FIDELITY SECURITY LIFE INSURANCE COMPANY
FSL SEPARATE ACCOUNT M
FSL FLEXIBLE PREMIUM VARIABLE ANNUITY
This prospectus describes the variable annuity contract offered by Fidelity
Security Life Insurance Company (we, us, our). This is an individual deferred
variable annuity. The contract is offered as a non-qualified annuity, an
individual retirement annuity (IRA), as a tax sheltered annuity (TSA), or
pursuant to other qualified plans. This contract provides for accumulation of
contract values and annuity payments on a fixed and variable basis.
The contract has a number of investment choices (1 fixed account and 5
investment options). The fixed account is part of our general assets and
provides an investment rate guaranteed by us. The 5 investment options available
are portfolios of Investors Mark Series Fund, Inc. and Berger Institutional
Products Trust, which are listed below. You can put your money in any of these
options which are offered through our separate account, the FSL Separate Account
M.
INVESTORS MARK SERIES FUND, INC.
Money Market Portfolio
Growth & Income Portfolio
Large Cap Growth Portfolio
Small Cap Equity Portfolio
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger/BIAM IPT - International Fund
Please read this prospectus before investing. You should keep it for future
reference. It contains important information about the contract.
To learn more about the contract, you can obtain a copy of the Statement of
Additional Information (SAI) (dated May 1, 2000). The SAI has been filed with
the Securities and Exchange Commission (SEC) and is legally a part of this
prospectus. The SEC maintains a Web site (http://www.sec.gov) that contains the
SAI, material incorporated by reference and other information regarding
companies that file electronically with the SEC. The Table of Contents of the
SAI is on page 17 of this prospectus. For a free copy of the SAI, call us at
(800) 648-8624 or write to: Fidelity Security Life Insurance Company, Annuity
Products, 3130 Broadway, Kansas City, MO 64111-2406.
The Contracts:
o are not bank deposits.
o are not federally insured.
o are not endorsed by any bank or governmental agency.
o are not guaranteed and may be subject to loss of principal.
THE SEC HAS NOT APPROVED THESE CONTRACTS OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION THAT IT HAS IS A CRIMINAL OFFENSE.
May 1, 2000
TABLE OF CONTENTS
INDEX OF SPECIAL TERMS..........................................................
HIGHLIGHTS......................................................................
FSL SEPARATE ACCOUNT M TABLE OF FEES AND EXPENSES...............................
THE COMPANY.....................................................................
THE ANNUITY CONTRACT............................................................
PURCHASE........................................................................
INVESTMENT CHOICES..............................................................
EXPENSES........................................................................
CONTRACT VALUE..................................................................
SURRENDERS......................................................................
DEATH BENEFIT...................................................................
ANNUITY PAYMENTS................................................................
OTHER BENEFITS..................................................................
TAXES...........................................................................
PERFORMANCE.....................................................................
OTHER INFORMATION...............................................................
APPENDIX........................................................................
INDEX OF SPECIAL TERMS
We have tried to make this prospectus as readable and understandable for you as
possible. By the very nature of the contract, however, certain technical words
or terms are unavoidable. We have identified the following as some of these
words or terms. The page indicated here is where we believe you will find the
best explanation for the word or term. These words and terms are in italics on
the indicated page.
Accumulation Phase..............................................................
Accumulation Unit...............................................................
Annuitant.......................................................................
Annuity Date....................................................................
Annuity Options.................................................................
Annuity Payments................................................................
Annuity Unit....................................................................
Beneficiary.....................................................................
Income Phase....................................................................
Investment Options..............................................................
Non-Qualified...................................................................
Qualified.......................................................................
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HIGHLIGHTS
- --------------------------------------------------------------------------------
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The variable annuity contract that we are offering is a contract between you,
the owner, and us, the insurance company. The contract provides a means for
investing on a tax-deferred basis in our fixed account and 5 investment options.
The contract is intended for retirement savings or other long-term investment
purposes and provides for a death benefit and guaranteed income options.
The contract, like all deferred annuity contracts, has two phases: the
accumulation phase and the income phase. During the accumulation phase, earnings
accumulate on a tax-deferred basis and are taxed as income when you make a
withdrawal. If you make a withdrawal during the accumulation phase, we may also
assess a surrender charge of up to 7%. The income phase occurs when you begin
receiving regular payments from your contract.
You can choose to receive annuity payments on a variable basis, fixed basis or
combination of both. If you choose variable payments, the amount of the variable
annuity payments will depend upon the investment performance of the investment
options you select for the income phase. If you choose fixed payments, the
amount of the fixed annuity payments are level for the payout period.
Free Look. If you cancel the contract within 10 days after receiving it (or
whatever period is required in your state), we will send your money back without
assessing a surrender charge. You will receive whatever your contract is worth
on the day we receive your request. This may be more or less than your original
payment. If we are required by law to return your original payment, we will put
your money in the Money Market Portfolio during the free-look period plus 5
days.
Tax Penalty. The earnings in your contract are not taxed until you take money
out of your contract. If you take money out during the accumulation phase,
earnings come out first and are taxed as income. If you are younger than 59 1/2
when you take money out, you may be charged a 10% federal tax penalty on those
earnings. Payments during the income phase are considered partly a return of
your original investment.
Inquiries. If you need more information, please contact us at:
Fidelity Security Life Insurance Company
Annuity Products
3130 Broadway
Kansas City, Missouri 64111-2406
(800) 648-8624
<TABLE>
<CAPTION>
FSL SEPARATE ACCOUNT M TABLE OF FEES AND EXPENSES
OWNER TRANSACTION EXPENSES
Surrender Charge: (as a percentage of purchase payments surrendered) (See Note 2)
Number of Complete Years Surrender Charge (See Note 3)
From Receipt of Purchase Payments Easy Pay Lump Sum
--------------------------------- -------- --------
<S> <C> <C> <C>
0-1 6% 7%
1 6 6
2 6 5
3 5 4
4 5 3
5 4 2
6 3 1
7 2 0
8 2 0
9 1 0
10 and thereafter 0 0
Transfer Fee: (See Notes 4 & 5) No charge for the first 12 transfers in a contract year during
the accumulation phase; thereafter, the fee is $50 per transfer.
There is no charge for the 4 allowable transfers in a contract
year during the income phase.
SEPARATE ACCOUNT ANNUAL EXPENSES: (as a percentage of the average account value)
Mortality and Expense Risk Fees: (See Note 6)
Lump Sum 0.90%
Easy Pay 1.50% (0.90% if contract value exceeds $100,000)*
TOTAL SEPARATE ACCOUNT ANNUAL EXPENSES:
Lump Sum 0.90%
Easy Pay 1.50% (0.90% if contract value exceeds $100,000)*
* Once your contract value reaches $100,000, it will be assessed the lower
charge even if the contract value is later reduced by changes in market value or
withdrawals.
INVESTMENT OPTION EXPENSES: (as a percentage of the average daily net assets of an investment option)
Other
Expenses Total Operating
Management (after expense Expenses (after
Fees reimbursement) expense reimbursement)
---- -------------- ----------------------
Investors Mark Series Fund, Inc. (See Note 7)
Money Market Portfolio .40% .10% .50%
Growth & Income Portfolio .80% .10% .90%
Large Cap Growth Portfolio .80% .10% .90%
Small Cap Equity Portfolio .95% .10% 1.05%
Berger Institutional Products Trust (See Note 8)
Berger/BIAM IPT - International Fund .00% 1.20% 1.20%
</TABLE>
EXAMPLES
There are two sets of examples below. The first set assumes your purchase
payments are Lump Sum payments or that your contract value exceeds $100,000. The
second set assumes that you are only making Easy Pay purchase payments to your
contract and that your contract value does not exceed $100,000.
These examples are designed to help you to understand the expenses in a
contract. You should not consider these to represent the actual expenses you
would pay. The actual expenses may be greater or less than those shown.
o This first set of examples assumes you invested $1,000 in a contract and
allocated all of it to an investment option which earned 5% each year. It
also assumes that your purchase payments are Lump Sum payments or that your
contract value exceeded $100,000. All the expenses of the options shown
above are assumed to apply. Under these assumptions you would pay the
following:
a) Upon surrender at the end of each time period;
b) If the contract is not surrendered or if you begin the income phase.
<TABLE>
<CAPTION>
Time Periods
1 Year 3 Years
-----------------------
Investors Mark Series Fund, Inc.
<S> <C> <C>
Money Market Portfolio a) $84.00 $95.70
b) 14.00 45.70
Growth & Income Portfolio a) 88.00 108.53
b) 18.00 58.53
Large Cap Growth Portfolio a) 88.00 108.53
b) 18.00 58.53
Small Cap Equity Portfolio a) 89.50 113.31
b) 19.50 63.31
Berger Institutional Products Trust
Berger/BIAM IPT - International Fund a) 91.00 118.08
b) 21.00 68.08
o This second set of examples assumes that you are only making Easy Pay
purchase payments to your contract and that your contract value does not
exceed $100,000. All the expenses of the investment options shown above are
assumed to apply. Under these assumptions you would pay the following:
a) Upon surrender at the end of each time period;
b) If the contract is not surrendered or if you begin the income phase.
Time Periods
1 Year 3 Years
------ -------
Investors Mark Series Fund, Inc.
Money Market Portfolio a) $80.00 $124.90
b) 20.00 64.90
Growth & Income Portfolio a) 84.00 137.58
b) 24.00 77.58
Large Cap Growth Portfolio a) 84.00 137.58
b) 24.00 77.58
Small Cap Equity Portfolio a) 85.50 142.31
b) 25.50 82.31
Berger Institutional Products Trust
Berger/BIAM IPT - International Fund a) 87.00 147.03
b) 27.00 87.03
</TABLE>
NOTES TO TABLE OF FEES AND EXPENSES AND EXAMPLES
1. The purpose of the Table of Fees and Expenses is to assist you in
understanding the various costs and expenses that you will incur directly
or indirectly. The Table reflects expenses of the separate account as well
as the investment options.
2. The contract provides for several circumstances under which we will waive
or reduce the surrender charge.
3. You can purchase a contract and add to it by making payments in one of two
ways:
o Lump Sum payments - any payment of $5,000 or more; or o Easy Pay payments -
any payment of $50 or more but lower than $5,000.
4. We charge $50 per transfer during the accumulation phase for any transfers
after 12 in any contract year.
5. When you transfer contract values from one of our annuity contracts to
another, we assess an internal transfer fee of 2% of the amount
transferred.
6. The contract refers to a Product Expense Charge. This charge is equivalent
to the aggregate charges that until recently were referred to as a
Mortality and Expense Risk Charge and an Administrative Charge by many
companies issuing variable annuity contracts. Throughout this prospectus we
will refer to this charge as a Product Expense Charge.
7. Investors Mark Advisors, Inc. has voluntarily agreed to reimburse expenses
for each portfolio of Investors Mark Series Fund, Inc. for the year ended
December 31, 1999 and will continue this arrangement until April 30, 2001
so that the annual expenses do not exceed the amounts set forth above under
"Total Operating Expenses" for each portfolio. Absent such expense
reimbursement, the Total Annual Expenses for the year ended December 31,
1999 were: 2.72% for the Money Market Portfolio; 2.53% for the Small Cap
Equity Portfolio; 1.49% for the Large Cap Growth Portfolio; and 1.67% for
the Growth and Income Portfolio.
8. BBOI Worldwide LLC has voluntarily agreed to waive its advisory fee and
expects to voluntarily reimburse the Berger/BIAM IPT - International Fund
for additional expenses to the extent that normal operating expenses in any
fiscal year, including the management fee but excluding brokerage
commissions, interest, taxes and extraordinary expenses, of the fund exceed
1.20% of the fund's average daily net assets. If such an expense
reimbursement plan and fee waiver were not in place for the year ended
December 31, 1999, the management fee for the fund was 90% and the total
annual expenses were 2.45%.
9. Premium taxes are not reflected in the examples and may apply in the state
where you live.
THERE IS AN ACCUMULATION UNIT VALUE HISTORY (CONDENSED FINANCIAL INFORMATION)
CONTAINED IN THE APPENDIX TO THIS PROSPECTUS.
THE COMPANY
Fidelity Security Life Insurance Company, 3130 Broadway, Kansas City, Missouri
64111-2406, is a stock life insurance company. We were originally incorporated
on January 17, 1969, as a Missouri Corporation. We are principally engaged in
the sale of life insurance and annuities. We are licensed in the District of
Columbia and all states except New York, where we are only admitted as a
reinsurer. Fidelity Security Life Insurance Company is majority owned by Richard
F. Jones (an individual).
THE ANNUITY CONTRACT
This Prospectus describes the variable annuity contract that we are offering.
An annuity is a contract between you, the owner, and us, the insurance company,
where we promise to pay you an income, in the form of annuity payments,
beginning on a designated date in the future. Until you decide to begin
receiving annuity payments, your annuity is in the accumulation phase. Once you
begin receiving annuity payments, your contract enters the income phase.
The contract benefits from tax deferral. Tax deferral means that you are not
taxed on earnings or appreciation on the assets in your contract until you take
money out of your contract.
The contract is called a variable annuity because you can choose among the
investment options, and depending upon market conditions, you can make or lose
money in any of these options. If you select the variable annuity portion of the
contract, the amount of money you are able to accumulate in your contract during
the accumulation phase depends upon the investment performance of the investment
option(s) you select as well as the interest we credit to the fixed account.
You can choose to receive annuity payments on a variable basis, fixed basis or a
combination of both. If you choose variable payments, the amount of the annuity
payments you receive will depend upon the investment performance of the
investment option(s) you select for the income phase. If you select to receive
payments on a fixed basis, the payments you receive will remain level.
PURCHASE
PURCHASE PAYMENTS
A purchase payment is the money you give us to buy the contract. You can make
payments in two ways:
o as Lump Sum payments; or
o as Easy Pay payments.
A Lump Sum payment is any payment of $5,000 or more. Easy Pay payments are
designed to give you the opportunity to make regular payments to your contract.
The minimum Easy Pay payment, whether for your initial payment or a subsequent
payment, we will accept is $50. The maximum total of all purchase payments we
will accept for the contract without our prior consent is $500,000.
ALLOCATION OF PURCHASE PAYMENTS
When you purchase a contract, you choose how we will apply your purchase
payments among the investment options. If you make additional purchase payments,
we will allocate them in the same way as your first purchase payment, unless you
tell us otherwise.
Free Look. If you change your mind about owning this contract, you can cancel it
within 10 days after receiving it (or the period required in your state, which
is shown on page 1 of your contract). When you cancel the contract within this
time period, we will not assess a surrender charge. You will receive back
whatever your contract is worth on the day we receive your request. In certain
states, or if you have purchased the contract as an IRA, we may be required to
give you back your purchase payment if you decide to cancel your contract within
10 days after receiving it (or whatever period is required in your state). If
that is the case, we will put your purchase payment in the Money Market
Portfolio for 15 days before we allocate your first purchase payment to the
investment option(s) you have selected. (In some states, the period may be
longer.) If we do allocate your purchase payment to the Money Market Portfolio
and you exercise your free look right, we will return the greater of your
contract value or your purchase payments.
Once we receive your purchase payment and the necessary information, we will
issue your contract and allocate your first purchase payment within two business
days. If you do not give us all of the information we need, we will contact you
to get it. If for some reason we are unable to complete this process within five
business days, we will either send back your money or get your permission to
keep it until we get all of the necessary information. If you add more money to
your contract by making additional purchase payments, we will credit those
amounts to your contract within one business day. Our business day closes when
the New York Stock Exchange closes, usually 4:00 p.m. Eastern time.
INVESTMENT CHOICES
The contract offers you the choice of allocating purchase payments to our fixed
account or to one or more of the investment options which are listed below.
Additional investment options may be available in the future.
You should read the prospectuses for these funds carefully before investing.
Copies of these prospectuses are attached to this prospectus. Certain investment
options contained in the fund prospectuses may not be available with your
contract.
INVESTORS MARK SERIES FUND, INC.
Investors Mark Series Fund, Inc. is managed by Investors Mark Advisors, LLC
(Adviser). Investors Mark Series Fund, Inc. is a mutual fund with multiple
portfolios, four of which are available under the contract. Each portfolio has a
different investment objective. The Adviser has engaged sub-advisers to provide
investment advice for the individual portfolios. The following portfolios are
available under the contract:
o Money Market Portfolio - Standish, Ayer & Wood, Inc. is the sub-advisor.
o Growth & Income Portfolio - Lord, Abbett & Co. is the sub-adviser.
o Large Cap Growth Portfolio - Stein Roe & Farnham, Incorporated is the
sub-adviser.
o Small Cap Equity Portfolio - Stein Roe & Farnham, Incorporated is the
sub-adviser.
BERGER INSTITUTIONAL PRODUCTS TRUST
Berger Institutional Products Trust is a mutual fund with multiple portfolios,
of which only one is available under the contract. That portfolio is managed by
BBOI Worldwide LLC, a joint venture between Berger LLC and Bank of Ireland Asset
Management (U.S.) Limited (BIAM). BBOI Worldwide LLC has retained BIAM as
sub-adviser. Berger LLC and BIAM have entered into an agreement to dissolve BBOI
Worldwide LLC. The dissolution of BBOI Worldwide LLC will have no effect on the
investment advisory services provided to the fund. Contingent upon shareholder
approval, when BBOI Worldwide LLC is dissolved, Berger LLC will become the
fund's advisor and BIAM will continue to be responsible for day-to-day
management of the fund's portfolio as sub-advisor. If approved by shareholders,
these advisory changes are expected to take place in the first half of this
year. The available portfolio under the contract is:
o Berger/BIAM IPT - International Fund
The investment objectives and policies of certain of the investment options are
similar to the investment objectives and policies of other mutual funds that
certain of the investment advisors manage. Although the objectives and policies
may be similar, the investment results of the investment options may be higher
or lower than the results of such other mutual funds. The investment advisors
cannot guarantee, and make no representation, that the investment results of
similar funds will be comparable even though the investment options have the
same investment advisors.
An investment option's performance may be affected by risks specific to certain
types of investments, such as foreign securities, derivative investments,
non-investment grade debt securities, initial public offerings (IPOs) or
companies with relatively small market capitalizations. IPOs and other
investment techniques may have a magnified performance impact on an investment
option with a small asset base. An investment option may not experience similar
performance as its assets grow.
Shares of the investment options may be offered in connection with certain
variable annuity contracts and variable life insurance policies of various life
insurance companies which may or may not be affiliated with us. Certain
investment options may also be sold directly to qualified plans. The investment
options believe that offering their shares in this manner will not be
disadvantageous to you.
We may enter into certain arrangements under which we are reimbursed by the
investment options' advisors, distributors and/or affiliates for the
administrative services which we provide to the options.
FIXED ACCOUNT
During the accumulation phase, you may allocate purchase payments and contract
values to our fixed account. The fixed account forms a portion of our general
account. At our discretion, we may, from time to time, declare an excess
interest rate for the fixed account.
GENERAL ACCOUNT
During the income phase, you can select to have your annuity payments paid out
of our general account. We guarantee a specified interest rate used in
determining the payments. If you choose this option, the payments you receive
will remain level. This option is only available during the income phase.
TRANSFERS
You can make transfers as described below. We have the right to terminate or
modify these transfer provisions.
You can make transfers by telephone. If you own the contract with a joint owner,
unless we are instructed otherwise, we will accept instructions from either you
or the other owner. We will use reasonable procedures to confirm that
instructions given to us by telephone are genuine. If we fail to use such
procedures, we may be liable for any losses due to unauthorized or fraudulent
instructions. However, we will not be liable for following telephone
instructions that we reasonably believe to be genuine. We may tape record
telephone instructions.
Transfers are subject to the following:
1. Currently, during the accumulation phase, you can make 12 transfers every
contract year without charge. You can transfer into the fixed account from
the investment options.
2. Currently, during the accumulation phase you can only make one transfer in
a calendar quarter out of the fixed account into the investment options.
Any transfer made pursuant to this provision is counted in determining any
transfer fee.
3. We will assess a $50 transfer fee for each transfer during the accumulation
phase in excess of the free 12 transfers allowed per contract year.
Transfers made at the end of the free look period by us and any transfers
made pursuant to the Dollar Cost Averaging program, the Rebalancing
program, or for loans will not be counted in determining the application of
any transfer fee.
4. The minimum amount which you can transfer is $500 or your entire value in
the investment option or fixed account if it is less. This requirement is
waived if the transfer is made in connection with the Dollar Cost Averaging
program, the Rebalancing program, or loans.
5. After a transfer is made, you must keep a minimum of $100 in the account
(either in the fixed account or an investment option) from which the
transfer was made, unless you transfer the entire account.
6. You may not make a transfer until after the end of the free look period.
7. A transfer will be effected as of the end of a business day when we receive
an acceptable transfer request containing all required information. This
would include the amount which is to be transferred, and the investment
option(s) and/or the fixed account affected.
8. We are not liable for a transfer made in accordance with your instructions.
9. We reserve the right to restrict transfers between investment options to a
maximum of 12 per contract year and to restrict transfers from being made
on consecutive business days. We also reserve the right to restrict
transfers into and out of the fixed account.
10. Your right to make transfers is subject to modification if we determine, in
our sole opinion, that the exercise of the right by one or more owners is,
or would be, to the disadvantage of other owners. Restrictions may be
applied in any manner reasonably designed to prevent any use of the
transfer right which is considered by us to be to the disadvantage of other
owners. A modification could be applied to transfers to, or from, one or
more of the investment options and could include, but is not limited to:
a) the requirement of a minimum time period between each transfer;
b) not accepting a transfer request from an agent acting under a power of
attorney on behalf of more than one owner; or
c) limiting the dollar amount that may be transferred between investment
options by an owner at any one time.
11. Transfers do not change your allocation instructions for future purchase
payments.
12. Transfers made during the income phase are subject to the following:
a) you may make 4 transfers each contract year between investment options
or between the investment options and the general account;
b) you may not make a transfer within 3 business days of the annuity
calculation date; and
c) you may not make a transfer from the general account to an investment
option.
DOLLAR COST AVERAGING PROGRAM
The Dollar Cost Averaging Program allows you to systematically transfer a set
amount each month from a selected investment option or the fixed account to any
of the other investment options. By allocating amounts on a regular schedule as
opposed to allocating the total amount at one particular time, you may be less
susceptible to the impact of market fluctuations. The Dollar Cost Averaging
Program is available only during the accumulation phase.
The minimum amount which can be transferred each month is $100. You must have at
least $1,200 in the selected investment option or fixed account (or the amount
required to complete your program, if less) in order to participate in the
Dollar Cost Averaging Program.
We have the right to modify, terminate or suspend the Dollar Cost Averaging
Program.
If you participate in the Dollar Cost Averaging Program, the transfers made
under the program are not taken into account in determining any transfer fee. If
you are participating in the Dollar Cost Averaging Program, you cannot also
participate in the Rebalancing Program.
Dollar Cost Averaging does not assure a profit and does not protect against loss
in declining markets. Dollar Cost Averaging involves continuous investment in
the selected investment option(s) regardless of fluctuating price levels of the
investment option(s). You should consider your financial ability to continue the
Dollar Cost Averaging Program through periods of fluctuating price levels.
REBALANCING PROGRAM
Once your money has been allocated among the investment options, the performance
of the selected options may cause your allocation to shift. You can direct us to
automatically rebalance your contract to return to your original percentage
allocations by selecting our Rebalancing Program. You can tell us whether to
rebalance monthly, quarterly, semi-annually or annually.
The Rebalancing Program is available only during the accumulation phase.
If you participate in the Rebalancing Program, the transfers made under the
program are not taken into account in determining any transfer fee. Amounts
allocated to the fixed account are not taken into account as part of the
Rebalancing Program. You cannot participate in the Rebalancing Program if you
are participating in the Dollar Cost Averaging Program.
EXAMPLE:
Assume that you want your initial purchase payment split between 2 investment
options. You want 80% to be in the Growth & Income Portfolio and 20% to be in
the International Fund. Over the next 2 1/2 months the domestic market does very
well while the international market performs poorly. At the end of the quarter,
the Growth & Income Portfolio now represents 86% of your holdings because of its
increase in value. If you had chosen to have your holdings rebalanced quarterly,
on the first day of the next quarter, we would sell some of your units in the
Growth & Income Portfolio to bring its value back to 80% and use the money to
buy more units in the International Fund to increase those holdings to 20%.
SUBSTITUTION AND LIMITATION ON FURTHER INVESTMENT
We may be required to substitute one of the investment options you have selected
with another investment option. We would not do this without the prior approval
of the Securities and Exchange Commission. We may also limit further investment
in an investment option. We will give you notice of our intent to take either of
these actions.
EXPENSES
There are charges and other expenses associated with the contracts that reduce
the return on your investment in the contract. These charges and expenses are:
PRODUCT EXPENSE CHARGE
Each day we make a deduction for our Product Expense Charge. We do this as part
of our calculation of the value of the accumulation units and the annuity units.
This charge is for all the insurance benefits, e.g., guarantee of annuity rates,
the death benefit, for certain expenses of the contract, and for assuming the
risk (expense risk) that the current charges will be insufficient in the future
to cover the cost of administering the contract. If the charges under the
contract are not sufficient, then we will bear the loss. We do, however, expect
to profit from this charge. This charge cannot be increased.
We assess the Product Expense Charge each business day and it is based on the
average value of your contract. We assess a Product Expense Charge as follows:
o Lump Sum Payments: 0.90%, on an
annual basis.
o Easy Pay Payments: 1.50% on an
annual basis
(0.90% on an
annual basis if
contract value
exceeds
$100,000)*
*Once your contract value reaches a $100,000, it will be assessed the lower
charge even if the contract value is later reduced by changes in market value or
withdrawals.
REDUCTION OF PRODUCT EXPENSE CHARGE
We may, at our sole discretion, reduce the Product Expense Charge. We would do
so when sales of the contract are made to individuals or to a group of
individuals in such a manner that results in a reduction of our administrative
costs or other savings. We would consider making such a reduction when:
o the size and type of group to whom the contract is offered can reasonably
be expected to produce such a cost savings; or
o the amount of purchase payments can produce some economies resulting in a
savings to us.
Any reduction of the Product Expense Charge will not be unfairly discriminatory
against any person. We will make such reductions in accordance with our own
administrative rules in effect at the time the contract(s) is issued. We have
the right to change these rules from time to time.
SURRENDER CHARGE
During the accumulation phase, you can make surrenders from your contract. We
keep track of each purchase payment. Subject to the free surrender amount and
other waivers discussed below, if you make a surrender and it has been less than
the stated number of years since you made your purchase payment, we will assess
a Surrender Charge.
Surrender Charge: (as a percentage of purchase payments surrendered)
SURRENDER CHARGES
Number of Complete Years Surrender Charge
From Receipt of Purchase Payments Easy Pay Lump Sum
- --------------------------------- -------- --------
0-1% 6% 7%
1 6 6
2 6 5
3 5 4
4 5 3
5 4 2
6 3 1
7 2 0
8 2 0
9 1 0
10 and thereafter 0 0
Each purchase payment has its own Surrender Charge period. For purposes of the
Surrender Charge, we treat surrenders as coming from the most recent purchase
payments first. When the surrender is for only part of the value of your
contract, the Surrender Charge is deducted from the remaining value in your
contract.
Note: For tax purposes, earnings are usually considered to come out first.
WAIVER OF THE SURRENDER CHARGE
Free Surrenders. You may make one surrender of up to 10% of your contract value
during a contract year free from any Surrender Charge. This right is non-
cumulative.
Internal Transfers. It is our current practice to reduce Surrender Charges for
an owner of one of our annuity contracts who wishes to transfer contract values
to another of our annuity contracts. The following will apply to such internal
transfers:
o there is an internal transfer fee of 2% of the amount transferred when you
make a transfer of contract value to another contract (which could be the
variable annuity contract we are offering by this prospectus) issued by us;
o once transferred into the other contract, the amount transferred will be
subject to an Adjusted Surrender Charge in accordance with the following:
ADJUSTED SURRENDER CHARGES
Number of Complete Years you
have been our Annuity Customer
Number of Complete
Years from Transfer 5 Years or less 5-10 Years 10 Years +
- ------------------- --------------- ---------- ----------
0-1 6% 4% 3%
1 5 3 3
2 4 2 2
3 3 1 1
4 2 0 0
5 1 0 0
6 and longer 0 0 0
o If your contract was issued prior to May 14, 1999, or is no longer subject
to a Surrender Charge, we will not assess the internal transfer fee for the
first internal transfer you make. Once contract values are in the new
contract, they will be subject to the Adjusted Surrender Charge shown
above. Any subsequent internal transfer will be subject to the above
conditions.
Reduction of Surrender Charges. We may, at our sole discretion, reduce the
Surrender Charge or the Adjusted Surrender Charge. We would do so when sales of
the contract are made to individuals or to a group of individuals in such a
manner that results in a reduction of our distribution costs. Some examples are:
if there is a large group of individuals that will be purchasing the contract or
if a prospective purchaser already had a relationship with us. We may, at our
sole discretion, not deduct the Surrender Charge under a contract issued to an
officer, director or employee of ours or any of our affiliates.
Any reduction of Surrender Charges will not be unfairly discriminatory against
any person. We will make such reductions in accordance with our administrative
rules in effect at the time the contract is issued. We have the right to change
those rules from time to time.
Waiver of Surrender Charges under Certain Benefits. Under the conditions set out
in the contract endorsements providing the following benefits, we will not
assess the Surrender Charge when:
o TERMINAL ILLNESS ENDORSEMENT. You become terminally ill (which means you
are not expected to live more than 12 months). Under this benefit, you may
make a one time surrender during the accumulation phase up to the full
value of your account.
o NURSING HOME OR HOSPITAL CONFINEMENT ENDORSEMENT. You become confined to a
long term care facility, nursing facility or hospital for at least 30
consecutive days. Under this benefit, the maximum amount that you can
surrender without the imposition of the Surrender Charge is $2,000 each
month for the period of confinement. The maximum total surrenders under
this provision is equal to your contract value. This benefit is only
available during the accumulation phase.
These benefits may not be available in your state.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for the payment of these
taxes and will make a deduction from the value of the contract for them. Some of
these taxes are due when the contract is issued, and others are due when annuity
payments begin. It is our current practice to not charge anyone for these taxes
until annuity payments begin. We may some time in the future discontinue this
practice and assess the charge when the tax is due. Premium taxes generally
range from 0% to 4%, depending on the state.
TRANSFER FEE
We will charge $50 for each additional transfer in excess of the free transfers
permitted. Transfers made at the end of the free look period by us and any
transfers made pursuant to the Dollar Cost Averaging program, Rebalancing
program, or loans will not be counted in determining the application of any
transfer fee.
INCOME TAXES
We will deduct from the contract for any income taxes which we incur because of
the contract. At the present time, we are not making any such deductions.
INVESTMENT OPTION EXPENSES
There are deductions from and expenses paid out of the assets of the various
investment options, which are described in the attached fund prospectuses.
CONTRACT VALUE
Your contract value is the sum of your interest in the various investment
options and our fixed account.
Your interest in the investment option(s) will vary depending upon the
investment performance of the options you choose. In order to keep track of your
contract value, we use a unit of measure called an accumulation unit. During the
income phase of your contract we call the unit an annuity unit.
ACCUMULATION UNITS
Every business day we determine the value of an accumulation unit and an annuity
unit for each of the investment options. We do this by:
1) determining the change in investment experience (including any charges) for
the investment option from the previous business day to the current
business day;
2) subtracting our Product Expense Charge and any other charges such as taxes
we have deducted; and
3) multiplying the previous business day's accumulation unit (or annuity unit)
value by this result.
When you make a purchase payment, we credit your contract with accumulation
units. The number of accumulation units credited is determined by dividing the
amount of the purchase payment allocated to an investment option by the value of
the accumulation unit for that investment option. When you make a surrender, we
deduct from your contract accumulation units representing the surrender.
We calculate the value of an accumulation unit for each investment option after
the New York Stock Exchange closes each day and then debit or credit your
account.
EXAMPLE:
On Monday we receive an additional purchase payment of $5,000 from you. You have
told us you want this to go to the Growth & Income Portfolio. When the New York
Stock Exchange closes on that Monday, we determine that the value of an
accumulation unit for the Growth & Income Portfolio is $13.90. We then divide
$5,000 by $13.90 and credit your contract on Monday night with 359.71
accumulation units for the Growth & Income Portfolio.
SURRENDERS
You can have access to the money in your contract:
o by making a surrender (either a partial or a complete surrender); or
o by electing to receive annuity payments; or
o when a death benefit is paid to your beneficiary; or
o if your contract was issued as a TSA, by taking a loan out of the fixed
account.
Surrenders can only be made during the accumulation phase.
When you make a complete surrender you will receive the value of your contract
on the day your request is received less any applicable surrender charge and
less any premium tax.
Unless you instruct us otherwise, any partial surrender will be made pro-rata
from all the investment options and the fixed account you selected. Under most
circumstances the amount of any partial surrender must be for at least $500, or
your entire interest in the fixed account or an investment option. We require
that after a partial surrender is made you keep at least $5,000 in your contract
for Lump Sum payments or $1,000 for Easy Pay payments.
Income taxes, tax penalties and certain restrictions may apply to any surrender
you make.
There are limits to the amount you can surrender from a qualified plan referred
to as a 403(b) plan (TSA). For a more complete explanation see the discussion in
the Taxes Section and the discussion in the Statement of Additional Information.
MINIMUM DISTRIBUTION PROGRAM
If your contract has been issued as an IRA, TSA or other qualified plan, you may
elect the Minimum Distribution Program. Under this program, we will make
payments to you that are designed to meet the applicable minimum distribution
requirements imposed by the Internal Revenue Code on such qualified plans. We
will make payments to you periodically at your election (currently: monthly,
quarterly, semi-annually or annually). The payment amount and frequency may be
limited. The payments will not be subject to the surrender charges and will be
in lieu of the 10% free surrender amount allowed each year.
LOANS
If you purchased this contract as a TSA (also referred to as a 403(b) plan),
during the accumulation phase you can take a loan out of the fixed account using
the contract as collateral. The minimum loan we will make is $2,000. No loans
are permitted out of the investment options and no loans are permitted during
the income phase. When you request a loan, we will transfer any amounts
necessary to implement the loan request from the investment options to the fixed
account. Repayment of the loan will be made into the fixed account. We will then
allocate that money in the same manner that your purchase payments are being
allocated. Your loan documents will explain the terms, conditions and
limitations regarding loans from your TSA contract.
DEATH BENEFIT
DEATH OF CONTRACT OWNER DURING THE
ACCUMULATION PHASE
Upon your death or that of the joint owner during the accumulation phase, the
death benefit will be paid to your primary beneficiary. Upon the death of a
joint owner, the surviving joint owner, if any, will be treated as the primary
beneficiary. Any other beneficiary designation on record at the time of death
will be treated as a contingent beneficiary unless you have informed us
otherwise in writing.
DEATH BENEFIT AMOUNT DURING THE
ACCUMULATION PHASE
The death benefit during the accumulation phase will be the greater of:
1) the purchase payments, less any surrenders including any applicable
charges; or
2) your contract value.
The amount of the death benefit is determined as of the end of the business day
during which we receive both due proof of death and an election for the payment
method. The death benefit amount remains in an investment option and/or the
fixed account until distribution begins. From the time the death benefit is
determined until complete distribution is made, any amount in an investment
option will be subject to investment risk which is borne by the beneficiary.
DEATH BENEFIT OPTIONS DURING THE
ACCUMULATION PHASE
A beneficiary must elect the death benefit to be paid under one of the following
options in the event of your death during the accumulation phase. If the
beneficiary is the spouse of the owner, he or she may elect to continue the
contract in his or her own name and exercise all the owner's rights under the
contract. In this event, the contract value will be adjusted to equal the death
benefit.
OPTION 1 - lump sum payment of the death benefit; or
OPTION 2 - the payment of the entire death benefit within 5 years of the
date of death of the owner or any joint owner; or
OPTION 3 - payment of the death benefit under an annuity option over the
lifetime of the beneficiary or over a period not extending beyond the life
expectancy of the beneficiary with distribution beginning within 1 year of
the date of your death or of any joint owner.
Any portion of the death benefit not applied under Option 3 within 1 year of the
date of your death, or that of a joint owner, must be distributed within 5 years
of the date of death.
If a lump sum payment is requested, the amount will be paid within 7 days,
unless the suspension of payments provision is in effect.
Payment to the beneficiary, in any form other than a lump sum, may only be
elected during the sixty-day period beginning with the date of receipt by us of
proof of death.
DEATH OF CONTRACT OWNER DURING THE INCOME
PHASE
If you or a joint owner, who is not the annuitant, dies during the income phase,
any remaining payments under the annuity option elected will continue to be made
at least as rapidly as under the method of distribution in effect at the time of
your death. Upon your death during the income phase, the beneficiary becomes the
owner. The annuitant is the person whose life we look to when we make annuity
payments.
DEATH OF ANNUITANT
Upon the death of the annuitant, who is not an owner, during the accumulation
phase, you automatically become the annuitant. You may designate a new annuitant
subject to our underwriting rules then in effect. If the owner is a non-natural
person, the death of the annuitant will be treated as the death of the owner and
a new annuitant may not be designated.
Upon the death of the annuitant during the income phase, the death benefit, if
any, will be as specified in the annuity option elected. Death benefits will be
paid at least as rapidly as under the method of distribution in effect at the
annuitant's death.
ANNUITY PAYMENTS
(THE INCOME PHASE)
Under the contract you can receive regular income payments. You can choose the
month and year in which those payments begin. We call that date the annuity
date. Your annuity date must be the first or fifteenth day of a calendar month.
You can also choose among income plans. We call those annuity options.
Your annuity date must be at least 1 month after you buy the contract. Annuity
payments must begin by the annuitant's 85th birthday or the 85th birthday of the
oldest joint annuitant. The annuitant is the person whose life we look to when
we make annuity payments.
If you do not choose an annuity option at the time you purchase the contract, we
will assume that you selected Option 2 with 10 years of guaranteed payments.
During the income phase, you have the same investment choices you had just
before the start of the income phase. If you do not tell us otherwise, your
annuity payments will be based on the investment allocations that were in place
on the annuity date.
The dollar amount of your payment from the investment option(s) will depend upon
four things:
o the value of your contract in the investment option(s) on the annuity date;
o the 3% assumed investment rate used in the annuity table for the contract;
o the performance of the investment options you selected; and
o if permitted in your state and under the type of contract you have
purchased, the age and sex of the annuitant(s).
If the actual performance exceeds the 3% assumed rate plus the deductions for
expenses, your annuity payments will increase. Similarly, if the actual
performance is less than 3% plus the amount of the deductions for expenses, your
annuity payments will decrease.
We will determine the amount of your variable annuity payments, including the
first, no more than 10 business days prior to the payment date. The payment
dates must be the same day each month as the date you selected for the annuity
date, i.e., the first or the fifteenth. The day we determine the variable
annuity payment is called the annuity calculation date.
You can choose one of the following annuity options. After annuity payments
begin, you cannot change the annuity option. All annuity payments are made to
you unless you direct us otherwise.
OPTION 1 - LIFE ANNUITY. Under this option we make monthly income payments
during the lifetime of the annuitant and terminating with the last payment
preceding his/her death.
OPTION 2 - LIFE INCOME WITH A GUARANTEED PERIOD.
Under this option we make monthly income payments during the lifetime of the
annuitant. We guarantee that if, at the death of the annuitant, payments have
been made for less than a stated period, which may be five, ten, fifteen or
twenty years, as elected, the monthly income will continue during the remainder
of the stated period. However, the owner may elect to receive a single sum
payment. A single sum payment will be equal to the present value of remaining
payments as of the date of receipt of due proof of death commuted at the assumed
investment rate.
OPTION 3 - SURVIVORSHIP ANNUITY. Under this option we make monthly income
payments during the joint lifetime of the annuitant and another named individual
and thereafter during the lifetime of the survivor. Payments cease with the last
income payment due prior to the death of the survivor.
OPTION 4 - OTHER OPTIONS. Under this option we provide you with any payout plan
that is mutually agreed upon between you and us.
OTHER BENEFITS
DISABILITY BENEFIT
This benefit is only available with respect to Easy Pay payments during the
accumulation phase. Under this benefit, so long as you are totally and
permanently disabled and can provide us with evidence of that fact, we will pay
you a life annuity with fixed payments at your normal retirement date (which is
defined in your endorsement) or make a death benefit payment to your beneficiary
if you die prior to that date. You should refer to the endorsement in your
contract for additional details.
ACCIDENTAL DEATH BENEFIT
During the accumulation phase, in the event that you die due to an accidental
injury prior to age 70, we will pay your beneficiary an accidental death benefit
equal to the contract value (less any outstanding loan balance if your contract
was issued as a 403(b) contract and you took out a loan) on the date of death.
This benefit is in addition to the death benefit contained in the contract. The
maximum amount of the accidental death benefit is $500,000.
TAXES
NOTE: We have prepared the following information on taxes as a general
discussion of the subject. It is not intended as tax advice to any individual.
You should consult your own tax adviser about your own circumstances. We have
included a more comprehensive discussion regarding taxes in the Statement of
Additional Information.
ANNUITY CONTRACTS IN GENERAL
Annuity contracts are a means of setting aside money for future needs - usually
retirement. Congress recognized how important saving for retirement was and
provided special rules in the Internal Revenue Code (Code) for annuities.
Simply stated, these rules provide that you will not be taxed on the earnings on
the money held in your annuity contract until you take the money out. This is
referred to as tax deferral. There are different rules as to how you are taxed
depending on how you take the money out and the type of contract - qualified or
non-qualified (see following sections).
Under non-qualified contracts, you as the owner, are not taxed on increases in
the value of your contract until a distribution occurs - either as a withdrawal
or as annuity payments. When you make a withdrawal, you are taxed on the amount
of the withdrawal that is earnings. For annuity payments, different rules apply.
A portion of each annuity payment is treated as a partial return of your
purchase payments and is not taxed. The remaining portion of the annuity payment
is treated as ordinary income. How the annuity payment is divided between
taxable and non-taxable portions depends upon the period over which the annuity
payments are expected to be made. Annuity payments received after you have
received all of your purchase payments are fully includible in income.
When a non-qualified contract is owned by a non-natural person (e.g.,
corporation or certain other entities other than a trust holding the contract as
an agent for a natural person), the contract will generally not be treated as an
annuity for tax purposes.
QUALIFIED AND NON-QUALIFIED CONTRACTS
If you purchase the contract as an individual and not under any pension plan,
specially sponsored program or an individual retirement annuity, your contract
is referred to as a non-qualified contract.
If you purchase the contract under a pension plan, specially sponsored program,
or an individual retirement annuity, your contract is referred to as a qualified
contract. Examples of qualified plans are: Individual Retirement Annuities
(IRAs), Tax-Sheltered Annuities (sometimes referred to as 403(b) contracts), and
pension and profit-sharing plans, which include 401(k) plans and H.R.10 Plans.
A qualified contract will not provide any necessary or additional tax deferral
if it is used to fund a qualified plan that is tax deferred. However, the
contract has features and benefits other than tax deferral that may make it an
appropriate investment for a qualified plan. You should consult your tax adviser
regarding these features and benefits prior to purchasing a qualified contract.
WITHDRAWALS - NON-QUALIFIED CONTRACTS
If you make a withdrawal from your contract, the Code treats such a withdrawal
as first coming from earnings and then from your purchase payments. Such
withdrawn earnings are includible in income.
The Code also provides that any amount received under an annuity contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income.
Some withdrawals will be exempt from the penalty. They include any amounts:
1. paid on or after the taxpayer reaches age 59 1/2;
2. paid after you die;
3. paid if the taxpayer becomes totally disabled (as that term is defined in
the Code);
4. paid in a series of substantially equal payments made annually (or more
frequently) for life or a period not exceeding life expectancy;
5. paid under an immediate annuity; or
6. which come from purchase payments made prior to August 14, 1982.
WITHDRAWALS - QUALIFIED CONTRACTS
If you make a withdrawal from your qualified contract, a portion of the
withdrawal is treated as taxable income. This portion depends on the ratio of
the pre-tax purchase payments to the after-tax purchase payments in your
contract. If all of your purchase payments were made with pre-tax money then the
full amount of any withdrawal is includible in taxable income. Special rules may
apply to withdrawals from certain types of qualified contracts.
The Code also provides that any amount received under a qualified contract which
is included in income may be subject to a penalty. The amount of the penalty is
equal to 10% of the amount that is includible in income. Some withdrawals will
be exempt from the penalty. They include any amounts:
1. paid on or after you reach age 59 1/2;
2. paid after you die;
3. paid if you become totally disabled (as that term is defined in the Code);
4. paid to you after leaving your employment in a series of substantially
equal payments made annually (or more frequently) under a lifetime annuity;
5. paid to you after you have left your employment, after attaining age 55;
6. paid for certain allowable medical expenses (as defined in the Code);
7. paid pursuant to a qualified domestic relations order;
8. paid on account of an IRS levy upon the qualified contract;
9. paid from an IRA for medical insurance (as defined in the Code);
10. paid from an IRA for qualified higher education expenses; or
11. paid from an IRA up to $10,000 for qualified first time homebuyer expenses
(as defined in the Code).
The exceptions in (5) and (7) above do not apply to IRAs. The exception in (4)
above applies to IRAs but without the requirement of leaving employment. We have
provided a more complete discussion in the Statement of Additional Information.
WITHDRAWALS - TAX-SHELTERED ANNUITIES
The Code limits the withdrawal of amounts attributable to purchase payments made
under a salary reduction agreement by owners from Tax-Sheltered Annuities.
Withdrawals can only be made when an owner:
1. reaches age 59 1/2;
2. leaves his/her job;
3. dies;
4. becomes disabled (as that term is defined in the Code);
5. in the case of hardship; or
6. has account balances as of December 31, 1988.
However, in the case of hardship, the owner can only withdraw the purchase
payments and not any earnings.
DIVERSIFICATION
The Code provides that the underlying investments for a variable annuity must
satisfy certain diversification requirements in order to be treated as an
annuity contract. We believe that the investment options are managed so as to
comply with the requirements.
Neither the Code nor the Internal Revenue Service Regulations issued to date
provide guidance as to the circumstances under which you, because of the degree
of control you exercise over the underlying investments, are considered the
owner of the shares of the investment options. If you are considered owner of
the shares, it will result in the loss of the favorable tax treatment for the
contract. It is unknown to what extent owners are permitted to select investment
options, to make transfers among the investment options or the number and type
of investment options owners may select from without being considered owner of
the shares. If any guidance is provided which is considered a new position, then
the guidance is generally applied prospectively. However, if such guidance is
considered not to be a new position, it may be applied retroactively. This would
mean that you, as the owner of the contract, could be treated as the owner of
the investment options.
Due to the uncertainty in this area, we reserve the right to modify the contract
in an attempt to maintain favorable tax treatment.
PERFORMANCE
We may periodically advertise performance of the various investment options. We
will calculate performance by determining the percentage change in the value of
an accumulation unit by dividing the increase (decrease) for that unit by the
value of the accumulation unit at the beginning of the period. This performance
number reflects the deduction of the insurance charges. It does not reflect the
deduction of any surrender charge. The deduction of any surrender charges would
reduce the percentage increase or make greater any percentage decrease. Any
advertisement will also include total return figures which reflect the deduction
of the product expense charges and surrender charges.
The performance will be based on the historical performance of the corresponding
investment options for the periods commencing from the date on which the
particular investment option was made available through the contracts. In
addition, for certain investment options performance may be shown for the period
commencing from the inception date of the investment option. These figures
should not be interpreted to reflect actual historical performance of the
separate account.
We may, from time to time, include in our advertising and sales materials, tax
deferred compounding charts and other hypothetical illustrations, which may
include comparisons of currently taxable and tax deferred investment
programs, based on selected tax brackets.
OTHER INFORMATION
THE SEPARATE ACCOUNT
We established a separate account, FSL Separate
Account M (Separate Account), to hold the assets that underlie the contracts.
Our Board of Directors adopted a resolution to establish the Separate Account
under Missouri insurance law on August 25, 1998. We have registered the Separate
Account with the Securities and Exchange Commission as a unit investment trust
under the Investment Company Act of 1940.
The assets of the Separate Account are held in our name on behalf of the
Separate Account and legally belong to us. However, those assets that underlie
the contracts, are not chargeable with liabilities arising out of any other
business we may conduct. All the income, gains and losses (realized or
unrealized) resulting from these assets are credited to or charged against the
contracts and not against any other contracts we may issue.
VOTING RIGHTS
We are the legal owner of the investment option shares. However, we believe that
when an investment option solicits proxies in conjunction with a vote of
shareholders, it is required to obtain from you and other owners instructions as
to how to vote those shares. When we receive those instructions, we will vote
all of the shares we own in proportion to those instructions. This will also
include any shares that we own on our own behalf. Should we determine that we
are no longer required to comply with the above, we will vote the shares in our
own right.
DISTRIBUTOR
National Pension & Group Consultants, Inc. (NPGC) serves as the distributor for
the contracts. NPGC is located at 3130 Broadway, Kansas City MO 64111-2406.
Commissions will be paid to agents and broker-dealers who sell the contracts.
Such agents and broker-dealers will be paid commissions up to 3% of purchase
payments but, under certain circumstances, may be paid an additional .25% of
assets as a trail commission.
OWNERSHIP
Owner. You, as the owner of the contract, have all the rights under the
contract. Prior to the annuity date, the owner is as designated at the time the
contract is issued, unless changed. On and after the annuity date, you continue
as the owner.
Joint Owner. The contract can be owned by joint owners. Any joint owner must be
the spouse of the other owner (except in Pennsylvania). Upon the death of either
joint owner, the surviving joint owner will be the designated beneficiary. Any
other beneficiary designation at the time the contract was issued or as may have
been later changed will be treated as a contingent beneficiary unless otherwise
indicated.
BENEFICIARY
The beneficiary is the person(s) or entity you name to receive any death
benefit. The beneficiary is named at the time the contract is issued unless
changed at a later date. Unless an irrevocable beneficiary has been named, you
can change the beneficiary at any time before you die.
ASSIGNMENT
You can assign the contract at any time during your
lifetime. We will not be bound by the assignment until we receive written notice
of the assignment. We will not be liable for any payment or other action we take
in accordance with the contract before we receive notice of the assignment. An
assignment may be a taxable event.
If the contract is issued pursuant to a qualified plan, there may be limitations
on your ability to assign the contract.
SUSPENSION OF PAYMENTS OR TRANSFERS
We may be required to suspend or postpone payments for surrenders or transfers
for any period when:
1. the New York Stock Exchange is closed (other than customary weekend and
holiday closings);
2. trading on the New York Stock Exchange is restricted;
3. an emergency exists as a result of which disposal of shares of the
investment options is not reasonably practicable or we cannot reasonably
value the shares of the investment options;
4. during any other period when the Securities and Exchange Commission, by
order, so permits for the protection of owners.
We have reserved the right to defer payment for a withdrawal or transfer from
the fixed account for the period permitted by law but not for more than six
months.
FINANCIAL STATEMENTS
Our statutory basis financial statements have been included in the Statement of
Additional Information. The financial statements of the Separate Account are
also included in the Statement of Additional Information.
ADDITIONAL INFORMATION
For further information about the contract you may obtain a Statement of
Additional Information. You can call the telephone number indicated on the cover
page or you can write to us. For your convenience we have included a post card
for that purpose.
The Table of Contents of this statement is as follows:
Company
Independent Auditors
Legal Opinions
Distribution
Calculation of Performance Information
Federal Tax Status
Annuity Provisions
Financial Statements
APPENDIX
CONDENSED FINANCIAL INFORMATION -
ACCUMULATION UNIT VALUE HISTORY
The table below provides accumulation unit values for the period from the
commencement of operations (5/14/99) to December 31, 1999. This data has been
extracted from the Separate Account's financial statements. This information
should be read in conjunction with the Separate Account's financial statements
and related notes which are included in the Statement of Additional Information.
Period Ended
12/31/99
--------
Lump Sum Easy Pay
-------- --------
Money Market
Beginning of Period $10.00 $10.00
End of Period $10.23 $10.19
Number of Accumulation
Units Outstanding 20,570 157
Growth & Income
Beginning of Period $10.00 $10.00
End of Period $10.30 $10.27
Number of Accumulation
Units Outstanding 16,745 2,344
Large Cap Growth
Beginning of Period $10.00 $10.00
End of Period $12.31 $12.27
Number of Accumulation
Units Outstanding 25,582 3,477
Small Cap Equity
Beginning of Period $10.00 $10.00
End of Period $15.30 $15.24
Number of Accumulation
Units Outstanding 8,438 971
Berger/BIAM IPT - International
Beginning of Period $10.00 $10.00
End of Period $12.39 $12.34
Number of Accumulation
Units Outstanding 12,371 1,177
FIDELITY SECURITY LIFE INSURANCE COMPANY
3130 BROADWAY
KANSAS CITY, MO 64111-2406
ATTN:
____________________________________________________________________________
Please send me, at no charge, the Statement of Additional Information
dated May 1, 2000 for the Annuity Contract issued by Fidelity Security Life
Insurance Company.
(Please print or type and fill in all information)
Name
- --------------------------------------------------------------------------------
Address
- --------------------------------------------------------------------------------
City State Zip Code
- --------------------------------------------------------------------------------
