price) per accumulation
unit on the last day of the period.
TOTAL RETURNS. Total return reflects all aspects of a Sub-Account's return,
including the automatic reinvestment by the Sub-Account of all distributions and
the deduction of all applicable charges to the Sub-Account on an annual basis,
including mortality and expense risk charges, the Annual Administration
Maintenance Charge, the Asset Related Administration Charge, and any other
charges against Contract Value. Quotations also will assume a termination
(surrender) at the end of the particular period and reflect the deduction of the
Contingent Deferred Sales Charge, if applicable. Additional quotations may be
given that do not assume a termination (surrender) and do not take into account
deduction of the Contingent Deferred Sales Charge, since the Contracts are
intended as long-term products.
From time to time, non-standardized total return figures may accompany the
standardized figures. Non-standardized total return figures may be calculated in
a variety of ways including but not necessarily limited to different time
periods, different initial investment amounts, additions of periodic payments,
use of time weighted average annual returns which take into consideration the
length of time each investment has been on deposit, and without the
Administration Charge and/or with or without the Contingent Deferred Sales
Charge. Non-standardized figures may cause the performance of the Sub-Accounts
to appear higher than performance calculated using standard parameters.
Average annual total returns are calculated by determining the growth or decline
in value of a hypothetical investment in the Sub-Account over certain periods,
including 1, 5, and 10 years (up to the life of the Sub-Account), and then
calculating the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over
48
<PAGE> 52
the period. Investors should realize that the Sub-Account's experience is not
constant over time, but changes from year to year, and that the average annual
returns represent averaged figures as opposed to the year-to-year performance of
a Sub-Account. Average annual returns are calculated pursuant to the following
formula: P(1 + T)(n) = ERV, where P is a hypothetical initial payment of
$1,000, T is the average annual total return, n is the number of years, and
ERV is the withdrawal value at the end of the period.
Cumulative total returns are unaveraged and reflect the simple change in value
of a hypothetical investment in the Sub-Account over a stated period of time.
EXPERTS
The financial statements of First SAFECO National Life Insurance Company
appearing in the Statement of Additional Information have been audited by Ernst
& Young LLP, independent auditors, as set forth to the extent indicated in their
reports thereon will be added by pre-effective amendment and will also appear in
the Statement of Additional Information. Such financial statements have been
included therein in reliance on their reports given on their authority as
experts in accounting and auditing.
FINANCIAL STATEMENTS
The consolidated financial statements of First SAFECO National Life Insurance
Company and First SAFECO Separate Account S will be included herein by
pre-effective amendment and should be considered only as bearing upon the
ability of First SAFECO to meet its obligations under the Contracts.
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<PAGE> 53
FINANCIAL STATEMENTS
TO BE ADDED BY PRE-EFFECTIVE AMENDMENT
FIRST SAFECO SEPARATE ACCOUNT S
(TO BE ADDED BY PRE-EFFECTIVE AMENDMENT)
TABLE OF CONTENTS
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Report of Ernst & Young LLP, Independent Auditors ...........................................
Statement of Assets and Liabilities as of _______________ ...................................
Statement of Operations for the year ended _____________ ....................................
Statements of Changes in Net Assets for the year or period ended December 31, 199_ ..........
and December 31, 199_................................................................
Notes to Financial Statements (including accumulation unit data) ............................
</TABLE>
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FIRST SAFECO SEPARATE ACCOUNT S
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
a. FINANCIAL STATEMENTS The audited financial statements of First SAFECO
National Life Insurance Company will be included in the Statement of
Additional Information of this Registration Statement by pre-effective
amendment:
REGISTRANT:
Not Applicable
FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY:
Consolidated Balance Sheets as of December 31, 1995 and 1994.
Statement of Consolidated Income for the years ended December
31, 1995, 1994.
Statement of Changes in Stockholder's Equity for the years
ended December 31, 1995, 1994.
Statement of Consolidated Cash Flows for the years ended
December 31, 1995, 1994.
Notes to Consolidated Financial Statements.
b. EXHIBITS
Exhibit Number Description of Document
- -------------- -----------------------
1. Resolution of Board of Directors of First SAFECO authorizing
the establishment of the Separate Account.
2. Not Applicable
3. (i) Form of Principal Underwriter's Agreement *
(ii) Selling Agreement *
4. (i) Individual Flexible Purchase Payment Deferred Variable
Annuity Contracts
(ii) Riders and Endorsements
5. Application for Annuity Contract
6. (i) Copy of Articles of Incorporation of First SAFECO *
(ii) Copy of the Bylaws of First SAFECO *
7. Not Applicable
8.a. Participation Agreement by and among First SAFECO National Life
Insurance Company, Federated Insurance Series, on behalf of
the Federated High Income Bond Fund II, Federated
International Equity Fund II, Federated Utility Fund II,
Federated Securities Corp. and Federated Advisers.
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8.b. Participation Agreement by and among First SAFECO NATIONAL Life
Insurance Company, Lexington Emerging Markets Fund, Inc., Lexington
Natural Resources Trust, and Lexington Management Corporation.
9. Opinion and Consent of Counsel
10. Consent of Independent Auditors *
11. Not Applicable
12. Not Applicable
13. Calculation of Performance Information
14. Power of Attorney *
15. Representation of Counsel
* To be filed by pre-effective amendment
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
Set forth below is a list of each director and officer of First SAFECO National
Life Insurance Company ("First SAFECO") who is engaged in activities relating to
First SAFECO Separate Account S or the variable annuity contracts offered
through First SAFECO Separate Account S. Unless otherwise indicated the
principal business address of all officers or directors listed is 15411 N. E.
51st Street, Redmond, Washington 98052.
Name Position with First SAFECO
---- --------------------------
Richard E. Zunker Director, President
John P. Fenlason Sr. Vice President,
Rod A. Pierson Director, Sr. Vice President, Secretary*
James T. Flynn Director, Vice President, Controller, Asst. Secretary
Clyde Goldberg Vice President#
Michael J. Kinzer Vice President, Actuary
Michael C. Knebel Vice President, Treasurer*
Stephen D. Collier Assistant Secretary*
H. Paul Lowber Asst. Secretary*
George C. Pagos Asst. Secretary
Bradford K. Young Asst. Secretary*
Kenneth N. Berk Director*
Ronald L. Spaulding Director*
52
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Boh A. Dickey Director*
*Messrs. Dickey, Spaulding, Berk, Young, Lowber, Collier, Knebel and Pierson
their principle business address at SAFECO Plaza Seattle, WA 98185.
#Messr. Goldberg maintains his principle business address at 6700 Old Collamer
Road, East Syracuse, NY 13057.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
First SAFECO Life Insurance Company ("First SAFECO") established First SAFECO
Separate Account S ("Registrant") by resolution of its Board of Directors
pursuant to New York law. First SAFECO is a wholly-owned subsidiary of SAFECO
LIFE INSURANCE COMPANY which in turn is a wholly-owned subsidiary of SAFECO
Corporation. SAFECO Corporation is a publicly-owned company. Both SAFECO AND
SAFECO CORPORATION were organized under Washington law. SAFECO Corporation, a
Washington corporation, owns 100% of the following Washington corporations:
SAFECO Insurance Company of America, General Insurance Company of America, First
National Insurance Company of America, SAFECO Life Insurance Company of America,
SAFECO Assigned Benefits Service Company, SAFECO Administrative Services, Inc.,
SAFECO Properties Inc., SAFECO Credit Company, Inc., SAFECO Asset Management
Company, SAFECO Securities, Inc., SAFECO Services Corporation, SAFECO Trust
Company and General America Corporation. SAFECO Corporation owns 100% of SAFECO
National Insurance Company, a Missouri corporation, and SAFECO Insurance Company
of Illinois, an Illinois corporation. SAFECO Corporation owns 20% of Agena,
Inc., a Washington corporation. SAFECO Insurance Company of America owns 100% of
SAFECO Management Corp., a New York corporation, and SAFECO Surplus Lines
Insurance Company, a Washington corporation. SAFECO Life Insurance Company owns
100% of SAFECO National Life Insurance Company, a Washington corporation, and
First SAFECO National Life Insurance Company of New York, a New York
corporation. SAFECO Administrative Services, Inc. owns 100% of Employee Benefit
Claims of Wisconsin, Inc. and Wisconsin Pension and Group Services, Inc., each a
Wisconsin corporation. General America Corporation owns 100% of COMAV Managers,
Inc., an Illinois corporation, F.B. Beattie & Co., Inc., a Washington
corporation, General America Corp. of Texas, a Texas corporation, Talbot
Financial Corporation, a Washington corporation and SAFECO Select Insurance
Services, Inc.., a California corporation. F.B. Beattie & Co., Inc. owns 100% of
F.B. Beattie Insurance Services, Inc., a California corporation. General America
Corp. of Texas is Attorney-in-fact for SAFECO Lloyds Insurance Company, a Texas
corporation. Talbot Financial Corporation owns 100% of Talbot Agency, Inc., a
New Mexico corporation. Talbot Agency, Inc. owns 100% of PNMR Securities, Inc.,
a Washington corporation. SAFECO Properties Inc. owns 100% of the following,
each a Washington corporation: RIA Development, Inc., SAFECARE Company, Inc. and
Winmar Company, Inc. SAFECARE Company, Inc. owns 100% of the following, each a
Washington corporation: S.C. Bellevue, Inc., S.C. Everett, Inc., S.C.
Marysville, Inc., S.C. Simi Valley, Inc. and S.C. Vancouver, Inc. SAFECARE
Company, Inc. owns 50% of Lifeguard Ventures, Inc., a California corporation.
S.C. Simi Valley, Inc. owns 100% of Simi Valley Hospital, Inc., a Washington
corporation. Winmar Company, Inc. owns 50% of C-W Properties, Inc., a Washington
corporation. Winmar Company, Inc. owns 100% of the following: Barton Street
Corp., Gem State Investors, Inc., Kitsap Mall, Inc. WNY Development, Inc.,
Winmar Cascade, Inc., Winmar Metro, Inc., Winmar Northwest, Inc., Winmar
Redmond, Inc. and Winmar of Kitsap, Inc., each a Washington corporation, and
Capitol Court Corp., a Wisconsin corporation, SAFECO Properties of Boise, Inc.,
an Idaho corporation, SCIT, Inc., a Massachusetts corporation, Valley Fair
Shopping Centers, Inc., a Delaware corporation, WDI Golf Club, Inc., a
California corporation, Winmar Oregon, Inc., an Oregon corporation, Winmar of
Texas, Inc., a Texas corporation, Winmar of Wisconsin, Inc., a Wisconsin
corporation, and Winmar of the Desert, Inc., a California corporation. Winmar
Oregon, Inc. owns 100% of the following, each an Oregon corporation: North Coast
Management, Inc., Pacific Surfside Corp., Winmar of Jantzen Beach, Inc. and W-P
Development, Inc., and 100% of the following, each a Washington corporation:
Washington Square, Inc. and Winmar Pacific, Inc.
No person is directly or indirectly controlled by Registrant.
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ITEM 27. NUMBER OF CONTRACT OWNERS
As this is the initial registration there are no contractholders as of yet.
ITEM 28. INDEMNIFICATION
Under its Bylaws, First SAFECO, to the full extent permitted by New York law ,
shall indemnify any person who was or is a party to any proceeding (whether
brought by or in the right of First SAFECO or otherwise) by reason of the fact
that he or she is or was a director of First SAFECO, or, while a director of
First SAFECO, is or was serving at the request of First SAFECO as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan, against judgments, penalties, fines, settlements and reasonable
expenses actually incurred by him or her in connection with such proceeding.
First SAFECO shall extend such indemnification as is provided to directors above
to any person, not a director of First SAFECO, who is or was an officer of First
SAFECO or is or was serving at the request of First SAFECO as a director,
officer, partner, trustee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit plan.
In addition, the Board of Directors of First SAFECO may, by resolution, extend
such further indemnification to an officer or such other person as may to it
seem fair and reasonable in view of all relevant circumstances.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of First
SAFECO pursuant to such provisions of the bylaws or statutes or otherwise, First
SAFECO has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in said
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by First SAFECO
of expenses incurred or paid by a director, officer or controlling person of
First SAFECO in the successful defense of any such action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the Contracts issued by the Separate Account, First SAFECO 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 said Act and will
be governed by the final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
a. SAFECO Securities, Inc., the principal underwriter for the
Contracts, also acts as the principal underwriter for SAFECO's
Group Variable Annuity Contracts.
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b. The following information is provided for each principal
officer and director of the principal underwriter:
Name and Principal Positions and Offices
Business Address* with Underwriter
----------------- ----------------
Rod A. Pierson Director
Ronald Spaulding Director
David F. Hill Director, President and Secretary
Neal A. Fuller Vice President, Controller, Treasurer,
Financial Principal and Assistant Secretary
*The business address for all individuals listed is SAFECO Plaza,
Seattle, Washington 98185.
c. During the fiscal year ending December 31, 1996, PNMR
Securities, Inc., through SAFECO Securities, Inc., does not
expect to receive commissions for the distribution of certain
annuity contracts sold in connection with Registrant of which
no payment are expected to be retained. PNMR has not received
any other compensation in connection with the sale of
Registrant's contracts.
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ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
First SAFECO National Life Insurance Company of New York at 6700 Collamer Road,
East Syracuse New York 13057, and/or SAFECO Asset Management Company at SAFECO
Plaza, Seattle, Washington 98185 maintain physical possession of the accounts,
books or documents of the Separate Account required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable
ITEM 32. UNDERTAKINGS
Registrant hereby represents that it is relying upon a No-Action Letter issued
to the American Council of Life Insurance dated November 28, 1988 (Commission
ref. IP-6-88) and that the following provisions have been complied with:
a. Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in each
registration statement, including the prospectus, used in
connection with the offer of the contract;
b. Include appropriate disclosure regarding the redemption
restrictions imposed by Section 403(b)(11) in any sales
literature used in connection with the offer of the contract;
c. Instruct sales representatives who solicit participants to
purchase the contract specifically to bring the redemption
restrictions imposed by Section 403(b)(11) to the attention of
the potential participants;
d. Obtain from each plan participant who purchases a Section
403(b) annuity contract, prior to or at the time of such
purchase, a signed statement acknowledging the participant's
understanding of (1) the restrictions on redemption imposed by
Section 403(b)(11), and (2) other investment alternatives
available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract
value.
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SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(a) for effectiveness of this Registration Statement and has caused this
Registration Statement to be signed on its behalf, in the City of Seattle, and
State of Washington on this 25th day of November1996.
First SAFECO Separate Account S
-----------------------------------
Registrant
By: First SAFECO National Life Insurance
------------------------------------
Company of New York
------------------------------------
By: /S/ RICHARD E. ZUNKER
------------------------------------
Richard E. Zunker, President
First SAFECO National Life Insurance
------------------------------------
Company of New York
------------------------------------
Depositor
By: /S/ RICHARD E. ZUNKER
------------------------------------
Richard E. Zunker, President
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Name Title Date
- ---- ----- ----
/S/ RICHARD E. ZUNKER Director and President
- ------------------------
Richard E. Zunker
ROD A. PIERSON* Director, Senior Vice
- ------------------------ President and Secretary
Rod A. Pierson
JAMES T. FLYNN* Director, Vice President,
- ------------------------ Controller and Assistant
James T. Flynn Secretary
KENNETH N. BERK* Director
- ------------------------
Kenneth N. Berk
RONALD L. SPAULDING* Director
- ------------------------
Ronald L. Spaulding
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/S/ BOH A. DICKEY Director
- ------------------------
Boh A. Dickey
*By: /S/ BOH A. DICKEY
----------------------------
Boh A. Dickey
Attorney-in-Fact
*By: /S/ RICHARD E. ZUNKER
----------------------------
Richard E. Zunker
Attorney-in-Fact
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
1. The Resolution of Board of Directors of First
SAFECO authorizing the establishment of the
Separate Account
4.(i) Individual Flexible Purchase Payment Deferred
Variable Annuity Contracts
4.(ii) Riders and Endorsements
5. Application for Annuity Contract
8.a. Participation Agreement by and among First SAFECO
National Life Insurance Company of New York,
Federated Insurance Series, on behalf of the
Federated High Income Bond Fund II, Federated
International Equity Fund II, Federated Utility Fund
II, Federated Securities Corp, and Federated
Advisers.
8.b. Participation Agreement by and among First SAFECO
National Life Insurance Company of New York,
Lexington Emerging Markets Fund, Inc., Lexington
Natural Resources Trust, and Lexington Management
Corporation.
9 Opinion and Consent of Counsel
13 Calculation of Performance Information
15 Representation of Counsel
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First SAFECO National Life Insurance Company of New York Exhibit 1
Secretary's Certificate
The undersigned, Secretary of First SAFECO National Life Insurance Company of
New York, hereby certifies that the following is a true and correct copy of a
resolution adopted by the Board of Directors of First SAFECO National Life
Insurance Company of New York on February 2, 1995 and that the same is in full
force and effect:
RESOLVED, That the Company be, and hereby is, authorized to develop a
program to issue and to sell variable and fixed annuity contracts, some of which
may be required to be registered with the Securities and Exchange Commission
pursuant to the securities laws;
RESOLVED FURTHER, That the appropriate officers of the Company be, and
hereby are, authorized to establish and designate one or more separate accounts
of the Company to provide for annuities (and other benefits incidental thereto),
payable in fixed or variable amounts or both;
RESOLVED FURTHER, That the appropriate officers of the Company be, and
hereby are, authorized to apply to the New York Insurance Department for
authority to issue and sell such variable and fixed annuity contracts;
RESOLVED FURTHER, That the purpose of any such separate account shall
be to provide an investment medium for such variable and fixed annuity contracts
issued by the Company as may be designated as participating therein;
RESOLVED FURTHER, That any such separate account shall receive, hold,
invest and reinvest only the monies arising from (i) premiums, contributions or
payments made pursuant to the variable and fixed annuity contracts participating
therein; (ii) such assets of the Company as shall be deemed appropriate to be
invested in the same manner as the assets applicable to the Company's reserve
liability under the variable and fixed annuity contracts participating in such
separate accounts, or as may be necessary for the establishment of such separate
accounts; and (iii) the dividends, interest and gains produced by the foregoing;
RESOLVED FURTHER, That the income, gains and losses, realized or
unrealized, in any such separate account shall be credited to or charged against
the amounts allocated to such separate account in accordance with the terms of
the variable and fixed annuity contracts, without regard to other income, gains
or losses of the Company, including upon insolvency;
<PAGE> 2
RESOLVED FURTHER, That the reserves or liabilities of any such separate
account, which are kept in accordance with federal and state securities and
insurance laws, shall not be chargeable with liabilities arising out of any
other business which the Company conducts;
RESOLVED FURTHER, That any such separate account shall be divided into
accounts and subaccounts so that each account or subaccount may invest in the
shares of designated investment companies with the net premiums received under
the variable and fixed annuity contracts as directed by the owners of said
contracts;
RESOLVED FURTHER, That the appropriate officers be, and each of them
hereby are, expressly authorized in their discretion and as they may deem
appropriate from time to time in accordance with applicable laws and
regulations; (i) to divide any such separate account into one or more accounts
or subaccounts, (ii) to modify, consolidate, or eliminate any such accounts or
subaccounts, (iii) to change the designation of any separate account to another
designation, (iv) to further designate any accounts or subaccounts thereof, and
(v) to take such other action as may be required to further any such separate
account's compliance with applicable federal and state laws;
RESOLVED FURTHER, That the appropriate officers of the Company be, and
they each hereby are, authorized:
(i) to register the variable and fixed annuity contracts
participating in any such separate accounts under the
provisions of the Securities Act of 1933 to the
extent that it shall be determined that such
registration is necessary;
(ii) to register any such separate accounts with the
Securities and Exchange Commission under the
provisions of the Investment Company Act of 1940 to
the extent that it shall be determined that such
registration is necessary;
(iii) to prepare, execute and file such amendments to any
registration statements filed under the
aforementioned Acts (including post-effective
amendments), supplements and exhibits thereto as they
may be deemed necessary or desirable;
(iv) to apply for exemption from those provisions of the
aforementioned Acts as shall be deemed necessary and
to take any
<PAGE> 3
and all other actions which shall be deemed
necessary, desirable, or appropriate in connection
with such Acts, including to prepare, execute and
file amendments to any such application;
(v) to file the variable and fixed annuity contracts
participating in any such separate accounts with the
appropriate state insurance departments and to
prepare and execute all necessary documents to obtain
approval of such insurance departments; and
(vi) to prepare or have prepared and to execute all
necessary documents to obtain approval of, or
clearance with, or other appropriate actions required
of, any other regulatory authority that may be
necessary;
RESOLVED FURTHER, That the appropriate officers of the Company be, and
they each hereby are, authorized to invest cash in any such separate account or
in any account thereof as may be deemed necessary or appropriate to facilitate
the commencement of such separate account's operations, including but not
limited to compliance with applicable tax laws, or to meet any minimum capital
requirements under the Investment Company Act of 1940 and to transfer cash or
securities from time to time between the Company's general account and such
separate account as deemed necessary or appropriate so long as such transfers
are not prohibited by law and are consistent with the terms of the variable and
fixed annuity contracts;
RESOLVED FURTHER, That the appropriate officers of the Company be, and
they each hereby are, authorized and directed to execute such agreement or
agreements as they deem necessary or appropriate:
(i) with SAFECO Securities, Inc., or any other qualified
entity, under which SAFECO Securities, Inc. or such
other entity will be appointed principal underwriter
and distributor for the variable and fixed annuity
contracts;
(ii) with one or more qualified banks or other qualified
entities including the Company or any of its
affiliates to provide administrative and/or custodial
service in connection with the establishment and
maintenance of any such separate account and the
design, issuance and administration of the variable
and fixed annuity contracts; and
(iii) with one or more investment companies, affiliated or
unaffiliated with the Company, to serve as eligible
investments under any such separate account;
<PAGE> 4
RESOLVED FURTHER, That the appropriate officers of the Company be, and
they each hereby are, authorized to establish procedures to the extent required,
or deemed appropriate, and subject to the limitations of applicable law, for
providing a pass-through of voting rights for owners of the variable and fixed
annuity contracts with respect to the shares of an investment company or
companies, attributable to them, owned by any such separate account;
RESOLVED FURTHER, That for the purpose of executing any post-effective
amendments to the Company's registration statements related to the separate
accounts and the variable and fixed annuity contracts and in connection with the
filing of all other documents necessary or desirable to the amendment process,
the officers and directors of the Company be, and each of them hereby are,
authorized, for themselves and on behalf of the Company, to execute and deliver
their several powers of attorney to Boh A. Dickey and Richard E. Zunker, and
each of them.
RESOLVED FURTHER, That in connection with the offering and sale of the
variable and fixed annuity contracts in the various States of the United States,
as and to the extent necessary, the appropriate officers of the Company be, and
they each hereby are, authorized to take any and all such action, including but
not limited to the preparation, execution and filing with proper state
authorities, on behalf of and in the name of the Company, of such applications,
notices, certificates, affidavits, powers of attorney, consents to service of
process, issuer's covenants, certified copies of minutes of shareholders' and
directors' meetings, bonds, escrow and impounding agreements and other writings
and instruments, as may be required in order to render permissible the offering
and sale of the fixed and variable annuity contracts in such jurisdiction;
RESOLVED FURTHER, That the forms of any resolutions required by any
state authority to be filed in connection with any of the documents or
instruments referred to in any of the preceding resolutions be, and the same
hereby are, adopted as if fully set forth herein if (1) in the opinion of the
appropriate officers of the Company, the adoption of the resolutions is
advisable and (2) the Secretary or any Assistant Secretary of the Company
evidences such adoption by inserting into these minutes copies of such
resolutions; and
RESOLVED, That the appropriate officers of the Company be, and they
each hereby are, authorized to prepare and to execute the necessary documents
and to take such further actions as may be deemed necessary or appropriate, in
their discretion, to implement the purpose of these resolutions.
RESOLVED, That the foregoing resolutions supersede the previous
resolutions adopted by the Directors of the Company on August 4, 1994 regarding
the foregoing.
<PAGE> 5
Dated: October 22, 1996 First SAFECO National Life Insurance Company
of New York
By: /S/
----------------------------
Rod A. Pierson, Secretary
<PAGE> 1
Exhibit 4(i)
<PAGE> 2
[SAFECO LOGO]
FIRST SAFECO NATIONAL LIFE
INSURANCE COMPANY OF NEW YORK
6700 OLD COLLAMER ROAD
EAST SYRACUSE, NEW YORK 13057
INDIVIDUAL VARIABLE ANNUITY CONTRACT
First SAFECO National Life Insurance Company of New York, a stock company with
its Home Office in East Syracuse, New York, (hereafter called First SAFECO), in
consideration of the payment of the Purchase Payments and Annuity Premiums as
provided herein, agrees to provide an Annuity and other benefits in accordance
with the Contract provisions.
10-DAY RIGHT TO EXAMINE CONTRACT
WITHIN TEN DAYS OF THE DATE OF RECEIPT OF THIS CONTRACT BY THE OWNER, IT MAY BE
RETURNED BY DELIVERING OR MAILING IT TO FIRST SAFECO OR TO THE AGENT THROUGH
WHOM IT WAS PURCHASED. WHEN THIS CONTRACT IS RECEIVED BY FIRST SAFECO, IT WILL
BE VOIDED AS IF IT HAD NEVER BEEN IN FORCE, AND FIRST SAFECO WILL REFUND THE
GREATER OF PURCHASE PAYMENTS OR THE CONTRACT VALUE. FIRST SAFECO ALSO RESERVES
THE RIGHT TO ALLOCATE ALL PAYMENTS TO THE MONEY MARKET SUB-ACCOUNT UNTIL THE
EXPIRATION OF 15 DAYS FROM THE DATE THE FIRST PURCHASE PAYMENT IS RECEIVED.
Signed for the Company
/s/ R. A. Pierson /s/ R. E. Zunker
R.A. Pierson R.E. Zunker
Sr. Vice President and Secretary President
BRIEF DESCRIPTION
Individual Variable Annuity, Flexible Premium Deferred Annuity,
Non-Participating, Monthly Income at Annuity Date, Cash Value Payable at Death
of Owner before Annuity Date.
VALUES PROVIDED BY THIS CONTRACT THAT ARE HELD IN THE SEPARATE ACCOUNT ARE BASED
ON THE INVESTMENT EXPERIENCE OF A SEPARATE ACCOUNT AND ARE, THEREFORE, VARIABLE
AND NOT GUARANTEED AS TO DOLLAR AMOUNT. SEE SECTION D OF YOUR CONTRACT FOR
DETAILS REGARDING THE SEPARATE ACCOUNT PROVISIONS.
The smallest annual rate of investment return which would have to be earned on
the assets of the Separate Account so that the dollar amount of Variable Annuity
payments will not decrease is 3%.
(R) Registered trademark of SAFECO Corporation
LPC-616/NY 6/96
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
<S> <C>
SECTION A: DEFINITIONS ........................................................ 1
Annuitant .................................................................. 1
Annuity Date ............................................................... 1
Owner ...................................................................... 1
SECTION B: GENERAL PROVISIONS ................................................. 2
Contract ................................................................... 2
Contract Amendments ........................................................ 2
Communications ............................................................. 2
Annual Report .............................................................. 2
Misstatement of Age or Sex ................................................. 2
Evidence of Survival ....................................................... 2
Beneficiary Designation .................................................... 2
Change of Beneficiary ...................................................... 3
Assignment ................................................................. 3
Termination of Contract .................................................... 3
SECTION C: PURCHASE PAYMENTS .................................................. 3
Place and Form of Payment .................................................. 3
Purchase Payments .......................................................... 3
Change in Purchase Payments ................................................ 3
Allocation of Purchase Payment.............................................. 3
Application of Purchase Payments to Eligible Investments ................... 3
SECTION D: SEPARATE ACCOUNT PROVISIONS ........................................ 4
The Separate Account ....................................................... 4
Non-Participation in Surplus ............................................... 4
Value of Accumulation Units ................................................ 4
Net Investment Factor ...................................................... 4
SECTION E: ANNUITY OPTIONS AND DEATH BENEFITS ................................. 5
Selection and Change of Annuity Option ..................................... 5
Payment of Benefits ........................................................ 5
State Required Minimum Benefits ............................................ 5
Frequency and Amount of Annuity Payments ................................... 5
Death of Annuitant ......................................................... 5
Death of Owner Prior to Annuity Date ....................................... 6
Death of Owner After Annuity Date .......................................... 7
Annuity Options from the Separate Account .................................. 7
Automatic Option from the Separate Account ................................. 8
Annuity Unit ............................................................... 8
Variable Annuity Payment Calculation ....................................... 8
Mortality and Expense Risk Premium Guarantee ............................... 8
SECTION F: WITHDRAWALS AND TRANSFERS .......................................... 8
Minimum Withdrawal ......................................................... 8
Minimum Transfer ........................................................... 8
Systematic Withdrawal ...................................................... 8
Deferral of Withdrawal Payment ............................................. 9
Investment Related Transfer Programs ....................................... 9
SECTION G: CHARGES AND DEDUCTIONS ............................................. 10
Deduction for Annual Administration Maintenance Charge ..................... 10
Deduction for Asset Related Administration Charge .......................... 10
Deduction for Contingent Deferred Sales Charge ............................. 10
Deduction for Withdrawal Charge ............................................ 11
Deduction for Transfer Charge .............................................. 11
Deduction for Mortality and Expense Risk Premium ........................... 11
Taxes ...................................................................... 11
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
SECTION H: ANNUITY PURCHASE RATE TABLE ........................................ 12
Mortality Tables Used ...................................................... 12
Variable Annuity Purchase Rate Table ....................................... 12
SECTION I: FIXED ACCOUNT PROVISIONS ........................................... 13
Fixed Account Allocations .................................................. 13
Interest Crediting ......................................................... 13
Guaranteed Interest Rate ................................................... 14
Annuity Options ............................................................ 14
Mortality Tables Used ...................................................... 15
Minimum Balance After Withdrawal ........................................... 18
Minimum Transfer ........................................................... 18
Transfers .................................................................. 18
Deferral of Withdrawal Payment ............................................. 18
</TABLE>
- ii -
<PAGE> 5
SECTION A: DEFINITIONS
A1 Accumulation Unit: An accounting unit of measure used to calculate the
value of a Sub-Account prior to the Annuity Date.
A2 Annuitant: The natural person on whose life Annuity payments are payable in
accordance with this Contract. This Contract will not be issued if the
Annuitant is 76 years of age or older on the Contract Date.
A3 Annuity: Any series of payments starting on the Annuity Date, payable in
accordance with this Contract.
A4 Annuity Date: The date selected by the Owner for commencing Annuity
payments under this Contract. Separate dates may be selected by the Owner
for commencing variable Annuity payments and fixed Annuity payments. The
day of the month on which the payments will be made will be determined by
First SAFECO. The Annuity Date cannot be later than the date the Annuitant
attains age 85.
A5 Annuity Unit: An accounting unit of measure used to calculate Annuity
payments after the Annuity Date.
A6 Beneficiary: The person or persons entitled to receive benefits under this
Contract upon the death of the Owner.
A7 Co-Annuitant is the individual specified by the Owner to receive annuity
payments after the death of the Annuitant under the Joint and Survivor
Annuity Option as described in Section E8(c) and Section I5(c).
A8 Contract: This Individual Variable Annuity Contract by and between First
SAFECO and the Owner.
A9 Contract Anniversary: Any anniversary of the Contract Date.
A10 Contract Date: The earlier of the date on which the initial Net Purchase
Payment is allocated to the Separate Account or the initial Net Purchase
Payment is allocated to the Fixed Account, as shown on the Contract Data
Page.
A11 Contract Value: The sum of the Owner's interest in the Sub-Accounts of the
Separate Account and the Fixed Account. Fixed Account Contract Value refers
to that portion of the Contract Value held in the Fixed Account.
A12 Contract Year: The twelve-month period which commences on the Contract Date
and each succeeding twelve-month period thereafter.
A13 Eight-Year Contract Anniversary: Each eighth Contract Year.
A14 Eligible Investments: An investment entity shown on the Contract Data Page,
including the Fixed Account.
A15 First SAFECO: First SAFECO National Life Insurance Company of New York.
A16 Net Purchase Payment: Purchase Payment less premium taxes.
A17 Net Surrender Value: The value of the Owner's interest after deduction of
applicable Contingent Deferred Sales Charge from the Contract Value.
A18 Owner: The person or persons named in the Application who has all rights
under this Contract. Joint Owners are allowed only if the joint Owners are
spouses. Each joint Owner shall have equal ownership rights and must
jointly exercise those rights. On the date the Application is signed, the
Owner must not be older than age 75 (if joint Owners, neither may be older
than 75).
A19 Programs: Programs are features whereby an Owner may elect to have Purchase
Payments, Contract Value or appreciation under the Contract allocated,
transferred, withdrawn or otherwise designated pursuant to requirements and
procedures described in the then current prospectus or registration
statement for the Contract under the Securities Act of 1933, as amended.
- 1 -
<PAGE> 6
A20 Purchase Payments: Payments made to purchase Accumulation Units or payments
allocated to the Fixed Account as provided in Section I1.
A21 Separate Account: The separate investment account of First SAFECO, as shown
on the Contract Data Page.
A22 Sub-Account: A segment of the Separate Account, as shown on the Contract
Data Page.
A23 Transfer: The redemption of units from a Sub-Account(s) and the purchase of
units of another Sub-Account(s), and the transfer of Contract Value to or
from the Fixed Account from or to the Sub-Account(s).
A24 Withdrawal: Withdrawal is any removal of funds from the Contract, including
Contract charges and deductions.
SECTION B: GENERAL PROVISIONS
B1 Contract: The entire contract between First SAFECO and the Owner consists
of this Contract, any Riders or Endorsements, and the Application, a copy
of which is attached to the Contract.
B2 Contract Amendments: The terms and conditions of this Contract may be
amended by written agreement between First SAFECO and the Owner by written
endorsement or amendment. All agreements made by First SAFECO will be
signed by the President or one of the Vice Presidents. No other person has
power on behalf of First SAFECO to amend or modify this Contract, extend
any due date, or waive any proof required by this Contract.
First SAFECO may unilaterally amend the provisions of this Contract as
required to conform to any state or Federal law which affects this
Contract. Such amendment will be subject to the approval of the Insurance
Department of the state where the Contract is delivered.
B3 Communications: All communications to First SAFECO shall be made to the
office of First SAFECO shown on the Contract Data Page.
B4 Essential Data: The Owner shall furnish to First SAFECO any information
necessary for the administration of this Contract.
B5 Annual Report: First SAFECO will provide the Owner with an annual calendar
year report showing the Contract Value and Net Surrender Value, and any
other information required by law. Reports will be sent to the last known
address of the Owner.
B6 Misstatement of Age or Sex: First SAFECO may require proof of the age of
the Annuitant before making any Life Annuity payment provided for by this
Contract. If the age or sex of the Annuitant has been misstated, the amount
payable will be the amount that the Contract Value would have provided at
the correct age or sex.
Once Annuity payments have begun, any underpayment will be made up in one
sum with the next Annuity payment, with interest of 6%. Any overpayment
will be deducted from future Annuity payments until the total is repaid,
with interest of 6%.
B7 Evidence of Survival: If any benefits under this Contract are contingent
upon the Annuitant being alive on a given date, First SAFECO may require
evidence satisfactory to First SAFECO that such condition continues to be
met.
B8 Beneficiary Designation: The Owner may designate a Beneficiary in the
Application to receive any proceeds payable due to the death of the Owner.
Unless the Owner provides otherwise, the death benefit will be paid in
equal shares to all surviving primary Beneficiaries. If the Owner has not
provided otherwise and there are no surviving primary Beneficiaries, the
death benefit will be paid in equal shares to all surviving contingent
Beneficiaries. If the Owner has not provided otherwise and there are no
surviving primary or contingent Beneficiaries, the death benefit will be
paid to the estate of the Owner.
- 2 -
<PAGE> 7
B9 Change of Beneficiary: If the Owner has made an irrevocable Beneficiary
designation, no change of Beneficiary is permitted. If the Owner has not
made an irrevocable Beneficiary designation, the Owner may file a signed
request with First SAFECO to change the Beneficiary designation. The change
of Beneficiary, upon recording by First SAFECO at its Home Office, will be
effective as of the date the Owner signs the Beneficiary designation change
request. First SAFECO shall not be liable for any payments made or other
action taken by First SAFECO before the change in Beneficiary was recorded
by First SAFECO at its Home Office. A recorded change of Beneficiary will
revoke any prior Beneficiary designations. First SAFECO will pay any death
proceeds to the most recently recorded Beneficiary.
B10 Contract Settlement: Unless otherwise designated in writing by First
SAFECO, all sums payable under this Contract are payable at First SAFECO's
Home Office. This contract must be returned to First SAFECO upon any
settlement.
B11 Assignment: To the extent permitted by law, this Contract and the benefits
or payments under this Contract are assignable or otherwise transferrable.
This Contract may be assigned for purposes of an Internal Revenue Code
Section 1035 exchange.
B12 Termination of Contract: All benefit provisions under this Contract
continue in force until the Contract Value is completely Withdrawn.
Discontinuance of Purchase Payments will not result in termination of the
Contract.
This Contract will terminate and cease to be of any further force or effect
at the close of the first day upon which First SAFECO has completed all of
the duties and obligations which have arisen under this Contract.
SECTION C: PURCHASE PAYMENTS
C1 Place and Form of Payment: All payments to First SAFECO under this Contract
shall be payable at the office of First SAFECO as shown on the Contract
Data Page.
All amounts to be paid under this Contract, whether payable to First SAFECO
or by First SAFECO, shall be paid in lawful money of the United States of
America.
C2 Purchase Payments: The initial Purchase Payment is due on the Contract
Date. The minimum initial and subsequent Purchase Payments are shown on the
Contract Data Page. First SAFECO reserves the right to reject any
Application, Purchase Payment that does not meet the minimum payment shown
on the Contract Data Page, any Applications by an Owner or Annuitant who is
ineligible for this Contract, and any incomplete Applications.
C3 Change in Purchase Payments: Subject to the minimum shown on the Contract
Data Page, the Owner may increase or decrease or change the frequency of
subsequent Purchase Payments.
C4 Allocation of Purchase Payments: The allocation of the initial Purchase
Payment is elected by the Owner on the Application. Unless the Owner elects
otherwise, subsequent Purchase Payments are allocated in the same manner as
the initial Purchase Payment. Allocation of the Purchase Payments is
subject to the terms and conditions imposed by First SAFECO.
C5 Application of Purchase Payments to Eligible Investments: Purchase Payments
applied to the Separate Account are allocated to a Sub-Account of the
Separate Account.
- 3 -
<PAGE> 8
SECTION D: SEPARATE ACCOUNT PROVISIONS
D1 The Separate Account:First SAFECO has established a Separate Account,
subject to the laws of the State of New York, for this and other similar
Contracts. A portion of First SAFECO's assets has been allocated to the
Separate Account for this and other similar Contracts. The assets of the
Separate Account are the property of First SAFECO and are not chargeable
with liabilities arising out of any other business First SAFECO may
conduct. The investments of the Separate Account will be valued at their
fair market value in accordance with the procedures approved by the Board
of Directors of First SAFECO and the Separate Account committee.
The Separate Account is divided into Sub-Accounts with the assets of each
Sub-Account invested as set forth on the Contract Data Page.
The assets of the Sub-Accounts are allocated to the Eligible Investments
and the portfolios, if any, within Eligible Investments shown on the
Contract Data Page. First SAFECO may, from time to time, add Eligible
Investments or portfolios, or remove Eligible Investments or portfolios. If
the shares of any Eligible Investment or portfolio within an Eligible
Investment become unavailable for investment by the Separate Account, or
First SAFECO's Board of Directors deems further investment in these shares
inappropriate, First SAFECO may substitute shares of another Eligible
Investment or portfolio for shares already purchased under this Contract.
Any material change requiring a change to the plan of operation of the
Separate Account or to this Contract is subject to appropriate regulatory
approval.
D2 Non-Participation in Surplus: The Variable Annuity portion of this Contract
will not share in any distribution of profits, losses, or surplus of First
SAFECO.
D3 Valuation Dates and Periods: A Valuation Date is each day the New York
Stock Exchange is open for business. A Valuation Period is the period
commencing at the close of business on each Valuation Date and ending at
the close of business for the next succeeding Valuation Date.
D4 Value of Accumulation Units: Each Purchase Payment is allocated to a
Sub-Account and is converted into Accumulation Units. The number of
Accumulation Units in a Sub-Account credited to this Contract is determined
by dividing each Net Purchase Payment by the value of an Accumulation Unit
for that Sub-Account. Accumulation Units for each Sub-Account are valued
separately. The Accumulation Unit value for each Sub-Account was
arbitrarily set at $10 when the Sub-Account was established. The
Accumulation Unit value for any later Valuation Period is determined by
multiplying the Accumulation Unit value for the Sub-Account, as of the
immediately preceding Valuation Period, by the Net Investment Factor for
the current Valuation Period.
D5 Net Investment Factor: The Net Investment Factor for any Sub-Account for
any Valuation Period is determined by dividing (a) by (b) and subtracting
(c) and (d) from the result, where:
(a) is the net result of:
(i) The net asset value per share of the portfolio set out on the
Contract Data Page as the investment of the Sub-Account,
determined as of the current Valuation Period, plus
(ii) The per share amount of any dividend or capital-gain distribution
made by the portfolio if the "ex-dividend" date occurs during the
current Valuation Period, plus or minus
(iii) A per share credit or charge, which is determined by First
SAFECO, for changes in tax reserves resulting from investment
operations of the Sub-Account.
(b) is the net result of:
(i) The net asset value per share of the portfolio determined as of
the immediately preceding Valuation Period, plus or minus
(ii) The per share credit or charge for any changes in tax reserves for
the immediately preceding Valuation Period.
- 4 -
<PAGE> 9
(c) is the percentage factor equal to the Mortality and Expense Risk
Premium. Such factor is equal on an annual basis to a percentage of the
daily net asset value of the Sub-Account, as shown on the Contract Data
Page.
(d) is the percentage factor equal to the Asset Related Administration
Charge. Such factor is equal on an annual basis to a percentage of the
daily net asset value of the Sub-Account, as shown on the Contract Data
Page.
The Net Investment Factor may be greater or less than one. Therefore, the
Accumulation Unit value may increase or decrease.
SECTION E: ANNUITY OPTIONS AND DEATH BENEFITS
E1 Selection and Change of Annuity Option: The Owner may select or change the
Annuity Option or Annuity Date by written notification to First SAFECO at
its Home Office. In order to be effective, the written notification must be
received by First SAFECO prior to any Annuity Date previously selected.
E2 Payment of Benefits: Subject to the provisions of this Contract, First
SAFECO will, upon the written direction of the Owner, issue an Annuity or
make a cash distribution to any person who is entitled to such benefits.
First SAFECO shall not be obligated to issue an Annuity or to make a cash
distribution until it receives written direction from the Owner containing
the terms and conditions of the Annuity or cash distribution.
First SAFECO may rely on the written direction of the Owner and shall not
be liable, except where First SAFECO has acted in a negligent manner or has
failed to exercise reasonable or prudent care, for any failure to question
or challenge such direction regarding the issuance of an Annuity or payment
of a cash distribution.
E3 State Required Minimum Benefits: The death benefit, the surrender value,
and the Annuity Options under this Contract will not be less than the
minimum benefits required by any statute of the state in which this
Contract is delivered.
E4 Frequency and Amount of Annuity Payments: Except as described below,
Annuity payments will be paid monthly. If the net amount available to apply
under any Annuity Option is less than $2,000, First SAFECO shall have the
right to pay such amount in a lump sum cash distribution.
(a) (i) If monthly Annuity payments described in Section E8(a), E8(b),
E8(c), I5(a), I5(b), or I5(c) would be or become less than $50, First
SAFECO shall have the right to change the frequency of payments to such
intervals as will result in payments of at least $50.
(ii) If monthly Annuity payments described in Section E8(d) or I5(d)
would be or become less than $250, First SAFECO shall have the right to
change the frequency of payments to such intervals as will result in
payments of at least $250.
(b) If any Annuity payment reduces the Contract Value to an amount less
than $500 on the effective date of such payment, the Contract shall be
surrendered and shall be subject to any applicable Contingent Deferred
Sales Charge.
E5 Death of Annuitant:
(a) If the Annuitant dies before an Annuity Option has commenced, the Owner
must designate a new Annuitant. If no designation is made within 30
days of notification to First SAFECO of the death of the Annuitant, the
Owner will become the Annuitant.
(b) If the Contract is owned by a non-natural person, the death of the
Annuitant will be treated as the death of the Owner.
- 5 -
<PAGE> 10
E6 Death of Owner Prior to Annuity Date:
(a) The Minimum Guaranteed Death Benefit: The initial Minimum Guaranteed
Death Benefit shall be equal to the initial Net Purchase Payment.
Additional Net Purchase Payments are added to the Minimum Guaranteed
Death Benefit. The Minimum Guaranteed Death Benefit will be adjusted
after any Withdrawal by multiplying it by the ratio of the Contract
Value after the Withdrawal to the Contract Value before the Withdrawal.
The Minimum Guaranteed Death Benefit shall be redetermined on each
Eight Year Contract Anniversary by taking the greater of the Contract
Value on that Eight Year Contract Anniversary or the previous Minimum
Guaranteed Death Benefit. The Minimum Guaranteed Death Benefit shall
subsequently be increased for additional Net Purchase Payments and
adjusted after any Withdrawals in the same manner as the initial
Minimum Guaranteed Death Benefit is adjusted. After the Owner's death,
the Minimum Guaranteed Death Benefit will be reduced dollar for dollar
by any Withdrawals.
(b) Death Benefit Options: Upon the death of the Owner prior to the Annuity
Date, the Beneficiary may elect an Annuity Option or to receive a
single lump sum payment.
(c) Death Benefit (Prior to age 72)
If the Owner dies prior to age 72 and before an Annuity Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to First SAFECO and has elected a Death
Benefit Option within six (6) months of the date of death, the amount
of the Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit.
(d) Death Benefit (On or After age 72)
If the Owner dies on or after age 72 and before a Settlement Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to First SAFECO and has elected a Death
Benefit Option within six (6) months of the date of death, the amount
of the Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit established on the last Eight
Year Contract Anniversary preceding the Owner's 72nd birthday, adjusted
for any Net Purchase Payments received or Withdrawals taken since that
Eight Year Contract Anniversary.
(e) Death Benefit (Death notification or Death Benefit Option election more
than Six Months after Date of Death)
If notification of death or election of a Death Benefit Option occurs
after the six month anniversary of the date of death, the death benefit
will be the Contract Value on the date of election of a Death Benefit
Option determined as follows: the Contract Value calculated as of the
six month anniversary of the date of death will be compared with the
Minimum Guaranteed Death Benefit calculated immediately prior to the
six month anniversary of the date of death to determine if additional
funds are required to be added by First SAFECO to equal such Minimum
Guaranteed Death Benefit. First SAFECO will supplement any deficiency
in Contract Value, such that Contract Value will equal the Minimum
Guaranteed Death Benefit. Thereafter, until the date of election of a
Death Benefit Option, the Contract Value attributable to First SAFECO's
contribution will be guaranteed and interest paid thereon at prevailing
money market rates; the portion of Contract Value existing on the six
month anniversary of the date of death will be subject to adjustment
reflecting the investment experience for the period from the six-month
anniversary to the date of election of a Death Benefit Option. In
addition, the amount of the death benefit will be reduced dollar for
dollar by any Withdrawal after the Owner's death.
- 6 -
<PAGE> 11
(f) Election Period: The election of an Annuity Option or other form of
payment must be made by the Beneficiary during the 60-day period
commencing with the date of receipt by First SAFECO of notification of
the Owner's death. If no election is made within the 60-day period,
then a single sum payment will be made to the Beneficiary.
(g) The Death Benefit must be distributed:
(i) By the fifth anniversary of the Owner's death; or
(ii) Over a designated Beneficiary's life or over a period not
extending beyond the Beneficiary's life expectancy, in equal or
substantially equal payments, with payments beginning within one year
of the death of the Owner.
(h) If the Beneficiary is the spouse of the Owner, the Contract may be
continued by the spouse, and the spouse will become the Owner.
(i) Joint Owners:
(i) The Minimum Guaranteed Death Benefit will only be payable on the
death of the older joint Owner. Upon the death of the older joint
Owner, if the Contract is continued, no Minimum Guaranteed Death
Benefit applies for the remaining duration of the Contract.
(ii) Upon the death of a joint Owner, the surviving Owner shall be the
designated Beneficiary. Any other named Beneficiary shall be a
contingent Beneficiary.
(iii) Upon the death of a joint Owner, the surviving Owner may elect an
Annuity Option or a lump sum payment, or may elect to continue the
Contract.
E7 Death of Owner After Annuity Date: If the Owner dies on or after an Annuity
Option has commenced and if applicable, any remaining payments must
continue at least as rapidly as under the method of distribution in effect
prior to the Owner's death.
E8 Annuity Options from the Separate Account: An Annuity may be issued in any
of the forms described below, or such other forms which First SAFECO agrees
to issue under this Contract. The Annuitant will become the Owner on
commencement of an Annuity Option.
(a) Variable Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and the
last payment is that payment due immediately on or before the
Annuitant's death. No death benefit is payable under this option.
(b) Variable Life Annuity with 120 or 240 Monthly Payments Guaranteed:
Monthly payments are made to the Annuitant commencing on the Annuity
Date. If at the death of the Annuitant the guaranteed number of
payments has not been received by the Annuitant, payments will be made
to the Beneficiary for the remainder of the guarantee period. The
Beneficiary may elect to have the present value of the guaranteed
Annuity remaining as of the date the notice of death is received by
First SAFECO, commuted at the assumed investment rate of 4%, and paid
in a single payment.
(c) Variable Joint and Survivor Life Annuity: Monthly payments are made to
the Annuitant commencing on the Annuity Date. After the death of the
Annuitant, payments will be continued to the Co-Annuitant for as long
as he or she lives. The written request for this option must specify
the percentage value of monthly payments to continue to the
Co-Annuitant.
(d) Systematic Payment Annuity: A specified number of whole or partial
Accumulation Units are liquidated for payment to the Annuitant on a
monthly, quarterly, or annual basis. The number to be liquidated during
a given year shall be a sufficient number so as to be expected to
deplete the Contract over the life expectancy of the Annuitant or the
joint life expectancy of the Annuitant and Beneficiary, with at least
50% of the payments expected to be made during the Annuitant's life.
This Option will remain in effect unless the Annuitant subsequently
elects to receive payments under Section E8(a), (b), or (c), or elects
to surrender the Contract after the eighth Contract Year.
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<PAGE> 12
E9 Automatic Option from the Separate Account: If, as of the Annuity Date, an
Annuity Option has not been selected, First SAFECO will make payments under
the Variable Life Annuity with 120 Monthly Payments option of Section
E8(b).
E10 Annuity Unit: The value of an Annuity Unit was arbitrarily set at $10 when
each Sub-Account was established. The value of the Annuity Unit for any
subsequent Valuation Period is determined by multiplying the value of the
Annuity Unit for the immediately preceding Valuation Period by the Net
Investment Factor for the Valuation Period for which the value is being
calculated (as described in Section D5), and dividing the result by the
Assumed Investment Factor for such Valuation Period (as described in
Section E11 ).
E11 Assumed Investment Factor: The Assumed Investment Factor for a one-day
Valuation Period is 1.00010746. This factor neutralizes the assumed
investment return of 4% in the Variable Annuity Purchase Rate Table in
Section H2.
E12 Variable Annuity Payment Calculation: A Variable Annuity is an Annuity with
payments which are not predetermined as to dollar amount. Payments will
vary in accordance with the net investment results of the Separate Account.
The dollar amount of the first monthly Variable Annuity payment under
Section E8(a), E8(b), or E8(c) will be determined by applying the Contract
Value (after deduction for premium taxes, if applicable), as of the 15th
day of the preceding month, to the Variable Annuity Purchase Rate Table in
Section H2. The number of Annuity Units to be credited to the Annuitant
will be determined by dividing the first monthly payment by the Annuity
Unit value calculated as of the 15th day of the preceding month. This
number of Annuity Units remains fixed during the Annuity payment period.
The dollar amount of each Variable Annuity payment after the first shall be
determined by multiplying the number of Annuity Units credited to the
Annuitant by the Annuity Unit value as of the 15th day of the preceding
month.
E13 Mortality and Expense Risk Premium Guarantee: First SAFECO guarantees that
the dollar amount of each Variable Annuity payment made after the first
payment will not be affected by variations in mortality experience or
expenses.
SECTION F: WITHDRAWALS AND TRANSFERS
F1 Minimum Withdrawal: The minimum Withdrawal is as shown on the Contract Data
Page, or the Contract Value, if less. Except as otherwise provided in this
Contract, the Owner may, at or prior to the Annuity Date, withdraw all or
part of the Contract Value.
F2 Minimum Balance After Withdrawal: If any Withdrawal reduces the remaining
balance in a Sub-Account to less than $500, the remaining balance will also
be Withdrawn.
F3 Minimum Transfer: The minimum Transfer from a Sub-Account must be at least
$500, except for Transfers pursuant to certain Programs. If the Sub-Account
from which the Transfer is being made is less than $500 the entire
Sub-Account will be transferred, including a Transfer pursuant to certain
Programs.
The minimum Transfer into a Sub-Account must be at least $50.
F4 Withdrawal of Accumulation Units: Upon a Withdrawal from a Sub-Account, the
number of Accumulation Units remaining under this Contract will be reduced
by the number of such units equal to the total of the Withdrawal, including
applicable charges and taxes, including income taxes withheld, if
applicable.
F5 Systematic Withdrawal: The Owner may elect periodic withdrawals to receive
cash distributions from this Contract in a predetermined amount on a
predetermined frequency. Payments under this election will be made directly
to the Owner by First SAFECO, and will not be made more often than monthly.
A specified number of whole or partial Accumulation Units are liquidated
pro-rata from the Sub- Accounts for payment to the Owner monthly,
quarterly, or annually. Enough units will be liquidated each year so as to
expect to deplete the Contract over the life expectancy of the Owner or the
joint life expectancy of the Annuitant and Beneficiary. The systematic
withdrawals will remain in effect until the Annuity Date unless the Owner
elects, prior to the Annuity Date, an Annuity Option under Section E8
and/or I5, or to surrender the Contract after the eighth Contract Year.
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<PAGE> 13
F6 Transfer of Accumulation Units: Upon a Transfer from a Sub-Account, the
number of Accumulation Units remaining under that Sub-Account will be
reduced by the number of such units equal to the total of the requested
Transfer, including applicable charges, and taxes.
F7 Minimum Balance After Transfer: If any Transfer, including a Transfer
pursuant to certain Programs, reduces the remaining balance in a
Sub-Account to less than $500, the remaining balance will also be
transferred.
F8 Deferral of Withdrawal Payment:
(a) Except as provided in Section F9(b), payments by First SAFECO from the
Contract will be made within seven days after receiving a Withdrawal
request.
(b) First SAFECO reserves the right to suspend or postpone payments for a
Withdrawal or Transfer for any period when:
(i) The New York Stock Exchange is closed (other than customary weekend
and holiday closings);
(ii) Trading on the New York Stock Exchange is restricted, as
determined by the rules and regulations of the Securities and Exchange
Commission;
(iii) An emergency exists as a result of which disposal of securities
held in the Separate Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Separate Account's
net assets, as determined by the rules and regulations of the
Securities and Exchange Commission; or
(iv) During any other period when the Securities and Exchange
Commission, by order, so permits for the protection of Owners.
F9 Investment Related Transfer Programs: Prior to the Annuity Date, First
SAFECO offers several Investment Related Transfer Programs. First SAFECO
retains the right to discontinue any Investment Related Transfer Program.
Transfers under an Investment Related Transfer Program between and among
Sub-Accounts and the Fixed Account are not counted as one of the twelve
free transfers. However, if an Owner executes an unrelated voluntary
transfer from the Sub-Account participating in a Program, other than the
Sub-Account Rebalancing Program, the Program will be terminated for the
remainder of the Contract Year. In addition, if a Program is terminated
before six Program transfers have occurred, the Program transfers that have
taken place are counted as part of the twelve free transfers. If the
balance in a Sub-Account would be less than $500 as a result of a transfer
pursuant to the Dollar Cost Averaging or Automatic Transfer Programs, then
the entire balance in that Sub-Account will also be transferred.
Dollar Cost Averaging Program: The Owner may elect a pre-established
automatic monthly or quarterly transfer from any Sub-Account or the Fixed
Account to any one or more of the Sub- Accounts or the Fixed Account, if
the amount transferred will be at least $50. However, for the duration of
this Program, transfers from the Fixed Account are limited to an amount
calculated by First SAFECO at the time of initial transfer, not to exceed
1.33% per month or 4% per quarter. To qualify for this Program, it must
continue for at least 6 months.
Automatic Transfer Program: The Automatic Transfer Program is identical to
the Dollar Cost Averaging Program except that the limits on transfers from
the Fixed Account will be recalculated annually and will not exceed 1.5%
per month or 4.5% per quarter. This Program will continue until the Owner
requests discontinuance, the transfer amount falls below $50, or there are
no funds left in the Sub-Account to Transfer.
Appreciation or Interest Sweep Program: This Program is available after the
total Contract Value exceeds $10,000; it applies only to transfers from the
First SAFECO Resource Money Market Sub-Account or the Fixed Account. If the
appreciation on the Money Market Sub-Account or the interest credited to
the Fixed Account exceeds 10%, then appreciation or earnings equal to 10%
will be transferred to the Sub-Account(s) specified by the Owner. Under
this Program, however, amounts may not be transferred between the Fixed
Account and the Money Market Sub-Account. This Program is not available in
any Contract Year in which transfers or withdrawals have already been made
from the Fixed Account.
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<PAGE> 14
Sub-Account Rebalancing Program: This Program is available after the total
Contract Value exceeds $10,000. If elected, First SAFECO will rebalance the
Contract Value of each Sub-Account quarterly, semi-annually or annually in
accordance with the Owner's Purchase Payment allocation percentages in
effect when the Program starts. At any time, the Owner may elect in writing
to change the allocation percentages. This Program may also be stopped at
any time, but may not be restarted until the next Contract Year.
The Dollar Cost Averaging, Automatic Transfer and the Appreciation or
Interest Sweep Programs may not be combined with each other or any other
Program. The Sub-Account Rebalancing Program may be combined with any one
of the other Programs, but it is not available with respect to the Fixed
Account.
SECTION G: CHARGES AND DEDUCTIONS
G1 Deduction for Annual Administration Maintenance Charge: There is no annual
fee if the Contract Value is $50,000 or above. If the Contract Value is
below $50,000, First SAFECO deducts the fee shown on the Contract Data Page
for each Contract Year, or any portion thereof, for general administrative
expenses. This fee is deducted on the last day of each Contract Year, and
in the event of complete Withdrawal.
The Sub-Account from which the Annual Administration Maintenance Charge is
deducted is determined by the hierarchical order of the Sub-Accounts as
shown on the Contract Data Page.
Prior to the Annuity Date the fee for general administrative expenses is
not guaranteed and may be changed for future years. However, the Annual
Administration Maintenance Charge may never exceed $35 per Contract Year.
If the Annual Administration Maintenance Charge is to be deducted from the
Fixed Account, the Charge will be reduced if it is greater than the Fixed
Account Allocations received for the current Contract Year and the excess
of the charge over those Fixed Account Allocations reduces net interest to
below three percent. The charge shall be limited to Fixed Account
Allocations received during the current Contract Year plus the amount of
interest credited in excess of three percent.
G2 Deduction for Asset Related Administration Charge: First SAFECO deducts an
amount computed on a daily basis as compensation for administration of the
Sub-Accounts. The Asset Related Administration Charge shall be a percentage
of the average daily net asset value of the Separate Account on an annual
basis, as shown on the Contract Data Page.
G3 Deduction for Contingent Deferred Sales Charge:
(a) A Contingent Deferred Sales Charge will be assessed against any
Withdrawal or Transfer, based upon the following schedule:
Contract Year Charge
1 8% of amount Withdrawn
2 7% of amount Withdrawn
3 6% of amount Withdrawn
4 5% of amount Withdrawn
5 4% of amount Withdrawn
6 3% of amount Withdrawn
7 2% of amount Withdrawn
8 1% of amount Withdrawn
After 8 0% of amount Withdrawn
Total Contingent Deferred Sales Charges will not exceed 8.5% of the
Purchase Payments made under this Contract.
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<PAGE> 15
(b) A Contingent Deferred Sales Charge will not be deducted:
(i) On Transfers between Sub-Accounts;
(ii) On Transfers from a Sub-Account to the Fixed Account;
(iii) On Transfers from the Fixed Account under Section I11;
(iv) On Withdrawals made under an Annuity Option;
(v) On Systematic Withdrawals over the life expectancy of the Owner or
the joint life expectancy of the Owner and Beneficiary;
(vi) On Withdrawals made pursuant to the death of the Owner;
(vii) On Withdrawals for payment of the Annual Administration
Maintenance Charge; or
(viii) On the sum of Withdrawals taken in any Contract Year which does
not exceed 10% of the Contract Value. The determination of whether more
than 10% of the Contract Value has been Withdrawn is made at the time
of Withdrawal. If more than one Withdrawal is made in a Contract Year,
the previous Withdrawals in the Contract Year are added to the current
Contract Value to determine whether more than 10% of the Contract Value
has been withdrawn in a Contract Year.
G4 Deduction for Withdrawal Charge: The first Withdrawal each Contract Year
will have no Withdrawal Charge assessed. All further Withdrawals each
Contract Year will be subject to a Withdrawal Charge as shown on the
Contract Data Page, which will be deducted from the amount being Withdrawn.
Annuity Options and Systematic Withdrawal will have no Withdrawal Charge
assessed.
G5 Deduction for Transfer Charge: First SAFECO reserves the right to assess a
Transfer Charge for each Transfer in excess of twelve Transfers per
calendar year, as shown on the Contract Data Page. Transfers pursuant to
any Program offered by First SAFECO may or may not be subject to the
Transfer Charge, subject to First SAFECO's administrative procedures under
the Programs.
G6 Deduction for Mortality and Expense Risk Premium: First SAFECO deducts an
amount computed on a daily basis as compensation for assuming the mortality
and expense risk. The Mortality and Expense Risk Premium shall be a
percentage of the average daily net asset value of the Separate Account on
an annual basis, as shown on the Contract Data Page.
G7 Taxes: Any premium taxes or other taxes levied by any governmental entity
which First SAFECO, in its sole discretion, determines have resulted from
the establishment or maintenance of this Contract or any portion of this
Contract, the receipt by First SAFECO of Purchase Payments, or the
commencement of Annuity payments, will be deducted from the Contract. The
Sub-Account from which the taxes are deducted is determined by the
hierarchical order of the Sub-Accounts as shown on the Contract Data Page.
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<PAGE> 16
SECTION H: ANNUITY PURCHASE RATE TABLE
H1 Mortality Tables Used: The rates in the Variable Annuity Purchase Rate
Table are based upon the 1983a Mortality Table Projected 20 Years with
Projection Scale G, separate male and female tables. An age setback of one
year will be used if the Annuity payment begins in the year 2000-2009, two
years if the Annuity payment begins in the year 2010-2019, and an
additional one-year setback for each additional ten years. The effective
interest rate assumed in the Variable Annuity Purchase Rate Table is 4%.
H2 Variable Annuity Purchase Rate Table:
TABLE A - MALE
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
QUALIFIED JOINT AND
LIFE ANNUITY SURVIVOR ANNUITY.
STRAIGHT WITH SURVIVOR ANNUITANT
AGE OF LIFE 10 YEARS IS OF SAME AGE.
ANNUITANT ANNUITY CERTAIN 100% 50%
--------- ------- ------- ---- ---
<S> <C> <C> <C> <C> <C>
55 $ 199.57 $ 201.96 $ 232.98 $ 216.28
56 196.14 198.72 230.18 213.16
57 192.62 195.42 227.28 209.95
58 189.05 192.07 224.29 206.67
59 185.38 188.65 221.19 203.29
60 181.61 185.17 217.99 199.80
61 177.74 181.63 214.69 196.21
62 173.78 178.05 211.27 192.53
63 169.74 174.42 207.75 188.74
64 165.61 170.78 204.12 184.86
65 161.41 167.13 200.38 180.90
66 157.15 163.48 196.54 176.85
67 152.84 159.85 192.59 172.71
68 148.49 156.24 188.53 168.51
69 144.09 152.66 184.36 164.23
70 139.66 149.14 180.09 159.88
71 135.21 145.67 175.71 155.46
72 130.74 142.28 171.24 150.99
73 126.39 139.01 166.70 146.54
74 122.05 135.83 162.07 142.06
75 117.72 132.75 157.36 137.54
</TABLE>
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished
by First SAFECO upon request.
* NOTE: The Consideration shown refers to the net value used to purchase an
annuity, after premium taxes or other applicable charges are deducted.
- 12 -
<PAGE> 17
TABLE B - FEMALE
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
QUALIFIED JOINT AND
LIFE ANNUITY SURVIVOR ANNUITY.
STRAIGHT WITH SURVIVOR ANNUITANT
AGE OF LIFE 10 YEARS IS OF SAME AGE.
ANNUITANT ANNUITY CERTAIN 100% 50%
--------- ------- ------- ---- ---
<S> <C> <C> <C> <C>
55 $ 216.52 $ 217.89 $ 232.98 $ 224.75
56 213.34 214.64 230.18 221.76
57 210.07 211.50 227.28 218.68
58 206.72 208.29 224.29 215.51
59 203.28 205.01 221.19 212.24
60 199.74 201.64 217.99 208.87
61 196.10 198.20 214.69 205.39
62 192.37 194.68 211.27 201.82
63 188.54 191.08 207.75 198.15
64 184.62 187.42 204.12 194.37
65 180.62 183.69 200.38 190.50
66 176.52 179.90 196.54 186.53
67 172.33 176.05 192.59 182.46
68 168.05 172.16 188.53 178.29
69 163.67 168.23 184.36 174.01
70 159.19 164.27 180.09 169.64
71 154.61 160.29 175.71 165.16
72 149.94 156.32 171.24 160.59
73 145.20 152.36 166.70 155.95
74 140.38 148.44 162.07 151.22
75 135.51 144.58 157.36 146.48
</TABLE>
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished
by First SAFECO upon request.
* NOTE: The Consideration shown refers to the net value used to purchase an
annuity, after premium taxes or other applicable charges are deducted.
SECTION I: FIXED ACCOUNT PROVISIONS
I1 Fixed Account Allocations: The Owner may make payments into the Fixed
Account, subject to acceptance and approval by First SAFECO. The Fixed
Account consists of the total Fixed Account Allocations received by First
SAFECO and not previously withdrawn, plus interest on each such Fixed
Account Allocation, less any applicable charges and deductions. Fixed
Account Allocations will become part of the general account of First SAFECO
to be so used and invested and will not be segregated from First SAFECO's
other assets.
I2 Interest Crediting:
(a) After receipt of each Fixed Account Allocation, and in accordance with
paragraph (b) below, First SAFECO will credit interest to the Fixed
Account Allocation at a rate determined according to First SAFECO's
investment year method of assigning interest credits. Under this method
the interest credits will be based on the original period of receipt of
such funds.
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<PAGE> 18
(b) Each Fixed Account Allocation will be credited with the Guaranteed
Interest Rate determined for such Fixed Account Allocation commencing
on the date the Fixed Account Allocation is received by First SAFECO.
(c) For purposes of crediting interest, the last-in, first-out accounting
method will apply to Withdrawals.
I3 Establishment of Interest Rates: Guaranteed Interest Rates for each Fixed
Account Allocation will be determined by First SAFECO as soon as
practicable prior to each Initial or Subsequent Interest Guarantee Period.
I4 Guaranteed Interest Rate:
(a) First SAFECO's Guaranteed Interest Rate on any Fixed Account Allocation
will be effective for the Initial Interest Guarantee Period applicable
to such Fixed Account Allocation. The Initial Interest Guarantee Period
shall be no less than the twelve (12) month period commencing on the
date a Fixed Account Allocation is received by First SAFECO.
(b) Upon the expiration of the Initial Interest Guarantee Period applicable
to any Fixed Account Allocation, the Guaranteed Interest Rate
applicable to such a Fixed Account Allocation plus credited interest
will be that rate determined by First SAFECO to be effective for each
successive Subsequent Interest Guarantee Period and may or may not be
the same as any interest rate applicable to new Fixed Account
Allocations. The Subsequent Interest Guarantee Period shall be the
period commencing on the expiration of the Initial Guarantee Period and
shall be no less than twelve (12) months. Each successive Subsequent
Interest Guarantee Period shall be the period commencing on the
expiration of the prior Subsequent Interest Guarantee Period and shall
be no less than twelve (12) months.
(c) First SAFECO's Guaranteed Interest Rate on any subsequent Fixed Account
Allocation will be that rate in effect at the time of such Fixed
Account Allocation, and may or may not be the same as any interest rate
previously applicable to Fixed Account Allocations or any interest rate
for Subsequent Interest Rate Guarantee Periods.
(d) First SAFECO's Guaranteed Interest Rate on any subsequent Fixed Account
Allocations will be that rate in effect at the time of such Fixed
Account Allocations, and may or may not be the same as any interest
rate previously advertised.
(e) The Guaranteed Interest Rate credited to monies allocated to the Fixed
Account will never be less than an annual effective interest rate of 3%
for any Contract Year.
I5 Annuity Options: On the date upon which First SAFECO is to issue an
Annuity, First SAFECO shall charge the premium for such Annuity against the
Fixed Account. The entire present value of the Fixed Account is available
to pay the Annuity and any premium taxes that may be required by state law;
the Annuity premium is calculated in accordance with the Fixed Annuity
Purchase Rate Table in Section I8, or current annuity rates if more
favorable. An Annuity may be issued only in one of the forms described
below, or such other forms which First SAFECO agrees to issue.
(a) Fixed Life Annuity: Monthly payments are made to the Annuitant
commencing on the Annuity Date, if he or she is then living, and the
last payment is that payment due immediately on or before his or her
death. No death benefit is payable under this option.
(b) Fixed Life Annuity with Guaranteed Period: Monthly payments are made to
the Annuitant commencing on the Annuity Date, if he or she is then
living. If at the death of the Annuitant the guaranteed number of
payments has not been received by the Annuitant, then payments will be
made to the Beneficiary for the remainder of the guaranteed period.
(c) Fixed Joint and Survivor Life Annuity: Monthly payments are made to the
Annuitant commencing on the Annuity Date. After the death of the
Annuitant, payments will be continued to the Co-Annuitant for as long
as he or she lives. The written request for this option must specify
the percentage value of monthly payments to continue to the
Co-Annuitant.
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<PAGE> 19
(d) Systematic Payment Annuity: A specified amount is Withdrawn for payment
to the Annuitant on a monthly, quarterly, or annual basis. The amount
Withdrawn shall be the amount calculated to deplete the Fixed Account
over the life expectancy of the Annuitant or the joint life expectancy
of the Annuitant and Beneficiary, with at least 50% of the payments
expected to be made during the Annuitant's life. The balance remaining
in the Fixed Account after any such payment will continue to earn
interest in the same manner as prior to the Withdrawal. This Option
will remain in effect unless the Annuitant subsequently elects to
receive payments under Section I5(a), (b), and (c) or surrender the
Contract after the eighth Contract Year.
I6 Automatic Option: If, as of the Annuity Date, an Annuity Option has not
been selected, First SAFECO will make payments under the Fixed Life Annuity
with Guaranteed Period option of Section I5(b) with 120 monthly payments
guaranteed.
I7 Commencement of Annuity Payments: Subject to the limitations of Sections
A4, E8, and I5, an Owner may elect:
(a) to have variable Annuity payments commence on the Annuity Date,
pursuant to one of the Settlement Options described in Section E8, and:
(i) continue to have Net Purchase Payments credited to the Fixed
Account; and
(ii) choose a "second Annuity Date" for the commencement of fixed
Annuity payments; or
(b) to have fixed Annuity payments commence on the Annuity Date, pursuant
to one of the Annuity Options described in Section I5, and:
(i) continue to have Net Purchase Payments credited to a
Sub-Account(s); and
(ii) choose a "second Annuity Date" for the commencement of variable
Annuity payments.
First SAFECO must receive any such election and the selected "second
Annuity Date" prior to any Annuity Date. If no such election is made, First
SAFECO will commence both variable and fixed Annuity payments on the
Annuity Date pursuant to the applicable Annuity Options. Any Annuity Date
selected, including the "second Annuity Date," cannot be later than the
date the Annuitant attains age 85.
I8 Mortality Tables Used: The rates in the Fixed Annuity Purchase Rate Table
are based upon the 1983a Mortality Table Projected 20 Years with Projection
Scale G, separate male and female tables. The effective interest rate
assumed in the Fixed Annuity Purchase Rate Table is 3%.
- 15 -
<PAGE> 20
Fixed Annuity Purchase Rate Table
TABLE A - MALE
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
QUALIFIED JOINT AND
LIFE ANNUITY SURVIVOR ANNUITY.
STRAIGHT WITH SURVIVOR ANNUITANT
AGE OF LIFE 10 YEARS IS OF SAME AGE.
ANNUITANT ANNUITY CERTAIN 100% 50%
--------- ------- ------- ---- ---
<S> <C> <C> <C> <C>
55 $ 226.04 $ 228.59 $ 259.78 $ 242.91
56 221.58 224.34 255.67 238.63
57 217.03 220.02 251.46 234.25
58 212.45 215.68 247.17 229.81
59 207.78 211.27 242.77 225.27
60 203.02 206.82 238.27 220.64
61 198.17 202.32 233.67 215.92
62 193.24 197.79 228.96 211.10
63 188.23 193.24 224.16 206.20
64 183.17 188.70 219.27 201.22
65 178.05 184.16 214.29 196.17
66 172.89 179.65 209.22 191.06
67 167.70 175.19 204.08 185.89
68 162.49 170.77 198.87 180.68
69 157.26 166.42 193.60 175.43
70 152.03 162.15 188.27 170.15
71 146.80 157.97 182.90 164.85
72 141.58 153.89 177.48 159.53
73 136.52 149.98 172.10 154.31
74 131.49 146.20 166.69 149.09
75 126.51 142.55 161.28 143.89
76 121.57 139.05 155.86 138.71
77 116.69 135.71 150.45 133.57
78 111.89 132.53 145.05 128.47
79 107.16 129.53 139.69 123.43
80 102.53 126.70 134.37 118.45
81 98.00 124.05 129.11 113.56
82 93.58 121.57 123.92 108.75
83 89.28 119.26 118.80 104.04
84 85.12 117.14 113.77 99.44
</TABLE>
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished
by First SAFECO upon request.
* NOTE: The Consideration shown refers to the net value used to purchase an
Annuity, after premium taxes or other applicable charges are deducted. By
way of example, it would cost $178,050 for a male Annuitant age 65 to
receive a Fixed Life Annuity which provides a monthly income of $1,000.
- 16 -
<PAGE> 21
TABLE B - FEMALE
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
<TABLE>
<CAPTION>
QUALIFIED JOINT AND
LIFE ANNUITY SURVIVOR ANNUITY.
STRAIGHT WITH SURVIVOR ANNUITANT
AGE OF LIFE 10 YEARS IS OF SAME AGE.
ANNUITANT ANNUITY CERTAIN 100% 50%
--------- ------- ------- ---- ---
<S> <C> <C> <C> <C>
55 $ 247.90 $ 249.16 $ 275.98 $ 261.94
56 243.63 245.01 272.17 257.90
57 239.26 240.79 268.26 253.76
58 234.82 236.50 264.26 249.54
59 230.29 232.13 260.15 245.22
60 225.66 227.70 255.94 240.80
61 220.95 223.19 251.61 236.28
62 216.15 218.61 247.18 231.67
63 211.26 213.97 242.65 226.95
64 206.29 209.28 238.00 222.15
65 201.25 204.54 233.25 217.25
66 196.13 199.75 228.39 212.26
67 190.94 194.92 223.42 207.18
68 185.67 190.06 218.34 202.00
69 180.31 185.18 213.15 196.73
70 174.87 180.31 207.85 191.36
71 169.36 175.44 202.45 185.90
72 163.78 170.60 196.94 180.36
73 158.15 165.81 191.33 174.74
74 152.47 161.08 185.64 169.05
75 146.77 156.45 179.86 163.31
76 141.05 151.93 174.02 157.53
77 135.32 147.55 168.11 151.72
78 129.74 143.35 162.22 145.98
79 124.19 139.32 156.30 140.25
80 118.69 135.48 150.36 134.52
81 113.25 131.85 144.42 128.83
82 107.88 128.42 138.49 123.18
83 102.61 125.23 132.58 117.59
84 97.44 122.29 126.72 112.08
</TABLE>
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished
by First SAFECO upon request.
* NOTE: The Consideration shown refers to the net value used to purchase an
annuity, after premium taxes or other applicable charges are deducted. By
way of example, it would cost $201,250 for a female Annuitant age 65 to
receive a Straight Life Annuity which provides a monthly income of $1,000.
- 17 -
<PAGE> 22
I9 Minimum Balance After Withdrawal: If any Withdrawal reduces the remaining
balance in the Fixed Account to less than $500, the remaining balance will
also be Withdrawn.
I10 Minimum Transfer: All Transfers from the Fixed Account, other than pursuant
to a Program, are subject to a $500 minimum. The minimum Transfer into the
Fixed Account must be at least $50.
I11 Transfers: The Owner may elect to participate in only one of the Programs
relating to transfers from the Fixed Account in any Contract Year or elect
to transfer up to a total of 10% of the value of the Fixed Account Contract
Value at the time of the Transfer, in a Contract Year. First SAFECO may
waive this limitation upon written notice to the Owner.
I12 Deferral of Withdrawal Payment: First SAFECO retains the right to defer the
payment of Withdrawals from the Fixed Account for a period of six months
after receiving a Withdrawal request. If First SAFECO defers payment of
Withdrawals under this Section, First SAFECO will pay interest on the
deferred payments at the rate specified by state law at the time of the
Withdrawal request.
- 18 -
<PAGE> 23
CONTRACT DATA PAGE
PRODUCT: SPINNAKER (QUALIFIED)
OWNER: JOHN DOE
321 CAPITOL BLVD
NEW YORK, NY 10013
ANNUITANT: JOHN DOE
CONTRACT NUMBER: LP12345678
CONTRACT DATE: 01/01/1996
ANNUITANT'S AGE ON CONTRACT DATE: 35
ANNUITY DATE: 01/01/2031
DELIVERED IN THE STATE OF NEW YORK AND GOVERNED BY ITS LAWS.
MINIMUM INITIAL PURCHASE PAYMENT OR ANNUITY PREMIUM: $30.00
MINIMUM SUBSEQUENT PURCHASE PAYMENT OR ANNUITY PREMIUM: $30.00
ANNUAL ADMINISTRATION MAINTENANCE CHARGE: $30 each Contract Year, waived if
Contract Value is $50,000 or more
ASSET RELATED ADMINISTRATION CHARGE: Equal on an annual basis to 0.15% of the
average daily net asset value of the Separate Account
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to 1.25% of the
average daily net asset value of the Separate Account
TRANSFER CHARGE: The lesser of $10 or 2% of amount transferred, for each
Transfer in excess of twelve per calendar year
MINIMUM WITHDRAWAL: The lesser of $250 or the Contract Value
CONTINGENT DEFERRED SALES CHARGE:
CONTRACT YEAR CHARGE
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After 8 0% of amount withdrawn
Total Contingent Deferred Sales Charges will not exceed 8.5% of the Purchase
Payments and Annuity Premium payments made under this Contract
WITHDRAWAL CHARGE: The lesser of $25 or 2% of the amount withdrawn, for each
Withdrawal in excess of one per Contract Year
ELIGIBLE INVESTMENTS:
1. SAFECO Resource Money Market Sub-Account
2. SAFECO Resource Bond Sub-Account
3. Federated Utility II Sub-Account
4. Federated High Income Bond II Sub-Account
5. Federated International Equity II Sub-Account
6. Lexington Natural Resources Sub-Account
7. Lexington Emerging Markets Sub-Account
8. SAFECO Resource Equity Sub-Account
9. SAFECO Resource Northwest Sub-Account
10. SAFECO Resource Growth Sub-Account
11. SAFECO Fixed Account
SEPARATE ACCOUNT: First SAFECO Separate Account S
ANNUITY SERVICE OFFICE:
HOME OFFICE: First SAFECO National Life
Insurance Company of New York
6700 Old Collamer Road
East Syracuse, New York 13057
Telephone: 1-800-878-2041
Fax: 315-463-2128
LPC - 656/NY 11/95
<PAGE> 24
CONTRACT DATA PAGE
PRODUCT: SPINNAKER (NONQUALIFIED)
OWNER: JOHN DOE
321 CAPITOL BLVD
NEW YORK, NY 10013
ANNUITANT: JOHN DOE
CONTRACT NUMBER: LP12345678
CONTRACT DATE: 01/01/1996
ANNUITANT'S AGE ON CONTRACT DATE: 35
ANNUITY DATE: 01/01/2031
DELIVERED IN THE STATE OF NEW YORK AND GOVERNED BY ITS LAWS.
MINIMUM INITIAL PURCHASE PAYMENT OR ANNUITY PREMIUM: $2,000.00
MINIMUM SUBSEQUENT PURCHASE PAYMENT OR ANNUITY PREMIUM: $250.00
ANNUAL ADMINISTRATION MAINTENANCE CHARGE: $30 each Contract Year, waived if
Contract Value is $50,000 or more
ASSET RELATED ADMINISTRATION CHARGE: Equal on an annual basis to 0.15% of the
average daily net asset value of the Separate Account
MORTALITY AND EXPENSE RISK CHARGE: Equal on an annual basis to 1.25% of the
average daily net asset value of the Separate Account
TRANSFER CHARGE: The lesser of $10 or 2% of amount transferred, for each
Transfer in excess of twelve per calendar year
MINIMUM WITHDRAWAL: The lesser of $250 or the Contract Value
CONTINGENT DEFERRED SALES CHARGE:
CONTRACT YEAR CHARGE
1 8% of amount withdrawn
2 7% of amount withdrawn
3 6% of amount withdrawn
4 5% of amount withdrawn
5 4% of amount withdrawn
6 3% of amount withdrawn
7 2% of amount withdrawn
8 1% of amount withdrawn
After 8 0% of amount withdrawn
Total Contingent Deferred Sales Charges will not exceed 8.5% of the Purchase
Payments and Annuity Premium payments made under this Contract
WITHDRAWAL CHARGE: The lesser of $25 or 2% of the amount withdrawn, for each
Withdrawal in excess of one per Contract Year
ELIGIBLE INVESTMENTS:
1. SAFECO Resource Money Market Sub-Account
2. SAFECO Resource Bond Sub-Account
3. Federated Utility II Sub-Account
4. Federated High Income Bond II Sub-Account
5. Federated International Equity II Sub-Account
6. Lexington Natural Resources Sub-Account
7. Lexington Emerging Markets Sub-Account
8. SAFECO Resource Equity Sub-Account
9. SAFECO Resource Northwest Sub-Account
10. SAFECO Resource Growth Sub-Account
11. SAFECO Fixed Account
SEPARATE ACCOUNT: First SAFECO Separate Account S
ANNUITY SERVICE OFFICE:
HOME OFFICE: First SAFECO National Life
Insurance Company of New York
6700 Old Collamer Road
East Syracuse, New York 13057
Telephone: 1-800-878-2041
Fax: 315-463-2128
LPC - 657/NY 11/95
<PAGE> 1
Exhibit 4(ii)
<PAGE> 2
ENDORSEMENT
Individual Retirement Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 408 of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract or
Rider, the terms of this Endorsement will control. This Endorsement is effective
upon issuance to the Owner.
SECTION A18, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under
this Contract. The Annuitant shall be the Owner of this Contract.
SECTION B11, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or
otherwise transferable. This Contract may be assigned for purposes of
an Internal Revenue Code Section 1035 exchange.
SECTION B13, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive
benefit of the Annuitant and Beneficiaries.
SECTION B14, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B15, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant.
SECTION B16, Life Insurance Contracts, is added to the Contract:
Life Insurance Contracts: No part of the Contract Value will be
invested in life insurance contracts.
SECTION C6, Contribution Limit, is added to the Contract:
Contribution Limit:
(a) If this Contract is purchased to fund an Individual Retirement
Annuity under Section 408(b) of the Internal Revenue Code, the
annual contribution to the Contract must be in cash and may not
exceed the lesser of $2,000 or 100% of Compensation. In the case of
a spousal IRA, separate Contracts are established for each spouse.
Annual contributions to the two Contracts together may not exceed
$2,250, while no more than $2,000 may be contributed to any one of
the two Contracts. Such limitations shall not include rollover
contributions under Sections 402(c), 403(a)(4), 403(b)(8), or
408(d)(3) of the Internal Revenue Code. Deductibility of
contributions depends on active participation in an employer
sponsored retirement plan and adjusted gross income.
(b) Compensation is defined in Internal Revenue Code Section 219(f) and
the regulations thereunder as follows: Wages, salaries,
professional fees, or other amounts derived from or received for
personal services actually rendered (including, but not limited to
commissions paid salesmen, compensation for services on the basis
of a percentage of profits, commissions on insurance premiums,
tips, and bonuses) and includes earned income, as defined in
Section 401(c)(2) of the Internal Revenue Code (reduced by the
deduction the self-employed individual takes for
contributions made to a self-employed retirement plan). For
purposes of this definition, IRC Section 401 (c)(2) shall be
applied as if the term "trade" or "business" for purposes of IRC
Section 1402 included service described in Subsection (c)(6).
Compensation does not include amounts
-1-
LPC-609/NY 11/95
<PAGE> 3
derived from or received as earnings or profits from property
(including but not limited to interest and dividends) or amounts
not includible in gross income. Compensation also does not include
any amount received as a pension or annuity or as deferred
compensation. Compensation shall include any amount includible in
the individual's gross income under IRC Section 71 with respect to
a divorce or separation instrument described in Subparagraph (A) of
Section 71(b)(2).
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and Systematic
Withdrawal shall distribute the Contract Value pursuant to the Minimum
Distribution Rules in Section 408(a)(6) or Section 408(b)(3) and
Section 401 (a)(9) of the Internal Revenue Code, including the minimum
distribution incidental benefit requirement of Section 401(a)(9)(G) of
the Internal Revenue Code and Section 1.401(a)(9)-2 of the Proposed
Income Tax Regulations.
(a) Minimum Distribution Rules:
(i)Required Beginning Date: Minimum Distributions must begin by
the Annuitant's Required Beginning Date, defined as April 1
following the year the Annuitant reaches age 70 1/2 . If the
Annuitant has reached age 70 1/2 as of the Contract Date, the
Required Beginning Date is no later than the close of the
taxable year following the taxable year during which the
Contract is issued.
(ii) Minimum Distribution Requirements: The Minimum Distributions
must be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant
and the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of the
Annuitant, or the joint and last survivor expectancy of
the Annuitant and the designated Beneficiary.
(iii) Minimum Amounts to be Distributed: If the Annuitant's entire
Contract Value is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with
the first calendar year for which distributions are required
to begin and for each calendar year thereafter) must be at
least an amount equal to the quotient obtained by dividing the
Contract Value by the lesser of (1) the applicable life
expectancy of the Annuitant or (2) if the Annuitant's spouse
is not the designated Beneficiary, the applicable divisor
determined from the table set forth in Question and Answer 4
or Question and Answer 5, as applicable, of Proposed Income
Tax Regulation 1.401(a)(9)-2. Payments must be made in
periodic payments of intervals no longer than one year. In
addition, payments must be either non-increasing or they may
increase only as provided in Question and Answer F-3 of
Proposed Income Tax Regulation 1.401(a)(9)-1. Distributions
after the death of the Annuitant shall be calculated using the
applicable life expectancy as the relevant divisor without
regard to Proposed Regulation 1.401(a)(9)-2.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is
the spouse of a deceased Annuitant may elect whether or not to
recalculate life expectancy. Life expectancy may be recalculated no
more frequently than annually. This election is irrevocable and
shall apply to all subsequent years. It must be made by written
notice to First SAFECO at its Home Office no later than the
Required Beginning Date. If an election is not made, life
expectancy for the Annuitant and a designated Beneficiary who is a
spouse will be recalculated. Under the non-recalculation method,
benefits are provided for a specific number of years and may
terminate prior to the Annuitant's or Beneficiary's death.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained
age of such Beneficiary during the calendar year in which
distributions are required to begin, and payments for subsequent
years shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar
year life expectancy was first calculated.
Life expectancy and joint and last survivor expectancy are computed
by use of the expected return multiples contained in Tables V and
VI, Section 1.72-9 of the Income Tax Regulations.
(c) Annuitant's Death Prior to Required Beginning Date: If the
Annuitant dies before distributions are considered to have
commenced, the Contract Value must be distributed according to one
of the following options:
-2-
<PAGE> 4
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary of
the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the
entire Contract Value must be distributed over a period not
extending beyond a designated Beneficiary's life or life
expectancy in substantially equal installments.
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31 of the calendar year
immediately following the calendar year of the Annuitant's
death. The Beneficiary may elect at any time to receive greater
payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Annuitant's death or the date distributions
are required to begin, to receive equal or substantially equal
payments over the life or life expectancy of the surviving
spouse commencing at any date prior to the later of (1)
December 31 of the calendar year immediately following the
calendar year in which the Annuitant died and (2) December 31
of the calendar year in which the Annuitant would have attained
age 70 1 /2 . The surviving spouse may increase the frequency
or amount of such payments at any time.
A surviving spouse may also elect to treat the Contract as the
spouse's own, and then delay distributions until the 1st of
April following the calendar year in which the spouse reaches
age 70 1 /2 if that date is later than the Annuitant's death or
the date the Annuitant would have reached age 70 1 /2 . Such
election is considered made if:
(I) Amounts required to be distributed on the Annuitant's
death have not been distributed from the Contract;
(II) A regular IRA contribution or rollover contribution is
made to the Contract;
(III) A rollover is made from the Contract; or
(IV) The spouse fails to make another election.
(d) Annuitant's Death On or After Required Beginning Date: If the Annuitant
dies on or after the date distributions are considered to have
commenced, payment to the designated Beneficiary must continue at least
as rapidly as the method in effect prior to the Annuitant's death.
SECTION E6, Death of Owner Prior to Annuity Date, is deleted.
SECTION E6, Minimum Guaranteed Death Benefit on Death of Annuitant Prior to
Annuity Date, is added to the Contract:
(a) The Minimum Guaranteed Death Benefit: The initial Minimum Guaranteed
Death Benefit shall be equal to the initial Net Purchase Payment.
Additional Net Purchase Payments are added to the Minimum Guaranteed
Death Benefit. The Minimum Guaranteed Death Benefit will be adjusted
after any Withdrawal by multiplying it by the ratio of the Contract
Value after the Withdrawal to the Contract Value before the Withdrawal.
The Minimum Guaranteed Death Benefit shall be redetermined on each
Eight Year Contract Anniversary by taking the greater of the Contract
Value on that Eight Year Contract Anniversary or the previous Minimum
Guaranteed Death Benefit. The Minimum Guaranteed Death Benefit shall
subsequently be increased for additional Net Purchase Payments and
adjusted after any Withdrawals in the same manner as the initial
Minimum Guaranteed Death Benefit is adjusted. After the Annuitant's
death, the Minimum Guaranteed Death Benefit will be reduced dollar for
dollar by any Withdrawals.
(b) Death Benefit Options: Upon the death of the Annuitant prior to the
Annuity Date, the Beneficiary may elect a Settlement Option or to
receive a single lump sum payment.
(c) Death Benefit (Prior to age 72)
If the Annuitant dies prior to age 72 and before the Annuity Date, and
provided that the Beneficiary provides due proof of death in a form
satisfactory to First SAFECO and has elected a Death Benefit Option
within six (6) months of the date of death, the amount of the Death
Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit.
-3-
<PAGE> 5
(d) Death Benefit (On or After age 72)
If the Owner dies on or after age 72 and before a Settlement Option has
commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to First SAFECO and has elected a Death
Benefit Option within six (6) months of the date of death, the amount
of the Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii)the Minimum Guaranteed Death Benefit established on the last Eight
Year Contract Anniversary preceding the Annuitant's 72nd birthday,
adjusted for any Net Purchase Payments received or Withdrawals
taken since that Eight Year Contract Anniversary.
(e) Death Benefit (Death Notification or Death Benefit Option election more
than Six Months after Date of Death).
If notification of death or election of a Death Benefit Option occurs
after the six-month anniversary of the date of death, the death benefit
will be the Contract Value on the date of election of a Death Benefit
Option determined as follows: the Contract Value calculated as of the
six-month anniversary of the date of death will be compared with the
last calculated Minimum Guaranteed Death Benefit to determine if
additional funds are required to be added by First SAFECO to equal such
Minimum Guaranteed Death Benefit. First SAFECO will supplement any
deficiency in Contract Value, such that Contract Value will equal the
Minimum Guaranteed Death Benefit. Thereafter, until the date of
election of a Death Benefit Option, the Contract Value attributable to
First SAFECO's contribution will be guaranteed and interest paid
thereon at prevailing money market rates; the portion of Contract Value
existing on the six-month anniversary of the date of death will be
subject to adjustment reflecting the investment experience for the
period from the six-month anniversary to the election of a Death
Benefit Option. In addition, the amount of the death benefit will be
reduced dollar for dollar by any Withdrawal after the Annuitant's
death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following the
year in which the Annuitant attains age 70 1 /2 , unless the Annuitant
sends written notice to First SAFECO that the minimum distributions for
this Contract will be taken from another IRA and requests that
distributions not be taken from this Contract.
An individual may satisfy the minimum distribution requirements under
Sections 408(a)(6) and 408(b)(3) of the Internal Revenue Code by
receiving a distribution from one IRA that is equal to the amount
required to satisfy the minimum distribution requirements for two or
more IRAs. For this purpose, the owner of two or more IRAs may use the
'alternative method' described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above.
(b)If First SAFECO has not received written notice prior to March 1
following the year in which the Annuitant attains age 70 1 /2 :
(i) If designated Beneficiary information has been provided to First
SAFECO, First SAFECO will make the Required Minimum Distributions
based on joint life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in accordance
with the Minimum Distribution Rules in Section 401(a)(9) of the
Internal Revenue Code.
(ii)If designated Beneficiary information has not been provided to
First SAFECO, First SAFECO will make the Required Minimum
Distributions based on single life expectancy with recalculation of
life expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section 401(a)(9)
of the Internal Revenue Code.
-4-
<PAGE> 6
SECTION G7, Taxes, is amended to read as follows:
Taxes: First SAFECO reserves the right to deduct premium taxes or other
taxes levied by any governmental entity which First SAFECO, in its sole
discretion, determines have resulted from the establishment or
maintenance of this Contract or any portion of this Contract, the
receipt by First SAFECO of Purchase payments or Annuity premium
payments, or the commencement of Annuity payments. If First SAFECO
exercises this right the Sub-Account from which the taxes will be
deducted will be determined by the hierarchical order of the
Sub-Accounts as listed on the Contract Data Page.
All other terms and conditions of the Contract remain unchanged.
FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY
OF NEW YORK
/s/ RE Zunker
--------------------------
R.E. Zunker
President
-5-
<PAGE> 7
ENDORSEMENT
Tax Sheltered Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 403(b) of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract, the
terms of this Endorsement will control. This Endorsement is effective upon
issuance to the Owner.
SECTION A18, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under
this Contract. The Annuitant shall be the Owner of this Contract.
SECTION B6, Misstatement of Age or Sex, is amended to read as follows:
Misstatement of Age: First SAFECO may require proof of the age of the
Annuitant before making any Life Annuity payment provided for by this
Contract. If the age of the Annuitant has been misstated, the amount
payable will be the amount that the Contract Value would have provided
at the correct age.
Once Annuity payments have begun, any underpayment will be made up in
one sum with the next Annuity payment, with interest of 6%. Any
overpayment will be deducted from future Annuity payments until the
total is repaid, with interest of 6%.
SECTION B11, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or
otherwise transferable.
SECTION B13, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive
benefit of the Annuitant and Beneficiaries.
SECTION B14, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B15, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant,
except to the issuer of this Contract.
SECTION C6, Contribution Limit, is added to the Contract:
Contribution Limit: If contributions to this Contract are made under a
salary reduction agreement, the maximum contribution when combined with
all other plans, contracts, or arrangements may not exceed the lesser
of the limits provided for in Section 403(b)(2), 402(g) and 415(c) of
the Internal Revenue Code.
SECTION C7, Plan, is added to the Contract:
Plan: The terms of this Contract are subject to the provisions of any
plan under which this Contract is issued.
SECTION C8, Annuity Purchase Agreement, is added to the Contract:
Annuity Purchase Agreement: The Annuitant and the Annuitant's employer
must have an agreement under the terms of which the employer agrees to
make Purchase Payments on the Annuitant's behalf to be applied to this
Contract. The agreement must provide for the purchase of a Contract
which qualifies for tax deferral under Section 403(b) of the Internal
Revenue Code. All Purchase Payments must be made by the employer on
behalf of the Annuitant.
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LPC-612/NY 11/95
<PAGE> 8
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and Systematic
Withdrawal shall distribute the Contract Value pursuant to the Minimum
Distribution Rules in Section 401(a)(9) of the Internal Revenue Code.
(a) Minimum Distribution Rules:
(i) Required Beginning Date: Minimum Distributions must begin by
the Annuitant's Required Beginning Date, defined as April 1
following the year the Annuitant reaches age 70 1/2, with the
following exceptions:
(I) For an Annuitant who was born prior to July 1, 1917, the
Required Beginning Date is April 1 following the calendar
year in which the Annuitant retires.
(II) For an Annuitant who is a participant in a governmental
or church plan, the Required Beginning Date is April 1
following the later of the calendar year in which the
Annuitant reaches age 70 1/2 or retires.
If the Annuitant has reached the Required Beginning Date as of
the Contract Date, distributions must begin no later than the
close of the taxable year following the taxable year during
which the Contract is issued.
(ii) Minimum Distribution Requirements: The Minimum Distributions
must be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant
and the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of the
Annuitant, or the joint and last survivor expectancy of
the Annuitant and the designated Beneficiary.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is
the spouse of a deceased Annuitant may elect whether or not to
recalculate life expectancy. Life expectancy may be recalculated no
more frequently than annually. This election is irrevocable and
shall apply to all subsequent years. It must be made by written
notice to First SAFECO at its Home Office no later than the
Required Beginning Date. If an election is not made, life
expectancy for the Annuitant and a designated Beneficiary who is a
spouse will be recalculated. Under the non-recalculation method,
benefits are provided for a specific number of years and may
terminate prior to the Annuitant's or Beneficiary's death.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained
age of such Beneficiary during the calendar year in which
distributions are required to begin, and payments for subsequent
years shall be calculated based on such life expectancy reduced by
one for each calendar year which has elapsed since the calendar
year life expectancy was first calculated.
Life expectancy and joint and last survivor expectancy are computed
by use of the expected return multiples contained in Tables V and
VI, Section 1.72-9 of the Income Tax Regulations.
(c) Annuitant's Death Prior to Required Beginning Date: If the
Annuitant dies before distributions are considered to have
commenced, the Contract Value must be distributed according to one
of the following options:
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary
of the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the
entire Contract Value must be distributed over a period not
extending beyond a designated Beneficiary's life or life
expectancy in substantially equal installments.
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<PAGE> 9
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31 of the calendar year
immediately following the calendar year of the Annuitant's
death. The Beneficiary may elect at any time to receive
greater payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth
anniversary of the Annuitant's death or the date distributions
are required to begin, to receive equal or substantially equal
payments over the life or life expectancy of the surviving
spouse commencing at any date prior to the later of (1)
December 31 of the calendar year immediately following the
calendar year in which the Annuitant died and (2) December 31
of the calendar year in which the Annuitant would have
attained age 70 1/2 . The surviving spouse may increase the
frequency or amount of such payments at any time.
(d) Annuitant's Death On or After Required Beginning Date: If the
Annuitant dies on or after the date distributions are considered to
have commenced, payment to the designated Beneficiary must continue
at least as rapidly as the method in effect prior to the
Annuitant's death.
SECTION E6, Death of Owner Prior to Annuity Date, is deleted.
SECTION E6, Minimum Guaranteed Death Benefit on Death of Annuitant Prior to
Annuity Date, is added to the Contract:
(a) The Minimum Guaranteed Death Benefit: The initial Minimum
Guaranteed Death Benefit shall be equal to the initial Net Purchase
Payment. Additional Net Purchase Payments are added to the Minimum
Guaranteed Death Benefit. The Minimum Guaranteed Death Benefit will
be adjusted after any Withdrawal by multiplying it by the ratio of
the Contract Value after the Withdrawal to the Contract Value
before the Withdrawal. The Minimum Guaranteed Death Benefit shall
be redetermined on each Eight Year Contract Anniversary by taking
the greater of the Contract Value on that Eight Year Contract
Anniversary or the previous Minimum Guaranteed Death Benefit. The
Minimum Guaranteed Death Benefit shall subsequently be increased
for additional Net Purchase Payments and adjusted after any
Withdrawals in the same manner as the initial Minimum Guaranteed
Death Benefit is adjusted. After the Annuitant's death, the Minimum
Guaranteed Death Benefit will be reduced dollar for dollar by any
Withdrawals.
(b) Death Benefit Options: Upon the death of the Annuitant prior to the
Annuity Date, the Beneficiary may elect a Settlement Option or to
receive a single lump sum payment.
(c) Death Benefit (Prior to age 72)
If the Annuitant dies prior to age 72 and before the Annuity Date,
and provided that the Beneficiary provides due proof of death in a
form satisfactory to First SAFECO and has elected a Death Benefit
Option within six (6) months of the date of death, the amount of
the Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit.
(d) Death Benefit (On or After Age 72)
If the Annuitant dies on or after age 72 and before the Annuity
Date, and provided that the Beneficiary provides due proof of death
in a form satisfactory to First SAFECO and has elected a Death
Benefit Option within six (6) months of the date of death, the
amount of the Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit established on the last
Eight Year Contract Anniversary preceding the Annuitant's 72nd
birthday, adjusted for any Net Purchase Payments received or
Withdrawals taken since that Eight Year Contract Anniversary.
-3-
<PAGE> 10
(e) Death Benefit (Death Notification or Death Benefit Option election
more than Six Months after Date of Death).
If notification of death or election of a Death Benefit Option
occurs after the six month anniversary of the date of death, the
death benefit will be the Contract Value on the date of election of
a Death Benefit Option determined as follows: the Contract Value
calculated as of the six month anniversary of the date of death
will be compared with the Minimum Guaranteed Death Benefit
calculated immediately prior to the six month anniversary of the
date of death to determine if additional funds are required to be
added by First SAFECO to equal such Minimum Guaranteed Death
Benefit. First SAFECO will supplement any deficiency in Contract
Value, such that Contract Value will equal the Minimum Guaranteed
Death Benefit. Thereafter, until the date of election of a Death
Benefit Option, the Contract Value attributable to First SAFECO's
contribution will be guaranteed and interest paid thereon at
prevailing money market rates; the portion of Contract Value
existing on the six-month anniversary of the date of death will be
subject to adjustment reflecting the investment experience for the
period from the six-month anniversary to the election of a Death
Benefit Option. In addition, the amount of the death benefit will
be reduced dollar for dollar by any Withdrawal after the
Annuitant's death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following
the year in which the Annuitant attains age 70 1/2 , unless the
Annuitant sends written notice to First SAFECO:
(i) Requesting that distributions not commence; or
(ii) Notifying First SAFECO that the Annuitant meets one of the
criteria for a later Required Beginning Date.
(b) If First SAFECO has not received written notice prior to March 1
following the year in which the Annuitant attains age 70 1/2 :
(i) If designated Beneficiary information has been provided to
First SAFECO, First SAFECO will make the Required Minimum
Distributions based on joint life expectancy with
recalculation of life expectancy under a Systematic Withdrawal
program and in accordance with the Minimum Distribution Rules
in Section 401 (a)(9) of the Internal Revenue Code.
(ii) If designated Beneficiary information has not been provided to
First SAFECO, First SAFECO will make the Required Minimum
Distributions based on single life expectancy with
recalculation of life expectancy under a Systematic Withdrawal
program and in accordance with the Minimum Distribution Rules
in Section 401 (a)(9) of the Internal Revenue Code.
(c) The calculation of the Required Minimum Distribution will be based
on the entire Contract Value as of the end of the calendar year
preceding the distribution year.
SECTION F10, Withdrawal Restrictions, is added to the Contract:
Withdrawal Restrictions:
(a) Withdrawals are restricted under Section 403(b) of the Internal
Revenue Code for:
(i) Salary reduction contributions made after December 31, 1988;
(ii) Income attributable to salary reduction contributions made
after December 31, 1988;
(iii) Income attributable to amounts held as of December 31, 1988;
and
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<PAGE> 11
(iv) Contracts that contain a full or partial transfer of funds
from a previous Section 403(b)(7) account.
(b) The Withdrawal restrictions under Section 403(b) of the Internal
Revenue Code allow Withdrawals only when the Annuitant:
(i) Attains age 59 1/2;
(ii) Separates from service;
(iii) Dies;
(iv) Becomes disabled (as defined in Section 72(m)(7) of the
Internal Revenue Code); or
(v) In the case of hardship. Withdrawals for hardship are
restricted to the portion of the Contract Value which
represents contributions made by the Annuitant and does not
include any income attributable to salary reduction
contributions made after December 31, 1988 or income
attributable to amounts held as of December 31, 1988.
(c) Withdrawal of restricted funds may result in disqualification of
the Contract as a tax qualified plan and subject the Withdrawal to
federal income tax penalties.
SECTION F11, Direct Rollovers, is added to the Contract:
Direct Rollovers: The Annuitant or Beneficiary may elect to have any
eligible rollover distribution, or any portion of an eligible rollover
distribution, paid directly to an eligible retirement plan.
SECTION G7, Taxes, is amended to read as follows:
Taxes: First SAFECO reserves the right to deduct premium taxes or other
taxes levied by any governmental entity which First SAFECO, in its sole
discretion, determines have resulted from the establishment or
maintenance of this Contract or any portion of this Contract, the
receipt by First SAFECO of Purchase Payments or Annuity premium
payments, or the commencement of Annuity Payments. If First SAFECO
exercises this right, the Sub-Account from which the taxes will be
deducted will be determined by the heirarchical order of the
Sub-Accounts as listed on the Contract Data Page.
SECTION H, Annuity Purchase Rate Table, is amended to read as follows:
H1 Mortality Tables Used: The rates in the Variable Annuity Purchase
Rate Table are based upon the 1983a Mortality Table Projected 20 Years
with Projection Scale G; 50% Male and 50% Female. An age setback of one
year will be used if the Annuity payment begins in the year 2000-2009,
two years if the Annuity payment begins in the year 2010-2019, and an
additional one year setback for each additional ten years. The
effective interest rate assumed in the Variable Annuity Purchase Rate
Table is 4%.
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<PAGE> 12
H2 Variable Annuity Purchase Rate Table:
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
UNISEX RATES
<TABLE>
<CAPTION>
LIFE
ANNUITY JOINT & SURVIVOR ANNUITY**
AGE OF LIFE 120-MONTHS 100% 50%
ANNUITANT ANNUITY CERTAIN ANNUITY ANNUITY
--------- ------- ---------- ------- -------
<S> <C> <C> <C> <C>
55 $208.85 $210.55 $233.18 $221.02
56 205.59 207.42 230.40 218.00
57 202.23 204.22 227.53 214.88
58 198.76 200.94 224.55 211.66
59 195.20 197.58 221.47 208.34
60 191.54 194.16 218.29 204.91
61 187.79 190.67 215.00 201.39
62 183.95 187.12 211.61 197.78
63 180.01 183.53 208.11 194.06
64 176.00 179.88 204.51 190.25
65 171.91 176.20 200.80 186.36
66 167.75 172.50 197.00 182.38
67 163.53 168.77 193.09 178.31
68 159.25 165.04 189.08 174.16
69 154.90 161.31 184.98 169.94
70 150.50 157.59 180.77 165.64
71 146.05 153.89 176.48 161.26
72 141.55 150.23 172.10 156.82
73 137.02 146.62 167.63 152.32
74 132.46 143.09 163.09 147.78
75 127.90 139.63 158.49 143.19
</TABLE>
* The consideration shown refers to the net value used to purchase an
Annuity, after premium taxes or other applicable charges are
deducted.
** Annuitant and Co-Annuitant are assumed to be the same age.
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be
furnished by First SAFECO upon request.
SECTION I8, Mortality Tables Used, is amended to read as follows:
Mortality Tables Used: The rates in the Fixed Annuity Purchase Rate
Table are based upon the 1983a Mortality Table Projected 20 Years with
Projection Scale G; 50% Male and 50% Female. The effective interest
rate assumed in the Fixed Annuity Purchase Rate Table is 3%.
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<PAGE> 13
SECTION I8, Fixed Annuity Purchase Rate Table, is amended to read as follows:
Fixed Annuity Purchase Rate Table
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
UNISEX RATES
<TABLE>
<CAPTION>
LIFE
ANNUITY JOINT & SURVIVOR ANNUITY**
AGE OF LIFE 10-YEARS 100% 50%
ANNUITANT ANNUITY CERTAIN ANNUITY ANNUITY
--------- ------- ---------- ------- -------
<S> <C> <C> <C> <C>
55 $236.33 $238.26 $267.87 $252.10
56 231.98 234.07 263.96 247.97
57 227.55 229.82 259.98 243.77
58 223.04 225.49 255.83 239.44
59 218.43 221.11 251.58 235.01
60 213.73 216.66 247.23 230.48
61 208.95 212.15 242.77 225.86
62 204.08 207.60 238.20 221.14
63 199.13 203.02 233.54 216.33
64 194.11 198.41 228.77 211.44
65 189.04 193.78 223.91 206.47
66 183.90 189.14 218.95 201.43
67 178.71 184.51 213.91 196.31
68 173.48 179.90 208.77 191.12
69 168.20 175.32 203.55 185.87
70 162.88 170.77 198.24 180.56
71 157.59 166.32 192.99 175.29
72 152.29 161.93 187.69 169.99
73 146.98 157.62 182.22 164.60
74 141.67 153.42 176.70 159.19
75 136.38 149.34 171.13 153.75
</TABLE>
* The consideration shown refers to the net value used to purchase an
Annuity, after premium taxes or other applicable charges are
deducted. For example, it would cost $189,040 for an Annuitant age
65 to receive a Fixed Life Annuity which provides a monthly income
of $1,000.00.
** Annuitant and Co-Annuitant are assumed to be the same age.
Age is to be taken for the exact number of years and completed months.
Values for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be
furnished by First SAFECO upon request.
SECTION I13, Loans, is added to the Contract:
(a) Prior to the Annuity Date and upon approval of application to First
SAFECO, an Annuitant may borrow funds from First SAFECO using the
Annuitant's interest in the Contract as security for the loan. Any
loan is subject to the terms of this Contract, the Plan and Section
72(p) of the Internal Revenue Code.
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<PAGE> 14
(b) The minimum loan available is $1,000. First SAFECO reserves the
right to limit the maximum loan available to 50% of the Contract
Value, subject to the Annuitant's acceptance of First SAFECO's loan
agreement. In no event will the amount of the loan exceed $50,000.
(c) The Annuitant may apply for only one loan per Contract Year and no
more than one loan may be outstanding at any time.
(d) A loan is made from a collateral loan account into which the loan
amount is transferred, on a LIFO basis, from the Fixed Account. The
loan annual interest rate will be 8%. The interest rate credited to
the collateral loan account will be 6%. Interest on the outstanding
loan and on the collateral loan account balance will accrue and
compound daily.
(e) Loan repayments must be made at least quarterly and identified as
such or they will be treated as Purchase Payments. A loan must be
repaid within 5 years unless the loan is for the purchase of the
principal residence of the Annuitant. In any event, the term of a
loan will not exceed 20 years and will not extend beyond the date
the Annuitant reaches age 70 1/2.
If the Annuitant does not make loan repayments when due, the
outstanding loan balance will be in default and treated as a
distribution, as permitted by law. The outstanding loan balance and
the collateral loan account will continue to accrue interest until
the Annuitant repays the loan or First SAFECO forecloses on the
collateral interest. If the Annuitant defaults and does not repay
the loan, First SAFECO may foreclose on the Annuitant's tax
sheltered annuity account value subject to its security interest
once a distributable event within the meaning of Section 403(b)(11)
of the Internal Revenue Code occurs. A distributable event occurs
when the Annuitant becomes age 59 1/2 , separates from service
with the Annuitant's employer, becomes disabled, dies or suffers a
financial hardship.
When a loan in default is repaid, a Contingent Deferred Sales
Charge, if any, will be paid at the rate applicable under the
Contract when the Annuitant received the loan.
Until the Annuitant repays the loan, First SAFECO reserves the
right to restrict the transfer of the Contract that would otherwise
qualify as a Revenue Ruling 90-24 transfer or an Internal Revenue
Code Section 1035 exchange. If the Annuitant requests a transfer of
the Contract to another company and no distributable event has
occurred, First SAFECO will keep that portion of the tax sheltered
annuity account value still subject to its security interest,
whether or not the outstanding loan balance is in default. The
Annuitant will continue to make scheduled payments to First SAFECO
to repay the loan or the loan will default.
If a loan is outstanding when Annuity payments begin, the Contract
Value will first be reduced by such outstanding loan balance plus
accrued interest.
All other terms and conditions of the Contract remain unchanged.
FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY
OF NEW YORK
/s/ R.E. Zunker
-------------------------------
R.E. Zunker
President
-8-
<PAGE> 15
ENDORSEMENT
Individual Retirement Annuity Endorsement
This Endorsement forms a part of the Contract to which it is attached. This
Endorsement applies to a Contract issued under Section 408(k) of the Internal
Revenue Code. In the case of a conflict with any provision in the Contract or
Rider, the terms of this Endorsement will control. This Endorsement is effective
upon issuance to the Owner.
SECTION A18, Owner, is amended to read as follows:
Owner: The person named in the Application who has all rights under this
Contract. The Annuitant shall be the Owner of this Contract.
SECTION B6, Misstatement of Age or Sex, is amended to read as follows:
Misstatement of Age: First SAFECO may require proof of the age of the
Annuitant before making any Life Annuity payment provided for by this
Contract. If the age of the Annuitant has been misstated, the amount
payable will be the amount that the Contract Value would have provided at
the correct age.
Once Annuity payments have begun, any underpayment will be made up in one
sum with the next Annuity payment, with interest of 6%. Any overpayment
will be deducted from future Annuity payments until the total is repaid,
with interest of 6%.
SECTION B11, Assignment, is amended to read:
Non-Assignment: To the extent permitted by law, this Contract and the
benefits or payments under this Contract are not assignable or otherwise
transferable. This Contract may be assigned for purposes of an Internal
Revenue Code Section 1035 exchange.
SECTION B13, Exclusive Benefit, is added to the Contract:
Exclusive Benefit: This Contract is established for the exclusive benefit
of the Annuitant and Beneficiaries.
SECTION B14, Nonforfeitable, is added to the Contract:
Nonforfeitable: The interest of the Annuitant in this Contract is
nonforfeitable.
SECTION B15, Nontransferable, is added to the Contract:
Nontransferable: This Contract is nontransferable by the Annuitant.
SECTION B16, Life Insurance Contracts, is added to the Contract:
Life Insurance Contracts: No part of the Contract Value will be invested in
life insurance contracts.
SECTION C6, Contribution Limit, is added to the Contract:
Contribution Limit:
(a) The annual contribution to the Contract may not exceed the lesser of
15% of Compensation or $30,000.
(b) Compensation is defined in Internal Revenue Code Section 219(f) and the
regulations thereunder as follows: Wages, salaries, professional fees,
or other amounts derived from or received for personal services
actually rendered (including, but not limited to commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, and bonuses) and
includes earned
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LPC - 615/NY 11/95
<PAGE> 16
income, as defined in Section 401(c)(2) of the Internal Revenue Code
(reduced by the deduction the self-employed individual takes for
contributions made to a self-employed retirement plan). For purposes of
this definition, IRC Section 401(c)(2) shall be applied as if the term
"trade" or "business" for purposes of IRC Section 1402 included service
described in Subsection (c)(6). Compensation does not include amounts
derived from or received as earnings or profits from property
(including but not limited to interest and dividends) or amounts not
includible in gross income. Compensation also does not include any
amount received as a pension or annuity or as deferred compensation.
Compensation shall include any amount includible in the individual's
gross income under IRC Section 71 with respect to a divorce or
separation instrument described in Subparagraph (A) of Section
71(b)(2).
SECTION E5, Death of Annuitant, is deleted.
SECTION E5, Minimum Distribution Rules, is added to the Contract:
Minimum Distribution Rules: All Settlement Options and Systematic
Withdrawal shall distribute the Contract Value pursuant to the Minimum
Distribution Rules in Section 408(a)(6) or Section 408(b)(3) and Section
401(a)(9) of the Internal Revenue Code, including the minimum distribution
incidental benefit requirement of Section 401(a)(9)(G) of the Internal
Revenue Code and Section 1.401(a)(9)-2 of the Proposed Income Tax
Regulations.
(a) Minimum Distribution Rules:
(i) Required Beginning Date: Minimum Distributions must begin by the
Annuitant's Required Beginning Date, defined as April 1 following
the year the Annuitant reaches age 70 1 /2 . If the Annuitant has
reached age 70 1 /2 as of the Contract Date, the Required
Beginning Date is no later than the close of the taxable year
following the taxable year during which the Contract is issued.
(ii) Minimum Distribution Requirements: The Minimum Distributions must
be in equal or substantially equal amounts, over:
(I) The life of the Annuitant, or the lives of the Annuitant and
the designated Beneficiary; or
(II) A period not extending beyond the life expectancy of the
Annuitant, or the joint and last survivor expectancy of the
Annuitant and the designated Beneficiary.
(iii)Minimum Amounts to be Distributed: If the Annuitant's entire
Contract Value is to be distributed in other than a lump sum,
then the amount to be distributed each year (commencing with the
first calendar year for which distributions are required to begin
and for each calendar year thereafter) must be at least an amount
equal to the quotient obtained by dividing the Contract Value by
the lesser of (1) the applicable life expectancy of the Annuitant
or (2) if the Annuitant's spouse is not the designated
Beneficiary, the applicable divisor determined from the table set
forth in Question and Answer 4 or Question and Answer 5, as
applicable, of Proposed Income Tax Regulation 1.401(a)(9)-2.
Payments must be made in periodic payments of intervals no longer
than one year. In addition, payments must be either
non-increasing or they may increase only as provided in Question
and Answer F-3 of Proposed Income Tax Regulation 1.401(a)(9)-1.
Distributions after the death of the Annuitant shall be
calculated using the applicable life expectancy as the relevant
divisor without regard to Proposed Regulation 1.401(a)(9)-2.
(b) Life Expectancy: The Annuitant and a designated Beneficiary who is the
spouse of a deceased Annuitant may elect whether or not to recalculate
life expectancy. Life expectancy may be recalculated no more
frequently than annually. This election is irrevocable and shall apply
to all subsequent years. It must be made by written notice to First
SAFECO at its Home Office no later than the Required Beginning Date.
If an election is not made, life expectancy for the Annuitant and a
designated Beneficiary who is a spouse will be recalculated. Under the
non-recalculation method benefits are provided for a specific number
of years and may terminate prior to the Annuitant's or Beneficiary's
death.
The life expectancy of a non-spouse Beneficiary may not be
recalculated. Life expectancy will be calculated using the attained
age of such Beneficiary during the calendar year in which
distributions are required to begin, and payments for subsequent years
shall be calculated based on such life expectancy reduced by one for
each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
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<PAGE> 17
Life expectancy and joint and last survivor expectancy are computed by
use of the expected return multiples contained in Tables V and VI,
Section 1.72-9 of the Income Tax Regulations.
(c) Annuitant's Death Prior to Required Beginning Date: If the Annuitant
dies before distributions are considered to have commenced, the
Contract Value must be distributed according to one of the following
options:
(i) The entire Contract Value remaining must be distributed by
December 31 of the year which contains the fifth anniversary of
the Annuitant's death; or
(ii) Unless the Annuitant or Beneficiary has elected (i), the entire
Contract Value must be distributed over a period not extending
beyond a designated Beneficiary's life or life expectancy in
substantially equal installments.
Under this option a non-spouse Beneficiary must begin
distributions no later than December 31 of the calendar year
immediately following the calendar year of the Annuitant's death.
The Beneficiary may elect at any time to receive greater
payments.
A surviving spouse may elect, no later than the earlier of
December 31 of the calendar year containing the fifth anniversary
of the Annuitant's death or the date distributions are required
to begin, to receive equal or substantially equal payments over
the life or life expectancy of the surviving spouse commencing at
any date prior to the later of (1) December 31 of the calendar
year immediately following the calendar year in which the
Annuitant died and (2) December 31 of the calendar year in which
the Annuitant would have attained age 70 1/2. The surviving
spouse may increase the frequency or amount of such payments at
any time.
A surviving spouse may also elect to treat the Contract as the
spouse's own, and then delay distributions until the 1st of April
following the calendar year in which the spouse reaches age
70 1/2 if that date is later than the Annuitant's death or the
date the Annuitant would have reached age 70 1/2. Such election
is considered made if:
(I) Amounts required to be distributed on the Annuitant's death
have not been distributed from the Contract;
(II) A regular IRA contribution or rollover contribution is made
to the Contract;
(III) A rollover is made from the Contract; or
(IV) The spouse fails to make another election.
(d) Annuitant's Death On or After Required Beginning Date: If the
Annuitant dies on or after the date distributions are considered to
have commenced, payment to the designated Beneficiary must continue at
least as rapidly as the method in effect prior to the Annuitant's
death.
SECTION E6, Death of Owner Prior to Annuity Date, is deleted.
SECTION E6, Minimum Guaranteed Death Benefit on Death of Annuitant Prior to
Annuity Date, is added to the Contract:
(a) The Minimum Guaranteed Death Benefit: The initial Minimum Guaranteed
Death Benefit shall be equal to the initial Net Purchase Payment.
Additional Net Purchase Payments are added to the Minimum Guaranteed
Death Benefit. The Minimum Guaranteed Death Benefit will be adjusted
after any Withdrawal by multiplying it by the ratio of the Contract
Value after the Withdrawal to the Contract Value before the
Withdrawal. The Minimum Guaranteed Death Benefit shall be redetermined
on each Eight Year Contract Anniversary by taking the greater of the
Contract Value on that Eight Year Contract Anniversary or the previous
Minimum Guaranteed Death Benefit. The Minimum Guaranteed Death Benefit
shall subsequently be increased for additional Net Purchase Payments
and adjusted after any Withdrawals in the same manner as the initial
Minimum Guaranteed Death Benefit is adjusted. After the Annuitant's
death, the Minimum Guaranteed Death Benefit will be reduced dollar for
dollar by any Withdrawals.
-3-
<PAGE> 18
(b) Death Benefit Options: Upon the death of the Annuitant prior to the
Annuity Date, the Beneficiary may elect a Settlement Option or to
receive a single lump sum payment.
(c) Death Benefit (Prior to age 72)
If the Annuitant dies prior to age 72 and before the Annuity Date, and
provided that the Beneficiary provides due proof of death in a form
satisfactory to First SAFECO and has elected a Death Benefit Option
within six (6) months of the date of death, the amount of the Death
Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit.
(d) Death Benefit (On or After age 72)
If the Owner dies on or after age 72 and before a Settlement Option
has commenced, and provided that the Beneficiary provides due proof of
death in a form satisfactory to First SAFECO and has elected a Death
Benefit Option within six (6) months of the date of death, the amount
of the Death Benefit will be the greater of:
(i) the Contract Value on the date of election of a Death Benefit
Option by the Beneficiary; or
(ii) the Minimum Guaranteed Death Benefit established on the last
Eight Year Contract Anniversary preceding the Annuitant's 72nd
birthday, adjusted for any Net Purchase Payments received or
Withdrawals taken since that Eight Year Contract Anniversary.
(e) Death Benefit (Death Notification or Death Benefit Option election
more than Six Months after Date of Death).
If notification of death or election of a Death Benefit Option occurs
after the six-month anniversary of the date of death, the death
benefit will be the Contract Value on the date of election of a Death
Benefit Option determined as follows: the Contract Value calculated as
of the six-month anniversary of the date of death will be compared
with the last calculated Minimum Guaranteed Death Benefit to determine
if additional funds are required to be added by First SAFECO to equal
such Minimum Guaranteed Death Benefit. First SAFECO will supplement
any deficiency in Contract Value, such that Contract Value will equal
the Minimum Guaranteed Death Benefit. Thereafter, until the date of
election of a Death Benefit Option, the Contract Value attributable to
First SAFECO's contribution will be guaranteed and interest paid
thereon at prevailing money market rates; the portion of Contract
Value existing on the six-month anniversary of the date of death will
be subject to adjustment reflecting the investment experience for the
period from the six-month anniversary to the election of a Death
Benefit Option. In addition, the amount of the death benefit will be
reduced dollar for dollar by any Withdrawal after the Annuitant's
death.
SECTION E7, Death of Owner After Annuity Date, is deleted.
SECTION E14, Commencement of Minimum Distributions, is added to the Contract:
Commencement of Minimum Distributions:
(a) Minimum Distributions will commence no later than April 1 following
the year in which the Annuitant attains age 70 1/2, unless the
Annuitant sends written notice to First SAFECO that the minimum
distributions for this Contract will be taken from another IRA and
requests that distributions not be taken from this Contract.
An individual may satisfy the minimum distribution requirements under
Sections 408(a)(6) and 408(b)(3) of the Internal Revenue Code by
receiving a distribution from one IRA that is equal to the amount
required to satisfy the minimum distribution requirements for two or
more IRAs. For this purpose, the owner of two or more IRAs may use the
'alternative method' described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above.
-4-
<PAGE> 19
(b) If First SAFECO has not received written notice prior to March 1
following the year in which the Annuitant attains age 70 1/2:
(i) If designated Beneficiary information has been provided to First
SAFECO, First SAFECO will make the Required Minimum Distributions
based on joint life expectancy with recalculation of life
expectancy under a Systematic Withdrawal program and in accordance
with the Minimum Distribution Rules in Section 401(a)(9) of the
Internal Revenue Code.
(ii) If designated Beneficiary information has not been provided to
First SAFECO, First SAFECO will make the Required Minimum
Distributions based on single life expectancy with recalculation
of life expectancy under a Systematic Withdrawal program and in
accordance with the Minimum Distribution Rules in Section
401(a)(9) of the Internal Revenue Code.
SECTION G7, Taxes, is amended to read as follows:
Taxes: First SAFECO reserves the right to deduct premium taxes or other taxes
levied by any governmental entity which First SAFECO, in its sole discretion,
determines have resulted from the establishment or maintenance of this Contract
or any portion of this Contract, the receipt by First SAFECO of Purchase
Payments or Annuity premium payments, or the commencement of Annuity payments.
If First SAFECO exercises this right the Sub-Account from which the taxes will
be deducted will be determined by the hierarchical order of the Sub-Accounts as
listed on the Contract Data Page.
-5-
<PAGE> 20
SECTION H, Annuity Purchase Rate Table, is amended to read as follows:
H1 Mortality Tables Used: The rates in the Variable Annuity Purchase Rate Table
are based upon the 1983a Mortality Table Projected 20 Years with Projection
Scale G; 50% Male and 50% Female. An age setback of one year will be used if
the Annuity payment begins in the year 2000-2009, two years if the Annuity
payment begins in the year 2010-2019, and an additional one year setback for
each additional ten years. The effective interest rate assumed in the
Variable Annuity Purchase Rate Table is 4%.
H2 Variable Annuity Purchase Rate Table:
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY *
UNISEX RATES
<TABLE>
<CAPTION>
LIFE
ANNUITY JOINT & SURVIVOR ANNUITY**
AGE OF LIFE 120-MONTHS 100% 50%
ANNUITANT ANNUITY CERTAIN ANNUITY ANNUITY
- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
55 $ 208.85 $ 210.55 $ 233.18 $ 221.02
56 205.59 207.42 230.40 218.00
57 202.23 204.22 227.53 214.88
58 198.76 200.94 224.55 211.66
59 195.20 197.58 221.47 208.34
60 191.54 194.16 218.29 204.91
61 187.79 190.67 215.00 201.39
62 183.95 187.12 211.61 197.78
63 180.01 183.53 208.11 194.06
64 176.00 179.88 204.51 190.25
65 171.91 176.20 200.80 186.36
66 167.75 172.50 197.00 182.38
67 163.53 168.77 193.09 178.31
68 159.25 165.04 189.08 174.16
69 154.90 161.31 184.98 169.94
70 150.50 157.59 180.77 165.64
71 146.05 153.89 176.48 161.26
72 141.55 150.23 172.10 156.82
73 137.02 146.62 167.63 152.32
74 132.46 143.09 163.09 147.78
75 127.90 139.63 158.49 143.19
</TABLE>
* The consideration shown refers to the net value used to purchase an Annuity,
after premium taxes or other applicable charges are deducted.
** Annuitant and Co-Annuitant are assumed to be the same age.
Age is to be taken for the exact number of years and completed months. Values
for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished by
First SAFECO upon request.
-6-
<PAGE> 21
SECTION I8, Mortality Tables Used, is amended to read as follows:
Mortality Tables Used: The rates in the Fixed Annuity Purchase Rate Table
are based upon the 1983a Mortality Table Projected 20 Years with Projection
Scale G; 50% Male and 50% Female. The effective interest rate assumed in
the Fixed Annuity Purchase Rate Table is 3%.
SECTION I8, Fixed Annuity Purchase Rate Table, is amended to read as follows:
Fixed Annuity Purchase Rate Table
CONSIDERATION REQUIRED TO PURCHASE $1 OF MONTHLY ANNUITY*
UNISEX RATES
<TABLE>
<CAPTION>
LIFE JOINT & SURVIVOR ANNUITY**
ANNUITY
AGE OF LIFE 10-YEARS 100% 50%
ANNUITANT ANNUITY CERTAIN ANNUITY ANNUITY
- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
55 $ 236.33 $ 238.26 $ 267.87 $ 252.10
56 231.98 234.07 263.96 247.97
57 227.55 229.82 259.98 243.77
58 223.04 225.49 255.83 239.44
59 218.43 221.11 251.58 235.01
60 213.73 216.66 247.23 230.48
61 208.95 212.15 242.77 225.86
62 204.08 207.60 238.20 221.14
63 199.13 203.02 233.54 216.33
64 194.11 198.41 228.77 211.44
65 189.04 193.78 223.91 206.47
66 183.90 189.14 218.95 201.43
67 178.71 184.51 213.91 196.31
68 173.48 179.90 208.77 191.12
69 168.20 175.32 203.55 185.87
70 162.88 170.77 198.24 180.56
71 157.59 166.32 192.99 175.29
72 152.29 161.93 187.69 169.99
73 146.98 157.62 182.22 164.60
74 141.67 153.42 176.70 159.19
75 136.38 149.34 171.13 153.75
</TABLE>
* The consideration shown refers to the net value used to purchase an Annuity,
after premium taxes or other applicable charges are deducted. For example, it
would cost $189,040 for an Annuitant age 65 to receive a Fixed Life Annuity
which provides a monthly income of $1,000.
** Annuitant and Co-Annuitant are assumed to be the same age.
Age is to be taken for the exact number of years and completed months. Values
for fractional ages are obtained by simple interpolation.
Consideration for ages or combination of lives not shown will be furnished by
First SAFECO upon request.
All other terms and conditions of the Contract remain unchanged.
FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY
OF NEW YORK
/s/ RE Zunker
-------------------------------
R.E. Zunker
President
-7-
<PAGE> 1
EXHIBIT 5
<PAGE> 2
[SAFECO LOGO] INDIVIDUAL VARIABLE ANNUITY APPLICATION
Complete and mail with payment to: First SAFECO National Life
Insurance Company of New York, 6700 Old Collamer Road, East Syracuse, NY 13057
/ / NEW YORK SPINNAKER (FLEXIBLE PREMIUM)
INITIAL MINIMUM PURCHASE PAYMENT:
Qualified - $30;
Non-Qualified - $2,000 (or $100 under Systematic Investing)
/ / NEW YORK SPINNAKER PLUS (SINGLE PREMIUM)
INITIAL MINIMUM PURCHASE PAYMENT:
Qualified and Non-Qualified - $50,000
- --------------------------------------------------------------------------------
1. OWNER INFORMATION
Non-Qualified: If no annuitant specified in Section 2, Contract Owner will also
be the Annuitant.
CONTRACT OWNER:
Name ________________________________________ / / Male / / Female / / Trustee
First Middle Last
Mailing Address ________________________________________________________________
Street City State Zip_
Telephone (______)________________ Soc. Sec. #____________ Date of Birth _______
JOINT OWNER (NON-QUALIFIED AND SPOUSE ONLY):
Name______________________________ Soc. Sec. #____________ Date of Birth _______
First Middle Last
- --------------------------------------------------------------------------------
2. ANNUITANT INFORMATION
Non-Qualified Only
Name ____________________________________________________ / / Male / / Female
First Middle Last
Mailing Address ____________________________________________________________
Street City State Zip
Telephone (______)________________ Soc. Sec. #____________ Date of Birth _______
- --------------------------------------------------------------------------------
3. TYPE OF ANNUITY
A. / / INDIVIDUAL RETIREMENT ANNUITY B. / / NON-QUALIFIED ANNUITY
/ / Contributory IRA for 19__ / / 1035(a) Exchange*
/ / Rollover from a Qualified C. / / SIMPLIED EMPLOYEE PENSION
Retirement Plan, IRA or TSA* PLAN
/ / Transfer from another IRA* (Internal Revenue Code
Section 408(k))
/ / Salary Reduction
(SARSEP)
Name of Employer: ___________________
Have you received an IRA Disclosure
Statement (Form LP-745/NY)? / / Yes / / No *NOTE: Must complete
Form LP-951/NY
- --------------------------------------------------------------------------------
4. BENEFICIARIES
PRIMARY: Name______________________________________________ Percentage_______%
First Middle Last
Soc. Sec. # ________________ Date of Birth__________
Relationship to Annuitant ___________________________
/ / PRIMARY
/ / CONTINGENT: Name______________________________________ Percentage________%
First Middle Last
Soc. Sec. # ________________ Date of Birth____________
Relationship to Annuitant ____________________________
- --------------------------------------------------------------------------------
5. INVESTMENT INSTRUCTIONS
Choose one or more of the following. Whole percentages only.
TOTAL OF ALL PERCENTAGES MUST EQUAL 100%
SAFECO RESOURCE FEDERATED INSURANCE
SERIES TRUST: SERIES:
______ % Money Market ______ % Utility II
______ % Bond ______ % High Income Bond II
______ % Equity ______ % International Equity II
______ % Northwest
______ % Growth ______ % SAFECO FIXED ACCOUNT
LEXINGTON
______ % Natural Resources Trust
______ % Emerging Markets Fund, Inc.
Purchase Payments to the Fixed Account will be allocated immediately upon
receipt. Purchase Payments to the Variable Sub-Accounts may be invested in the
Money Market Sub-Account until the expiration of 15 days from the date the first
Purchase Payment is received, and then will be invested according to your
investment instructions.
- --------------------------------------------------------------------------------
6. REPLACEMENT ANNUITY
Will the annuity applied for here replace any life insurance or annuity from
this or any other company?
/ / Yes / / No If yes, you must complete the IRA & Non-Qualified Rollover,
Direct Rollover and Transfer form, LP-951/NY, and submit it
with this application.
- --------------------------------------------------------------------------------
LPC - 801/NY 6/96 (R) Registered Trademark of
SAFECO Corporation
<PAGE> 3
- --------------------------------------------------------------------------------
7. SUITABILITY
Questions must be answered.
Do you understand that because variable benefits and contract values are based
on investment experience of the Separate Account and cannot be predicted or
guaranteed as to dollar amounts, variable annuity contracts should be purchased
for long term retirement purposes? / / Yes / / No
WHAT IS YOUR:
Occupation? _____________________
Gross Income? $ _____________________
Income Net Worth? $ _____________________
WHAT IS YOUR INVESTMENT OBJECTIVE:
_____ High Income _____ Long Term Growth
_____ Tax Advantage _____ Growth with Income
_____ Other (specify) __________________
Are you a Registered Representative of a Broker/Dealer? / / Yes / / No If yes,
please give name and address of Broker/Dealer:
_______________________________
_______________________________ __________________________
Signature of Reviewing Principal Date
- --------------------------------------------------------------------------------
8. PROGRAMS
Min $10,000 balance required to elect Sweep or Rebalancing.
I have read the information in the Prospectus in regard to the following
programs and would like to elect:
1. / / SYSTEMATIC INVESTING - Please complete Form LP-1107/NY and remit with
this application.
2. / / INTEREST/APPRECIATION SWEEP - I elect to have:
/ / the interest earned in my Fixed Account...OR
/ / appreciation of my Money Market sub-account, in excess of
$___________________________________ transferred
(cannot be less than total payments)
/ / Monthly / / Quarterly / / Annually into the sub-accounts listed below.
3. / / DOLLAR COST AVERAGING - I elect to transfer $___________________________
or __________ % (minimum $50)
/ / Monthly / / Quarterly from the / /_________________
variable sub-account OR FROM the / / Fixed Account (maximum 1.33% per month, 4%
per quarter) TO the sub-account(s) listed below:
Money Market ______ % (DCA Only) Bond ______ % Equity ______ %
Growth ______ % Northwest ______ % Utility II ______ %
High Income Bond II ______ % Nat. Resources ______ % Emerging Markets ______ %
International Equity II ______ % Balanced ______ % International ______ %
4. / / SUB-ACCOUNT REBALANCING - I elect to rebalance my variable sub-accounts:
/ / Quarterly / / Semi-Annually / / Annually in the same percentages as
indicated above.
- --------------------------------------------------------------------------------
9. STATEMENT OF OWNER(S)
HAVE YOU RECEIVED A CURRENT PROSPECTUS? / / YES / / NO
WOULD YOU LIKE TO RECEIVE A STATEMENT OF ADDITIONAL INFORMATION? / / YES / / NO
I declare that the statements and answers on this application are full, complete
and true, to the best of my knowledge and belief, and shall form a part of the
annuity Contract issued hereon. I understand and agree that any fees or taxes
will be deducted from my Contract Value or Payment, as applicable.
Signed at _______________
_____________________ ___________________________ on _______________
Signature of Owner Signature of Joint Owner (if applicable) (mo, day, year)
- -------------------------------------------------------------------------------
10. REGISTERED REPRESENTATIVE INFORMATION
MAIL CONTRACT DIRECTLY TO:
/ / client's address
/ / registered rep's office
To the best of my knowledge, the annuity applied for here / / DOES / / DOES NOT
replace any life insurance or annuity in this or any other company. I hereby
certify that I witnessed the signature(s) above and that the answers to the
questions above are true to the best of my knowledge and belief.
REGISTERED REPRESENTATIVE'S SIGNATURE: ________________________________________
REGISTERED REPRESENTATIVE'S NAME (PLEASE PRINT):_______________________________
FIRST SAFECO REP #: __________________________ TELEPHONE #: ( )____________
STATE/LOCATION ID #: _________________________ DATE: ________________________
<PAGE> 4
[LOGO] INDIVIDUAL VARIABLE ANNUITY First SAFECO National Life
APPLICATION Insurance Company of New York
6700 Old Collamer Road
East Syracuse, NY 13057
- --------------------------------------------------------------------------------
PLEASE CHECK ALL APPROPRIATE BOXES: / / New Participant / / Change of Employer
/ / Address/Name / / Investment
Allocation Change
/ / Change of Agent
- --------------------------------------------------------------------------------
CONTRACT OWNER INFORMATION
Name_________________________________________________________ / / Male / /Female
First Middle Last
Mailing Address_________________________________________________________________
Street City State Zip
Telephone (__)_____________ Soc. Sec. #__________ Date of Birth ________________
Mo. Day Yr.
- --------------------------------------------------------------------------------
PRIMARY BENEFICIARY
Name_________________________________________________________ / / Male / /Female
First Middle Last
Address_________________________________________________________________________
Street City State Zip
Soc. Sec. #___________ Date of Birth__________ Relationship to Annuitant________
Mo.Day Yr.
CONSENT OF SPOUSE REQUIRED FOR ERISA PLAN PARTICIPANT NAMING A NON-SPOUSE
PRIMARY BENEFICIARY: I consent to the above designation of Beneficiary. I
understand that if anyone other than me is designated as Primary Beneficiary on
this form, I am waiving my rights to receive benefits under the plan when my
spouse dies.
Spousal Signature:____________________________________________ Date: ___________
/ / I'm not married
- --------------------------------------------------------------------------------
CONTINGENT BENEFICIARY
Name_________________________________________________________ / / Male / /Female
First Middle Last
Address_________________________________________________________________________
Street City State Zip
Soc. Sec. #___________ Date of Birth__________ Relationship to Annuitant________
Mo. Day Yr.
NOTE: Please attach a separate page for multiple beneficiaries.
- --------------------------------------------------------------------------------
EMPLOYER
Name ___________________________________________________________________________
Address_________________________________________________________________________
Street City State Zip
Please verify that TSA transmittal checklist is on file with First SAFECO Home
Office. Application cannot be processed without verification of Employer's
eligibility to sponsor a 403(b) Plan.
PLANS COVERED BY ERISA:
This employee has satisfied all eligibility requirements to receive
contributions under our plan. Furthermore, Joint and Survivor Annuity option
disclaimers (if required by Plan) are on file with the Plan Administrator.
PLAN ADMINISTRATOR SIGNATURE______________________________ DATE_________________
- --------------------------------------------------------------------------------
TYPE OF ANNUITY
/ / DEFERRAL TSA
/ / TRANSFER FROM ANOTHER TSA
Original TSA was an: / / Annuity under Internal Revenue Code 403(b)
/ / Account under Internal Revenue Code 403(b)(7)
or Mutual Fund TSA
- --------------------------------------------------------------------------------
CARRIER TO CARRIER TRANSFERS
Is there an expected transfer pending? / / Yes / / No Transfer Amount: $________
If yes, TSA Transfer Authorization (Form LP-724/NY) must be completed and
submitted with this application.
- --------------------------------------------------------------------------------
REPLACEMENT ANNUITY
Will the annuity applied for here replace any life insurance or annuity from
this or any other company?
/ / Yes / / No If yes, give policy number and full company name: Policy #_______
Company Name: __________________________________________________________________
- --------------------------------------------------------------------------------
(R)Registered trademark of SAFECO Corporation
LPC - 802/NY 6/96
<PAGE> 5
- --------------------------------------------------------------------------------
INVESTMENT INSTRUCTIONS
/ / NEW YORK SPINNAKER / / NEW YORK SPINNAKER PLUS
(MINIMUM PURCHASE PAYMENT $30) (SINGLE SUM ONLY $50,000 MINIMUM)
SAFECO SUB-ACCOUNT OPTIONS: OTHER COMPANY SUB-ACCOUNT OPTIONS:
Equity ______ % Lexington Natural Resources _____ %
Growth ______ % Lexington Emerging Markets _____ %
Bond ______ % Federated International Equity II ____ %
Northwest ______ % Federated High Income Bond II _____ %
Money Market ______ % Federated Utility II _____ %
FIXED ACCOUNT ______ %
TOTAL PERCENTAGE OF ALL INVESTMENT OPTIONS MUST EQUAL 100%.
INVESTMENT INSTRUCTIONS FOR SINGLE SUM 90-24 TRANSFER: _________________________
(If different from above)
Purchase Payments to the Fixed Account will be allocated to the Fixed Account
immediately. The initial Purchase Payment to Variable Annuity Sub-Accounts may
be allocated to the Money Market Sub-Account until the expiration of 15 days
from the date the first Purchase Payment is received. Then the Purchase Payment
will be allocated according to your investment instructions as shown above.
- --------------------------------------------------------------------------------
CONTRIBUTION FREQUENCY & SOURCE
Minimum initial investment for New York Spinnaker Q is $30.
SOURCE OF CONTRIBUTION: / / Employee Salary Reduction
/ / Employer
Minimum $50,000 initial investment for New York Spinnaker Plus.
/ / Annual(01) / / Bi-Weekly(26)
/ / Quarterly(04) / / Weekly(52)
/ / Monthly(12) / / 10-Pay Periods Deductions will begin month of_______
/ / Semi-Monthly(24) / / Other_________ Months to exclude ___________________
Anticipated annual contributions: $______________________________________
(AMOUNT MUST BE PROVIDED)
- --------------------------------------------------------------------------------
SUITABILITY (Must be completed)
I understand that a $30 non-refundable administrative fee will be deducted on
the last day of each certificate year of New York Spinnaker Q accounts with
balances of less than $50,000.
Do you understand that because variable benefits and contract values are based
on the investment experience of the Separate Account and cannot be predicted or
guaranteed as to dollar amounts, variable annuity contracts should be purchased
for long term retirement purposes? / / Yes / / No
Have you received a current Prospectus? / / Yes / / No
Would you like to receive a Statement of Additional Information: / / Yes / / No
WHAT IS YOUR: WHAT IS YOUR INVESTMENT OBJECTIVE:
Occupation?_____________________ _____ HIGH INCOME _____ LONG TERM GROWTH
Income?_________________________ _____ TAX ADVANTAGE _____ GROWTH WITH INCOME
Net worth? _____________________ _____ OTHER (SPECIFY)________________________
Are you a Registered Representative of another Broker-Dealer? / / Yes / / No
If yes, provide name and address of Broker-Dealer: _____________________________
________________________________________________________________________________
Signature of Reviewing Principal Date
- --------------------------------------------------------------------------------
STATEMENT OF OWNER
I understand that the contract(s) I am applying for contains the following
restrictions and provisions:
- - A surrender charge on withdrawals for the first eight (8) years.
- - Required Minimum Distributions will be sent to me upon attainment of age 70
1/2 per IRS regulations.
- - Withdrawals are restricted under 403(b)(11) to the following: Separation
from Service, Age 59 1/2, Death, Disability, Pre-89 Balance, or Financial
Hardship (as defined in the Internal Revenue Code).
- - I am solely responsible for ensuring that my contributions do not exceed
the maximum allowable per IRS regulations.
I DECLARE THAT THE STATEMENTS AND ANSWERS RECORDED ON THIS APPLICATION ARE
COMPLETE AND ACCURATE TO THE BEST OF MY KNOWLEDGE.
________________________________________________________________________________
Signature of Annuitant Date
- --------------------------------------------------------------------------------
REGISTERED REPRESENTATIVE INFORMATION
To the best of my knowledge, the annuity applied for here [ / / DOES OR / / DOES
NOT ] replace any life insurance or annuity in this or any other company. I
hereby certify that I witnessed the signature of the annuitant and that his/her
answers to the questions above are true to the best of my knowledge. ALSO, I
HAVE ATTACHED THE MAXIMUM EXCLUSION ALLOWANCE CALCULATION OR THE INFORMATION
NECESSARY TO CALCULATE THE PARTICIPANT'S MAXIMUM EXCLUSION ALLOWANCE.
Registered Representative's Name(s):_____________________ Stat #:________ %_____
Registered Representative's Name(s):_____________________ Stat #:________ %_____
Agency: ________________________________________________________________________
State/Location ID#
Registered Representative's Signature:________________________ (___)____________
Telephone #
<PAGE> 1
FUND PARTICIPATION AGREEMENT EXHIBIT 8.a.
This AGREEMENT is made this day of , 1996, by and between First
SAFECO National Life Insurance Company of New York (the "Insurer"), a life
insurance company domiciled in Washington, on its behalf and on behalf of the
segregated asset accounts of the Insurer listed on Exhibit A to this Agreement
(the "Separate Accounts"); Insurance Management Series (the "Fund"), a
Massachusetts business trust; and Federated Securities Corp. (the
"Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended ("1940 Act") and the Fund is
authorized to issue separate classes of shares of beneficial interest
("shares"), each representing an interest in a separate portfolio of assets
known as a "portfolio" and each portfolio has its own investment objective,
policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity contracts ("Variable Contracts") and to serve as an investment medium
for Variable Contracts offered by insurance companies that have entered into
participation agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund will be made available in the future to
offer shares of one or more of its portfolios to separate accounts of insurance
companies that fund variable life insurance policies (at which time such
policies would also be "Variable Contracts" hereunder), and
WHEREAS, the Fund is currently comprised of seven separate portfolios,
and other portfolios may be established in the future; and
WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Associated of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants hereinafter set forth, the parties hereby agree as
follows:
-1-
<PAGE> 2
ARTICLE I. SALE OF FUND SHARES
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that the Insurer orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of
the Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios of
the Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Portfolio being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations thereunder. No shares of any Portfolio
will be sold directly to the general public to the extent not permitted by
applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the Portfolios
to any insurance company or separate account unless an agreement containing
provisions substantially the same as the provisions in Article IV of this
Agreement is in effect to govern such sales.
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 The Insurer shall be the agent of the Fund only for the limited
purpose of receiving and accepting purchase and redemption orders from each
Separate Account and receipt of such orders by 4:00 p.m. Eastern time by the
Insurer shall be deemed to be receipt by the Fund for purposes of Rule 22c-1 of
the 1940 Act; provided that the Fund receives notice of such orders on the next
following business day prior to 4:00 p.m. Eastern time on such day, although the
Insurer will use its best efforts to provide such notice by 12:00 noon Eastern
time. The Insurer shall not be deemed or construed to be an agent for the Fund
other than as set forth in this Section 1.6.
1.7 The Insurer agrees to purchase and redeem the shares of each
Portfolio in accordance with the provisions of the current prospectus for the
Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next
business day after it places an order to purchase shares of the Portfolio.
Payment shall be in federal funds transmitted by wire.
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<PAGE> 3
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not be
issued to the Insurer or the Separate Accounts unless otherwise agreed by the
Fund. Shares ordered from the Fund will be recorded in an appropriate title for
the Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurer of any income dividends or
capital gain distributions payable on the shares of the Portfolios. The Insurer
hereby elects to reinvest in the Portfolio all such dividends and distributions
as are payable on a Portfolio's shares and to receive such dividends and
distributions in additional shares of that Portfolio. The Insurer reserves the
right to revoke this election in writing and to receive all such dividends and
distributions in cash. The Fund shall notify the Insurer of the number of shares
so issued as payment of such dividends and distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the
Insurer on each business day of the net asset value per share for each Portfolio
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value per share
available by 7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Insurer represents and warrants that it is an insurance
company duly organized and in good standing under applicable law and that it is
taxed as an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and
validly established each of the Separate Accounts as a segregated asset account
under the Washington Insurance Code, and that each of the Separate Accounts is a
validly existing segregated asset account under applicable federal and state
law.
2.3 The Insurer represents and warrants that the Variable Contracts
issued by the Insurer or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively, (2) are not
registered because they are properly exempt from registration under the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance with
the provisions of the 1940 Act or, alternatively, (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
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2.7 The Fund represents and warrants that the shares of the Portfolios
are duly authorized for issuance in accordance with applicable law and that the
Fund is registered as an open-end management investment company under the 1940
Act.
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. GENERAL DUTIES
3.1 The Fund, at its expense, shall take all such actions as are
necessary to permit the sale of the shares of each Portfolio to the Separate
Accounts, including maintaining its registration as an investment company under
the 1940 Act, and registering the shares of the Portfolios sold to the Separate
Accounts under the 1933 Act for so long as required by applicable law. The Fund
shall amend its Registration Statement filed with the SEC under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of the shares of the Portfolios. The Fund, at its expense, shall
register and qualify the shares for sale in accordance with the laws of the
various states to the extent deemed necessary by the Fund or the Distributor.
3.2 The Fund represents and warrants that it is currently qualified as
a regulated investment company under Subchapter M of the Code and that it shall
make every effort to maintain such qualification of each Portfolio under
Subchapter M of the Code (or any successor or similar provision) and that it
will notify the Insurer immediately upon having a reasonable basis for believing
that a Portfolio has ceased to so qualify or that it might not so qualify in the
future. The Fund acknowledges that any failure to qualify as a regulated
investment company under Subchapter M of the Code would constitute a breach of
its general duties under this Agreement.
3.3 The Fund represents and warrants that each Portfolio will at all
times be adequately diversified within the meaning of Section 817(h) of the Code
and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity contracts
and any prospective amendments or other modifications to Section 817 or
regulations thereunder, and shall notify the Insurer immediately upon having a
reasonable basis for believing that any Portfolio has ceased to comply. The Fund
further represents and warrants that, at all times while this Agreement is in
effect, all beneficial interests will be owned by one or more insurance
companies or by any other party permitted under Section 1.817-5(f)(3) of the
regulations promulgated under the Code.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of
the Variable Contracts issued by the Insurer as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of the
Code, and shall notify the Fund and the Distributor
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<PAGE> 5
immediately upon having a reasonable basis for believing that such Variable
Contracts have ceased to be so treated or that they might not be so treated in
the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by
the Insurer in accordance with applicable provisions of the 1933 Act, the 1934
Act, the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.7 The Distributor shall sell and distribute the shares of the
Portfolios of the Fund in accordance with the applicable provisions of the 1933
Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any
proposal or oppose or interfere with any proposal submitted by the Fund at a
meeting of owners of Variable Contracts or shareholders of the Fund, and will in
no way recommend, oppose, or interfere with the solicitation of proxies for Fund
shares held by Contract Owners, without the prior written consent of the Fund,
which consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities have jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. POTENTIAL CONFLICTS
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the
existence of any material irreconcilable conflict (1) between the interests of
owners of variable annuity contracts and variable life insurance policies, and
(2) between the interests of owners of Variable Contracts ("Variable Contract
Owners") issued by different Participating Life Insurance Companies that invest
in the Fund. A material irreconcilable conflict may arise for a variety of
reasons, including: (a) an action by any state insurance regulatory authority;
(b) a change in applicable federal or state insurance, tax, or securities laws
or regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
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<PAGE> 6
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the fund is engaged in Mixed Funding or Shared Funding in reliance on Rule 6e-2,
6e-3(T), or any other regulation under the 1940 Act, the Insurer will be
responsible for assisting the Board of Trustees of the Fund in carrying out its
responsibilities under such regulation, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Insurer to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Insurer shall carry out its responsibility under this Section 4.3 with a view
only to the interests of the Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's election, to withdraw the Separate Accounts'
investment in the Fund, provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees, and no
charge or penalty will be imposed as a result of such withdrawal. These
responsibilities shall be carried out with a view only to the interests of the
Variable Contract Owners. A majority of the disinterested Trustees of the Fund
shall determine whether or not any proposed action adequately remedies any
material irreconcilable conflict, but in no event will the Fund or its
investment adviser or the Distributor be required to establish a new funding
medium for any Variable Contract. The Insurer shall not be required by this
Section 4.4 to establish a new funding medium for any Variable Contact if any
offer to do so has been declined by vote of a majority of Variable Contract
Owners materially adversely affected by the material irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the
Fund's Board of Trustees, and all Board action with regard to determining the
existence of a conflict, notifying Participating Insurance Companies of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees of
the Fund or other appropriate records, and such minutes or other records shall
be made available to the SEC upon request.
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<PAGE> 7
4.7 The Board of Trustees of the Fund shall promptly notify the Insurer
in writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. PROSPECTUSES AND PROXY STATEMENTS; VOTING
5.1 The Insurer shall distribute such prospectuses, proxy statements
and periodic reports of the Fund to the owners of Variable Contracts issued by
the Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of
the current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Insurer to either print a stand-alone document or print together in one
document the current prospectus for the Variable Contracts issued by the Insurer
and the current prospectus for the Fund, or a document combining the Fund
prospectus with prospectuses of other funds in which the Variable Contracts may
be invested. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Insurer shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Insurer. The expenses of printing prospectuses combining the Fund prospectus
with the Variable Contract prospectus or with prospectuses of other funds in
which the Variable Contracts may be invested shall be apportioned between (a)
the Insurer and (b) the Fund, in proportion to the number of pages of the
combined prospectus. The Fund will bear the cost of printing the Funds'
prospectus portion of such document for distribution to owners of existing
Variable Contracts invested in the Fund, and the Insurer will bear the expense
of printing the portion of such documents relating to the Separate Accounts;
provided, however, that the Insurer will bear all printing expenses of such
combined prospectuses where used for distribution to prospective purchasers or
to owners of existing Variable Contracts not invested in the Fund.
5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI") as
may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of
its proxy materials, periodic reports to shareholders, and other communications
to shareholders in such quantity as the Insurer shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Insurer.
The Fund, at the Insurer's expense, shall provide the Insurer with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Insurer shall reasonably request for use in connection with
offering the Variable Contracts issued by the Insurer. If requested by the
Insurer in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders, and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require
pass-through voting by Participating Insurance Companies whose Separate Accounts
are registered as investment companies under the 1940 Act, the Insurer shall
vote shares of each Portfolio of the Fund held in a Separate Account or a
subaccount thereof, whether or not registered under the 1940 Act, at regular and
special meetings of the Fund in accordance with instructions timely received by
the Insurer (or its designated agent) from owners of Variable Contracts funded
by such Separate Account or subaccount thereof having a voting interest in the
Portfolio. The Insurer shall vote
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<PAGE> 8
shares of a Portfolio of the Fund held in a Separate Account or a subaccount
thereof that are attributable to the Variable Contracts as to which no timely
instructions are received, as well as shares held in such Separate Account or
subaccount thereof that are not attributable to the Variable Contracts and owned
beneficially by the Insurer (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Portfolio from whom instructions have been
timely received. The Insurer shall vote shares of each Portfolio of the Fund
held in its general account, if any, in the same proportion as the votes cast
with respect to shares of the Portfolio held in all Separate Accounts of the
Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI. SALES MATERIAL AND INFORMATION
6.1 The Insurer shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund (or any Portfolio thereof) or its investment adviser
or the Distributor is named at least 15 days prior to the anticipated use of
such material, and no such sales literature or other promotional material shall
be used unless the Fund and the Distributor or the designee of either approve
the material or do not respond with comments on the material within 10 days from
receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund other than the information or
representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee and by the Distributor or its designee, except with the permission of
the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall furnish
to the Insurer or its designee, each piece of sales literature or other
promotional material in which the Insurer or its Separate Accounts are named at
least 15 days prior to the anticipated use of such material, and no such
material shall be used unless the Insurer or its designee approves the material
or does not respond with comments on the material within 10 days from receipt of
the material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts issued by the Insurer, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such
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<PAGE> 9
Variable Contracts, or in sales literature or other promotional material
approved by the Insurer or its designee, except with the permission of the
Insurer.
6.5 The Fund will provide to the Insurer at least one complete
copy of the Mixed and Shared Funding Exemptive Application and any amendments
thereto, all prospectuses, Statements of Additional Information, reports, proxy
statements and other voting solicitation materials, and all amendments and
supplements to any of the above, that relate to the Fund or its shares, promptly
after the filing of such document with the SEC or other regulatory authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which
shall include an offering memorandum if the Variable Contracts issued by the
Insurer or interests therein are not registered under the 1933 Act), Statements
of Additional Information, reports, solicitations for voting instructions
relating to the Fund, and all amendments or supplements to any of the above that
relate to the Variable Contracts issued by the Insurer or the Separate Accounts
which utilize the Fund as an underlying investment medium, promptly after the
filing of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, computerized media, or other
public media), sales literature (i.e., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees.
ARTICLE VII. INDEMNIFICATION
7.1 Indemnification by the Insurer
7.1(a) The Insurer agrees to indemnify and hold harmless the
Fund, each of its Trustees and officers, any affiliated person of the
Fund within the meaning of Section 2(a)(3) of the 1940 Act, and the
Distributor (collectively, the "Indemnified Parties" for purposes of
this Section 7.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Insurer) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject
under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or litigation expenses are
related to the sale or acquisition of the Fund's shares or the Variable
Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
registration statement or prospectus (which shall include an offering
memorandum) for the Variable Contracts issued by the Insurer or sales
literature for such Variable Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall
not apply as to any Indemnified Party if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Insurer by or on behalf of
the Fund for use in the registration statement or prospectus for the
Variable Contracts issued by the Insurer or sales literature (or any
amendment or supplement)
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<PAGE> 10
or otherwise for use in connection with the sale of such Variable
Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained in
the registration statement, prospectus or sales literature of the Fund
not supplied by the Insurer or persons under its control) or wrongful
conduct of the Insurer or any of its affiliates, employees or agents
with respect to the sale or distribution of the Variable Contracts
issued by the Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon information furnished to the Fund by or on behalf
of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Insurer;
except to the extent provided in Section 7.1(b) and 7.1(c) hereof.
7.1.(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
7.1 (c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Insurer of any such claim shall not relieve the Insurer
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Insurer
shall be entitled to participate, at its own expense, in the defense of such
action. The Insurer also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Insurer to such party of the Insurer's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurer will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.1 (d) The Indemnified Parties shall promptly notify the Insurer of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Contracts issued by
the Insurer or the operation of the Fund.
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<PAGE> 11
7.2 Indemnification By the Distributor
7.2 (a) The Distributor agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Distributor) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become subject under
any statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of the Fund
(or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on behalf
of the Insurer for use in the registration statement or prospectus for
the Fund or in sales literature (or any amendment or supplement) or
otherwise for use in the registration statement or prospectus for the
Fund or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Variable Contracts
issued by the Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations contained in
the registration statement, prospectus or sales literature for the
Variable Contracts not supplied by the Distributor or any employees or
agents thereof) or wrongful conduct of the Fund or Distributor, or the
affiliates, employees, or agents of the Fund or the Distributor with
respect to the sale or distribution of the Variable Contracts issued by
the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Contracts issued
by the Insurer, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Insurer by or on behalf of
the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach of
this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or
-11-
<PAGE> 12
gross negligence in the performance of the Indemnified Party's duties or by
reason of the Indemnified Party's reckless disregard of obligations or duties
under this Agreement or to the Insurer or the Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise that on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expense subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.3 Indemnification by the Fund
7.3(a) The Fund agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning of Section 2(a)(3) of the 1940 Act (collectively, the
"Indemnified Parties" for purposes of this Section 7.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Fund) or litigation expenses (including legal and
other expenses) to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Insurer
and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact
contained in the registration statement or prospectus or sales
literature of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Distributor or the Fund
or the designee of either by or on behalf of the Insurer for use in
the registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts issued by the
Insurer or Fund shares; or
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<PAGE> 13
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund, or the affiliates, employees, or agents
of the Fund, with respect to the sale or distribution of the
Variable Contracts issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus or sales literature
covering the Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach
of any representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation expenses to which an Indemnified Party would otherwise be
subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Indemnified Party's duties or by
reason of the Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Insurer or the Separate Accounts.
7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Party shall have received notice of
such service on any designated agent), but failure to notify the Fund
of any such claim shall not relieve the Fund from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Fund will be entitled to participate, at its own expense, in the
defense thereof. The Fund also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and expenses of any additional counsel retained by it, and the Fund
will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.3(d) The Insurer shall promptly notify the Fund of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Variable Contracts issued by the Insurer or the sale of the Fund's
shares.
ARTICLE VIII. APPLICABLE LAW
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<PAGE> 14
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Pennsylvania.
8.2 This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and ruling thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order), and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. TERMINATION
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice
to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios are
not reasonably available to meet the requirements of the Variable
Contracts issued by the Insurer, as determined by the Insurer, and upon
prompt notice by the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution
of formal proceedings against the Insurer or its agent by the NASD, the
SEC, or any state securities or insurance department or any other
regulatory body regarding the Insurer's duties under this Agreement or
related to the sale of the Variable Contracts issued by the Insurer,
the operation of the Separate Accounts, or the purchase of the Fund
shares; or
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC,
or any state securities or insurance department or any other regulatory
body; or
(e) upon requisite vote of the Variable Contract Owners having an
interest in the Separate Accounts (or any subaccounts thereof) to
substitute the shares of another investment company for the
corresponding shares of the Fund or a Portfolio in accordance with the
terms of the Variable Contracts for which those shares had been
selected or serve as the underlying investment media; or
(f) in the event any of the shares of a Portfolio are not
registered, issued or sold in accordance with applicable state and/or
federal law, or such law precludes the use of such shares as the
underlying investment media of the Variable Contracts issued or to be
issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a
majority of the Trustees of the Fund, or a majority of its
disinterested Trustees, that an irreconcilable conflict, as described
in Article IV hereof, exists; or
(h) at the option of the Insurer if the Fund or a Portfolio fails
to meet the requirements under Subchapter M of the Code for
qualification as a Regulated Investment Company specified in Section
3.2 hereof or the diversification requirements specified in Section 3.3
hereof.
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<PAGE> 15
9.2 If the need for substitution of the shares of another investment
company, pursuant to Section 20(b) of the 1940 Act, arises out of the Fund's
failure to be registered, issued or sold in conformance with federal law or such
law precludes the use of the Funds as an underlying investment medium of
contracts issued or to be issued by the Insurer, the expenses of obtaining such
an order shall be reimbursed by the Distributor. The Distributor and the Fund
shall cooperate with the Insurer in connection with such an application.
9.3 Each party to this Agreement shall promptly notify the other
parties to the Agreement of the institution against such party of any such
formal proceedings as described in Sections 9.1(c) and (d) hereof. The insurer
shall give 60 days prior written notice to the Fund of the date of any proposed
vote of Variable Contract Owners to replace the Fund's shares as described in
Section 9.1(e) hereof.
9.4 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a Portfolio, until 30 days after the Insurer
shall have notified the Fund or Distributor of its intention to do so.
9.5 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Insurance Management Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
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<PAGE> 16
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
First SAFECO National Life Insurance Company of New York
c/o SAFECO Life Insurance Company
15411 N.E. 51st Street
Redmond, Washington 98052
Attn.: William E. Crawford
ARTICLE XI. MISCELLANEOUS
11.1 The Fund and the Insurer agree that if and to the extent Rule 6e-2
or Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable, the Fund and the Insurer shall each take
such steps as may be necessary to comply with the Rule as amended or adopted in
final form.
11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In consideration
of the administrative savings resulting from having a sole shareholder rather
than multiple shareholders, Distributor agrees to pay to Insurer an amount
computed at an annual rate of .25 of 1% of the average daily net asset value of
shares held in subaccounts for which Insurer provides administrative services.
Such payments will be made monthly to Insurer. Distributor's payments to Insurer
are for administrative services only and do not constitute payment in any manner
for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative
thereof or logo associated with that name is the valuable property of the
Distributor and its affiliates, and that the Insurer has the right to use such
name (or derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
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<PAGE> 17
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
INSURANCE MANAGEMENT SERIES
ATTEST: \S\S. Elliott Cohan BY: \S\Richard B. Fisher
--------------------------- -----------------------------
Name: S. Elliott Cohan Name: Richard B. Fisher
--------------------------- -----------------------------
Title: Assistant Secretary Title: Vice President
--------------------------- -----------------------------
FEDERATED SECURITIES CORP.
ATTEST: \S\Joseph M. Huber BY: \S\Byron F. Bowman
--------------------------- -----------------------------
Name: Joseph M. Huber Name: Byron F. Bowman
--------------------------- -----------------------------
Title: Assistant Secretary Title: Vice President
--------------------------- -----------------------------
FIRST SAFECO LIFE INSURANCE NATIONAL LIFE
ATTEST: \S\Sheridan H. Hollender BY: \S\Gregory Clarke
- ---------------------------------- -----------------------------
Name: Sheridan H. Hollender Name: Gregory Clarke
--------------------------- -----------------------------
Title: Assistant General Counsel Title: Vice President
--------------------------- -----------------------------
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<PAGE> 19
Exhibit A
Annuity Products Separate Accounts
- ---------------- -----------------
MainSail SAFECO Separate Account C
Spinnaker Q/NQ SAFECO Separate Account C
Spinnaker Group SAFECO Separate Account C
Spinnaker Plus SAFECO Resource Variable Account B
-19-
<PAGE> 20
Exhibit B
Utility Fund
Corporate Bond Fund
International Stock Fund
-20-
<PAGE> 1
FUND PARTICIPATION AGREEMENT Exhibit 8.b.
First SAFECO National Life Insurance Company of New York (the "Company")
and Lexington Emerging Markets Fund, Inc. and Lexington Natural Resources Trust
("Lexington Funds or the Funds") and its investment adviser, Lexington
Management Corporation ("LMC") hereby agree to an arrangement whereby shares of
the Funds shall be made available to serve as underlying investment media for
Variable Annuity and/or Variable Life Contracts ("Contracts") to be issued by
the Company, subject to the following provisions:
1. Establishment of Accounts: Availability of Funds.
(a) The Company represents that it has established variable annuity
accounts and variable life account (the "Accounts"), each of which
is a separate account under Washington Insurance law, and has
registered each of the Accounts as a unit investment trust under the
Investment Company Act of 1940 (the "1940") to serve as an
investment vehicle for the Contracts. Each Contract provides for the
allocation of net amounts received by the Company to an Account for
investment in the shares of one or more specified open-end companies
("Funds") available through that account as underlying investment
media. Selection of a particular Fund and changes therein from time
to time are made by the person covered under the Contract
("Participant") or Contract owner, as applicable under a particular
Contract.
(b) Lexington Funds and LMC represent and warrant that the investments
of the Funds will at all times be adequately diversified within the
meaning of Section 817(h) of the Internal Revenue Service Code of
1986, as amended (the "Code"), and the Regulations thereunder, and
that at all times while this agreement is in effect, all beneficial
interests will be owned by one or more insurance companies or by any
other party permitted under Section 1.817-5(f)(3) of the Regulations
promulgated under the Code.
2. Marketing and Promotion.
The Company agrees to make every reasonable effort to market its
Contracts, whether directly or through its affiliates. It will use its
best efforts to cause equal emphasis and promotion to be given to shares
of the Funds relative to other Funds available through the Accounts. In
marketing and administering the Contracts, the Company and its affiliates
will comply with all applicable State and Federal laws.
3. Pricing Information; Orders; Settlement.
(a) Lexington Funds will make shares available to be purchased by the
Company, and will accept redemption orders from the Company, on
behalf of each Account at the net asset value applicable to each
order. Fund shares shall be purchased and redeemed in such quantity
and at such time determined by the Company to be necessary to meet
the requirements of those Contracts for which the Funds serve as
underlying investment media.
1
<PAGE> 2
(b) Lexington Funds will provide to the Company closing net asset value,
dividend and capital gain information at the close of trading each
day that the New York Stock Exchange (the "Exchange") is open (each
such day, a "business day"). The Company will send via facsimile
transmission to Lexington Funds or its specified agent orders to
purchase and/or redeem Fund shares by 10:00 a.m., Eastern Time the
following business day. Payment for net purchases will be wired by
the Company to a custodial account designated by Lexington Funds to
coincide with the order for shares of the Funds.
(c) Orders from Contract owners or Participants received by the Company
and sent by the Company prior to the close of the Exchange on any
given business day via facsimile transmission to Lexington Funds or
its specified agent by 10:00 a.m., Eastern Time, the following
business day will be executed by Lexington Funds at the net asset
value determined as of the close of the Exchange on such prior
business day. Any orders received by the Company after the close of
the Exchange on such prior business day (or not meeting the
foregoing sentence's requirements) will be executed by Lexington
Funds at the net asset value determined as of the close of the
Exchange on the next business day following the day of receipt of
such order.
(d) Payments for net redemptions of shares of the Funds will be wired by
Lexington Funds from the Lexington Funds custodial account to an
account designated by the Company.
(e) Each party has the right to rely on information or confirmations
provided by the other party (or by any affiliate of the other
party), and shall not be liable in the event that an error is a
result of any misinformation supplied by the other party. If a
mistake is caused in supplying such information or confirmations,
which results in a reconciliation with incorrect information, the
amount required to make a Contract owner's or a Participant's
account whole shall be borne by the party providing the incorrect
information.
4. Expenses.
(a) Except as otherwise provided in this Agreement, all expenses
incident to the performance by Lexington Funds under this Agreement
shall be paid by Lexington Funds including the cost of registration
of Lexington Funds shares with the Securities and Exchange
Commission (the "SEC") and in states where required.
(b) Lexington Funds shall distribute to the Company its proxy material,
periodic fund reports to shareholders and other material that are
required by law to be sent to Contract owners. In addition,
Lexington Funds shall provide the Company with a sufficient quantity
of its prospectuses to be used in connection with the offerings and
transactions contemplated by this Agreement. Subject to subsection
(c) below, the cost of preparing and printing such materials shall
be paid by Lexington Funds, and the cost of distributing such
materials shall be paid by the Company.
(c) In lieu of Lexington Funds' providing printed copies of prospectuses
and periodic fund reports to shareholders, the Company shall have
the right to request that Lexington
2
<PAGE> 3
Funds provide a copy of such materials in an electronic format,
which the Company may use to have such materials printed together
with similar materials of other Account funding media that the
Company or any distributor will distribute to existing or
prospective Contract owners or participants. In that event Lexington
Funds shall reimburse the Company for the same proportion of the
total printing expense for such materials as the number of pages in
each such printed document provided by Lexington Funds bears to the
total number of pages in such printed document.
5. Representations.
(a) The Company agrees that it and its agents shall not, without the
written consent of Lexington Funds, make representations concerning
Lexington Funds or its shares except those contained in the then
current prospectuses and in current printed sales literature of
Lexington Funds.
(b) The Company represents and warrants that interests in certain
Contracts are or will be registered under the Securities Act of 1933
("1933 Act") or are exempt from registration thereunder; that the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws and that the
sale of the Contracts shall comply in all material respects with
state insurance suitability requirements. The Company further
represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it has
legally and validly established each Account prior to any issuance
or sale thereof as a segregated asset account and that each Account
is or will be registered as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts or is exempt from registration
thereunder.
(c) The Company represents that the Contracts are currently treated as
annuity and/or life insurance contracts under applicable provisions
of the Code and that it will make every effort to maintain such
treatment and that it will notify Lexington Fund and LMC immediately
upon having a reasonable basis for believing that the Contracts have
ceased to be so treated or that they might not be so treated in the
future.
(d) The Company represents and warrants that all of its directors,
officers, and employees dealing with the money and/or securities of
the Funds are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the
Funds in an amount not less than $2 million. The aforesaid bond
shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company.
(e) LMC and Lexington Funds make no representation as to whether any
aspect of the Funds' operations (including, but not limited to, fees
and expenses and investment policies) complies with the insurance
laws or regulations of the various states.
(f) The Lexington Funds represents that it will sell and distribute
Funds' shares in accordance with all applicable federal and state
securities laws, including without limitation, the 1933 Act, the
Securities Exchange Act of 1934, and the 1940 Act.
3
<PAGE> 4
(g) Lexington Funds represents it is currently qualified as a regulated
investment company under Subchapter M of the Code and that it will
make every effort to maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify the
Company immediately upon having a reasonable basis for believing
that it ceased to so qualify or might not so qualify in the future.
(h) LMC and Lexington Funds represent and warrant that the Fund's shares
sold pursuant to this Agreement shall be registered under the 1933
Act, duly authorized for issuance and sold in compliance with the
laws of the State of Washington and all applicable federal and state
securities laws and that the Funds are and shall remain registered
under the 1940 Act. The Funds shall amend the registration statement
for its shares under the 1933 Act and 1940 Act from time to time as
required in order to effect the continuous offering of its shares.
The Funds shall also register and qualify its shares for sale in
accordance with the laws of the various states only if and to the
extent deemed advisable by the Funds or LMC.
(i) Lexington Funds represents that it is lawfully organized and validly
existing under the laws of its state of domicile and that it is and
will comply in all material respects with the 1940 Act.
(j) LMC and Lexington Funds represent and warrant that LMC is duly
organized under its state of domicile, and is and shall remain duly
registered in all material respects under all applicable federal and
state securities laws, and further that LMC shall perform its
obligations for the Funds in compliance in all material respects
with applicable federal and state securities laws.
(k) LMC and Lexington Funds represent and warrant that all of their
respective directors, officers, and employees dealing with the money
and/or securities of the Funds are and shall continue to be at all
times covered by a blanket fidelity bond or similar coverage for the
benefit of the Funds in an amount not less than the minimal coverage
as required currently by Rule 17g-(1) of the 1940 Act or related
provisions as may be promulgated from time to time. The aforesaid
bond shall include coverage for larceny and embezzlement and shall
be issued by a reputable bonding company.
6. Administration of Accounts.
(a) Administrative services to Contract owners and Participants shall be
the responsibility of the Company and shall not be the
responsibility of Lexington Funds or LMC. LMC recognizes the Company
as the sole shareholder of fund shares issues under this Agreement.
From time to time, LMC may pay amounts from it past profits to the
Company for providing certain administrative services for the Funds
or for providing Contract owners with other services that relate to
the Funds. These services may include, among other things,
sub-accounting services, answering inquiries of Contract owners
regarding the Funds, transmitting, on behalf of the funds, proxy
statements, annual reports, updated prospectus and other
communications to Contract owners regarding the Funds and such other
related services as the Funds or a Contract holder may request. In
consideration of the savings resulting from such arrangement, and to
compensate the Company for its costs, LMC agrees to pay to the
Company an amount equal to 25 basis points (0.25%) per annum of the
average aggregate amount
4
<PAGE> 5
invested by the Company in the Fund under this Agreement. Payment of
such amounts by LMC will not increase the fees paid by the Funds or
its shareholders.
(b) The parties agree that LMC's payments to the Company are for
administrative services only and do not constitute payment in any
manner for investment advisory services or for costs of
distribution.
(c) For the purposes of computing the administrative fee reimbursement
contemplated by this Section 6, the average aggregate amount
invested by the Company over a one month period shall be computed by
totaling the Company's aggregate investment (share net asset value
multiplied by total number of shares held by the Company) on each
business day during the month and dividing by the total number of
business days during each month.
(d) LMC will calculate the reimbursement of administrative expenses at
the end of each calendar quarter and will make such reimbursement to
the Company within 30 days thereafter. The reimbursement check will
be accompanied by a statement showing the calculation of the monthly
amounts payable by LMC and such other supporting data as may be
reasonably requested by the Company.
7. Termination.
This agreement shall terminate as to the sale and issuance of new
Contracts:
(a) at the option of either the Company or Lexington Funds, upon three
months advance written notice to the other;
(b) at the option of the Company, upon one week advance written notice
to Lexington Funds if Lexington Fund shares are not available for
any reason to meet the requirement of Contracts as determined by the
Company.
(c) at the option of either the Company or Lexington Funds, immediately
upon institution of formal proceedings against the broker-dealer or
broker-dealers marketing the Contracts, the Account, the Company,
Lexington Funds, or LMC by the National Association of Securities
Dealers, Inc. (the "NASD"), the SEC or any other regulatory body;
(d) upon the requisite vote of Contract owners or Participants having an
interest in the Funds, to substitute for the Funds' shares the
shares of another investment company in accordance with the terms of
the applicable Contracts. The Company will give 60 days written
notice to Lexington Funds of any proposed vote to replace the Funds'
shares;
(e) upon assignment of this Agreement, unless made with the written
consent of all other parties hereto;
(f) if the Funds' shares are not registered, issued or sold in
conformance with Federal law or such law precludes the use of Funds'
shares as an underlying investment medium
5
<PAGE> 6
for Contracts issued or to be issued by the Company. Prompt notice
shall be given by either party should such situation occur.
8. Continuation of Agreement.
Termination as the result of any cause listed in Section 7 shall not
affect Lexington Funds' obligation to furnish its shares to Contacts then
in force for which its share serve or may serve as the underlying medium
unless such further sale of Funds' shares is proscribed by law or the SEC
or other regulatory body.
9. Advertising Materials; Filed Documents.
(a) Advertising and sales literature with respect to the Funds prepared
by the Company or its agents for use in marketing its Contracts will
be submitted to Lexington Funds for review before such material is
submitted by any regulatory body for review.
(b) Lexington Funds will provide to the Company at least one complete
copy of all registration statements, prospectuses, statements of
additional information, annual and semiannual reports, proxy
statements and all amendments or supplements to any of the above
that relate to the Funds promptly after the filing of such document
with the SEC or other regulatory authorities. The Company will
provide to Lexington Funds at least one complete copy of all
registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and
all amendments or supplements to any of the above that relate to
each Account promptly after the filing of such document with the SEC
or other regulatory authority.
10. Proxy Voting.
(a) The Company shall provide pass-through voting privileges on Funds'
shares to all Contract owners and Participants to the extent the SEC
continues to interpret the 1940 Act as requiring such privileges. If
shares are held in any other separate account not required to be
registered under the 1940 Act, those shares will be voted in the
Company's sole discretion.
(b) The Company will distribute to Contract owners and participants, as
appropriate, all proxy material furnished by Lexington Funds and
will vote Funds' shares in accordance with instructions received
from Contract owners and participants. The Company, with respect to
each Contract and in each Account, shall vote Fund shares for which
no instructions have been received in the same proportion as shares
for which such instructions have been received. The Company and its
agents shall not oppose or interfere with the solicitation of
proxies for Fund shares held for such Contract owners and
participants.
11. Indemnification.
(a) The Company agrees to indemnify and hold harmless Lexington Funds,
LMC, and each of its directors, officers, employees, agents and each
person, if any, who controls the Funds or its investment adviser
within the meaning of the Securities Act of
6
<PAGE> 7
1933 (the "1933 Act") against any losses, claims, damages or
liabilities to which the Funds or any such director, officer,
employee, agent, or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, prospectus or
sales literature of the Company, or arise out of or are based upon
the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements or representations (other than statement or
representations contained in the prospectuses or sales literature of
the Funds) of the Company or its agents, with respect to the sale
and distribution of Contracts for which Fund shares are the
underlying investment. The Company will reimburse any legal or other
expenses reasonably incurred by the Fund or any such director,
officer, employee, agent, investment adviser, or controlling person
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or omission or alleged omission made in such
Registration Statement or prospectus in conformity with written
materials furnished to the Company by the Fund specifically for use
therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Company shall not be liable under this Section 11. to Lexington
Funds, LMC or other parties covered under Section 11.(a) with
respect to any losses, claims, damages or liabilities (or actions in
respect thereof) incurred or assessed against any such party
(including Lexington Funds and LMC) as such may arise from such
party's willful misfeasance, bad faith, or gross negligence in the
performance of such party's duties or by reason of such party's
reckless disregard of obligations or duties under this Agreement.
(c) Lexington Fund and LMC agree to indemnify and hold harmless the
Company and its directors, officers, employees, agents and each
person, if any, who controls the Company within the meaning of the
1933 Act against any losses, claims, damages or liabilities to which
the Company or any such director, officer, employee, agent or
controlling person may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, prospectuses or sales
literature of the Funds, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading. Lexington Funds will reimburse any legal or
other expenses reasonably incurred by the Company or any such
director, officer, employee, agent, or controlling person in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that LMC and
Lexington Funds will not be liable in any such case to the extent
that any such loss, claim, damage or liability rises out of or is
based upon a Registration Statement or prospectuses which are in
conformity with written materials furnished to Lexington Funds by
the Company specifically for use therein. This indemnity agreement
will be in addition to any liability which Lexington Funds of LMC
may otherwise have.
7
<PAGE> 8
(d) Lexington Funds and LMC shall not be liable under this Section 11.
to the Company or other parties covered under Section 11.(c) with
respect to any losses, claims, damages or liabilities (or actions in
respect thereof) incurred or assessed against any such party
(including the Company) as such may arise from such party's willful
misfeasance, bad faith, or gross negligence in the performance of
such party's duties or by reason of such party's reckless disregard
of obligations or duties under this Agreement.
(e) Promptly after receipt by an indemnified party hereunder of notice
of the commencement of action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying
party hereunder, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 11. In case any
such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to
the extent that it may wish to, assume the defense thereof, with
counsel satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its
election to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section 11 for
any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation.
12. Potential Conflicts.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by Lexington Funds on March 21, 1994, with
the SEC and the order issued by the SEC in response thereto (the
"Shared Funding Exemptive Order"). The Company has reviewed the
conditions to the requested relief set forth in such application for
exemptive relief. As set forth in such application, the Board of
Directors of Funds (the "Board") will monitor the Funds for the
existence of any material irreconcilable conflict between the
interests of the contract holders of all separate accounts
("Participating Companies") investing in the Funds. An
irreconcilable material conflict may arise for a variety of reasons,
including: (i) an action by any state insurance regulatory
authority; (ii) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar
actions by insurance, tax or securities regulatory authorities;
(iii) an administrative or judicial decision in any relevant
proceeding, (iv) the manner in which the investments of any
portfolio are being managed; (v) a difference in voting instructions
given by variable annuity contract holders and variable life
insurance contract holders; or (vi) a decision by an insurer to
disregard the voting instructions of contract holders. The Board
shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications
thereof.
(b) The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive
Order by providing the Board with all information reasonably
necessary for the Board to consider any issues raised. This
includes, but
8
<PAGE> 9
is not limited to, an obligation by the Company to inform the Board
whenever contract holder voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists
with regard to contract holder investments in the Funds, the Board
shall give prompt notice to all Participating Companies. If the
Board determines that the Company is responsible for causing or
creating said conflict, the Company shall at its sole cost and
expense, and to the extent reasonably practicable (as determined by
a majority of the disinterested Board members), take such action as
is necessary to remedy or eliminate the irreconcilable material
conflict. Such necessary action may include but shall not be limited
to:
(i) withdrawing the assets allocable to the Account from the fund
and reinvesting such assets in a different investment medium or
submitting the question of whether such segregation should be
implemented to a vote of all affected contract holders and as
appropriate, segregating the assets of any appropriate group
(i.e., annuity contract owners, life insurance contract owners,
or variable contract owners of one or more Participating
Companies) that votes in favor of such segregation, or offering
to the affected contract holders the option of making such a
change; and/or
(ii) establishing a new registered management investment company
or managed separate account.
(d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard its contract holder voting
instructions and said decision represents a minority position or
would preclude a majority vote by all of its contact holders having
an interest in the Fund, the Company at its sole cost, may be
required, at the Board's election, to withdraw an Account's
investment in the Fund and terminate this Agreement; provided,
however, that such withdrawal and termination shall be limited to
the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of
the Board.
(e) For the purpose of this Section 12, a majority of the disinterested
Board members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no
event will Lexington Funds be required to establish a new funding
medium for any Contract. The Company shall not be required by this
Section 12 to establish a new funding medium for any Contract if an
offer to do so has been declined by vote of a majority of the
Contract owners or participants materially adversely affected by the
irreconcilable material conflict.
13. Miscellaneous.
(a) Amendment and Waiver. Neither this Agreement, nor any provision
hereof, may be amended, waived, discharged or terminated orally, but
only by an instrument in writing signed by all parties hereto.
9
<PAGE> 10
(b) Notices. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent
by telex, telecopier or registered or certified mail, postage
prepaid, return receipt requested, to the party or parties to whom
they are directed at the following addresses, or at such other
addresses as may be designated by notice from such party to all
other parties.
To the Company:
First SAFECO National Life Insurance Company of New York
6700 Old Collamer Road
East Syracuse, New York 13057
Attention: Clyde Goldberg
To Lexington Management Corporation:
Lexington Management Corporation
Park 80 West Plaza Two
Saddle Brook, New Jersey 07662
Attention: Lisa Curcio, Vice President & Secretary
Any notice, demand or other communication given in a manner
prescribed in this subsection (b) shall be deemed to have been
delivered on receipt.
(c) Successors and Assigns. This agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
permitted successors and assigns.
(d) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
agreement, and any party hereto may execute this Agreement by
signing any such counterpart.
(e) Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or
impaired thereby.
(f) Entire Agreement. This Agreement constitutes the entire agreement
and understanding between the parties hereto and supersedes all
prior agreement and understandings relating to the subject matter
hereof.
(g) Governing Law. This Agreement shall be governed and interpreted in
accordance with the laws of the State of New Jersey.
10
<PAGE> 11
14. Limitation on Liability of Trustees, etc.
This Agreement has been executed on behalf of the Funds by the undersigned
officer of the Funds in his/her capacity as an officer of the Funds. The
obligations of this Agreement that pertain to the Funds shall only be
binding upon the assets and property of the Funds and shall not be binding
upon any individual trustee, officer or shareholder of the Funds. This
provision shall not affect the obligations or liabilities of LMC under
this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement by their
duly authorized officers as of this ___________ day of January 1995.
FIRST SAFECO NATIONAL LIFE LEXINGTON
INSURANCE COMPANY OF NEW YORK MANAGEMENT CORPORATION
By:__________________________________ By: ____________________________________
Name: Clyde Goldberg Name: Lawrence Kantor
Title: Vice President Title: Managing Director
LEXINGTON NATURAL RESOURCES TRUST
LEXINGTON EMERGING MARKETS FUND, INC.
By: ____________________________________
Name: Lisa Curcio
Title: Vice President & Secretary
11
<PAGE> 1
EXHIBIT 9
November 17, 1996
Board of Directors
First SAFECO National Life Insurance Company of New York
6700 Collamer Road
East Syracuse, New York 13057
Gentlemen:
I have acted as counsel to the Company in connection with the filing with the
Securities and Exchange Commission of the Registration Statement on Form N-8A
and Form N-4 for the Individual Flexible Purchase Payment Deferred Variable
Annuity Contracts (the "Contracts") to be issued by the Company and its separate
account, First SAFECO Separate Account S. I have made such examination of the
law and have examined such records and documents as in my judgment are necessary
or appropriate to enable me to render the following opinion:
1. First SAFECO National Life Insurance Company of New York is a validly
existing stock life insurance company of the state of New York.
2. First SAFECO Separate Account S is a separate investment account of First
SAFECO National Life Insurance Company of New York created and validly
existing pursuant to the New York insurance laws and regulations
thereunder.
3. All of the prescribed corporate procedures for the issuance of the
Contracts have been followed, and, when such Contracts are issued in
accordance with the prospectus contained in the Registration Statement, all
state requirements relating to such Contracts will have been complied with.
4. Upon the acceptance of the purchase payments made by a prospective Contract
Owner pursuant to a Contract issued in accordance with the Prospectus
contained in the Registration Statement and upon compliance with applicable
law, such Owner will have a legally-issued, fully paid, non-assessable
contractual interest in such Contract.
You may use this letter, or a copy hereof, as an exhibit to the Registration
Statement.
Very truly yours,
/S/ William E. Crawford
- --------------------------------------
William E. Crawford
Counsel
60
<PAGE> 1
EXHIBIT 13
EXHIBIT OF PERFORMANCE CALCULATIONS
This exhibit reflects the calculation of certain performance figures that appear
under "Performance" in the Statement of Additional Information.
A. TOTAL RETURN
1. Formula. The total return performance of the RST: Money Market,
Equity, Growth Northwest and Bond Sub-Accounts; Lexington: Emerging Markets and
Natural Resources Sub-Accounts; Twentieth Century: Balanced and International
Sub-Accounts; Wanger: U.S. Small Cap Sub-Account; Federated: High Income Bond
II, International Equity and Utility Sub-Accounts for a specified period equals
the change in the value of a hypothetical initial purchase payment of $10,000
("Purchase Payment") from the beginning of the period to the end of the period.
The total return performance is calculated assuming the change in the value of
the Purchase Payment fully allocated to each subaccount and the deduction of all
expenses and fees, including a prorated portion of the $30 annual administration
charge. This proration is based on the total number of contract holders. No
withdrawals are assumed. Total Return may be expressed either as a dollar value
or as a percentage change. The percentage change in the value of the Purchase
Payment for the period is calculated by subtracting the initial Purchase Payment
from the ending value and dividing the remainder by the beginning value:
Percentage Change = EV - P
------
P
EV = Ending Value
P = Purchase Payment
The decimal return is converted to a percentage by multiplying by 100.
2. Performance Reflected. The representative total return calculation
reflected in this Section A is for a $10,000 Purchase Payment into the RST:
Equity Subaccount for the one-year period ended December 31, 1995.
3. Calculation. The Purchase Payment is divided by the beginning AUV to
calculate the beginning number of units.
P/AUV1 = 10,000.00/25.372803 = 394.123 units
The initial number of units are reduced at the end of the year by a prorated
portion of the annual administration charge, if any.
U1 - (M/AUV2) = U2, 394.123 - ($30.00 / $32.208944) = 393.192 units
The ending value is calculated by converting ending units to dollars.
U2 x AUV2 = EV, 393.192 units x $32.208944 = $12,664.30
The percentage change return is calculated by subtracting the initial Purchase
Payment from the ending value and dividing the remainder by the beginning value.
(EV - P)/P =R, ($12,664.30 - $10,000)/$10,000 = 0.26643
The decimal return is converted to a percentage by multiplying by 100.
61
<PAGE> 2
R x 100 = Total Return % 0.26643 x 100.00 = 26.64%
B. AVERAGE ANNUAL TOTAL RETURN
1. Formula. The average annual return (AATR) performance of the RST:
Money Market, Equity, Growth Northwest and Bond Sub-Accounts; Lexington:
Emerging Markets and Natural Resources Sub-Accounts; Twentieth Century: Balanced
and International Sub-Accounts; Wanger: U.S. Small Cap Sub-Account; Federated:
High Income Bond II, International Equity and Utility Sub-Accounts for a
specified period equals the change in the value of a hypothetical initial
purchase payment of $1,000 ("Purchase Payment") from the beginning of the period
to the end of the period. The AATR performance is calculated assuming the change
in the value of the Purchase Payment fully allocated to each subaccount and the
deduction of all expenses and fees, including a prorated portion of the $30
annual administration charge, if any. This proration is based on the total
number of contract holders. At the end of the specified period, it is assumed
that a full surrender is taken. The AATR for a specific period is found by
taking a hypothetical $1,000 Purchase Payment and computing the redeemable value
at the end of the period after all fees and surrender charges. The Ending
Redeemable Value (ERV) is then divided by the Purchase Payment, and this
quotient is taken to the Nth root (N representing the number of years in the
period) and 1 is subtracted from the result, which is then expressed as a
percentage. Thus, the following formula applies:
Average Annual Total Return = ((ERV) to the power of 1/N) -1
--------
P
ERV = Ending Redeemable Value
P = Purchase Payment
N = Number of years
The decimal return is converted to a percentage by multiplying by 100.
2. Performance Reflected. The representative AATR calculation reflected in
this Section B is for a $1,000 Purchase Payment into the RST: Equity Subaccount
for the one-year period ended December 31, 1995.
3. Calculation. The Purchase Payment is divided by the beginning AUV to
calculate the beginning number of units.
P/AUV1 = U1, $1,000/$25.372803 = 39.412 units
The initial number of units are reduced at the end of the year by a prorated
portion of the annual administration charge, if any.
U1 - (M/AUV2) = U2, 39.412 - ($30.00/$32.208944) = 38.481 units
The ending value is calculated by converting ending units to dollars.
U2 x AUV2 = EV, 38.481 units x $32.208944 = $1,239.43
The ending redeemable value is calculated by subtracting the surrender change
from the ending value.
EV - (EV x SC) = ERV, $1,239.43 - ($1,239.43 x 8%) = $1,140.28
62
<PAGE> 3
The percentage change quotient is calculated by dividing the ending redeemable
value by the beginning value.
(ERV/P) = R, $1,140.28 / $1,000 = 1.14028
The quotient is taken to the Nth root.
The first root of 1.14028 is = 1.14028
One is subtracted from the result.
1.14028 - 1 = 0.14028
The decimal return is converted to a percentage by multiplying by 100.
0.14028 x 100 = 14.03% = Average Annual Total Return
C. YIELD CALCULATION
RST: MONEY MARKET SUBACCOUNT
1. Formula. The subaccount's current yield quotation is based on a
seven-day period and is calculated as follows. The first calculation is "base
period return before annual administration charge", which is the net change in
the Accumulation Unit Value ("AUV") during the period resulting from net
investment income divided by the AUV at the beginning of the period. Realized
capital gains or losses and unrealized appreciation or depreciation are not
included in the calculation. The next calculation is "base period annual
administration charge", which is the annual administration charge prorated for a
seven-day period and divided by the average contract size.
The "base period return" is then calculated by subtracting the base
period annual administration charge from the base period return before the
annual administration charge. The result is then divided by 7 and multiplied by
365 and the resulting yield figure is carried to the nearest one-hundredth of
one percent.
The Subaccount's effective yield is determined by taking the base
period return (calculated as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is:
(base period return +1) (to the power of 365/7) - 1.
2. Performance Reflected. The representative yield calculations reflected
herein are for the seven-day period ended December 29, 1995 for the Money Market
Subaccount.
3. Yield. First base period return before annual administration charge is
calculated. The following figures are provided for this purpose:
a. AUV at 12/22/95, beginning of seven-day period equals 14.360039.
b. AUV at 12/29/95, end of seven-day period equals 14.370429.
c. Change in AUV during the seven-day period ended 12/29/95 due to realized
capital gains or losses and unrealized appreciation or depreciation of
investments equals zero.
63
<PAGE> 4
Base period return before annual administration charge for the seven-day period
ended 12/29/95 equals
12/29/95 AUV - 12/22/95 AUV - change in AUV due to capital gains or losses and
unrealized appreciation or depreciation divided by 12/22/95 AUV,
= 14.370429 - 14.360039 = 0.010390 = 0.000723013
- --- ---------------- -------
14.370429 14.370429
Next, base period annual administration charge is calculated. The following
figures are provided for this purpose:
d. Annual administration charge = $30 per contract.
e. Average contract size = $14,500
<TABLE>
<S> <C>
Base period annual administration charge = Annual administration charge x 7/365 days
-----------------------------------------
Average contract size
= 30 x 7/365 = 0.575342466 = 0.000039679
---------- -----------
14,500 14,500
</TABLE>
Then, base period return is calculated.
Base period return = Base period return before annual administration
charge - Base period annual administration charge
= 0.000723013 - 0.000039679 = 0.000683334
Then, yield is calculated.
Yield = Base period return x 365/7 = 0.000683334 x 365/7 = 0.035631
The decimal return is converted to a percentage by multiplying by 100.
0.035631 x 100 = 3.56%
4. Effective Yield. The base period return for use in the formula for
effective yield set forth in Subsection 1 above is the same as calculated in
Subsection 3 above.
Effective Yield = (Base period return +1) (to the power of 365/7) -1
= (.000683334 + 1) (to the power of 365/7) -1
= (1.000683334) (to the power of 365/7) -1
= 1.036261 -1 = .036261
The decimal return is converted to a percentage by multiplying by 100.
.036261 x 100 = 3.63%
64
<PAGE> 1
EXHIBIT 15
November 17, 1996
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: REPRESENTATION OF COUNSEL FOR FIRST SAFECO NATIONAL LIFE INSURANCE COMPANY
OF NEW YORK ("FIRST SAFECO") AND ITS FIRST SAFECO SEPARATE ACCOUNT S ("SEPARATE
ACCOUNT") INITIAL REGISTRATION ON FORM N-8A AND FORM N-4
FILE NOS.
Commissioners:
First SAFECO and its Separate Account believe that the filing of this initial
registration, is consistent with the purposes and requirements for filing under
Rule 485(a) under the Securities Act of 1933 ("1933 Act"). This representation
is based on the fact that the changes included in this initial registration are
consistent with the purposes and requirements described in the adopting release
for the changes to Rule 485 (IC-Rel. 20486).
Based on the above, the filing of this initial registration, is made pursuant to
Rule 485(a) of the 1933 Act to become effective as soon as is practicable. The
undersigned has prepared and reviewed this initial registration, and it is his
opinion that this registration does not contain disclosures which would render
it ineligible to become effective pursuant to paragraph (a) of Rule 485.
Sincerely,
/S/ William E. Crawford
William E. Crawford
Counsel
65
