INDIVIDUAL VARIABLE ANNUITY CONTRACTS
OFFERED BY
FIRST INVESTORS LIFE INSURANCE COMPANY
("FIRST INVESTORS LIFE")
THROUGH
FIRST INVESTORS LIFE VARIABLE ANNUITY FUND A ("SEPARATE ACCOUNT A")
95 Wall Street, New York, New York 10005/(212) 858-8200
This Prospectus describes deferred Variable Annuity Contracts (the
"Contracts") offered by First Investors Life which provide you with the
opportunity to accumulate capital, on a tax-deferred basis, for retirement or
other long-term purposes and thereafter to annuitize your accumulated cash value
if you so elect. If you so elect, the Contracts offer several options under
which you can receive annuity payments for life.
The Contracts invest, through Separate Account A, in the First Investors
Special Bond Fund, Inc. ("Special Bond Fund"). The amount you accumulate depends
upon the performance of Separate Account A. You bear all of the investment risk,
which means that you could lose money.
THE INTERNAL REVENUE SERVICE MAY ASSESS A PENALTY ON EARLY WITHDRAWAL. THE
CONTRACTS PROVIDE YOU WITH A 10-DAY REVOCATION RIGHT.
Please read this prospectus and keep it for future reference. It contains
important information that you should know before buying a Contract. We filed a
Statement of Additional Information ("SAI"), dated April 28, 2000, with the
Securities and Exchange Commission. We incorporate the SAI by reference into
this prospectus. See page 19 of this prospectus for the SAI Table of Contents.
You can get a free SAI by contacting us at the address or telephone number shown
above.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
This prospectus is valid only if attached to the current prospectus of First
Investors Special Bond Fund, Inc. (the "Fund").
THE DATE OF THIS PROSPECTUS IS APRIL 28, 2000.
<PAGE>
TABLE OF CONTENTS*
VARIABLE ANNUITY PROSPECTUS
Item Page
---- ----
GLOSSARY OF SPECIAL TERMS.......................................3
FEE TABLE.......................................................4
CONDENSED FINANCIAL INFORMATION.................................5
OVERVIEW........................................................5
How the Contracts Work.......................................5
Who We Are...................................................5
Who Should Consider Purchasing a Contract....................6
Risk and Reward Considerations...............................6
THE CONTRACTS IN DETAIL.........................................7
Purchase Payments............................................7
Sales Charge Deducted from Purchase Payments.................8
Mortality and Expense Risk Charges...........................8
Other Charges................................................9
The Accumulation Period......................................9
Exchange Privilege..........................................11
The Annuity Period..........................................11
Ten-Day Revocation Right....................................13
TAX INFORMATION................................................14
General.....................................................14
Non-Qualified Contracts.....................................14
Qualified Plan Contracts....................................15
Withholding.................................................16
Our Tax Status..............................................16
PERFORMANCE INFORMATION........................................16
OTHER INFORMATION..............................................17
Voting Rights...............................................17
Reservation of Rights.......................................18
Distribution of Contracts...................................18
Financial Statements...........................................18
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...19
APPENDIX I.....................................................19
- -----------------------------
*A Table of Contents for the Special Bond Fund prospectus can be found at page 2
of that prospectus.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATED VALUE - The value of all the Accumulation Units credited to the
Contract.
ACCUMULATION PERIOD - The period between the date of issue of a Contract and
the Annuity Commencement Date.
ACCUMULATION UNIT - A unit that measures the value of a Contractowner's
interest in Separate Account A before the Annuity Commencement Date.
ADDITIONAL PAYMENT - A Purchase Payment made to First Investors Life after
issuance of a Contract.
ANNUITANT - The person who is designated to receive annuity payments or who
is actually receiving annuity payments.
ANNUITY COMMENCEMENT DATE - The date on which we begin making annuity
payments.
ANNUITY UNIT - A unit that determines the amount of each annuity payment
after the first annuity payment.
BENEFICIARY - The person who is designated to receive any benefits under a
Contract upon the death of the Annuitant or the Contractowner.
CONTRACT - An individual variable annuity contract offered by this
Prospectus.
CONTRACTOWNER - The person or entity with legal rights of ownership of the
Contract.
FIXED ANNUITY - An annuity with annuity payments that remain fixed as to
dollar amount throughout the payment period.
GENERAL ACCOUNT - All assets of First Investors Life other than those
allocated to Separate Account A and other segregated investment accounts of
First Investors Life.
JOINT ANNUITANT - The designated second person under a joint and survivor
life annuity.
PURCHASE PAYMENT - A payment made to First Investors Life to purchase a
Contract.
SEPARATE ACCOUNT A - The segregated investment account entitled "First
Investors Life Variable Annuity Fund A," established by First Investors Life
pursuant to applicable law and registered as a unit investment trust under the
Investment Company Act of 1940 ("1940 Act").
VALUATION DATE - Any date on which the New York Stock Exchange ("NYSE") is
open for regular trading. Each Valuation Date ends as of the close of regular
trading on the NYSE (normally 4:00 P.M., Eastern Time). The NYSE currently
observes the following holidays: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
VALUATION PERIOD - The period beginning at the end of any Valuation Date and
extending to the end of the next Valuation Date.
VARIABLE ANNUITY - An annuity with annuity payments that vary in dollar
amount, in accordance with the net investment experience of Separate Account A,
throughout the payment period.
WE (AND OUR) - First Investors Life.
YOU (AND YOUR) - The prospective Contractowner.
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FEE TABLE
The tables below are provided to help you understand the various charges and
expenses you will directly or indirectly bear in purchasing a Contract. They
reflect the charges and expenses of Separate Account A, as well as the Fund in
which Separate Account A invests. The tables reflect expenses expected to be
incurred in 2000.
SEPARATE ACCOUNT A EXPENSES
CONTRACTOWNER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of Purchase Payments)
7.00%
SEPARATE ACCOUNT A ANNUAL EXPENSES
- ----------------------------------
(as a percentage of average account value)
Mortality and Expense Risk Charges.................................. 0.75%
Other Charges....................................................... 0.00%
-----
Total Separate Account A Annual Expenses............................ 0.75%
FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF FUND AVERAGE NET ASSETS)
Management Fees.................................................. 0.75%
Other Expenses................................................... 0.12%
-----
Total Fund Operating Expenses ................................... 0.87%*
* The Fund has an expense offset arrangement that may reduce the Fund's
custodian fee based on the amount of cash maintained by the Fund with its
custodian. We do not reflect these fee reductions under Total Fund Operating
Expenses.
For more complete descriptions of the various charges and expenses shown in
the Fee Table, please refer to "THE CONTRACTS IN DETAIL -- Sales Charge,
Mortality and Expense Risk Charges, and Other Charges." We may deduct an
administrative charge of $7.50 annually from the Accumulated Value of Contracts
that have an Accumulated Value of less than $1,500 (see "Administrative
Charge"). In addition, Premium taxes may be applicable (see "Other Charges").
EXAMPLE
If you surrender your Contract
(or if you annuitize) at the end
of the period shown, you would pay the
following expenses on a $1,000 investment,
assuming 5% annual return on assets: 1 year 3 years 5 years 10 years
------ ------- ------- --------
$85 $118 $152 $249
YOU SHOULD NOT CONSIDER THE EXPENSES IN THE EXAMPLE A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES IN FUTURE YEARS MAY BE GREATER OR LESS
THAN THOSE SHOWN.
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CONDENSED FINANCIAL INFORMATION
ACCUMULATION UNIT VALUES
This table shows the Accumulation Unit Values and the number of Accumulation
Units outstanding for Separate Account A for the last ten fiscal years.
Accumulation Number of
At Unit Value($) Accumulation Units
---------------- ------------- ------------------
December 31, 1989 2.08689 40,781,044.9
December 31, 1990 1.88053 28,318,605.0
December 31, 1991 2.53391 19,910,946.0
December 31, 1992 2.88323 15,144,947.0
December 31, 1993 3.38150 12,724,736.0
December 31, 1994 3.31907 11,057,783.2
December 31, 1995 3.97815 9,552,100.7
December 31, 1996 4.46562 8,254,269.6
December 31, 1997 4.91727 7,334,261.6
December 31, 1998 4.94340 6,517,336.4
December 31, 1999 5.21266 5,785,665.3
OVERVIEW
This overview highlights some basic information about the Variable Annuity
Contract offered by First Investors Life Insurance Company ("First Investors
Life", "We", "Us", or "Our") in this prospectus. We sell Separate Account A
Contracts with a front-end sales charge. The Contracts invest in Separate
Account A. You will find more information about the Contracts beginning on page
7 of this Prospectus.
HOW THE CONTRACTS WORK
Like all variable annuity contracts, the Contract has two phases: an
accumulation period and an annuity income period. During the accumulation
period, earnings on your investment accumulate on a tax-deferred basis. The
annuity income period begins when you start to receive annuity income payments.
You can select one of several annuity income payment options. The amount of your
annuity payments will vary with the performance of Separate Account A as well as
the type of annuity option you choose.
During the accumulation period, the amount of money you accumulate in your
Contract depends on the performance of Separate Account A. You can gain or lose
money if you invest in the Contract. Separate Account A invests at net asset
value in shares of the Special Bond Fund.
The Contract provides a guaranteed death benefit that we pay to a designated
beneficiary when the Annuitant dies. The Separate Account A Contract guarantees
that the beneficiary will receive the greater of (i) the total Purchase Payments
less any withdrawals or (ii) the Accumulated Value of the Contract at the time
of death.
WHO WE ARE
First Investors Life Insurance Company
--------------------------------------
First Investors Life, 95 Wall Street, New York, New York 10005 is a stock
life insurance company incorporated in New York in 1962. We write life
insurance, annuities and accident and health insurance. First Investors
Consolidated Corporation ("FICC"), a holding company, owns all of the voting
common stock of First Investors Management Company, Inc. and all of the
outstanding stock of First Investors Life, First Investors Corporation ("FIC" or
"Underwriter") and Administrative Data Management Corp., the transfer agent for
the Life Series Fund. Mr. Glenn O. Head, Chairman of FICC, controls FICC and,
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therefore, controls the First Investors Management Company, Inc. and First
Investors Life.
Separate Account A
------------------
First Investors Life Variable Annuity Fund A ("Separate Account A") was
established on September, 1979 under New York Insurance Law.
Separate Account A is a registered unit investment trust with the Securities
and Exchange Commission ("SEC"). This registration does not involve SEC
supervision or the management or investment practices or policies of Separate
Account A.
We segregate the assets of Separate Account A from our other assets. We
cannot charge liabilities arising out of our other businesses against that
portion of Separate Account A's assets that is approximately equal to Contract
reserves and liabilities. We credit to, or charge against, Separate Account A
realized and unrealized income, gains and losses without regard to our other
income, gains and losses. The obligations under the Contracts are our
obligations.
Separate Account A invests, at net asset value, in shares of the Special Bond
Fund. Separate Account A reinvests all distributions received from the Fund in
additional shares of the Fund at net asset value. Separate Account A may make
deductions for charges and expenses by redeeming the number of equivalent Fund
shares at net asset value. We value Fund shares that we hold in Separate Account
A at their net asset values.
The Special Bond Fund
---------------------
The Special Bond Fund is a diversified open-end management investment company
(commonly known as a "mutual fund") registered with the SEC under the 1940 Act.
Registration of the Fund does not involve supervision by the SEC of the
management or investment practices or policies of the Fund. The Fund offers its
shares only through the purchase of our variable annuity contracts. It does not
offer its shares directly to the general public. The Fund reserves the right to
offer its shares to other separate accounts of ours or directly to us.
First Investors Management Company, Inc. (the "Adviser"), an affiliate of
First Investors Life, is the investment adviser of the Fund. The Adviser
supervises and manages the investments and operations of the Fund. The Adviser
is a New York corporation located at 95 Wall Street, New York, NY 10005.
WHO SHOULD CONSIDER PURCHASING A CONTRACT
The Contract allows you to accumulate money on a tax-deferred basis for
retirement or other long-term goals and thereafter to annuitize the accumulated
value of your Contract if you wish. Generally, the higher your tax bracket, the
more you will benefit from the tax-deferred feature of the Contract. You should
not purchase a Contract if you are looking for a short-term investment or if you
cannot take the risk of receiving less money than you paid for the Contract. You
may want to consult a tax advisor or other professional before you purchase a
Contract.
RISK AND REWARD CONSIDERATIONS
The Contracts offer you the opportunity to benefit on a tax deferred basis
from the performance of an underlying investment portfolio or Subaccount.
However, there are several important factors that you should consider before
making a decision to purchase a Contract:
1. You bear all of the investment risk of the underlying investment
portfolio. You should therefore carefully review the prospectus for the Special
Bond Fund. It explains the Fund's investment objectives, primary investment
strategies, and primary risks.
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2. The Contracts are generally not appropriate choices for the investment
of money that you will need in the short term. You should therefore only invest
money that you will not need in the short term.
3. If you are considering purchasing a Contract inside of an individual
retirement account or qualified retirement plan, you should know that the same
tax benefits are available whether you invest in mutual funds or variable
annuities and that variable annuities generally have higher cost structures than
those of mutual funds. The variable annuity's death benefit should be an
important factor if you select a variable annuity.
THE CONTRACTS IN DETAIL
The Contract is a variable annuity contract which provides you with the
opportunity to accumulate capital on a tax deferred basis by investing in
Separate Account A and thereafter annuitizing your accumulated cash value if you
wish. We offer the Contract in states where we have the authority to issue the
Contract. We designed the Contract to provide lifetime annuity payments to
Annuitants according to several annuity options. The amount of annuity payments
will vary with the investment performance of Separate Account A as well as the
type of annuity you select. The Contract obligates us to make payments for the
lifetime of the Annuitant in accordance with the annuity rates in the Contract,
regardless of actual mortality experience (see "The Annuity Period"). On the
death of the Annuitant before the Annuity Commencement Date, we pay a death
benefit to the Beneficiary whom you designate. For a discussion of the amount
and manner of payment of this benefit, see "Death of Annuitant During the
Accumulation Period."
You may surrender all or a portion of the Accumulated Value during the
Accumulation Period. For a discussion on withdrawals during the Accumulation
Period, see "Surrender and Termination (Redemption) During the Accumulation
Period." For Federal income tax consequences of a withdrawal, see "Tax
Information." The exercise of any Contract right, including the right to make a
withdrawal during the Accumulation Period, is subject to the terms and
conditions of any qualified trust or plan under which the Contracts are
purchased. This Prospectus contains no information concerning such trust or
plan.
We reserve the right to amend the Contracts to meet the requirements of the
1940 Act or other applicable Federal or state laws or regulations.
Contractowners with any inquiries concerning their account should write to us
at our Home Office, 95 Wall Street, New York, New York 10005.
PURCHASE PAYMENTS
Your initial Purchase Payment must be at least $2,000. You may make
Additional Payments under the Contract of at least $200 at any time after
Contract issuance.
We credit your initial Purchase Payment (less any charges) to a your Account
on the Valuation Date that we receive it, provided that we have received a
properly completed application. We credit an Additional Payment to your Account
on the Valuation Date that we receive it. If we receive an incomplete
application from you, you must provide us with all required information not
later than five business days following the receipt of such application.
Otherwise, we will return the Purchase Payment to you at the end of such
five-day period.
Your Purchase Payments buy Accumulation Units of Separate Account A and not
shares of the Fund in which Separate Account A invests. We allocate Purchase
Payments to Separate Account A based on the next computed value of an
Accumulation Unit following receipt at our Home Office or other designated
office. We value Accumulation Units at the end of each Valuation Date (i.e., as
of the close of regular trading on the NYSE, normally 4:00 P.M., Eastern Time).
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SALES CHARGE DEDUCTED FROM PURCHASE PAYMENTS
We intend the sales charge to cover expenses relating to the sale of the
Contracts, including commissions paid to persons distributing the Contracts.
Discounts are available on larger purchases. Moreover, when you make an
Additional Payment after the issuance of the Contract, you are entitled to a
credit for all prior payments in computing the sales charge percentage. In other
words, you pay the sales charge percentage that reflects: (a) the total amount
of all Purchase Payments previously made plus (b) the amount of the Additional
Payment being made.
<TABLE>
DEDUCTION TABLE
<CAPTION>
Sales Charge as % of Concession to
Purchase Net Amount Dealers as % of
Amount of Purchase Payment(s) Payment(s)* Invested Purchase Payment(s)
<S> <C> <C> <C>
Less than $25,000...................... 7.00% 7.53% 5.75%
$25,000 but under $50,000.............. 6.25 6.67 5.17
$50,000 but under $100,000............. 4.75 4.99 3.93
$100,000 but under $250,000............ 3.50 3.63 2.90
$250,000 but under $500,000............ 2.50 2.56 2.19
$500,000 but under $1,000,000.......... 2.00 2.04 1.67
$1,000,000 or over..................... 1.50 1.52 1.24
</TABLE>
* Assumes that we have deducted no Premium taxes.
We do not impose a sales charge for Contracts sold to (a) officers and
full-time employees of First Investors Life or its affiliates who have been
employed for at least one year, or (b) our agents who have been under contract
for at least one year.
MORTALITY AND EXPENSE RISK CHARGES
The mortality risk that we assume arises from our obligation to continue to
make Fixed or Variable Annuity payments, determined in accordance with the other
provisions of the Contracts, to each Annuitant regardless of (a) how long that
person lives and (b) how long all payees as a group live. This assures an
Annuitant that neither the Annuitant's own longevity nor an improvement in life
expectancy generally will have any adverse effect on the variable annuity
payments the Annuitant will receive under the Contract. Moreover, these factors
may reduce the risk that the Annuitant will outlive the funds that the Annuitant
has accumulated for retirement. We also assume mortality risk because of our
guarantee of a minimum payment in the event of the death prior to the Annuity
Commencement Date of the Annuitant prior to the Annuity Commencement Date. In
addition, we assume the risk that the charges for administrative expenses may
not be adequate to cover such expenses. We will not increase the amount we
charge for administrative expenses. In consideration for our assumption of these
mortality and expense risks, we deduct an amount equal, on an annual basis, to
0.75% of the daily Accumulation Unit value of Separate Account A. Of this
charge, approximately 0.60% is for assuming the mortality risk, and 0.15% is for
assuming the expense risk.
We guarantee that we will not increase the mortality and expense risk charges
during the term of any Contract. If the charges are insufficient to cover the
actual cost of the mortality and expense risks, the loss will fall on us.
Conversely, if the deductions prove more than sufficient, the excess will be a
profit to us. We can use any profits resulting to us from over-estimates of the
actual costs of the mortality and expense risks for any business purpose,
including the payment of expenses of distributing the Contracts. These profits
will not remain in Separate Account A.
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OTHER CHARGES
Administrative Charge
---------------------
We may deduct an administrative charge of $7.50 annually from the Accumulated
Value of Contracts that have an Accumulated Value of less than $1,500 due to
partial surrenders. These charges are to compensate us for expenses involved in
administering small accounts. If the actual expenses exceed charges, we will
bear the loss.
Premium Tax Charge
------------------
Some states assess Premium taxes at the time you:
o make Purchase Payments,
o surrender, or
o begin receiving annuity payments.
We currently advance any Premium taxes due at the time you make Purchase
Payments and then deduct Premium taxes from the Accumulated Value of the
Contract at the time of surrender, on death of the Annuitant or when annuity
payments begin. However, we reserve the right to deduct Premium taxes when
incurred. See "Appendix I" for Premium tax table.
Expenses
--------
Total Separate Account A expenses for the fiscal year ended December 31, 1999
amounted to $233,880 or 0.75% of average net assets for Separate Account A. The
Special Bond Fund has expenses that it pays out of its assets.
THE ACCUMULATION PERIOD
Crediting Accumulation Units
----------------------------
During the Accumulation Period, we credit Purchase Payments on the Contracts
to the Contractowner's Individual Account in the form of Accumulation Units. We
determine the number of Accumulation Units that we credit to a Contractowner for
Separate Account A by dividing (a) the Purchase Payment (less any charges) by
(b) the value of an Accumulation Unit for Separate Account A. We make this
valuation after we receive the Purchase Payment at our Home Office or other
designated office.
The value of the Contractowner's Individual Account varies with the value of
the assets of Separate Account A. The investment performance of Separate Account
A and the expenses and deduction of certain charges affect the value of an
Accumulation Unit. There is no assurance that the value of your Individual
Account will equal or exceed Purchase Payments. We determine your Individual
Account for a Valuation Period by multiplying (a) the total number of
Accumulation Units we credit to Separate Account A by (b) the value of an
Accumulation Unit for Separate Account A for the Valuation Period.
Death of Annuitant During the Accumulation Period
-------------------------------------------------
If the Annuitant dies before the Annuity Commencement Date, we pay a Death
Benefit to the Beneficiary you have designated. We make this payment when we
receive (a) a death certificate or similar proof of the death of the Annuitant
("Due Proof of Death") and (b) a First Investors Life Claimant's Statement that
includes notification of the Beneficiary's election to receive payment in either
a single sum settlement or an Annuity Option. We determine the value of the
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Death Benefit as of the next computed value of the Accumulation Units following
our receipt of written notification of death at our Home Office or other
designated office.
If you do not elect payment of the Death Benefit under one of the Annuity
Options before the Annuitant's death, the Beneficiary may elect to have the
Death Benefit (a) paid in a single sum, (b) applied to provide an annuity under
one of the Annuity Options or (c) as we otherwise permit. If the Beneficiary
elects a single sum settlement, we pay the amount of the Death Benefit within
seven days of receipt of Due Proof of Death and a Claimant's statement.
If the Beneficiary wants an Annuity Option, the Beneficiary will have up to
60 days commencing with the date of our receipt of Due Proof of Death to select
an Annuity Option. If the Beneficiary does not make a selection by the end of
the 60-day period, we pay a single sum settlement to the Beneficiary. If the
Beneficiary selects any Annuity Option, the Annuity Commencement Date is the
date specified in the election. That date may be no later than 60 days after
receipt by us of Due Proof of Death.
The amount of the Death Benefit payable upon the death of the Annuitant will
be the greater of (a) the total Purchase Payments less withdrawals or (b) the
Accumulated Value.
Death Benefit During Annuity Period
-----------------------------------
On receipt of Due Proof of Death of the Annuitant after annuity payments have
begun under an Annuity Option, we make any remaining payments under the Annuity
Option to the Beneficiary as provided by the Annuity Option.
Unless otherwise provided in the Beneficiary designation, if no Beneficiary
survives the Annuitant, the proceeds will be paid in one sum to the
Contractowner, if living; otherwise, to the Contractowner's estate.
Death of Contractowner During the Accumulation Period
-----------------------------------------------------
If the Contractowner dies before we have distributed the entire interest in
the Contract, we must distribute the value of the Contract to the Beneficiary as
provided below. Otherwise, the Contract will not qualify as an annuity under
Section 72 of the Internal Revenue Code of 1986, as amended (the "Code"). The
entire interest of the Contractowner is the Accumulated Value of the Contract.
If the death of the Contractowner occurs before the Annuity Commencement
Date, we distribute the entire interest in the Contract to the Beneficiary (a)
within five years, or (b) beginning within one year of death, over a period not
longer than the life or life expectancy of the Beneficiary. If the Contract is
payable to (or for the benefit of) the Contractowner's surviving spouse, we need
not make any distribution. The surviving spouse may continue the Contract as the
new Contractowner. If the Contractowner is also the Annuitant, the spouse has
the right to become the Annuitant under the Contract. Likewise, if the Annuitant
dies and the Contractowner is not a natural person, the Annuitant's surviving
spouse has the right to become the Contractowner and the Annuitant.
Surrender and Termination (Redemption) During the Accumulation Period
---------------------------------------------------------------------
You may elect, at any time before the earlier of the Annuity Commencement
Date or the death of the Annuitant, to surrender the Contract for all or any
part of your Individual Account. In the event of the termination of the Contract
and on due surrender of the Contract at our Home Office or other designated
office, we pay you the Accumulated Value of the Contract.
We deduct any amount you request as a partial surrender from Separate Account
A. This results in a corresponding reduction in the number of Accumulation Units
credited to you in Separate Account A. For any total or partial surrender, we
base the deduction on the next computed value of an Accumulation Unit following
our receipt of a written request at our Home Office or other designated office.
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We may defer any such payment for a period of not more than seven days. However,
we may postpone such payment during any period when:
o trading on the NYSE is restricted as the SEC determines or the NYSE is
closed for other than weekends and holidays;
o the SEC has by order permitted such suspension; or
o any emergency, as defined by SEC rules, exists when the sale of
portfolio securities or calculation of securities is not reasonably
practicable.
For information as to Federal tax consequences of surrenders, see "Tax
Information." For information as to Premium tax consequences, see "Other
Charges."
EXCHANGE PRIVILEGE
At any time prior to the Annuity Commencement Date, you may exchange Separate
Account A Contracts for First Investors Life Variable Annuity Fund C ("Separate
Account C") Contracts, at the next computed values of the respective
Accumulation Units of the two Separate Accounts. Although there is no charge for
this exchange, Contractowners who exchange from Separate Account A to Separate
Account C will be required to execute a change of contract form. This form
states that we deduct a daily charge equal to an annual rate of 1.00% of the
daily Accumulation Unit value of Separate Account C as a charge for mortality
and expense risks. Contractowners are advised to read the Prospectus of Separate
Account C, which may be obtained free of charge from First Investors Life,
before exchanging Separate Account A Contracts for Separate Account C Contracts.
We may modify or terminate this exchange privilege at any time.
THE ANNUITY PERIOD
Commencement Date
-----------------
Annuity payments begin on the Annuity Commencement Date you select when you
buy a Contract. You may elect in writing to advance or defer the Annuity
Commencement Date, not later than 30 days before the Annuity Commencement Date.
You may defer the Annuity Commencement Date until the first day of the calendar
month after the Annuitant's 85th birthday or, if state law permits, 90th
birthday. If you elect no other date, annuity payments will commence on the
Contract anniversary date after the Annuitant's 85th birthday, or, if state law
permits, 90th birthday.
If the net Accumulated Value on the Annuity Commencement Date is less than
$2,000, we may pay such value in one sum in lieu of annuity payments. If the net
Accumulated Value is $2,000 or more, but the variable annuity payments are less
than $20, we may change the frequency of annuity payments to intervals that will
result in payments of at least $20.
Assumed Investment Rate
-----------------------
We build a 3.5% assumed investment rate into the Contract's Annuity Tables
which are used to determine the amount of the monthly annuity payments. A higher
rate would mean a higher initial payment but more slowly rising and more rapidly
falling subsequent Variable Annuity payments. A lower rate would have the
opposite effect. If the actual net investment rate of Separate Account A is at
the annual rate of 3.5%, the Variable Annuity payments will be level. A Fixed
Annuity features annuity payments that remain fixed as to dollar amount
throughout the payment period and an assumed interest rate of 3.5% per year
built into the Annuity Tables in the Contract.
Annuity Options
---------------
You may elect to receive payments under any one of the Annuity Options in the
Contract. You may make this election at any time up to 30 days before the
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Annuity Commencement Date on written notice to us at our Home Office or other
designated office. If no election is in effect on the Annuity Commencement Date,
we will make annuity payments on a variable basis only under Annuity Option 3
below, Life Annuity with 120 Monthly Payments Guaranteed. This is the Basic
Annuity.
The material factors that determine the level of your annuity benefits are:
o the value of your Individual Account described in this Prospectus
before the Annuity Commencement Date;
o the Annuity Option you select;
o the frequency and duration of annuity payments;
o the sex and adjusted age of the Annuitant and any Joint Annuitant at
the Annuity Commencement Date; and,
o in the case of a variable annuity, the investment performance of
Separate Account A.
On the Annuity Commencement Date, we apply the Accumulated Value, reduced by
any applicable Premium taxes not previously deducted, to provide (a) the Basic
Annuity or (b) if you have elected an Annuity Option, one of the Annuity Options
we describe below.
The Contracts provide for the six Annuity Options described below:
Option 1 - LIFE ANNUITY. An annuity payable monthly during the lifetime of
the Annuitant, ceasing with the last payment due before the death of the
Annuitant. If you elect this Option, annuity payments terminate automatically
and immediately on the death of the Annuitant without regard to the number or
total amount of payments received.
Option 2a - JOINT AND SURVIVOR LIFE ANNUITY. An annuity payable monthly
during the joint lifetime of the Annuitant and the Joint Annuitant and
continuing thereafter during the lifetime of the survivor, ceasing with the last
payment due before the death of the survivor.
Option 2b - JOINT AND TWO-THIRDS TO SURVIVOR LIFE ANNUITY. An annuity payable
monthly during the joint lifetime of the Annuitant and the Joint Annuitant and
continuing thereafter during the lifetime of the survivor at an amount equal to
two-thirds of the joint annuity payment, ceasing with the last payment due
before the death of the survivor.
Option 2c - JOINT AND ONE-HALF TO SURVIVOR LIFE ANNUITY. An annuity payable
monthly during the joint lifetime of the Annuitant and the Joint Annuitant and
continuing thereafter during the lifetime of the survivor at an amount equal to
one-half of the joint annuity payment, ceasing with the last payment due before
the death of the survivor.
Under Annuity Options 2a, 2b and 2c, annuity payments terminate automatically
and immediately on the deaths of both the Annuitant and the Joint Annuitant
without regard to the number or total amount of payments received.
Option 3 - LIFE ANNUITY WITH 60, 120 OR 240 MONTHLY PAYMENTS GUARANTEED. An
annuity payable monthly during the lifetime of the Annuitant, with the guarantee
that if, at his or her death, payments have been made for less than 60, 120 or
240 monthly periods, as elected, we will continue to pay to the Beneficiary any
guaranteed payments during the remainder of the selected period and, if the
Beneficiary dies after the Annuitant, we will pay the Beneficiary's estate the
present value of the remainder of the guaranteed payments. The present value of
the remaining payments is the discounted (or reduced) amount which would produce
the total of the remaining payments assuming that the discounted amount grew at
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the effective annual interest rate assumed in the Annuity Tables of the
Contract. Pursuant to the 1940 Act, the Beneficiary may also, at any time he or
she is receiving guaranteed payments, elect to have us pay him or her the
present value of the remaining guaranteed payments in a lump sum.
Option 4 - UNIT REFUND LIFE ANNUITY. An annuity payable monthly during the
lifetime of the Annuitant, terminating with the last payment due before the
death of the Annuitant. We make an additional annuity payment to the Beneficiary
equal to the following. We take the Annuity Unit value of Separate Account A as
of the date we receive notice of death in writing at our Home Office or other
designated office. We multiply that value by the excess, if any, of (a) over
(b). For this purpose, (a) is (i) the net Accumulated Value we allocate to
Separate Account A and apply under the option at the Annuity Commencement Date,
divided by (ii) the corresponding Annuity Unit Value as of the Annuity
Commencement Date, and (b) is the product of (i) the number of Annuity Units
applicable under Separate Account A represented by each annuity payment and (ii)
the number of annuity payments made. (For an illustration of this calculation,
see Appendix II, Example A, in the Statement of Additional Information.)
Annuity Election
----------------
You may elect to have the net Accumulated Value applied at the Annuity
Commencement Date to provide a Fixed Annuity, a Variable Annuity, or any
combination thereof. After the Annuity Commencement Date, we allow no transfers
or redemptions where we are making payments based on life contingencies. You
must make these elections in writing to us at our Home Office or other
designated office at least 30 days before the Annuity Commencement Date. In the
absence of an election, we make annuity payments on a variable basis only under
Annuity Option 3 above. Option 3 is the Basic Annuity, a Life Annuity with 120
Monthly Payments Guaranteed.
Annuity Commencement Date Exchange Privilege
--------------------------------------------
If you fully surrender this Contract during the one-year period preceding its
Annuity Commencement Date, you can use the proceeds to purchase Class A shares
of First Investors mutual funds without incurring a sales charge.
Death of Contractowner During the Annuity Period
------------------------------------------------
If the death of the Contractowner occurs on or after the Annuity Commencement
Date, we distribute the entire interest in the Contract at least as rapidly as
under the Annuity Option in effect on the date of death.
TEN-DAY REVOCATION RIGHT
You may elect to cancel the Contract, (a) within ten days from the date the
Contract is delivered to you or (b) longer as applicable state law requires. We
will cancel the Contract after we receive from you (a) the Contract and (b) a
written request for cancellation, at our Home Office or other designated office.
We will pay you an amount equal to the sum of (a) the difference between the
Purchase Payments made under the Contract and the amount allocated to Separate
Account A under the Contract and (b) the Accumulated Value of the Contract on
the date of surrender. The amount we refund to you may be more or less than your
initial Purchase Payment depending on the investment results of Separate Account
A. Some states require a full refund of premiums. In those states, if the
Contractowner elects to cancel the Contract under the ten-day revocation right,
the Contractowner will receive a full refund of the Purchase Payment.
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<PAGE>
TAX INFORMATION
GENERAL
We base this discussion on our understanding of the federal income tax law
and interpretations in effect on the date of this Prospectus. The discussion
assumes that the contractowner is a natural person who is a U.S. citizen and
U.S. resident. The tax effect on corporate taxpayers, non-U.S. citizens, and
non-U.S. residents may be different. That law and interpretations could
change, possibly retroactively. The discussion is general in nature. We do
not intend it as tax advice, for which you should consult a qualified tax
adviser.
We discuss only federal income taxes and not state or other taxes.
Taxation of the Contracts will depend, in part, on whether the Contract is
purchased outside of a qualified retirement plan or an individual retirement
account ("Non-Qualified Contracts") or as part of an individual retirement
account or qualified plan ("Qualified Contracts").
NON-QUALIFIED CONTRACTS
Purchase Payments
-----------------
Your Purchase Payments under a Non-Qualified Contract are not deductible from
your gross income for tax purposes.
Increases in Accumulated Value Before Distribution from Contract
----------------------------------------------------------------
Generally, there is no tax on increases in your Contract's Accumulated Value
until there is a distribution from a Non-Qualified Contract. A distribution
could include a surrender or an annuity payment. However, the Contractowner is
subject to tax on such increases, even before a distribution, in the following
two situations:
o The Contractowner is not a natural person, subject to exceptions.
o The investments of Separate Account A do not meet certain
diversification or "investor controls" tests, discussed below.
Annuity Payments
----------------
Once annuity payments begin, a portion of each payment is taxable as ordinary
income. The remaining portion is a nontaxable recovery of your investment in the
contract. Generally, your investment in the Contract equals the Purchase
Payments you made, less any amounts you previously withdrew that were not
taxable.
For fixed annuity payments, the tax-free portion of each payment is
determined by:
o dividing your investment in the Contract by the total amount you expect to
receive out of the Contract and
o multiplying the result by the amount of the payment.
For Variable Annuity payments, the tax-free portion of each payment is (a)
your investment in the Contract divided by (b) the number of expected payments.
The remaining portion of each payment, and all of the payments you receive
after you recover your investment in the Contract, are fully taxable. If
payments under a life annuity stop because the Annuitant dies, there is an
income tax deduction for any unrecovered investment in the contract.
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Distributions Other than Annuity Payments
- -----------------------------------------
Before annuity payments begin, the Code taxes distributions from
Non-Qualified Contracts as follows:
o a partial or total surrender is taxed in the year of receipt to the
extent that the Contract's Accumulated Value exceeds the investment in
the Contract;
o a loan under, or an assignment or pledge of, a Contract is taxed in
the same manner as a partial or total surrender;
o a penalty equal to 10% of the taxable distribution applies to
distributions before the taxpayer's age 59-1/2, subject to certain
exceptions; and
o the Code treats all Contracts that we issue to you in the same
calendar year as a single Contract. Consequently, you should consult
your tax advisor before buying more than one Contract in any calendar
year.
Diversification and Control Tests
---------------------------------
Separate Account A must meet the Code's investment diversification test. It
meets the test if:
o the Fund in which Separate Account A invests is diversified according
to certain limits;
o the Fund in which Separate Account A invests is a regulated investment
company under the Code;
o all shares of the Fund are owned only by (a) Separate Account A or
similar accounts of First Investors Life or other insurance companies,
(b) a life insurance company general account, or (c) the Adviser in
starting or managing the Fund (in the case of (b) and (c) of this
paragraph, there must be no intention to sell shares of the Fund to
the general public); (d) the trustee of a qualified pension or
retirement plan; and
o access to the Fund is available only through the purchase of
Contracts, or other Variable Annuity or life insurance products of
First Investors Life or other insurance companies.
If Separate Account A failed the diversification test, you would be taxed on
increases in the value of any Contract you own that is supported by Separate
Account A. The tax would apply from the first quarter of the failure, until we
corrected the failure in conformity with a Treasury Department procedure.
The Contracts must also meet an "investor control" test, which the Treasury
Department has said it may address in guidelines through regulations or rulings.
This test could specify that your control over allocation of values among
different investments may cause you to be treated as the owner of Separate
Account A assets, as applicable, for tax purposes. We reserve the right to amend
the Contracts in any way necessary to avoid this result. As of the date of this
prospectus, the Treasury Department has issued no guidelines on the subject.
However, the Department has informally indicated that guidelines could limit the
number of underlying funds or the frequency of transfers among those funds. The
guidelines may apply only prospectively, although retroactive effect is possible
if the guidelines do not embody a new position. Failure of the "control test"
would result in current taxation to you of increases in your Contract value.
QUALIFIED PLAN CONTRACTS
Taxation of a Contract depends, in part, on the provisions of the
applicable plan where the Contract is issued to
o a qualified individual retirement account;
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<PAGE>
o a qualified corporate employee pension and profit-sharing plan; or
o a retirement or deferred compensation plan that does not meet the
requirements applicable to a qualified plan.
Some of tax rules applicable to such Contracts are similar to tax rules
applicable to Non-Qualified Contracts, including: (a) deferral of the taxation
until you receive a distribution, (b) taxation of a part of each distribution or
annuity payment, and (c) the 10% penalty on early distributions.
WITHHOLDING
The Code generally requires us to withhold income tax from any Contract
distribution, including a total or partial surrender or an annuity payment. The
amount of withholding depends, in part, on whether the payment is "periodic" or
"non-periodic."
For periodic payments (e.g., annuity payments), we withhold from the taxable
portion of each payment based on a payroll withholding schedule that assumes a
married recipient claiming three withholding exemptions. If you want us to
withhold on a different basis, you must file an appropriate withholding
certificate with us. For non-periodic payments (e.g., distributions such as
partial surrenders), we generally withhold 10% of the taxable portion of each
payment.
You may elect not to have the withholding rules apply. For periodic payments,
that election is effective for the calendar year for which you file it with us,
and for each subsequent year until you amend or modify it. For non-periodic
payments, an election is effective when you file it with us, but only for the
payment to which it is applicable. We have to notify your recipients of your
right to elect not to have taxes withheld.
The Code generally requires us to report all payments to the Internal Revenue
Service.
OUR TAX STATUS
The Code taxes us as a life insurance company. The Code taxes Separate
Account A as part of our overall operation. Currently, we do not charge Separate
Account A for an allocable portion of our federal income taxes. However, we do
reserve the right to impose such a charge if it becomes necessary in the future.
PERFORMANCE INFORMATION
From time to time, Separate Account A may advertise several types of
performance information, including "yield," "average annual total return" and
"total return." We base each of these figures on historical results and do not
intend them to indicate the future performance of Separate Account A.
The "total return" of Separate Account A is the total change in value of an
investment in Separate Account A over a period of time, expressed as a
percentage. "Average annual total return" is the rate of return that would
produce that change in value over the specified period, if compounded annually.
We will quote average annual total return for one, five and ten-year periods.
Average annual total return and total return figures include the deduction of
all expenses and fees, including the payment of the Mortality and Expense Risk
charges of 0.75% and the maximum sales charge of 7.00%.
The "yield" of Separate Account A refers to the income that an investment in
Separate Account A generates over a one-month or 30-day period expressed as a
percentage of the value of Separate Account A's Accumulation Units. Yield is an
annualized figure. We assume that Separate Account A generates the same level of
net income over a one-year period, which we compound on a semi-annual basis.
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<PAGE>
Neither the total return nor the yield figures reflect deductions for Premium
taxes, since most states do not impose those taxes.
For further information on performance calculations, see "Performance
Information" in the Statement of Additional Information.
OTHER INFORMATION
VOTING RIGHTS
Because the Special Bond Fund is not required to have annual shareholder
meetings, Contractowners generally will not have an occasion to vote on matters
that pertain to the Special Bond Fund. In certain circumstances, the Fund may be
required to hold a shareholders meeting or may choose to hold one voluntarily.
For example, the Fund may not change fundamental investment objectives or
investment policies without the approval of a majority vote of the Fund's
shareholders in accordance with the 1940 Act. Thus, if the Fund sought to change
fundamental investment objectives or investment policies, Contractowners would
have an opportunity to provide voting instructions for shares of the Fund held
by the Subaccount in which their Contract invests.
We would vote the shares of the Fund held in Separate Account A or directly,
at any Fund shareholders as follows:
o shares attributable to Contractowners for which we received
instructions, would be voted in accordance with the instructions;
o shares attributable to Contractowners for which we did not receive
instructions would be voted in the same proportion that we voted
shares held in Separate Account A for which we received instructions;
and
o shares not attributable to Contractowners would be voted in the same
proportion that we voted shares held in Separate Account A
attributable to Contractowners for which we received instructions.
We will vote Fund shares that we hold directly in the same proportion that we
vote shares held in Separate Account A that are attributable to Contractowners
and for which we receive instructions. However, we will vote our own shares as
we deem appropriate where there are no shares held in the subaccount. We will
present all the shares of the Fund that we held through Separate Account A or
directly at any Fund shareholders meeting for purposes of determining a quorum.
We will determine the number of Fund shares held in Separate Account A that
is attributable to each Contractowner as follows:
o before the Annuity Commencement Date, we divide Separate Account A's
Accumulated Value by the net assets value of one Fund share, and
o after the Annuity Commencement Date, we divide the reserve held in
Separate Account A for the variable annuity payment under the
Contracts by the net asset value of one Fund share. As this reserve
fluctuates, the number of votes fluctuates.
We will determine the number of votes that a Contractowner has the right to
cast as of the record date that the Fund establishes.
We will solicit instructions by written communication before the date of the
meeting at which votes will be cast. We will send meeting and other materials
relating to the Fund to each Contractowner having a voting interest in Separate
Account A.
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<PAGE>
The voting rights that we describe in this Prospectus are created under
applicable laws. If the laws eliminate the necessity to submit such matters for
approval by persons having voting rights in separate accounts of insurance
companies or restrict such voting rights, we reserve the right to proceed in
accordance with any such changed laws or regulations. Specifically, we reserve
the right to vote Fund shares in our own right, to the extent the law permits.
RESERVATION OF RIGHTS
We also reserve the right to make certain changes if we believe they would
(a) best serve the interests of the Contractowners and Annuitants or (b) be
appropriate in carrying out the purposes of the Contract. We will make a change
only as the law permits. We will obtain, when required, the necessary
Contractowner or regulatory approval for any change and provide, when required,
notification to Contractowners before making a change. For example, we may:
o operate Separate Account A in any form permitted under the 1940 Act or
in any other form permitted by law,
o add, delete, or substitute for the Fund shares held in Separate
Account A, the shares of any investment company or series thereof, or
any investment permitted by law, or
o amend the Contracts if required to comply with the Internal Revenue
Code or any other applicable federal or state law.
DISTRIBUTION OF CONTRACTS
We sell the Contracts solely through individuals who, in addition to being
licensed insurance agents of First Investors Life, are registered
representatives of FIC which is an affiliate of First Investors Life. FIC is a
registered broker-dealer under the Securities Exchange Act of 1934, and a member
of the National Association of Securities Dealers. FIC's executive offices are
located at 95 Wall Street, New York, NY 10005. First Investors Life has reserved
the right to sell the Contracts directly.
FINANCIAL STATEMENTS
The Statement of Additional Information, dated April 28, 2000, includes:
o the financial statements for First Investors Life and the accompanying
Report of Independent Certified Public Accountants; and
o and the financial statements for Separate Account A and the
accompanying Report of Independent Certified Public Accountants.
You can get the Statement of Additional Information at no charge on request
to First Investors Life at the address or telephone number on the cover page of
this Prospectus.
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<PAGE>
TABLE OF CONTENTS
OF THE STATEMENT OF ADDITIONAL
INFORMATION
Item Page
---- ----
General Description.............................................2
Services........................................................2
Annuity Payments................................................3
Other Information...............................................4
Performance Information.........................................5
Relevance of Financial Statements...............................7
Appendices......................................................8
Financial Statements...........................................13
APPENDIX I
STATE AND LOCAL TAXES*
Alabama.....................-- Missouri......................--
Alaska......................-- Nebraska......................--
Arizona.....................-- Nevada.........................3.5%
Arkansas....................-- New Jersey....................--
California..................2.35% New Mexico....................--
Colorado...................-- New York .....................--
Connecticut................-- North Carolina ...............--
Delaware...................-- Ohio..........................--
District of Columbia........2.25% Oklahoma......................--
Florida.....................1.00% Oregon........................--
Georgia....................-- Pennsylvania..................--
Illinois...................-- Rhode Island..................--
Indiana....................-- South Carolina................--
Iowa........................2.00% Tennessee.....................--
Kentucky....................2.00% Texas.........................--
Louisiana..................-- Utah..........................--
Maryland...................-- Virginia......................--
Massachusetts..............-- Washington....................--
Michigan...................-- West Virginia.................1.00%
Minnesota..................-- Wisconsin.....................--
Mississippi.................-- Wyoming.......................1.00%
Note: State legislation could change the rates above. State insurance
regulation could change the applicability of the rates above.
* Includes local annuity Premium taxation.
19
<PAGE>
[GRAPHIC OMITTED] FIRST INVESTORS
SPECIAL BOND FUND
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS APRIL 28, 2000.
<PAGE>
Contents
INTRODUCTION..................................................................3
FUND DESCRIPTION...............................................................4
FUND MANAGEMENT................................................................7
BUYING AND SELLING SHARES......................................................7
O How and when does the Fund price its shares?...............................7
O How do I buy and sell shares?..............................................8
ACCOUNT POLICIES...............................................................8
O What about dividends and capital gain distributions?.......................8
O What about taxes?..........................................................8
FINANCIAL HIGHLIGHTS...........................................................9
2
<PAGE>
INTRODUCTION
This prospectus describes the First Investors Fund that is used solely as the
underlying investment option for variable annuity contracts offered by First
Investors Life Insurance Company ("FIL"). This means that you cannot purchase
shares of the Fund directly, but only through such a contract as offered by FIL.
The Fund description in this prospectus has an "Overview" which provides a brief
explanation of the Fund's objectives, its primary strategies and primary risks,
and how it has performed. The Fund description also contains a "Fund in Detail"
section with more information on strategies and risks of the Fund.
3
<PAGE>
FUND DESCRIPTION
SPECIAL BOND FUND
OVERVIEW
OBJECTIVES: The Fund primarily seeks high current income without undue risk
to principal and secondarily seeks growth of capital.
PRIMARY The Fund primarily invests in a diversified portfolio of
INVESTMENT high-yield, below-investment grade corporate bonds (commonly
STRATEGIES: known as "junk bonds"). These bonds provide a higher level of
income than investment grade bonds because they have a higher
risk of default. The Fund seeks to reduce the risk of a default
by selecting bonds through careful credit research and analysis.
The Fund seeks to reduce the impact of a potential default by
diversifying its investments among bonds of many different
companies and industries. While the Fund invests primarily in
domestic companies, it also invests in securities of issuers
domiciled in foreign countries. These securities will generally
be dollar-denominated and traded in the U.S. The Fund seeks to
achieve growth of capital by investing in high-yield bonds with
stable to improving credit conditions.
PRIMARY There are four primary risks of investing in the Fund. First, the
RISKS: value of the Fund's shares could decline as a result of a
deterioration of the financial condition of an issuer of bonds
owned by the Fund or as a result of a default by the issuer. This
is known as credit risk. High yield bonds carry higher credit
risks than investment grade bonds because the companies that
issue them are not as strong financially as companies with
investment grade credit ratings. High yield bonds issued by
foreign companies are subject to additional risks including
currency fluctuations, political instability, government
regulation, unfavorable political or legal developments,
differences in financial reporting standards and less stringent
regulation of foreign markets. Second, the value of the Fund's
shares could decline if the entire high yield bond market were to
decline, even if none of the Fund's bond holdings were at risk of
a default. The high yield market can experience sharp declines at
times as the result of a deterioration in the overall economy,
declines in the stock market, a change of investor tolerance for
risk, or other factors. Third, high yield bonds tend to be less
liquid than other bonds, which means that they are more difficult
to sell. Fourth, while high yield bonds are generally less
interest rate sensitive than higher quality bonds, their values
generally will decline when interest rates rise. Fluctuations in
the prices of high yield bonds can be substantial. Accordingly,
the value of an investment in the Fund will go up and down, which
means that you could lose money.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
How has the Special Bond Fund performed?
The bar chart and table below show you how the Fund's performance has varied
from year to year and in comparison with a broad-based index. This information
gives you some indication of the risks of investing in the Fund.
4
<PAGE>
The bar chart shows changes in the performance of the Fund's shares for each of
the last ten calendar years. The bar chart does not reflect fees and expenses
that may be deducted by the variable annuity contract through which you invest.
If they were included, the returns would be less than those shown.
SPECIAL BOND
Year Change in Performance
---- ---------------------
1990 -9.18%
1991 35.76%
1992 14.56%
1993 18.15%
1994 -1.00%
1995 20.76%
1996 13.10%
1997 10.94%
1998 1.29%
1999 6.24%
During the periods shown, the highest quarterly return was 10.85% (for the
quarter ended March 31, 1991), and the lowest quarterly return was -7.24% (for
the quarter ended September 30, 1990). THE FUND'S PAST PERFORMANCE DOES NOT
NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE FUTURE.
The following table shows how the average annual total returns for the Fund's
shares compare to those of the Credit Suisse First Boston High Yield Index
("High Yield Index") as of December 31, 1999. The Fund sells its shares solely
to the variable annuity subaccount at net asset value. The average annual total
returns shown for the Fund's shares do not reflect the fees and charges that an
individual would pay in connection with an investment in a variable annuity
contract. The High Yield Index is designed to measure the performance of the
high yield bond market. The High Yield Index does not take into account fees and
expenses that an investor would incur in holding the securities in the Index. If
it did so, the returns would be lower than those shown.
5
<PAGE>
1 Year* 5 Years* 10 Years*
Special Bond 6.24% 10.27% 10.43%
High Yield Index 2.26% 8.86% 10.95%
*The annual returns are based upon calendar years.
THE FUND IN DETAIL
What are the Special Bond Fund's objectives, principal investment strategies,
and principal risks?
OBJECTIVES: The Fund primarily seeks high current income without undue risk to
principal and secondarily seeks growth of capital.
PRINCIPAL INVESTMENT STRATEGIES: The Fund invests at least 65% of its total
assets in a diversified portfolio of high-yield, below-investment grade
corporate bonds commonly known as "junk bonds" (those rated below Baa by Moody's
Investors Service, Inc. or below BBB by Standard & Poor's Ratings Group). High
yield bonds generally provide higher income than investment grade bonds to
compensate investors for their higher risk of default (i.e., failure to make
required interest or principal payments). High-yield bond issuers include small
or relatively new companies lacking the history or capital to merit investment
grade status, former Blue Chip companies downgraded because of financial
problems, companies using debt rather than equity to fund capital investment or
spending programs, companies electing to borrow heavily to finance or avoid a
takeover or buyout, and firms with heavy debt loads. The Fund's portfolio may
include zero coupon bonds and pay in kind bonds. While the Fund invests
primarily in domestic companies, it also invests in securities of issuers
domiciled in foreign countries. These securities will generally be
dollar-denominated and traded in the U.S. The Fund seeks to reduce the risk of a
default by selecting bonds through careful credit research and analysis. The
Fund seeks to reduce the impact of a potential default by diversifying its
investments among bonds of many different companies and industries. The Fund
attempts to invest in bonds that have stable to improving credit quality that
could appreciate in value because of a credit rating upgrade or an improvement
in the outlook for a particular company, industry or the economy as a whole.
Although the Fund will consider ratings assigned by ratings agencies in
selecting high yield bonds, it relies principally on its own research and
investment analysis. The Fund considers a variety of factors, including the
issuer's managerial strength, anticipated cash flow, debt maturity schedules,
borrowing requirements, interest or dividend coverage, asset coverage and
earnings prospects. The Fund will usually sell a bond when it shows
deteriorating fundamentals or falls short of the portfolio manager's
expectations. Information on the Fund's recent strategies and holdings can be
found in the most recent annual report (see back cover).
PRINCIPAL RISKS: Any investment carries with it some level of risk. An
investment offering greater potential rewards generally carries greater risks.
Here are the principal risks of investing in the Special Bond Fund:
CREDIT RISK: This is the risk that an issuer of bonds will be unable to pay
interest or principal when due. The prices of bonds are affected by the credit
quality of the issuer. High yield bonds are subject to greater credit risk than
higher quality bonds because the companies that issue them are not as
financially strong as companies with investment grade ratings. Changes in the
financial condition of an issuer, changes in general economic conditions, and
changes in specific economic conditions that affect a particular type of issuer
can impact the credit quality of an issuer. Such changes may weaken an issuer's
ability to make payments of principal or interest, or cause an issuer of bonds
to fail to make timely payments of interest or principal. Lower quality bonds
generally tend to be more sensitive to these changes than higher quality bonds.
While credit ratings may be available to assist in evaluating an issuer's credit
quality, they may not accurately predict an issuer's ability to make timely
payments of principal and interest.
6
<PAGE>
MARKET RISK: The entire junk bond market can experience sharp price swings due
to a variety of factors, including changes in economic forecasts, stock market
volatility, large sustained sales of junk bonds by major investors, high-profile
defaults, or changes in the market's psychology. This degree of volatility in
the high yield market is usually associated more with stocks than bonds. The
prices of high yield bonds held by the Fund could therefore decline, regardless
of the financial condition of the issuers of such bonds. Markets tend to run in
cycles with periods when prices generally go up, known as "bull" markets, and
periods when prices generally go down, referred to as "bear" markets.
LIQUIDITY RISK: High yield bonds tend to be less liquid than higher quality
bonds, meaning that it may be difficult to sell high yield bonds at a reasonable
price, particularly if there is a deterioration in the economy or in the
financial prospects of their issuers. As a result, the prices of high yield
bonds may be subject to wide price fluctuations due to liquidity concerns.
INTEREST RATE RISK: The market value of a bond is affected by changes in
interest rates. When interest rates rise, the market value of a bond declines,
and when interest rates decline, the market value of a bond increases. The price
volatility of a bond also depends on its maturity and duration. Generally, the
longer the maturity and duration of a bond, the greater its sensitivity to
interest rates. To compensate investors for this higher risk, bonds with longer
maturities and durations generally offer higher yields than bonds with shorter
maturities and durations.
FOREIGN ISSUERS RISK: Foreign investments involve additional risks, including
currency fluctuations, political instability, government regulation, unfavorable
political or legal developments, differences in financial reporting standards,
and less stringent regulation of foreign securities markets.
FUND MANAGEMENT
First Investors Management Company, Inc. ("FIMCO") is the investment adviser to
the Fund. Its address is 95 Wall Street, New York, NY 10005. It currently is
investment adviser to 48 mutual funds or series of funds with total net assets
of over $5 billion. FIMCO supervises all aspects of the Fund's operations and
determines the Fund's portfolio transactions. For the fiscal year ended December
31, 1999, FIMCO received advisory fees of 0.75% of the Fund's average daily net
assets.
Nancy W. Jones serves as Portfolio Manager of the Fund. Ms. Jones manages
certain other First Investors Funds. Ms. Jones joined FIMCO in 1983 as Director
of Research in the High Yield Department.
BUYING AND SELLING SHARES
How and when does the Fund price its shares?
The share price (which is called "net asset value" or "NAV" per share) for the
Fund is calculated once each day as of 4 p.m., Eastern Time ("E.T."), on each
day the New York Stock Exchange ("NYSE") is open for regular trading. The NYSE
is closed on most national holidays and Good Friday. In the event that the NYSE
closes early, the share price will be determined as of the time of the closing.
To calculate the NAV, the Fund's assets are valued and totaled, liabilities are
subtracted, and the balance, called net assets, is divided by the number of
shares outstanding.
In valuing its assets, the Fund uses the market value of securities for which
market quotations or last sale prices are readily available. If there are no
readily available quotations or last sale prices for an investment or the
available quotations are considered to be unreliable, the securities will be
valued at their fair value as determined in good faith pursuant to procedures
adopted by the Board of Directors of the Fund.
7
<PAGE>
How do I buy and sell shares?
Investments in the Fund may only be made through purchases of variable annuity
contracts offered by FIL. Purchase payments for variable annuity contracts, less
applicable charges or expenses, are paid into Separate Account A, a unit
investment trust. The Separate Account pools the proceeds to purchase shares of
the Fund.
For information about how to buy or sell the variable annuity contracts, see the
Separate Account prospectus which is attached to this prospectus. It will
describe not only the process for buying and selling contracts, but also the
fees and charges involved. This prospectus is not valid unless a Separate
Account prospectus is attached hereto.
ACCOUNT POLICIES
What about dividends and capital gain distributions?
The Separate Account which owns the shares of the Fund will receive all
dividends and distributions. As described in the attached Separate Account
prospectus, all dividends and distributions are then reinvested by the Separate
Account in additional shares of the Fund.
To the extent that it has net investment income, the Fund will declare daily and
pay, on a quarterly basis, dividends from net investment income. Any net
realized capital gains will be declared and distributed on an annual basis,
usually after the end of the Fund's fiscal year. The Fund may make an additional
distribution in any year if necessary to avoid a Federal excise tax on certain
undistributed income and capital gain.
What about taxes?
You will not be subject to taxes as the result of purchases or sales of Fund
shares by the Separate Account, or Fund dividends, or distributions to the
Separate Account. There are tax consequences associated with investing in the
variable annuity contracts. These are discussed in the attached Separate Account
prospectus.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past five years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
information has been audited by Tait, Weller & Baker, whose report, along with
the Fund's financial statements, are included in the SAI, which is available
upon request.
<TABLE>
--------------------------------------------------------------------------------------
Year Ended December 31
--------------------------------------------------------------------------------------
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year $11.86 $12.89 $12.75 $12.23 $11.03
------ ------ ------ ------
Income from Investment Operations
Net investment income............ 1.10 1.12 1.11 1.17 1.20
Net realized and unrealized .....
gain (loss) on investments...... (.39) (.95) .23 .37 1.02
----- ----- ---- ---- ----
Total from Investment Operations .71 .17 1.34 1.54 2.22
----- ----- ---- ---- ----
Less Distributions from:
Net investment income.......... 1.20 1.20 1.20 1.02 1.02
---- ---- ---- ---- ----
Net Asset Value, End of Year..... $11.37 $11.86 $12.89 $12.75 $12.23
====== ====== ====== ====== ======
Total Return(%)+................. 6.24 1.29 10.94 13.10 20.76
Ratios/Supplemental Data
Net Assets, End of Year (in thousands) $30,194 $32,260 $36,082 $36,948 $38,037
Ratios to Average Net Assets (%)
Expenses......................... .87 .89 .86 .86 .88
Net investment income............ 9.38 8.93 8.60 9.31 10.17
Portfolio Turnover Rate (%)...... 32 65 53 29 45
</TABLE>
+ The effect of fees and charges incurred at the separate account level are not
reflected in these performance figures.
9
<PAGE>
[GRAPHIC OMITTED] FIRST INVESTORS
SPECIAL BOND FUND
For investors who want more information about the Fund, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
prospectus.
You can get free copies of reports and the SAI, request other information and
discuss your questions about the Fund by contacting the Fund at:
Administrative Data Management Corp.
581 Main Street
Woodbridge, NJ 07095-1198
Telephone: 1-800-423-4026
You can review and copy Fund documents (including reports, and SAIs) at the
Public Reference Room of the SEC in Washington, D.C. You can also obtain copies
of Fund documents after paying a duplicating fee (i) by writing to the Public
Reference Section of the SEC, Washington, D.C. 20549-0102 or (ii) by electronic
request at [email protected]. You can obtain information on the operation of
the Public Reference Room, including information about duplicating fee charges,
by calling (202) 942-8090. Text-only versions of Fund documents can be viewed
online or downloaded from the EDGAR database on the SEC's Internet website at
http://www.sec.gov.
(Investment Company Act File No. First
Investors Special Bond Fund, Inc.: 811-2981)
<PAGE>
FIRST INVESTORS LIFE VARIABLE ANNUITY FUND A
INDIVIDUAL VARIABLE ANNUITY CONTRACTS
OFFERED BY
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 28, 2000
This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus for First Investors Life Variable
Annuity Fund A, dated April 28, 2000, which may be obtained at no cost by
writing to First Investors Life Insurance Company, 95 Wall Street, New York, New
York 10005, or by telephoning (800) 342-7963.
TABLE OF CONTENTS
PAGE
General Description........................................ 2
Services................................................... 2
Annuity Payments........................................... 3
Other Information.......................................... 4
Performance Information.................................... 5
Relevance of Financial Statements.......................... 7
Appendices................................................. 8
Financial Statements....................................... 13
1
<PAGE>
GENERAL DESCRIPTION
FIRST INVESTORS LIFE INSURANCE COMPANY. First Investors Life Insurance
Company, 95 Wall Street, New York, New York 10005 ("First Investors Life"), a
stock life insurance company incorporated under the laws of the State of New
York in 1962, writes life insurance, annuities and accident and health
insurance. First Investors Consolidated Corporation ("FICC"), a holding company,
owns all of the voting common stock of First Investors Management Company, Inc.
("FIMCO" or "Adviser") and all of the outstanding stock of First Investors Life,
First Investors Corporation ("FIC" or "Underwriter") and Administrative Data
Management Corp., the transfer agent for First Investors Special Bond Fund, Inc.
Mr. Glenn O. Head, Chairman of FICC, controls FICC and, therefore, controls the
Adviser and First Investors Life.
SEPARATE ACCOUNT A. First Investors Life Variable Annuity Fund A
("Separate Account A") was established on September 11, 1979 under the
provisions of the New York Insurance Law. The assets of Separate Account A are
segregated from the assets of First Investors Life, and that portion of such
assets having a value equal to, or approximately equal to, the reserves and
contract liabilities under the Contracts are not chargeable with liabilities
arising out of any other business of First Investors Life. Separate Account A is
registered with the Securities and Exchange Commission ("Commission") as a unit
investment trust under the Investment Company Act of 1940, as amended (the "1940
Act"), but such registration does not involve any supervision by the Commission
of the management or investment practices or policies of Separate Account A.
The assets of Separate Account A are invested at net asset value in shares
of First Investors Special Bond Fund, Inc. (the "Fund"). The Fund's Prospectus
describes the risks attendant to an investment in the Fund.
SERVICES
CUSTODIAN. First Investors Life, subject to applicable laws and
regulations, is the custodian of the securities of Separate Account A.
INDEPENDENT PUBLIC ACCOUNTANTS. Tait, Weller & Baker, Eight Penn Center
Plaza, Philadelphia, PA 19103, independent certified public accountants, has
been selected as the independent accountants for Separate Account A. First
Investors Life pays Tait, Weller & Baker a fee for serving as the independent
accountants for Separate Account A which is set by the Audit Committee of the
Board of Directors of First Investors Life.
UNDERWRITER. First Investors Life and Separate Account A have entered into
an Underwriting Agreement with FIC. FIC, an affiliate of First Investors Life,
and of the Adviser has its principal business address at 95 Wall Street, New
York, New York 10005. For the fiscal years ending December 31, 1997, 1998 and
1999, FIC received fees of $9,399, $17,586 and $8,508, respectively, in
connection with the distribution of the Contracts in a continuous offering.
The Contracts are sold by insurance agents licensed to sell variable
annuities, who are registered representatives of the Underwriter or
broker-dealers who have sales agreements with the Underwriter.
2
<PAGE>
ANNUITY PAYMENTS
VALUE OF AN ACCUMULATION UNIT. For Separate Account A, the value of an
Accumulation Unit was arbitrarily initially set at $1.00. The value of an
Accumulation Unit for any subsequent Valuation Period is determined by
multiplying the value of an Accumulation Unit for the immediately preceding
Valuation Period by the Net Investment Factor for the Valuation Period for which
the Accumulation Unit Value is being calculated (see Appendix I, Example B). The
investment performance of the Fund, and expenses and deductions of certain
charges affect the Accumulation Unit Value. The value of an Accumulation Unit
for Separate Account A may increase or decrease from Valuation Period to
Valuation Period.
NET INVESTMENT FACTOR. The Net Investment Factor for Separate
Account A for any Valuation Period is determined by dividing (a) by (b) and
subtracting (c) from the result, where:
(a) is the net result of:
(1) the net asset value per share of the Fund determined at the end
of the current Valuation Period, plus
(2) the per share amount of any dividend or capital gains distributions
made by the Fund if the "ex-dividend" date occurs during the current
Valuation Period.
(b) is the net asset value per share of the Fund determined as of the end
of the immediately preceding Valuation Period.
(c) is a factor representing the charges deducted for mortality and expense
risks. Such factor is equal on an annual basis to 0.75% of the daily net
asset value of Separate Account A. This percentage represents
approximately 0.60% charge for the mortality risk assumed and 0.15% charge
for the expense risk assumed.
The Net Investment Factor may be greater or less than one, and therefore,
the value of an Accumulation Unit for Separate Account A may increase or
decrease. (For an illustration of this calculation, see Appendix I, Example A.)
VALUE OF AN ANNUITY UNIT. For Separate Account A, the value of an Annuity
Unit was arbitrarily initially set at $10.00. The value of an Annuity Unit for
any subsequent Valuation Period is determined by multiplying the Annuity Unit
Value for the immediately preceding Valuation Period by the Net Investment
Factor for the Valuation Period for which the Annuity Unit Value is being
calculated, and multiplying the result by an interest factor to offset the
effect of an investment earnings rate of 3.5% per annum, which is assumed in the
Annuity Tables contained in the Contract. (For an illustration of this
calculation, see Appendix III, Example A.)
AMOUNT OF ANNUITY PAYMENTS. When annuity payments are to commence, the
Accumulated Value to be applied to a variable annuity option will be determined
by multiplying the value of an Accumulation Unit for the Valuation Date on or
immediately preceding the seventh day before the Annuity Commencement Date by
the number of Accumulation Units owned. This seven day period is used to permit
calculation of amounts of annuity payments and mailing of checks in advance of
the due date. At that time any applicable Premium taxes not previously deducted
will be deducted from the Accumulated Value to determine the Net Accumulated
Value. The resultant value is then applied to the Annuity Tables set forth in
the Contract to determine the amount of the first monthly annuity payment. The
Contract contains Annuity Tables setting forth the amount of the first monthly
installment for each $1,000 of Accumulated Value applied. These Annuity Tables
vary according to the Annuity Option selected by the Contractowner and according
to the sex and adjusted age of the Annuitant and any Joint Annuitant at the
Annuity Commencement Date. The Contract contains a formula for determining the
adjusted age, and the Annuity Tables are determined from the Progressive Annuity
Table with interest at 3.5% per year and assumes births prior to 1900, adjusted
by a setback of four years of age for persons born 1900 and later and an
additional setback of one year of age for each completed five years by which the
year of birth is later than 1900. Annuity Tables used by other insurers may
provide greater or less benefits to the Annuitant.
The dollar amount of the first monthly Variable Payment, based on Separate
Account A determined as above, is divided by the value of an Annuity Unit for
Separate Account A for the Valuation Date on or immediately preceding the
seventh day before the Annuity Commencement Date to establish the number of
Annuity Units representing each monthly payment under Separate Account A. This
seven day period is used to permit calculation of amounts of annuity payments
and mailing of checks in advance of the due date. This number of Annuity Units
remains fixed for all variable annuity payments. The dollar amount of the second
and subsequent variable annuity payments is determined by multiplying the fixed
number of Annuity Units for Separate Account A by the applicable value of an
Annuity Unit Value for the Valuation Date on or immediately preceding the
seventh day before the due date of the payment. The value of an Annuity Unit
will vary with the investment performance of the Fund, and, therefore, the
dollar amount of the second and subsequent variable annuity payments may change
from month to month. (For an illustration of the calculation of the first and
subsequent Variable Payments, see Appendix III, Examples B, C and D.)
3
<PAGE>
A fixed annuity is an annuity with annuity payments which remain fixed as
to dollar amount throughout the payment period and is based on an assumed
interest rate of 3.5% per year built into the Annuity Tables in the Contract.
OTHER INFORMATION
TIME OF PAYMENTS. All payments due under the Contracts will ordinarily be
made within seven days of the payment due date or within seven days after the
date of receipt of a request for partial surrender or termination. However,
First Investors Life reserves the right to suspend or postpone the date of any
payment due under the Contracts (1) for any period during which the New York
Stock Exchange ("NYSE") is closed (other than customary weekend and holiday
closings) or during which trading on the NYSE, as determined by the Commission,
is restricted; (2) for any period during which an emergency, as determined by
the Commission, exists as a result of which disposal of securities held by the
Fund are not reasonably practical or it is not reasonably practical to determine
the value of the Fund's net assets; or (3) for such other periods as the
Commission may by order permit for the protection of security holders or as may
be permitted under the 1940 Act.
REPORTS TO CONTRACTOWNERS. First Investors Life will mail to each
Contractowner, at the last known address of record at the Home Office of First
Investors Life, at least annually, a report containing such information as may
be required by any applicable law or regulation and a statement of the
Accumulation Units credited to the Contract for Separate Account A and the
Accumulation Unit Values. In addition, latest available reports of the Fund will
be mailed to each Contractowner.
ASSIGNMENT. Any amounts payable under the Contracts may not be commuted,
alienated, assigned or otherwise encumbered before they are due. To the extent
permitted by law, no such payments shall be subject in any way to any legal
process to subject them to payment of any claims against any Annuitant, Joint
Annuitant or Beneficiary. The Contracts may be assigned. No assignment of a
Contract shall be binding on First Investors Life unless such assignment is in
writing and is filed with First Investors Life at its Home Office.
4
<PAGE>
PERFORMANCE INFORMATION
Separate Account A may advertise its performance in various ways.
The yield for Separate Account A is presented for a specified thirty-day
period (the "base period"). Yield is based on the amount determined by (i)
calculating the aggregate amount of net investment income earned by Separate
Account A during the base period less expenses accrued for that period (net of
reimbursement), and (ii) dividing that amount by the product of (A) the average
daily number of Accumulation Units of Separate Account A outstanding during the
base period and (B) the maximum public offering price per Accumulation Unit on
the last day of the base period. The result is annualized by compounding on a
semi-annual basis to determine Separate Account A's yield. For this calculation,
interest earned on debt obligations held by the Fund is generally calculated
using the yield to maturity (or first expected call date) of such obligations
based on their market values (or, in the case of receivables-backed securities
such as GNMA's, based on cost). Dividends on equity securities are accrued daily
at their estimated stated dividend rates.
Separate Account A's "average annual total return" ("T") is an average
annual compounded rate of return. The calculation produces an average annual
total return for the number of years measured. It is the rate of return based on
factors which include a hypothetical initial investment of $1,000 ("P" in the
formula below) over a number of years ("n") with an Ending Redeemable Value
("ERV") of that investment, according to the following formula:
T=[(ERV/P)(superscript)1/n(superscript)]-1
The "total return" uses the same factors, but does not average the rate of
return on an annual basis. Total return is determined as follows:
[ERV-P]/P = TOTAL RETURN
In providing such performance data, Separate Account A will assume the
payment of the maximum sales charge of 7.00% (as a percentage of the purchase
payment) on the initial investment and the payment of the Mortality and Expense
Risk Charges of 0.75% ("P"). Separate Account A will assume that during the
period covered all dividends and capital gain distributions are paid at net
asset value per Accumulation Unit, and that the investment is redeemed at the
end of the period.
Average annual total return and total return for the periods ended
December 31, 1999 calculated using the offering price for Separate Account A is
set forth in the tables below:
AVERAGE ANNUAL TOTAL RETURN*
One Year (2.45)%
Five Years 7.23%
Ten Years 8.11%
TOTAL RETURN*
One Year (2.45)%
Five Years 41.77%
Ten Years 118.11%
Nonstandardized average annual total return and total return may also be
advertised without any sales charges, but assuming the payment of all recurring
Separate Account charges, including the Mortality and Expense Risk Charge of
0.75% (non-standardized performance information). In such case, the initial
investment will either reflect a reduced sales load or no sales load. Any
quotation of return not reflecting the maximum sales charge will be greater than
if the maximum sales charge were used. Nonstandardized average annual total
return and total return computed at net asset value for the periods ended
December 31, 1999 for Separate Account A is set forth in the tables below:
NONSTANDARDIZED AVERAGE ANNUAL TOTAL RETURN
One Year 4.87%
Five Years 8.80%
Ten Years 8.90%
- --------
* The return figures assume the current maximum sales charge of 7.00%. Prior to
December 30, 1991, the maximum sales charge for Separate Account A was 7.25%.
5
<PAGE>
TOTAL RETURN
One Year 4.87%
Five Years 52.43%
Ten Years 134.48%
Return information may be useful to investors in reviewing Separate
Account A's performance. However, the total return and average annual total
return will fluctuate over time and the return for any given past period is not
an indication or representation by Separate Account A of future rates of return.
At times, the Adviser may reduce its compensation or assume expenses of
the Fund in order to reduce the Fund's expenses. Any such waiver or
reimbursement would increase Separate Account A's total return, average annual
total return and yield during the period of the waiver or reimbursement.
Separate Account A may include in advertisements and sales literature,
examples, information and statistics that illustrate the effect of taxable vs.
tax-deferred compounding income at a fixed rate of return to demonstrate the
growth of an investment over a stated period of time resulting from the payment
of dividends and capital gains distributions in additional Accumulation Units.
The examples may include hypothetical returns comparing taxable versus
tax-deferred growth. The examples used will be for illustrative purposes only
and are not representations by Separate Account A of past or future yield or
return.
From time to time, in reports and promotional literature, Separate Account
A may compare its performance to, or cite the historical performance of, other
variable annuities. The performance rankings and ratings of variable annuities
reported in L-VIPPAS, a monthly publication for insurance companies and money
managers published by Lipper Analytical Services, Inc. and in Morningstar
Variable Annuity Performance Report, also a monthly publication published by
Morningstar, Inc., may be used. Additionally, performance rankings and ratings
reported periodically in national financial publications such as MONEY, FORBES,
BUSINESS WEEK, BARRON'S, FINANCIAL TIMES, CHANGING TIMES, FORTUNE, NATIONAL
UNDERWRITER, etc., may also be used. Quotations from articles appearing in daily
newspaper publications such as THE NEW YORK TIMES, THE WALL STREET JOURNAL and
THE NEW YORK DAILY NEWS may be cited.
6
<PAGE>
RELEVANCE OF FINANCIAL STATEMENTS
The values of the interests of Contractowners under the variable portion
of the Contracts will be affected solely by the investment results of Separate
Account A. The financial statements of First Investors Life as contained herein
should be considered only as bearing upon First Investors Life's ability to meet
its obligations to Contractowners under the Contracts, and they should not be
considered as bearing on the investment performance of Separate Account A.
7
<PAGE>
APPENDICES
8
<PAGE>
APPENDIX I
EXAMPLE A
FORMULA AND ILLUSTRATION FOR DETERMINING
THE NET INVESTMENT FACTOR OF A SUBACCOUNT
OF SEPARATE ACCOUNT A
Net Investment Factor = A + B
----- -D
C
<TABLE>
<CAPTION>
Where:
<S> <C>
A = The Net Asset Value of a Fund share, plus dividends accrued but not reinvested,
as of the end of the current Valuation Period.
Assume............................................................................. = $8.51000000
B = The per share amount of any dividend or capital gains distribution reinvested
since the end of the immediately preceding Valuation Period.
Assume............................................................................. = 0
C = The Net Asset Value of a Fund share, plus dividends accrued but not reinvested,
as of the end of the immediately preceding Valuation Period.
Assume............................................................................. = $8.39000000
D = The daily deduction for mortality and expense risks, which totals .75%
on an annual basis.
On a daily basis................................................................... = .00002054
Then, the Net Investment Factor = 8.51000000 + 0 - .00002054.............................. = 1.01428220
--------------
8.39000000
</TABLE>
EXAMPLE B
FORMULA AND ILLUSTRATION FOR DETERMINING
ACCUMULATION UNIT VALUE OF A SUBACCOUNT
OF SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
Accumulation Unit Value = A x B Where:
<S> <C>
A = The Accumulation Unit Value for the immediately preceding Valuation Period.
Assume............................................................................. = $1.46328760
B = The Net Investment Factor for the current Valuation Period.
Assume............................................................................. = 1.01428220
Then, the Accumulation Unit Value = $1.46328760 x 1.01428220.............................. = 1.48418657
</TABLE>
9
<PAGE>
APPENDIX II
EXAMPLE A
FORMULA AND ILLUSTRATION FOR DETERMINING
DEATH BENEFIT PAYABLE UNDER
ANNUITY OPTION 4-UNIT REFUND LIFE ANNUITY
Upon the death of the Annuitant, the designated Beneficiary under this option
will receive under a Separate Account a lump sum death benefit of the then
dollar value of a number of Annuity Units computed using the following formula:
Annuity Units Payable = A A
--- - (CxD), if --- is greater than CxD
B B
<TABLE>
<CAPTION>
Where:
<S> <C>
A = The Net Accumulated Value applied on the Annuity Commencement Date
to purchase the Variable Annuity.
Assume............................................................................ = $20,000.00
B = The Annuity Unit Value at the Annuity Commencement Date.
Assume............................................................................ = $1.08353012
C = The number of Annuity Units represented by each payment made.
Assume............................................................................ = 116.61488844
D = The total number of monthly Variable Annuity Payments made prior to the
Annuitant's death.
Assume............................................................................ = 30
</TABLE>
Then the number of Annuity Units Payable:
$20,000.00 - (116.61488844 x 30)
------------
$1.08353012
= 18,458.18554633 - 3,498.44665320
= 14,959.73889313
If the value of an Annuity Unit on the date of receipt of notification of death
was $1.12173107 then the amount of the death benefit under the Separate Account
would be:
14,959.73889313 x $1.12173107 = $16,780.80
10
<PAGE>
APPENDIX III
EXAMPLE A
FORMULA AND ILLUSTRATION FOR DETERMINING
ANNUITY UNIT VALUE OF
SEPARATE ACCOUNT A
Annuity Unit Value = A x B x C
<TABLE>
<CAPTION>
Where:
<S> <C>
A = Annuity Unit Value of the immediately preceding Valuation Period.
Assume............................................................................ = $1.10071211
B = Net Investment Factor for the Valuation Period for which the Annuity
Unit is being calculated.
Assume............................................................................ = 1.00083530
C = A factor to neutralize the assumed interest rate of 3 1/2% built into the
Annuity Tables used.
Daily factor equals............................................................... = 0.99990575
</TABLE>
Then, the Annuity Value is:
$1.10071211 x 1.00083530 x 0.99990575 = $1.10152771
EXAMPLE B
FORMULA AND ILLUSTRATION FOR DETERMINING
AMOUNT OF FIRST MONTHLY VARIABLE ANNUITY PAYMENT FROM
SEPARATE ACCOUNT A
First Monthly Variable Annuity Payment = A x B
-------
$1,000
<TABLE>
<CAPTION>
Where:
<S> <C>
A = The Net Accumulated Value allocated to Separate Account A for the
Valuation Date on or immediately preceding the seventh day before the
Annuity Commencement Date.
Assume............................................................................ = $20,000.00
B = The Annuity purchase rate per $1,000 based upon the option
selected, the sex and adjusted age of the Annuitant according to the
Annuity Tables contained in the Contract.
Assume............................................................................ = $6.40
</TABLE>
Then, the first Monthly Variable Payment = $20,000 x $6.40 = $128.00
-------
$1,000
11
<PAGE>
EXAMPLE C
FORMULA AND ILLUSTRATION FOR DETERMINING
THE NUMBER OF ANNUITY UNITS FOR SEPARATE ACCOUNT A
REPRESENTED BY EACH MONTHLY VARIABLE ANNUITY PAYMENT
Number of Annuity Units = A
---
B
<TABLE>
<CAPTION>
Where:
<S> <C>
A = The dollar amount of the first monthly Variable Annuity Payment.
Assume............................................................................ = $128.00
B = The Annuity Unit Value for the Valuation Date on or immediately
preceding the seventh day before the Annuity Commencement Date.
Assume............................................................................ = $1.09763000
</TABLE>
Then, the number of Annuity Units = $128.00 = 116.61488844
-------------
$1.09763000
EXAMPLE D
FORMULA AND ILLUSTRATION FOR DETERMINING
THE AMOUNT OF SECOND AND SUBSEQUENT MONTHLY VARIABLE
ANNUITY PAYMENTS FROM SEPARATE ACCOUNT A
Second Monthly Variable Annuity Payment = A x B
<TABLE>
<CAPTION>
Where:
<S> <C>
A = The Number of Annuity Units represented by each monthly Variable
Annuity Payment.
Assume............................................................................ = 116.61488844
B = The Annuity Unit Value for the Valuation Date on or immediately
preceding the seventh day before the date on which the second
(or subsequent) Variable Annuity Payment is due.
Assume............................................................................ = $1.11834234
</TABLE>
Then, the second monthly Variable Annuity Payment = 116.61488844 x $1.11834234 =
$130.42
The above example was based upon the assumption of an increase in the Annuity
Unit Value since the initial Variable Annuity Payment due to favorable
investment results of the Separate Account and the Fund. If the investment
results were less favorable, a decrease in the Annuity Unit Value and in the
second monthly Variable Annuity Payment could result. Assume B above was
$1.08103230.
Then, the second monthly Variable Annuity Payment = 116.61488844 x $1.08103230 =
$126.06
12
<PAGE>
Financial Statements
as of December 31, 1999
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
First Investors Life Insurance Company
New York, New York
We have audited the accompanying balance sheets of First Investors Life
Insurance Company as of December 31, 1999 and 1998, and the related statements
of income, stockholder's equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Investors Life
Insurance Company as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
BALANCE SHEET
ASSETS
DECEMBER 31, 1999 DECEMBER 31, 1998
----------------- -----------------
<S> <C> <C>
Investments (note 2):
Available-for-sale securities....................................... $109,081,845 $131,031,939
Held-to-maturity securities......................................... 31,147,991 5,491,598
Short term investments.............................................. 4,179,510 3,982,209
Policy loans........................................................ 28,640,385 24,961,708
---------------- --------------
Total investments................................................ 173,049,731 165,467,454
Cash ................................................................. (729,147) 113,094
Premiums and other receivables, net of allowances of
$30,000 in 1999 and 1998............................................ 6,391,696 6,297,635
Accrued investment income............................................. 3,204,950 3,473,067
Deferred policy acquisition costs (note 6)............................ 24,607,577 20,873,233
Deferred Federal income taxes (note 7) ........................... 1,868,000 473,000
Furniture, fixtures and equipment, at cost, less accumulated
depreciation of $1,169,049 in 1999 and $1,110,857 in 1998........... 57,966 102,448
Other assets.......................................................... 118,396 82,822
Separate account assets............................................... 1,058,703,230 821,105,059
--------------- -------------
Total assets..................................................... $1,267,272,399 $1,017,987,812
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES:
Policyholder account balances (note 6)................................ $123,677,096 $118,786,854
Claims and other contract liabilities................................. 14,870,396 13,934,636
Accounts payable and accrued liabilities.............................. 3,573,113 3,796,503
Separate account liabilities.......................................... 1,058,229,265 821,105,059
-------------- -------------
Total liabilities................................................ 1,200,349,870 957,623,052
-------------- -------------
STOCKHOLDER'S EQUITY:
Common Stock, par value $4.75; authorized,
issued and outstanding 534,350 shares............................... 2,538,163 2,538,163
Additional paid in capital............................................ 6,496,180 6,496,180
Accumulated other comprehensive income (note 2)....................... (908,000) 2,193,000
Retained earnings .................................................... 58,796,186 49,137,417
---------------- -------------
Total stockholder's equity....................................... 66,922,529 60,364,760
---------------- -------------
Total liabilities and stockholder's equity....................... $1,267,272,399 $1,017,987,812
============== ==============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF INCOME
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31,1998 DECEMBER 31,1997
----------------- ---------------- ----------------
<S> <C> <C> <C>
REVENUES
Policyholder fees................................... $26,171,703 $25,393,372 $24,826,454
Premiums............................................ 5,656,183 6,091,731 6,279,137
Investment income (note 2).......................... 11,049,520 10,501,572 10,259,601
Realized gain (loss) on investments................. (1,190,548) 914,891 158,874
Other income........................................ 818,604 893,181 702,644
-------------- ------------- -------------
Total income..................................... 42,505,462 43,794,747 42,226,710
------------ ----------- -----------
BENEFITS AND EXPENSES
Benefits and increases in contract liabilities...... 10,571,181 13,803,921 14,370,510
Dividends to policyholders.......................... 1,390,300 1,749,579 1,033,663
Amortization of deferred acquisition costs (note 6). 969,205 1,005,483 663,200
Commissions and general expenses.................... 14,848,007 15,553,605 15,445,888
------------ ----------- -----------
Total benefits and expenses...................... 27,778,693 32,112,588 31,513,261
------------ ------------ -----------
Income before Federal income tax ..................... 14,726,769 11,682,159 10,713,449
Federal income tax (note 7):
Current............................................. 4,865,000 3,682,000 4,285,000
Deferred............................................ 203,000 265,000 (603,000)
----------- ------------ -----------
5,068,000 3,947,000 3,682,000
------------ ------------ -----------
Net Income............................................ $ 9,658,769 $ 7,735,159 $ 7,031,449
============ ============ ===========
Income per share, based on 534,350 shares outstanding
$18.08 $14.48 $13.16
============ ============= ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31,1999 DECEMBER 31,1998 DECEMBER 31, 1997
---------------- ---------------- -----------------
<S> <C> <C> <C>
Balance at beginning of year............................. $60,364,760 $ 52,044,601 $ 44,049,152
----------- ------------ ------------
Net income............................................... 9,658,769 7,735,159 7,031,449
Other comprehensive income
Increase (decrease) in unrealized holding gains on
available-for-sale securities.......................... (3,101,000) 585,000 964,000
------------- -------------- --------------
Comprehensive income..................................... 6,557,769 8,320,159 7,995,449
------------- -------------- --------------
Balance at end of year................................... $ 66,922,529 $ 60,364,760 $ 52,044,601
============ ============ ============
STATEMENT OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31,1997
----------------- ----------------- ----------------
Increase (decrease) in cash:
Cash flows from operating activities:
Policyholder fees received..........................$ 25,827,717 $ 25,010,611 $ 24,587,113
Premiums received................................... 5,931,178 5,433,211 6,088,582
Amounts received on policyholder accounts........... 124,375,574 132,528,386 125,818,334
Investment income received.......................... 11,726,193 10,630,564 10,263,095
Other receipts...................................... 73,652 91,864 57,287
Benefits and contract liabilities paid.............. (129,416,853) (142,124,914) (138,420,373)
Commissions and general expenses paid............... (24,060,176) (24,138,476) (20,899,476)
------------- -------------- --------------
Net cash provided by operating activities........... 14,457,285 7,431,246 7,494,562
-------------- -------------- --------------
Cash flows from investing activities:
Proceeds from sale of investment securities......... 47,855,224 42,655,632 38,900,851
Purchase of investment securities................... (58,962,363) (47,605,879) (44,021,791)
Purchase of furniture, equipment and other assets... (13,710) (79,322) (62,170)
Net increase in policy loans........................ (3,678,677) (3,433,898) (2,662,162)
Investment in Separate Account ..................... (500,000) 100 593,945
-------------- -------------- ------------
Net cash used for investing activities.............. (15,299,526) (8,463,367) (7,251,327)
-------------- -------------- -------------
Net increase (decrease) in cash..................... (842,241) (1,032,121) 243,235
Cash
Beginning of year ..................................... 113,094 1,145,215 901,980
------------- ------------- ----------
End of year ...........................................$ (729,147) $ 113,094 $ 1,145,215
============= ============= ==============
The Company received a refund of Federal income tax of $79,000 in 1997 and paid Federal income tax
of $5,075,000 in 1999, $4,400,000 in 1998 and $4,358,000 in 1997.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income........................................ $ 9,658,769 $ 7,735,159 $ 7,031,449
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 66,281 82,342 117,804
Amortization of deferred policy acquisition costs 969,205 1,005,483 663,200
Realized investment (gains) losses............. 1,190,548 (914,891) (158,874)
Amortization of premiums and discounts on
investments.................................. 408,556 421,135 280,852
Deferred Federal income taxes.................. 203,000 265,000 (603,000)
Other items not requiring cash - net........... 25,470 (660) 9,771
(Increase) decrease in:
Premiums and other receivables, net............ (94,061) (1,548,536) (750,889)
Accrued investment income...................... 268,117 (292,143) (277,358)
Deferred policy acquisition costs, exclusive
of amortization.............................. (3,797,549) (3,613,000) (1,866,787)
Other assets................................... (43,663) 29,133 9,323
Increase (decrease) in:
Policyholder account balances.................. 4,890,242 3,505,536 1,985,844
Claims and other contract liabilities.......... 935,760 1,386,540 357,815
Accounts payable and accrued liabilities....... (223,390) (629,852) 695,412
------------ ------------ ------------
$ 14,457,285 $ 7,431,246 $ 7,494,562
============ =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF FINANCIAL STATEMENTS
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles (GAAP). Such basis of presentation
differs from statutory accounting practices permitted or prescribed by insurance
regulatory authorities primarily in that:
(a) policy reserves are computed according to the Company's estimates of
mortality, investment yields, withdrawals and other benefits and expenses,
rather than on the statutory valuation basis;
(b) certain expenditures, principally for furniture and equipment and
agents' debit balances, are recognized as assets rather than being
non-admitted and therefore charged to retained earnings;
(c) commissions and other costs of acquiring new business are recognized
as deferred acquisition costs and are amortized over the premium paying
period of policies and contracts, rather than charged to current operations
when incurred;
(d) income tax effects of temporary differences, relating primarily to
policy reserves and acquisition costs, are provided
(e) the statutory asset valuation and interest maintenance reserves are
reported as retained earnings rather than as liabilities;
NOTE 2 -- OTHER SIGNIFICANT ACCOUNTING PRACTICES
(a) ACCOUNTING ESTIMATES. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosures of contingent assets and liabilities, at the date
of the financial statements and revenues and expenses during the reported
period. Actual results could differ from those estimates.
(b) DEPRECIATION. Depreciation is computed on the useful service life of
the depreciable asset using the straight line method of depreciation over three
to seven years.
(c) INVESTMENTS. Investments in equity securities that have readily
determinable fair values and all investments in debt securities are classified
in separate categories and accounted for as follows:
HELD-TO-MATURITY SECURITIES
Debt securities in which the Company has the positive intent and
ability to hold to maturity are recorded at amortized cost.
AVAILABLE-FOR-SALE SECURITIES
Debt securities not classified as held to maturity securities and
equity securities are recorded at fair value with unrealized gains and
losses excluded from earnings and reported as "accumulated other
comprehensive income" in stockholder's equity.
Short term investments are reported at market value which approximates
cost.
Gains and losses on sales of investments are determined using the specific
identification method. Investment income for the years indicated consists of the
following:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31,1999 DECEMBER 31, 1998 DECEMBER 31,1997
---------------- ----------------- ----------------
<S> <C> <C> <C>
Interest on fixed maturities............................. $ 9,589,859 $ 9,276,036 $ 9,029,979
Interest on short term investments....................... 243,945 226,544 307,656
Interest on policy loans................................. 1,714,441 1,465,497 1,268,834
------------ ------------- ------------
Total investment income............................. 11,548,245 10,968,077 10,606,469
Investment expense.................................. 498,725 466,505 346,868
-------------- ------------- -------------
Net investment income.................................... $11,049,520 $ 10,501,572 $ 10,259,601
=========== ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The amortized cost and estimated market values of investments at December 31, 1999 and 1998 are as
follows:
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AVAILABLE-FOR-SALE SECURITIES
DECEMBER 31, 1999
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies............................... $ 35,374,157 $ -- $ 297,674 $ 35,076,483
Debt Securities issued by
States of the U.S.......................... 984,941 -- 78,161 906,780
Corporate Debt Securities................... 69,097,105 209,641 1,899,219 67,407,527
Other Debt Securities ...................... 5,966,094 -- 275,039 5,691,055
-------------- ------------- ------------- ---------------
$111,422,297 $ 209,641 $ 2,550,093 $109,081,845
============ ========== ============ ============
DECEMBER 31,1998
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies............................... $ 28,353,391 $ 1,703,441 $ 912 $ 30,055,920
Debt Securities issued by
States of the U.S.......................... 13,964,587 261,109 8,696 14,217,000
Corporate Debt Securities................... 77,938,088 2,148,113 378,682 79,707,519
Other Debt Securities....................... 6,676,873 374,627 -- 7,051,500
-------------- ------------- -------------- ---------------
$126,932,939 $ 4,487,290 $ 388,290 $131,031,939
============ =========== ============ ============
</TABLE>
At December 31, 1999 and 1998, the Company had "Unrealized Holding Gains
(Losses) on Available-For-Sale Securities" of ($908,000) and $2,193,000, net of
applicable deferred income taxes and amortization of deferred acquisition costs.
The change in the Unrealized Holding Gains (Losses) of ($3,101,000), $585,000
and $964,000 for 1999, 1998 and 1997, respectively is reported as other
comprehensive income in stockholders' equity. During the year ended December 31,
1999, the Company reclassified certain investments from Available-For-Sale
securities to Held-To-Maturity securities. In connection with the
reclassification, $834,455 of unrealized gains on such securities are included
in Accumulated Other Comprehensive Income in Stockholder's Equity and is being
amortized over the remaining life of the securities as an adjustment to yield.
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES
DECEMBER 31,1999
<S> <C> <C> <C> <C>
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies*.............................. $ 3,336,121 $ 68,367 $ 7,222 $ 3,397,266
Debt Securities issued by
States of the U.S.......................... 15,578,482 -- 1,896,633 13,681,849
Corporate Debt Securities................... 7,171,138 -- 755,842 6,415,296
Other Debt Securities....................... 5,062,250 -- 632,074 4,430,176
-------------- -------------- ---------- ------------
$ 31,147,991 $ 68,367 $ 3,291,771 $ 27,924,587
============= =========== =========== ============
DECEMBER 31,1998
U.S. Treasury Securities and obligations
of U.S. Government Corporations
and Agencies*.............................. $ 3,381,598 $ 223,647 $ -- $ 3,605,245
Corporate Debt Securities................... 2,000,000 125,400 -- 2,125,400
Other Debt Securities....................... 110,000 -- -- 110,000
-------------- ------------ --------- -------------
$ 5,491,598 $ 349,047 $ -- $ 5,840,645
============ ========= =========== ===========
</TABLE>
*These securities are on deposit for various state insurance departments and are
therefore restricted as to sale.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The amortized cost and estimated market value of debt securities at
December 31, 1999, by contractual maturity, are shown below. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
HELD TO MATURITY AVAILABLE FOR SALE
---------------- ------------------
AMORTIZED ESTIMATED AMORTIZED ESTIMATED
COST MARKET VALUE COST MARKET VALUE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less.......................$ 100,000 $ 100,000 $ 9,263,507 $ 9,067,102
Due after one year through five years......... 3,346,121 3,407,266 23,841,639 23,782,165
Due after five years through ten years........ 1,098,443 979,037 41,461,579 40,105,851
Due after ten years........................... 26,603,427 23,438,284 36,855,572 36,126,727
------------ ------------ --------------- --------------
$31,147,991 $27,924,587 $111,422,297 $109,081,845
=========== =========== ============ ============
</TABLE>
Proceeds from sales of investments in fixed maturities were $47,855,224,
$42,655,632 and $38,900,851 in 1999, 1998 and 1997, respectively. Gross gains of
$422,254 and gross losses of $1,612,802 were realized on those sales in 1999.
Gross gains of $977,442 and gross losses of $62,551 were realized on those sales
in 1998. Gross gains of $374,583 and gross losses of $215,709 were realized on
those sales in 1997.
(d) RECOGNITION OF REVENUE, POLICYHOLDER ACCOUNT BALANCES AND POLICY
BENEFITS
TRADITIONAL ORDINARY LIFE AND HEALTH
Revenues from the traditional life insurance policies represent
premiums that are recognized as earned when due. Health insurance
premiums are recognized as revenue over the time period to which the
premiums relate. Benefits and expenses are associated with earned
premiums so as to result in recognition of profits over the lives of the
contracts. This association is accomplished by means of the provision
for liabilities for future policy benefits and the deferral and
amortization of policy acquisition costs.
UNIVERSAL LIFE AND VARIABLE LIFE
Revenues from universal life and variable life policies represent
amounts assessed against policyholders. Included in such assessments are
mortality charges, surrender charges and policy service fees.
Policyholder account balances on universal life consist of the
premiums received plus credited interest, less accumulated policyholder
assessments. Amounts included in expense represent benefits in excess of
policyholder account balances. The value of policyholder accounts on
variable life are included in separate account liabilities as discussed
below.
ANNUITIES
Revenues from annuity contracts represent amounts assessed against
contractholders. Such assessments are principally sales charges,
administrative fees, and in the case of variable annuities, mortality
and expense risk charges. The carrying value and fair value of fixed
annuities are equal to the policyholder account balances, which
represent the net premiums received plus accumulated interest.
(e) SEPARATE ACCOUNTS. Separate account assets and the related liabilities,
both of which are valued at market, represent segregated variable annuity and
variable life contracts maintained in accounts with individual investment
objectives. All investment income (gains and losses of these accounts) accrues
directly to the contractholders and therefore does not affect net income of the
Company.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(f) COMPREHENSIVE INCOME. For 1998, the Company adopted Statement of
Financial Accounting Standards No, 130 ("SFAS 130"), "Reporting Comprehensive
Income". SFAS 130 establishes the disclosure requirements for reporting
comprehensive income in an entity's financial statements. Total comprehensive
income includes net income and unrealized gains and losses on available-for-sale
securities. Accumulated other comprehensive income, a component of stockholders'
equity, was formerly reported as unrealized gains and losses on
available-for-sale securities. There was no impact on previously reported net
income from the adoption of SFAS 130.
Note 3 -- Fair Value of Financial Instruments
The carrying amounts for cash, short-term investments and policy loans as
reported in the accompanying balance sheet approximate their fair values. The
fair values for fixed maturity and equity-securities are based upon quoted
market prices, where available or are estimated using values from independent
pricing services.
The carrying amounts for the Company's liabilities under investment - type
contracts approximate their fair values because interest rates credited to
account balances approximate current rates paid on similar investments and are
generally not guaranteed beyond one year. Fair values for the Company's
insurance contracts other than investment - type contracts are not required to
be disclosed. However, the fair values of liabilities for all insurance
contracts are taken into consideration in the overall management of interest
rate risk, which minimizes exposure to changing interest rates.
NOTE 4 -- RETIREMENT PLANS
The Company participates in a non-contributory profit sharing plan for the
benefit of its employees and those of other wholly-owned subsidiaries of its
parent. The Plan provides for retirement benefits based upon earnings. Vesting
of benefits is based upon years of service. For the years ended December 31,
1999, 1998 and 1997, the Company charged operations approximately $74,000,
$79,000 and $70,000 respectively for its portion of the contribution.
The Company also has a non-contributory retirement plan for the benefit of
its sales agents. The plan provides for retirement benefits based upon
commission on first-year premiums and length of service. The plan is unfunded.
Vesting of benefits is based upon graduated percentages dependent upon the
number of allocations made in accordance with the plan by the Company for each
participant. The Company charged to operations pension expenses of approximately
$478,000 in 1999, $475,000 in 1998 and $419,000 in 1997. The accrued liability
of approximately $3,406,000 in 1999 and $3,251,000 in 1998 was sufficient to
cover the value of benefits provided by the plan.
In addition, the Company participates in a 401(k) savings plan covering all
of its eligible employees and those of other wholly-owned subsidiaries of its
parent whereby employees may voluntarily contribute a percentage of their
compensation with the Company matching a portion of the contributions of certain
employees. Contributions to this plan were not material.
NOTE 5 -- COMMITMENTS AND CONTINGENT LIABILITIES
The Company has agreements with affiliates and non-affiliates as follows:
(a) The Company's maximum retention on any one life is $100,000. The Company
reinsures a portion of its risk with other insurance companies and reserves are
reduced by the amount of reserves for such reinsured risks. The Company is
liable for any obligations that any reinsurance company may be unable to meet.
The Company had reinsured approximately 10% of its net life insurance in force
at December 31, 1999, 1998 and 1997. The Company also had assumed reinsurance
amounting to approximately 19%, 20% and 20% of its net life insurance in force
at the respective year ends. None of these transactions had any material effect
on the Company's operating results.
FIRST INVESTORS LIFE INSURANCE COMPANY
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(b) The Company and certain affiliates share office space, data processing
facilities and management personnel. Charges for these services are based upon
the Company's proportionate share of: space occupied, usage of data processing
facilities and time allocated to management. During the years ended December 31,
1999, 1998 and 1997, the Company paid approximately $1,610,000, $1,440,000 and
$1,114,000, respectively, for these services. In addition, the Company
reimbursed an affiliate approximately $10,501,000 in 1999, $10,799,000 in
1998,and $9,814,000 in 1997 for commissions relating to the sale of its
products.
The Company maintains a checking account with a financial institution,
which is also a wholly-owned subsidiary of its parent. The balance in this
account was approximately $443,000 at December 31, 1999 and $387,000 at December
31, 1998.
(c) The Company is subject to certain claims and lawsuits arising in the
ordinary course of business. In the opinion of management, all such claims
currently pending will not have a material adverse effect on the financial
position of the Company or its results of operations.
NOTE 6 -- ADJUSTMENTS MADE TO STATUTORY ACCOUNTING PRACTICES
Note 1 describes some of the common differences between statutory practices
and generally accepted accounting principles. The effects of these differences
for the years ended December 31, 1999, 1998 and 1997 are shown in the following
table in which net income and capital shares and surplus reported therein on a
statutory basis are adjusted to a GAAP basis.
<TABLE>
<CAPTION>
NET INCOME CAPITAL SHARES AND SURPLUS
YEAR ENDED DECEMBER 31 AT DECEMBER 31
------------------------------------------ -----------------------------------------
1999 1998 1997 1999 1998 1997
------------- ------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Reported on a statutory basis ........... $ 8,813,513 $ 6,191,762 $ 5,809,629 $ 45,872,816 $ 37,991,708 $ 32,159,721
------------ ------------ ------------ ------------ ------------ ------------
Adjustments:
Deferred policy acquisition costs (b) 2,828,344 2,607,517 351,239 24,607,577 20,873,233 18,446,716
Future policy benefits (a) ........... (901,121) (1,259,673) 133,848 (5,161,385) (4,260,262) (3,000,589)
Deferred income taxes ................ (203,000) (265,000) 603,000 1,868,000 473,000 1,039,000
Premiums due and deferred (e) ........ 102,955 85,385 84,291 (1,086,477) (1,189,428) (1,274,816)
Cost of collection and other statutory
liabilities ....................... (4,228) (6,185) (924) 25,648 29,874 36,060
Non-admitted assets .................. -- -- -- 236,793 218,959 224,411
Asset valuation reserve .............. -- -- -- 2,065,557 1,691,873 1,325,986
Interest maintenance reserve ......... (192,495) (223,136) (55,019) -- 436,803 56,112
Gross unrealized holding gains on
available-for-sale securities ..... -- -- -- (1,506,000) 4,099,000 3,032,000
Net realized capital gains (losses) .. (1,190,548) 914,891 158,874 -- -- --
Other ................................ 405,349 (310,402) (53,489) -- -- --
------------ ------------ ------------ ------------ ------------ ------------
845,256 1,543,397 1,221,820 21,049,713 22,373,052 19,884,880
------------ ------------ ------------ ------------ ------------ ------------
In accordance with generally accepted
accounting principles ................ $ 9,658,769 $ 7,735,159 $ 7,031,449 $ 66,922,529 $ 60,364,760 $ 52,044,601
============ ============ ============ ============ ============ ============
Per share, based on 534,350 shares
outstanding .......................... $ 18.08 $ 14.48 $ 13.16 $ 125.24 $ 112.97 $ 97.40
============ ============ ============ ============ ============ ============
</TABLE>
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following is a description of the significant policies used to adjust
the net income and capital shares and surplus from a statutory to a GAAP basis.
(a) Liabilities for future policy benefits have been computed primarily by
the net level premium method with assumptions as to anticipated mortality,
withdrawals and investment yields. The composition of the policy liabilities and
the more significant assumptions pertinent thereto are presented below:
<TABLE>
<CAPTION>
DISTRIBUTION OF LIABILITIES* BASIS OF ASSUMPTIONS
- -------------------------------------------------------------------------------------------------------------
YEARS
1999 1998 OF ISSUE INTEREST MORTALITY TABLE WITHDRAWAL
---- ---- -------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Non-par:
$1,314,871 $ 1,458,458 1962-1967 4 1/2% 1955-60 Basic Select plus Ultimate Linton B
4,852,177 5,021,949 1968-1988 5 1/2% 1955-60 Basic Select plus Ultimate Linton B
2,093,102 2,403,257 1984-1988 7 1/2% 85% of 1965-70 Basic Select Modified
plus Ultimate Linton B
130,064 116,030 1989-Present 7 1/2% 1975-80 Basic Select plus Ultimate Linton B
118,686 63,482 1989-Present 7 1/2% 1975-80 Basic Select plus Ultimate Actual
25,240 26,682 1989-Present 8% 1975-80 Basic Select plus Ultimate Actual
33,668,196 33,158,902 1985-Present 6% Accumulation of Funds --
Par:
220,214 216,096 1966-1967 4 1/2% 1955-60 Basic Select plus Ultimate Linton A
12,886,598 13,141,191 1968-1988 5 1/2% 1955-60 Basic Select plus Ultimate Linton A
956,577 907,950 1981-1984 7 1/4% 90% of 1965-70 Basic Select
plus Ultimate Linton B
4,864,140 4,791,142 1983-1988 9 1/2% 80% of 1965-70 Basic Select
plus Ultimate Linton B
19,211,131 17,805,284 1990-Present 8% 66% of 1975-80 Basic Select
plus Ultimate Linton B
Annuities:
14,360,260 16,075,327 1976-Present 5 1/2% Accumulation of Funds --
Miscellaneous:
29,724,170 24,418,452 1962-Present 2 1/2%-3 1/2% 1958-CSO None
</TABLE>
- ------------------
* The above amounts are before deduction of deferred premiums of $748,330 in
1999 and $817,348 in 1998.
(b) The costs of acquiring new business, principally commissions and related
agency expenses, and certain costs of issuing policies, such as medical
examinations and inspection reports, all of which vary with and are primarily
related to the production of new business, have been deferred. Costs deferred on
universal life and variable life are amortized as a level percentage of the
present value of anticipated gross profits resulting from investment yields,
mortality and surrender charges. Costs deferred on traditional ordinary life and
health are amortized over the premium-paying period of the related policies in
proportion to the ratio of the annual premium revenue to the total anticipated
premium revenue. Anticipated premium revenue was estimated using the same
assumptions that were used for computing liabilities for future policy benefits.
Amortization of $969,205 in 1999, $1,005,483 in 1998 and $663,200 in 1997 was
charged to operations.
(c) Participating business represented 7.9% and 8.8% of individual life
insurance in force at December 31, 1999 and 1998, respectively.
The Board of Directors annually approves a dividend formula for calculation
of dividends to be distributed to participating policyholders.
The portion of earnings of participating policies that can inure to the
benefit of shareholders is limited to the larger of 10% of such earnings or $.50
per thousand dollars of participating insurance in force. Earnings in excess of
that limit must be excluded from shareholders' equity by a charge against
operations. No such charge has been made, since participating business has
operated at a loss to date on a statutory basis. It is anticipated, however,
that the participating lines will be profitable over the lives of the policies.
(d) New York State insurance law prohibits the payment of dividends to
stockholders from any source other than the statutory unassigned surplus. The
amount of said surplus was $36,088,375, $28,207,166 and $22,374,879 at December
31, 1999, 1998 and 1997, respectively.
(e) Statutory due and deferred premiums are adjusted to conform to the
expected premium revenue used in computing future benefits and deferred policy
acquisition costs. In this regard, the GAAP due premium is recorded as an asset
and the GAAP deferred premium is applied against future policy benefits.
<PAGE>
FIRST INVESTORS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- FEDERAL INCOME TAXES
The Company joins with its parent company and other affiliated companies in
filing a consolidated Federal income tax return. The provision for Federal
income taxes is determined on a separate company basis.
Retained earnings at December 31, 1999 included approximately $146,000 which
is defined as "policyholders' surplus" and may be subject to Federal income tax
at ordinary corporate rates under certain future conditions, including
distributions to stockholders.
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
1999 1998
------------------ -------------------
<S> <C> <C>
Policyholder dividend provision.................................................... $ (471,717) $ (448,300)
Non-qualified agents' pension plan reserve......................................... (1,306,579) (1,262,900)
Deferred policy acquisition costs.................................................. 3,535,251 2,956,800
Future policy benefits............................................................. (3,042,310) (2,835,100)
Bond discount...................................................................... 47,677 35,900
Unrealized holding gains (losses) on Available-For-Sale Securities................. (468,000) 1,130,000
Capital loss carryover............................................................. (100,759) -
Other.............................................................................. (61,563) (49,400)
--------------- ------------------
$ (1,868,000) $ (473,000)
=============== ===============
</TABLE>
The currently payable Federal Income tax provision of $4,865,000 for 1999 is
net of a $311,000 Federal tax benefit resulting from a capital loss carryback of
$914,891.
<PAGE>
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
First Investors Life Insurance Company
New York, New York
We have audited the statement of assets and liabilities of First Investors
Life Variable Annuity Fund A (a separate account of First Investors Life
Insurance Company, registered as a unit investment trust under the Investment
Company Act of 1940), as of December 31, 1999, and the related statements of
operations for the year then ended and changes in net assets for each of the two
years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of First Investors Life
Variable Annuity Fund A as of December 31, 1999, and the results of its
operations for the year then ended and the changes in its net assets for each of
the two years in the period then ended, in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 18, 2000
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE
VARIABLE ANNUITY FUND A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<S> <C>
ASSETS
Investments at net asset value (Note 2)
First Investors Special Bond Fund, Inc. (2,655,288 shares at
$11.37 per share, cost $51,242,034)....................................... $30,194,320
LIABILITIES
Payable to First Investors Life Insurance Company......................... 18,804
---------------
NET ASSETS................................................................ $30,175,516
===========
Net assets represented by Contracts in accumulation period
(5,785,665 units at unit value of $5.21).................................. $30,175,516
===========
</TABLE>
See notes to financial statements.
<PAGE>
FIRST INVESTORS LIFE
VARIABLE ANNUITY FUND A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
INVESTMENT INCOME
Income:
Dividends..................................... $ 3,176,467
-------------
Total income................................ 3,176,467
--------------
Expenses:
Mortality and expense risks (Note 3).......... 233,880
---------------
Total expenses.............................. 233,880
---------------
NET INVESTMENT INCOME............................ 2,942,587
--------------
UNREALIZED DEPRECIATION ON INVESTMENTS
Beginning of year................................ 19,741,491
End of year...................................... 21,047,715
------------
Change in unrealized depreciation on investments. (1,306,224)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,636,363
==============
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FIRST INVESTORS LIFE
VARIABLE ANNUITY FUND A
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31,
1999 1998
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets
From Operations
Net investment income ....................................... $ 2,942,587 $ 3,006,948
Change in unrealized depreciation on investments............. (1,306,224) (2,745,326)
----------- ------------
Net increase in net assets resulting from operations......... 1,636,363 261,622
----------- ------------
From Unit Transactions
Net annuity considerations................................... 155,124 361,514
Contract payments............................................ (3,855,343) (4,442,664)
----------- ------------
Net decrease in net assets derived from unit transactions (3,700,219) (4,081,150)
----------- ------------
Net decrease in net assets................................... (2,063,856) (3,819,528)
Net Assets
Beginning of year............................................ 32,239,372 36,058,900
----------- ------------
End of year.................................................. $30,175,516 $32,239,372
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
FIRST INVESTORS LIFE
VARIABLE ANNUITY FUND A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 -- ORGANIZATION
First Investors Life Variable Annuity Fund A (Separate Account A), a unit
investment trust registered under the Investment Company Act of 1940 (the 1940
Act), is a segregated investment account established by First Investors Life
Insurance Company (FIL). All assets of the separate account are invested in
shares of First Investors Special Bond Fund, Inc. (the Fund), an open-end
diversified management investment company registered under the 1940 Act.
NOTE 2 -- SIGNIFICANT ACCOUNTING PRACTICES
INVESTMENTS
Shares of the Fund held by Separate Account A are valued at net asset value
per share. All distributions received from the Fund are reinvested to purchase
additional shares of the Fund at net asset value. The Fund's investments in high
yield securities, whether rated or unrated, may be considered speculative and
subject to greater market fluctuations and risks of loss of income and principal
than lower yielding, higher rated, fixed income securities.
FEDERAL INCOME TAXES
Separate Account A is not taxed separately because its operations are part of
the total operations of FIL, which is taxed as a life insurance company under
the Internal Revenue Code. Separate Account A will not be taxed as a regulated
investment company under Subchapter M of the Code. Under existing Federal income
tax law, no taxes are payable on the investment income or on the capital gains
of Separate Account A.
NOTE 3-- MORTALITY AND EXPENSE RISKS AND DEDUCTIONS
In consideration for its assumption of the mortality and expense risks
connected with the Variable Annuity Contracts, FIL deducts an amount equal on an
annual basis to 0.75% of the daily net asset value of Separate Account A. The
deduction for the year ended December 31, 1999 was $233,880. An additional
administrative charge of $7.50 may be deducted annually by FIL from the
Accumulated Value of Deferred Annuity Contracts which have an Accumulated Value
of less than $1,500 due to partial surrenders. There was no deduction under this
provision during 1999.
