<PAGE> 1
'33 ACT FILE NO. 33-___
'40 ACT FILE NO. 811-3365
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. ____ [ ]
POST-EFFECTIVE AMENDMENT NO. ____ [ ]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 78 [X]
(CHECK APPROPRIATE BOX OR BOXES.)
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(EXACT NAME OF REGISTRANT)
SECURITY FIRST LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 312-6100
RICHARD C. PEARSON
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SECURITY FIRST LIFE INSURANCE COMPANY
11365 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
(NAME AND ADDRESS OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS POSSIBLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
THE REGISTRANT HEREBY ELECTS, PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT
COMPANY ACT OF 1940, TO REGISTER AN INDEFINITE NUMBER OF SECURITIES BY THIS
REGISTRATION STATEMENT. PURSUANT TO PARAGRAPH (a)(3) OF SAID RULE 24f-2 AND 17
CFR SECTION 202.3a, THE REGISTRANT HAS CAUSED THE REQUISITE REGISTRATION FEE OF
$500 TO BE REMITTED TO THE U.S. TREASURY DESIGNATED LOCKBOX DEPOSITORY AT THE
MELLON BANK IN PITTSBURGH, PENNSYLVANIA.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
SECURITY FIRST LIFE SEPARATE ACCOUNT A
CROSS REFERENCE SHEET
PART A - PROSPECTUS
<TABLE>
<CAPTION>
Item Number in Form N-4 Caption in Prospectus
- ----------------------- ---------------------
<S> <C>
1. Cover Page Cover Page
2. Definitions Glossary
3. Synopsis Summary of the Contracts; Fee Tables
4. Condensed Financial Information Condensed Financial Information; Financial
Information
5. General Description of Registrant, Description of Security First Life Insurance
Depositor and Portfolio Companies Company, The Separate Account and The Funds;
Voting Rights
6. Deductions and Expenses Contract Charges
7. General Description of Variable Description of the Contracts; Accumulation
Annuity Contracts Period; Annuity Benefits
8. Annuity Period Annuity Benefits
9. Death Benefit Death Benefits
10. Purchases and Contract Value Description of the Contracts; Accumulation
Period; Principal Underwriter
11. Redemptions Accumulation Period
12. Taxes Federal Income Tax Status
13. Legal Proceedings Legal Proceedings
14. Table of Contents of the Statement of Table of Contents of the Statement of
Additional Information Additional Information
</TABLE>
<PAGE> 3
PART B - STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<S> <C>
15. Cover Page Cover Page
16. Table of Contents Table of Contents
17. General Information and History The Insurance Company; The Separate
Account
18. Services Servicing Agent; Safekeeping of Securities;
Independent Public Accountant; Legal
Matters
19. Purchase of Securities Being Offered Purchase of Securities Being Offered
20. Underwriters Distribution of the Contracts
21. Calculation of Yield Quotations of Not Applicable
Money Market Subaccounts
22. Annuity Payments Annuity Payments
23. Financial Statements Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this registration statement.
<PAGE> 4
SECURITY FIRST LIFE SEPARATE ACCOUNT
- --------------------------------------------------------------------------------
GROUP FLEXIBLE PAYMENT
VARIABLE ANNUITY CONTRACTS
Security First Life Insurance Company
11365 West Olympic Boulevard
Los Angeles, California 90064
- --------------------------------------------------------------------------------
The group flexible payment fixed and variable contracts (the "Contracts")
described in this prospectus are issued by Security First Life Insurance Company
("Security First Life"). These Contracts are designed to provide annuity
benefits to employees of public school systems and certain tax-exempt
organizations as tax deferred annuity contracts under the provisions of Section
403(b) of the Internal Revenue Code of 1986 (the "Code"), to retirement plans
that qualify under Section 401 of the Code, to employees covered under employer
deferred compensation plans which are qualified under Section 457 of the Code,
and to individuals as individual retirement annuities under Section 408 of the
Code.
Participants may allocate premiums and cash value to one or more series of the
Separate Account (the "Series"). The assets of the Series will be used to
purchase, at net asset value, shares of (i) the Money Market Portfolio and
Growth Portfolio of the Variable Insurance Products Fund; (ii) the Asset Manager
Portfolio, Contrafund Portfolio and Index 500 Portfolio of the Variable
Insurance Products Fund II; (iii) the T. Rowe Price Bond Series (formerly Bond
Series), the T. Rowe Price Growth and Income Series (formerly Growth and Income
Series) and the Virtus U.S. Government Income Series (formerly U.S. Government
Income Series) of the Security First Trust; (iv) the International Portfolio of
the Scudder Variable Life Investment Fund; and (v) the Small Capitalization
Portfolio of The Alger American Fund (referred to herein as the "Funds").
This prospectus sets forth information a prospective investor should know before
investing. Additional information about the Contracts has been filed with the
Securities and Exchange Commission ("SEC") in a Statement of Additional
Information, dated , 1996, which information is incorporated herein
by reference and is available without charge upon written request to Security
First Life Insurance Company, P.O. Box 92193, Los Angeles, California 90009 or
by telephoning 1(800)283-4536.
The table of contents of the Statement of Additional Information appears on Page
24 of the Prospectus.
- --------------------------------------------------------------------------------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING OF SHARES OF ANY UNDERLYING FUND
FOR WHICH A CURRENT PROSPECTUS HAS NOT BEEN RECEIVED AND IN NO EVENT WILL
DESIGNATION OF AN UNDERLYING FUND FOR WHICH A CURRENT PROSPECTUS HAS NOT BEEN
RECEIVED BE PERMITTED. PLEASE READ AND RETAIN THIS PROSPECTUS FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
Prospectus dated , 1996 SF 230 ( /96)
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Glossary....................................................................................... 3
Summary of the Contract........................................................................ 4
Fee Tables..................................................................................... 7
Condensed Financial Information................................................................ 10
Performance.................................................................................... 10
Financial Information.......................................................................... 10
Description of Security First Life Insurance Company,
The Separate Account and The Funds........................................................... 10
The Insurance Company...................................................................... 10
The General Account........................................................................ 10
The Separate Account....................................................................... 10
The Funds.................................................................................. 11
Principal Underwriter.......................................................................... 12
Servicing Agent................................................................................ 13
Custody of Securities.......................................................................... 13
Contract Charges............................................................................... 13
Premium Taxes.............................................................................. 13
Sales Charges.............................................................................. 13
Administration Fees........................................................................ 14
Contract Maintenance Charge................................................................ 14
Transaction Charges........................................................................ 14
Mortality and Administrative Expense Risk Charges.......................................... 14
Free Look Period........................................................................... 15
Deferred Compensation Plans................................................................ 15
Description of the Contracts................................................................... 15
General.................................................................................... 15
Purchase Payments.......................................................................... 15
Conversions................................................................................ 15
Interest Transfer Options..................................................................
Dollar Cost Averaging...................................................................... 16
Reallocation Election...................................................................... 16
Loans...................................................................................... 16
Modification of the Contracts.............................................................. 17
Assignment................................................................................. 17
Accumulation Period............................................................................ 18
Crediting Accumulation Units in the Separate Account....................................... 18
Valuation of Accumulation Units............................................................ 18
Net Investment Factor...................................................................... 18
Surrenders................................................................................. 18
Statement of Account....................................................................... 18
Annuity Benefits............................................................................... 19
Variable Annuity Payments.................................................................. 19
Level Payments Varying Annually............................................................ 19
Assumed Investment Return.................................................................. 19
Election of Annuity Date and Form of Annuity............................................... 20
Frequency of Payment....................................................................... 20
Annuity Unit Values........................................................................ 21
Death Benefits................................................................................. 21
Death Benefit Before the Annuity Date...................................................... 21
Death Benefit After the Annuity Date....................................................... 21
Federal Income Tax Status...................................................................... 22
Withholding................................................................................ 23
Multiple Contracts......................................................................... 23
Obtaining Tax Advice....................................................................... 23
Voting Rights.................................................................................. 23
Legal Proceedings.............................................................................. 24
Additional Information......................................................................... 24
Table of Contents of Statement of Additional Information....................................... 24
</TABLE>
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
the offer described herein and, if given or made, such information or
representations must not be relied upon as having been authorized. This
Prospectus does not constitute an offer in any jurisdiction to any person to
whom such offer would be unlawful therein.
2
<PAGE> 6
GLOSSARY
As used in this Prospectus, these terms have the following meanings:
ACCUMULATION UNIT -- A measuring unit used to determine the value of a
Participant's interest in a General Account or Separate Account Series under a
Contract at any time before Annuity payments commence.
ANNUITANT -- The individual on whose life Annuity payments under a Contract are
based.
ANNUITY -- A series of periodic payments made to an Annuitant for a defined
period of time.
ANNUITY DATE -- The date on which Annuity payments begin.
ANNUITY UNIT -- A measuring unit used to determine the amount of Variable
Annuity payments based on a Separate Account Series after such payments have
commenced.
ASSUMED INVESTMENT RETURN -- The investment rate selected by the Annuitant for
use in determining the Variable Annuity payments.
BENEFICIARY -- The person who has the right to receive a Death Benefit on the
death of the Participant.
BUSINESS DAY -- Each Monday through Friday except for days the New York Stock
Exchange is not open for trading.
CERTIFICATE -- The form given to Participants describing their rights under a
Contract. No Certificates are issued to Participants under deferred compensation
or qualified retirement plans.
CERTIFICATE DATE -- The date a Participant's Certificate is issued, or the date
when a Participant's Account is established where no Certificate is issued.
CERTIFICATE YEAR -- A period of 12 consecutive months beginning on the
Certificate Date and each anniversary of this date.
CONTRACT -- The agreement between Security First Life and the group
contractholder covering the rights of the whole group and the certificate issued
to the Participants.
FIXED ANNUITY -- An Annuity providing guaranteed level payments. Such payments
are not based upon the investment experience of the Separate Account.
FUND -- An open end management investment company, or series thereof, registered
under the Investment Company Act of 1940 ("1940 Act"), which serves as the
underlying investment medium for a Series of the Separate Account.
GENERAL ACCOUNT -- All assets of Security First Life other than those in the
Separate Account or any of its other segregated asset accounts.
NORMAL ANNUITY DATE -- The earlier of (i) the first day of the month coincident
with or immediately preceding the date on which a distribution must commence
under the terms of the Plan to which the Contract is issued, or (ii) the first
day of the month coincident with or next following the anniversary of the
Certificate Date nearest the Participant's 75th birthday.
OWNER -- The person who has title to the Contract.
PARTICIPANT -- The individual by or for whom Purchase Payments are made under a
Contract.
PARTICIPANT'S ACCOUNT -- The sum of the values of all Accumulated Units credited
for a Participant under a Contract and the Participant's interest in the General
Account.
PLAN -- The 403(b) plan, 457 deferred compensation plan, 401 qualified
retirement plan or 408 individual retirement annuity with respect to which the
Contract is issued.
PURCHASE PAYMENT -- The amounts paid to Security First Life in order to provide
Annuity benefits under the Contract.
SEPARATE ACCOUNT -- The segregated asset account entitled "Security First Life
Separate Account A" which has been established by Security First Life pursuant
to Delaware law to receive and invest amounts allocated to provide Variable
Annuity benefits under the Contracts. The Separate Account is registered as a
unit investment trust under the 1940 Act.
3
<PAGE> 7
SERIES -- A division of the Separate Account, the assets of which consist of
shares of a Fund, or an accounting series maintained for Security First Life's
General Account to determine values used to provide Fixed Annuity benefits under
the Contracts.
SURRENDER CHARGE -- A percentage charge which may be deducted upon full or
partial surrender, which varies according to the period of time that Purchase
Payments have remained with Security Life prior to surrender.
VALUATION DATE -- Any Business Day used by the Separate Account to determine the
value of part or all of its assets for purposes of determining Accumulation and
Annuity Unit values for the Contracts. Security First Life will establish
Valuation Dates at its discretion, but until notice to the contrary is given
there will be one Valuation Date in each calendar week for Annuity Unit values,
such date being the last Business Day in a week. Accumulation unit values will
be determined each Business Day.
VALUATION PERIOD -- The period of time from one Valuation Date through the next
Valuation Date.
VARIABLE ANNUITY -- An Annuity providing payments which will vary annually in
accordance with the net investment experience of the applicable Separate Account
Series.
SUMMARY OF THE CONTRACT
THE CONTRACT
The Contract is a combined fixed and variable annuity contract which may be
issued to plans qualified for special tax treatment under Section 403(b) of the
Code (tax shelter annuities), retirement plans which qualify under Section 401
of the Code, Section 457 deferred compensation plans and Section 408 individual
retirement annuities. This prospectus is intended to serve as a disclosure
document only for the variable portion of the Contract.
PURCHASE PAYMENTS
Purchase Payments under the Contract may be made to the General Account, the
Separate Account or allocated between them in accordance with the election of
the Participant. The minimum Purchase Payment is $20 with an annual minimum of
$240. There is no initial sales charge; however, certain charges and deductions
will be made to the Participant's Account. (See "Contract Charges," page 11.)
Amounts allocated to a Series of the Separate Account may be converted to one or
more of the other Separate Account Series at any time and may be transferred to
the General Account at any time before the Annuity Date. Amounts allocated to
the General Account may be transferred to the Separate Account subject to
certain limitations as to time and amount. (See "Conversions," page 15,
"Interest Transfer Option," page 16; and "Reallocation," page 16.) Unless the
Participant has made an election of a special option, the minimum conversion is
the lesser of $500 or the balance of the Participant's Account in the Series.
SEPARATE ACCOUNT
Pursuant to the Participant's designation, Purchase Payments allocated to
the Separate Account are invested at net asset value in Accumulation Units of
one or more of ten series, each of which consists of the Shares of a different
Fund. The Funds presently consist of the Money Market Portfolio and Growth
Portfolio of the Variable Insurance Products Fund, the Asset Manager Portfolio,
Contrafund Portfolio and Index 500 Portfolio of the Variable Insurance Products
Fund II, the T. Rowe Price Bond Series, T. Rowe Price Growth and Income Series
and Virtus U.S. Government Income Series of the Security First Trust, the
International Portfolio of the Scudder Variable Life Investment Fund, and the
Small Capitalization Portfolio of The Alger American Fund. The investment
adviser of the Variable Insurance Products Fund and the Variable Insurance
Products Fund II is Fidelity Management & Research Company ("FMR"). The
investment adviser and manager of Security First Trust is Security First
Investment Management Corporation ("Security Management"). T. Rowe Price
Associates, Inc. ("Price Associates") is subadvisor to Security Management with
respect to the T. Rowe Price Bond Series and T. Rowe Price Growth and Income
Series, and Virtus Capital Management, Inc. ("Virtus") is subadvisor to Security
Management with respect to the Virtus U.S. Government Income Series. The
investment adviser and manager of the Scudder Variable Life Investment Fund is
Scudder, Stevens & Clark Inc. ("Scudder"). The investment adviser and manager of
The Alger American Fund is Fred Alger Management, Inc. ("Alger Management").
(See "The Separate Account," page 10 and "The Funds," page 11.)
4
<PAGE> 8
CHARGES AND DEDUCTIONS
A transaction charge of $10 will be deducted from the Participant's Account
for each conversion from a Series and upon annuitization of all or a portion of
the Participant's Account. In addition, a transaction charge of the lesser of
$10 or 2% of the amount withdrawn will be deducted from the Participant's
Account upon each partial or full surrender. (See "Transaction Charges," page
14.) Conversion transaction fees are currently waived and such waiver is
permanent for Certificates issued before termination of this waiver.
An administration fee will be deducted daily from the Participant's
interests in the Separate Account in the amount of .000274% (.10% per annum).
(See "Administration Fees," page 14.)
Daily deductions will be made for mortality risks in the amount of .002192%
(.80% per annum) and for expense risks in the amount of .001233% (.45% per
annum) (See "Mortality Risk and Expense Risk Charge," page 14).
A surrender charge (contingent deferred sales charge) may be deducted in the
event the Participant requests a full or partial surrender. The charge is based
on a graduated table of charges starting at 7% for Purchase Payments credited
within the calendar year of the surrender and decreasing 1% for each preceding
calendar year or part thereof from the date of receipt and declining to 0% for
Purchase Payments received earlier than the fourth calendar year prior to the
surrender. No charge will be made for that part of the first surrender in a
Certificate Year that does not exceed 10% from the Participant's interest in the
Separate Account and 10% from his or her interest in the General Account. (See
"Sales Charges," page 13.)
The Contract permits Security First Life to deduct a maximum administrative
fee of $27.50 plus $2.50 for each Series in which the Participant invests. The
fee is payable on each anniversary of the Certificate Date. Until further
notice, Security First Life will waive these administrative fees and this
reduction is permanent for Certificates issued prior to the termination or
reduction of the waiver. (See "Administrative Fees, page 12.")
Premium taxes payable to any state or other governmental agency may be
deducted from the Participant's Account when incurred. Premium taxes currently
range from 0% to 2.35% (3.5% in Nevada). Until further notice to the
Participant, Security First Life will waive deduction of premium taxes. (See
"Premium Taxes," page 13.)
FREE LOOK PERIOD
At any time within twenty days (or such longer period as required by state
law) after the receipt of the Contract it may be returned for cancellation and a
full refund of all Purchase Payments or, if required by state law, the greater
of the Purchase Payments or the account value. (See "Free Look Period," page
15).
VARIABLE ANNUITY PAYMENTS
Annuity payments will start on the Annuity Date. The Participant selects the
Annuity Date, an Annuity payment option, and an Assumed Investment Return. Any
of these selections may be changed prior to the Annuity Date. The Variable
Annuity payment will vary annually based on a comparison of the Assumed
Investment Returns with the investment experience of the Series in which the
Annuity Units are invested. (See "Variable Annuity Payments," page 19.) If
Annuity payments from any one Series would be less than $50, Security First Life
reserves the right to change the frequency of the payments from that Series to
such intervals as will result in payments of at least $50 from each Series. (See
"Frequency of Payment," page 20.)
SURRENDERS
If permitted by the Plan and the Contract, a Participant may surrender all
or part of his or her account before the Annuity Date. Requests for partial or
full surrenders must be made in writing. However, no partial surrender from a
Series is permitted if it would reduce the Participant's interest in the Series
to less than $200, unless the entire amount allocated to that Series is being
surrendered. A surrender charge may be assessed and a transaction charge will be
assessed. (See "Sales Charges," page 13 and "Transaction Charges," page 14.) In
addition, the amounts surrendered, less any basis, will be taxed as ordinary
income and may be subject to a penalty tax under the Code. Certain restrictions
are applicable to withdrawals from Contracts funding retirement plans qualified
for special tax treatment under the Code. (See "Federal Income Tax Status," page
22.)
LOANS (SECTION 403(B) PLANS ONLY)
Participants whose Contracts are issued under a Plan which qualifies under
Section 403(b) of the Code may be eligible to obtain a loan from that portion of
the Participant's Account allocated to the General Account. Security First
5
<PAGE> 9
Life reserves the right to terminate loans and to change the terms under which
loans may be made. Any such action would not affect outstanding loans. (See
"Loans," page 16.) A default in the repayment of a loan may result in unrepaid
loan proceeds being considered a distribution for tax purposes (See "Federal
Income Tax Status," page 22.)
DEATH BENEFIT
Unless otherwise restricted by the Plan, in the event of the Participant's
death prior to the Annuity Date, the Beneficiary may elect either to receive
death benefits in a lump sum or to apply the Annuity Value under any of the
available Annuity options contained in the Contract. If a Participant who has
not attained age 65 dies before the Annuity Date, the amount of any lump sum
settlement will be the greater of the value of the Participant's Account or the
total of the Participant's Purchase Payments, less any Purchase Payments
previously withdrawn as partial surrenders or applied to annuity options. (See
"Death Benefits," page 21.)
6
<PAGE> 10
FEE TABLES
PARTICIPANT TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Calendar
Years Between
Purchase Payment
and Surrender Percentage
---------------- ----------
<C> <S> <C> <C>
(a) Contingent Deferred Sales 0 7%
Charge (as a percentage of 1 but not 2 6%
amount surrendered 2 but not 3 5%
3 but not 4 4%
4 but not 5 3%
5 or more 0%
(b) Transaction Charge Lesser of $10 or 2% for
each surrender and $10
for annuitization
(c) Contract Maintenance Charge Maximum $55
(Currently Waived)
(d) Conversion Charge (Currently $10 per
Waived) conversion
</TABLE>
SEPARATE ACCOUNT EXPENSES
(AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE.
DEDUCTED DAILY FROM THE SEPARATE ACCOUNT.)
<TABLE>
<S> <C>
Administration Fee(1).......................... .10% per annum
Mortality and Expense Risk Fees................ 1.25% per annum
Total Separate Account Annual Expenses......... 1.35% per annum
</TABLE>
FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
Virtus
Money Asset Index U.S. Govt.
Market Growth Manager Contrafund 500 Income
Portfolio Portfolio Portfolio Portfolio Portfolio(3) Series
--------- --------- ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
(a) Management
Fee............ 0.24% 0.61% 0.71% 0.61% 0.09% 0.22%
(b) Other
Expenses....... 0.09% 0.09% 0.08% 0.11% 0.19% 0.48%
(c) Total Annual
Expenses....... 0.33% 0.70% 0.79% 0.72% 0.28% 0.70%
</TABLE>
<TABLE>
<CAPTION>
T. Rowe
T. Rowe Price
Price Growth Small
Bond & Income International Capitalization
Series Series Portfolio Portfolio
-------- --------- -------------- ---------------
<S> <C> <C> <C> <C>
(a) Management Fee................. 0.50% 0.50% 0.88% 0.85%
(b) Other Expenses................. 0.79% 0.24% 0.20% 0.07%
(c) Total Annual Expenses.......... 1.29% 0.74% 1.08% 0.92%
</TABLE>
7
<PAGE> 11
EXAMPLES
<TABLE>
<CAPTION>
CONDITIONS
SEPARATE A PARTICIPANT WOULD PAY THE FOLLOWING EXPENSES ON A TIME PERIODS
ACCOUNT $1,000 INVESTMENT ASSUMING 5% ANNUAL RETURN ON ----------------------------------
SERIES ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------- --------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Money (a) upon surrender at the end of the stated time (a) $ 83 $ 103 $ 101 $209
Market period
Portfolio
(b) if the Certificate WAS NOT surrendered (b) 17 53 91 199
(c) if you annuitize at the end of the applicable (c) 27 63 101 209
time period
- ----------- --------------------------------------------------- ------ ------- ------- --------
Growth SAME (a) 86 114 120 248
Portfolio
(b) 21 64 110 238
(c) 31 74 120 248
- ----------- --------------------------------------------------- ------ ------- ------- --------
Asset SAME (a) 87 116 125 257
Manager
Portfolio
(b) 22 67 115 247
(c) 32 77 125 257
- ----------- --------------------------------------------------- ------ ------- ------- --------
Contrafund SAME (a) 87 114 121 250
Portfolio
(b) 21 65 111 240
(c) 31 75 121 250
- ----------- --------------------------------------------------- ------ ------- ------- --------
Index SAME (a) 82 101 99 203
500
Portfolio
(b) 17 51 89 193
(c) 27 61 99 203
- ----------- --------------------------------------------------- ------ ------- ------- --------
Virtus U.S. SAME (a) 86 114 120 248
Govt.
Income
Series
(b) 21 64 110 238
(c) 31 74 120 248
- ----------- --------------------------------------------------- ------ ------- ------- --------
T. Rowe SAME (a) 92 131 150 307
Price
Bond
Series
(b) 27 82 140 297
(c) 37 92 150 307
- ----------- --------------------------------------------------- ------ ------- ------- --------
T. Rowe SAME (a) 87 115 122 252
Price
Growth &
Income
Series
(b) 21 65 112 242
(c) 31 75 122 252
- ----------- --------------------------------------------------- ------ ------- ------- --------
International SAME (a) 90 125 140 287
Portfolio
(b) 25 76 130 277
(c) 35 86 140 287
- ----------- --------------------------------------------------- ------ ------- ------- --------
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
CONDITIONS
SEPARATE A PARTICIPANT WOULD PAY THE FOLLOWING EXPENSES ON A TIME PERIODS
ACCOUNT $1,000 INVESTMENT ASSUMING 5% ANNUAL RETURN ON ----------------------------------
SERIES ASSETS: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------- --------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Small SAME (a) 88 120 132 271
Capitalization
Portfolio
(b) 23 71 122 261
(c) 33 81 132 271
- ----------- --------------------------------------------------- ------ ------- ------- --------
</TABLE>
EXPLANATION OF FEE TABLE AND EXAMPLES
1. Security First Life has determined to voluntarily waive its administration
fee to .10% per annum. Absent this waiver, the fee would have been .15% per
annum. This may be terminated at any time, but any change in this waiver will
not affect Certificates issued prior to the change.
2. The purpose of the foregoing tables and examples is to assist the Participant
in understanding the various costs and expenses that he or she will bear
directly or indirectly. The table reflects expenses of the Separate Account
as well as the underlying funds. For additional information see "Contract
Charges," beginning on page 13.
3. The investment adviser to the Index 500 Portfolio voluntarily reimbursed
certain expenses of the Portfolio. If there had been no reimbursement, total
expenses would have been 0.47% (see the Variable Insurance Products Fund II
prospectus for more information).
4. The examples assume that there were no transactions that would result in the
imposition of a Transaction Charge (other than in connection with the assumed
redemption or annuitization at the end of the periods shown). Contract
Maintenance Charges, which vary from $30 to $55 annually depending on how
many Series the Participant has invested in, are not reflected in the
examples because they are currently waived. Premium taxes are not reflected.
Presently, premium taxes ranging from 0% to 2.35% (3.5% in Nevada) may be
deducted from each Purchase Payment, or upon annuitization. Until further
notice, Security First Life currently absorbs these charges.
5. The examples reflect the fact that a purchase payment withdrawn at the end of
a 1 year period will necessarily be withdrawn in the calendar year following
the calendar year of the purchase payment and thus will incur a surrender
charge of 6% rather than the maximum of 7%. Similarly, the data for the
3-year periods reflect a surrender charge of 4%.
6. NEITHER THE TABLE NOR THE EXAMPLES ARE REPRESENTATIONS OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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CONDENSED FINANCIAL INFORMATION
Condensed financial information for the Separate Account is not contained in
this Prospectus or the Statement of Additional Information, because as of the
date of this Prospectus, the public offering of the Contracts had not commenced.
As a consequence, as of that date, the Separate Account had no assets and no
liabilities attributable to the Contracts. The Separate Account also funds other
contracts issued by Security First Life that are not described in this
Prospectus and which are separately accounted for.
PERFORMANCE
Security First Life from time to time will advertise the yield and effective
yield on the Series invested in the Money Market Portfolio of the Separate
Account and the average annual total returns for the other Series in the
Separate Account. Yields and average annual total returns are determined in
accordance with the methods of computation set forth by the SEC in the Form N-4
Registration Statement and are more particularly described in the Statement of
Additional Information. Yields are expressed for a seven day period, and average
annual total returns are expressed for at least one, five and ten year periods
(or from inception if shorter).
The yields of the Series invested in Money Market Portfolio are determined
based upon the change in the value of an outstanding unit in the Separate
Account over a seven day period and annualizing the result. The computation
takes into account recurring deductions from account values, but no deduction is
made for transaction or surrender charges which may apply upon a full or partial
surrender. These charges are described in "Sales Charges," page 13 and
"Transaction Charges," page 14. In the event of a surrender of the Contract, the
imposition of surrender and transaction charges will have the effect of reducing
the yield earned over the period of ownership.
The computation of average annual total returns do take into consideration
recurring charges and any non-recurring charges applicable to a Contract which
is surrendered in full at the end of the stated holding period.
FINANCIAL INFORMATION
Financial statements of the Separate Account and Security First Life are
contained in the Statement of Additional Information.
DESCRIPTION OF SECURITY FIRST LIFE INSURANCE COMPANY,
THE SEPARATE ACCOUNT AND THE FUNDS
THE INSURANCE COMPANY
Security First Life is a stock life insurance company founded in 1960 and
organized under the laws of the state of Delaware. Its principal executive
offices are located at 11365 West Olympic Boulevard, Los Angeles, California
90064. Security First Life is a wholly owned subsidiary of Security First Group,
Inc. ("SFG") (formerly The Holden Group, Inc.). The outstanding voting common
stock of SFG is owned by London Insurance Group, Inc., a Canadian insurance
service corporation and a publicly traded subsidiary of the Trilon Financial
Corporation of Toronto, Canada. Security First Life is authorized to transact
business of life insurance, including annuities. Security First Life presently
is licensed to do business in 49 states and the District of Columbia.
THE GENERAL ACCOUNT
The General Account is made up of all of the assets of Security First Life,
other than those in the Separate Account and any other segregated asset account.
The Participant may allocate amounts to the General Account at the time of
purchase or by subsequent transfers from the Separate Account. Amounts allocated
to the General Account will be credited with interest on the basis of interest
rates guaranteed or declared by Security First Life under the terms of the
Contract. Instead of the Participant bearing the risk of fluctuations in the
value of the assets as is the case for amounts invested in the Separate Account,
Security First Life bears the full investment risk for amounts in the General
Account. Security First Life has sole discretion to invest the assets of the
General Account, subject to applicable law. The General Account provisions of
the Contract are not intended to be offered by this Prospectus. Participants are
referred to the terms of the Contract itself for more information concerning the
General Account provisions.
THE SEPARATE ACCOUNT
The Separate Account was established by Security First Life on May 29, 1980,
in accordance with the provisions of the Delaware Insurance Code. It is
registered with the SEC as a unit investment trust under the 1940 Act.
Registration
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with the SEC does not involve supervision by the Commission of the management or
investment practices or policies of the Separate Account or Security First Life.
The Separate Account and each Series therein are administered and accounted
for as part of the general business of Security First Life, but the income and
realized capital gains or losses of each Series are credited to or charged
against the assets held for that Series in accordance with the terms of the
Contracts. This is done without regard to the income, realized capital gains or
losses of any other Series or the experience of Security First Life in any other
business it may conduct. The assets of each of these Series are not chargeable
with the liabilities arising out of any other business Security First Life may
conduct.
All obligations under the Contracts, including the guarantee to make Annuity
payments, are general corporate obligations of Security First Life, and all of
Security First Life's assets are available to meet its expenses and obligations
under the Contracts. However, while Security First Life is obligated to make the
Variable Annuity payments under the Contract, the amount of such payments is
guaranteed only to the extent of the level amount calculated at the beginning of
each Annuity year. (See "Level Payments Varying Annually," page 19.)
The Funds consist of (i) the Money Market Portfolio and Growth Portfolio of
the Variable Insurance Products Fund, (ii) the Asset Manager Portfolio,
Contrafund Portfolio and Index 500 Portfolio of the Variable Insurance Products
Fund II; (iii) the T. Rowe Price Bond Series, T. Rowe Price Growth and Income
Series and Virtus U.S. Government Income Series of the Security First Trust;
(iv) the International Portfolio of the Scudder Variable Life Investment Fund
and (v) the Small Capitalization Portfolio of The Alger American Fund. The
shares of each Fund are purchased, without sales charge, for the corresponding
Series at the net asset value per share next for each Fund following receipt of
the applicable payment. Any dividend or capital gain distributions received from
a Fund are reinvested in Fund shares which are retained as assets of the
applicable Series. Fund shares will be redeemed without fee to the Series to the
extent necessary for Security First Life to make Annuity or other payments under
the Contracts.
If shares of any Fund should no longer be available for investment by a
Series or if in the judgment of Security First Life's management further
investment in shares of any Fund should become inappropriate in view of the
purposes of the Contracts, Security First Life may substitute for each Fund
share already purchased, and apply future Purchase Payments under the Contracts
to the purchase of shares of another Fund or other securities. No substitution
of securities of any Series may take place, however, without prior notice to
Participants and the prior approval of the SEC.
THE FUNDS
Each of the Funds is a portfolio or series of an open-end management
investment company registered with the SEC under the 1940 Act. Registration does
not involve supervision by the SEC of the investments or investment policies of
the Funds. There can be no assurance that the investment objectives of the Funds
will be achieved.
Variable Insurance Products Fund and Variable Insurance Products Fund II are
Massachusetts business trusts. Each is divided into separate portfolios. The
following portfolios are available under the Contracts:
Money Market Portfolio seeks to obtain as high a level of current income as
is consistent with preserving capital and providing liquidity. The portfolio
will invest only in high quality U.S. dollar denominated money market securities
of domestic and foreign issuers.
Growth Portfolio seeks to achieve capital appreciation normally through the
purchase of common stocks (although the portfolio's investments are not
restricted to any one type of security). Capital appreciation may also be found
in other types of securities, including bonds and preferred stocks.
Asset Manager Portfolio seeks high total return with reduced risk over the
long-term by allocating its assets among stocks, bonds and short-term, fixed
income instruments.
Contrafund Portfolio seeks capital appreciation by investing in companies
that the investment adviser believes to be undervalued due to an overly
pessimistic appraisal by the public.
Index 500 Portfolio seeks investment results that correspond to the total
return (i.e., the combination of capital changes and income) of common stocks
publicly traded in the United States, as represented by the Standard & Poor's
500 Composite Stock Price Index while keeping transaction costs and other
expenses low.
FMR is the investment adviser to each of the portfolios of the Variable
Insurance Products Fund and the Variable Insurance Products Fund II.
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The Security First Trust is a Massachusetts business trust which has a
number of series, three of which are available under the Contracts:
Virtus U.S. Government Income Series (formerly U.S. Government Income
Series) seeks to provide current income. The Series pursues this objective by
investing in a professionally managed, diversified portfolio limited primarily
to U.S. government securities.
T. Rowe Price Bond Series (formerly Bond Series) seeks to achieve the
highest investment income over the long-term consistent with the preservation of
principal through investment primarily in marketable debt instruments. Growth of
principal and income will also be objectives with respect to up to 10% of the T.
Rowe Price Bond Series' assets that may be invested in common and preferred
stocks.
T. Rowe Price Growth and Income Series (formerly Growth and Income Series)
seeks capital growth and a reasonable level of current income. While this series
will generally invest in common stocks and other equities, it may, depending on
economic conditions, reduce such investments and substitute fixed income
instruments.
Security Management, a subsidiary of SFG and an affiliate of Security First
Life and Security First Financial, Inc., provides investment advice and
management services to the three series of Security First Trust described above.
Under subadvisory agreements with Security Management, Price Associates provides
investment management services to the T. Rowe Price Bond Series and T. Rowe
Price Growth and Income Series and Virtus provides investment management
services to the Virtus U.S. Government Income Series.
Scudder Variable Life Investment Fund is a Massachusetts business trust
which is divided into separate Portfolios. The following Portfolio is available
under the Contracts.
International Portfolio seeks long-term growth of capital primarily through
diversified holdings of marketable foreign equity investments. The Portfolio
invests in companies, wherever organized, which do business primarily outside
the United States. The Portfolio intends to diversify investments among several
countries and to have represented in its holdings business activities in not
less than three different countries. The Portfolio does not intend to
concentrate investments in any particular industry.
The investment adviser of the Scudder Variable Life Investment Fund is
Scudder.
The Alger American Fund is a Massachusetts business trust which has a number
of portfolios, one of which is available under the Contracts.
Small Capitalization Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies within the range of companies included in the Russell
2000 Growth Index. Income is a consideration in the selection of investments but
is not an investment objective of the Portfolio.
The investment adviser of The Alger American Fund is Alger Management.
Funds are available to registered separate accounts offering variable
annuity and variable life products of participating insurance companies and
entities permitted under Section 817(h) of the Code. Although it is not
anticipated that any disadvantage will result, there is a possibility that a
material conflict may arise between the interest of the Separate Account and one
or more of the other separate accounts participating in the Funds. A conflict
may occur due to a change in law affecting the operations of variable life and
variable annuity separate accounts, differences in the voting instructions of
our Owners and those of other companies, or some other reason. In the event of a
conflict, the Separate Account will take any steps necessary to protect Owners
and variable annuity payees, which may include withdrawal of amounts invested in
the Fund by the Separate Account.
The rights of Participants or Beneficiaries to instruct Security First Life
on voting shares of the Funds are described under "Voting Rights," page 23.
Detailed information about the Funds, their investment objectives,
investment portfolios and the charges may be found in the prospectuses of the
Funds. An investor should carefully read the Funds' prospectuses before
investing. Prospectuses for the Variable Insurance Products Fund, the Variable
Insurance Products Fund II, the Security First Trust, the Scudder Variable Life
Investment Fund and The Alger American Fund may be obtained without charge by
written request to Security First Life Insurance Company, P.O. Box 92193, Los
Angeles, California 90009.
PRINCIPAL UNDERWRITER
Security First Financial, Inc., 11365 West Olympic Boulevard, Los Angeles,
California 90064, a broker-dealer registered under the Securities Exchange Act
of 1934 and a member of the National Association of Securities Dealers,
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<PAGE> 16
Inc., is the principal underwriter for the Contract. Security First Financial,
Inc., is a Delaware corporation and a subsidiary of SFG.
SERVICING AGENT
Security First Life receives certain administrative services such as office
space, supplies, utilities, office equipment, travel expenses and periodic
reports pursuant to an agreement with SFG.
CUSTODY OF SECURITIES
The custodian of assets of the Separate Account is Security First Life. The
assets of each Series will be kept physically segregated by Security First Life
and held separate from the assets of the other Series and of any other firm,
person, or corporation. Additional protection for the assets of the Separate
Account is afforded by fidelity bonds covering all of Security First Life's
officers and employees.
CONTRACT CHARGES
Charges under the Contract may be assessed for the following: (i) premium
taxes; (ii) surrenders, part of which may be deemed to be a sales charge; (iii)
administration fees; (iv) contract maintenance charge; (v) certain transactions;
and (vi) assumption of mortality risks and expense risks with respect to the
Separate Account. These charges may not be changed under the Contract, and
Security First Life may profit from certain of these charges.
A Participant should note that there are deductions from and expenses paid
out of the assets of the Funds that are described in the Funds' prospectuses.
PREMIUM TAXES
Certain state and governmental entities impose a premium tax of up to 2.35%
(3.50% in Nevada) of Purchase Payments or amounts applied to an Annuity option.
The Contract permits Security First Life to deduct any applicable premium taxes
from the Participant's Account on or after the time they are incurred. Until
further notice, such premium taxes will be absorbed by Security First Life and
will not be charged against a Participant's Account.
SALES CHARGES
No sales charge is deducted from any Purchase Payment. However, a surrender
charge (contingent deferred sales charge) may be imposed upon a partial or full
surrender of the Participant's Account. The surrender charge covers expenses
relating to the sale of the Contract, including commissions paid to sales
personnel and other promotional costs.
Up to 10% of the value of the Participant's Account in each of the Separate
Account and the General Account withdrawn in the first surrender in a calendar
year will not be subject to surrender charges ("Free Withdrawal Amount").
Amounts surrendered in excess of the Free Withdrawal Amount may be subject to
surrender charges, and each surrender will be subject to a transaction charge.
(See "Transaction Charges," page 12).
The amount credited to the Participant's Account with respect to each
Purchase Payment will be subject to a charge equal to the applicable percentage
of such amount at the time a full or partial surrender is made. These charges
amount to:
7% for Purchase Payments received in the calendar year of the surrender;
6% for Purchase Payments received in the calendar year before the surrender;
5% for Purchase Payments received in the 2nd calendar year before the
surrender;
4% for Purchase Payments received in the 3rd calendar year before the
surrender;
3% for Purchase Payments received in the 4th calendar year before the
surrender;
0% for Purchase Payments received prior to the 4th calendar year before the
surrender.
These charges are applied by reducing the Series from which the surrender
will be taken by an amount determined by dividing the amount elected to be
surrendered by a factor derived from the above percentage charges, plus the
transaction charges. This factor is equivalent to (a) -- (b) where (a) is 1 and
(b) is the percentage charge
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expressed as a decimal. Accumulation Units are cancelled on a first-in,
first-out basis. In no event will surrender charges imposed on Accumulation
Units in a Participant's Account exceed an amount equal to 9% of such
Participant's Purchase Payments allocated to the Separate Account. The effect of
this varying schedule of percentage charges is that amounts left in the Separate
Account for longer periods of time are subject to lower charges than amounts
immediately surrendered.
In the event of a partial surrender, the Participant will receive a check in
the amount requested. Surrender charges, if any, will be deducted from the
Series from which the partial surrender was taken, or proportionally from the
remaining Series in the event that the Series is fully surrendered. Deductions
from the Participant's interest in the General Account, if any, will be from
Purchase Payments and accumulations thereon on a first-in, first-out basis.
Surrender charges will be waived on a lump sum withdrawal if the Participant
is confined to a hospital for a minimum of 30 consecutive days or a skilled
nursing home for a minimum of 90 consecutive days and the withdrawal is
requested prior to 60 days after termination of confinement. Surrender charges
will be eliminated when the Contracts are issued to officers, directors or
full-time employees of Security First Life or its affiliates.
ADMINISTRATION FEES
An administration fee is deducted from the Owner's interest in the Separate
Account on a daily basis. Contract administration expenses include the cost of
policy issuance; salaries; rent; postage; telephone and travel expenses; legal,
administrative, actuarial and accounting fees; periodic reports; office
equipment; stationery; office space; and custodial expenses. These fees will not
exceed the cost of providing such administration services. Security First Life
may voluntarily waive a portion of the administration fee. Until further notice,
Security First Life has determined to reduce its administration fee to .10% per
annum (.000274% deducted daily from the assets of the Separate Account). This
reduction in the administration fee is permanent for Certificates issued prior
to the termination or reduction of the waiver.
CONTRACT MAINTENANCE CHARGE
At the end of each Certificate year Security First Life may deduct a
contract maintenance charge. This fee will not exceed $27.50 plus $2.50 for each
Series for which there are Accumulation Units included in the value of the
Participant's Account. Therefore, the maximum fee on an annual basis will not
exceed $55. The fee will be prorated between Series in the Participant's Account
on the basis of their respective values on the date of the deduction.
Administrative expenses include the cost of policy issuance, salaries, postage,
telephone, travel expenses, legal, administrative, actuarial, management and
accounting fees, periodic reports, office equipment, stationery, office space
and custodial expenses. Until further notice, Security First Life will waive the
deduction of contract maintenance charges, and this waiver is permanent for
Certificates issued prior to the termination or change in this waiver.
TRANSACTION CHARGES
A $10 transaction charge will be deducted from the Participant's Account for
each conversion from a Series and upon annuitization of all or a portion of the
Participant's Account (see "Annuity Benefits," page 19). Similarly, in the event
of a surrender, a transaction charge will be deducted from the Participant's
Account in an amount equal to the lesser of $10 or 2% of the amount surrendered.
These charges are at cost, and Security First Life does not anticipate profiting
from them. Conversion charges for conversions from one series of the Separate
Account to another Series of the Separate Account are currently waived. This
waiver is permanent for Certificates issued prior to the termination or change
in this waiver.
MORTALITY AND EXPENSE RISK CHARGES
The minimum death benefit provided for by the Contract requires Security
First Life to assume a mortality risk that the Participant's Account will be
less than the Participant's Purchase Payments adjusted for prior surrenders
and/or amounts applied to Annuity options. (See "Death Benefit Before the
Annuity Date," page 21.) In addition, because the Contract provides life Annuity
options, Security First Life assumes a mortality risk that the death rate of
Participants as a group will be lower than the death rate upon which the
mortality tables specified in the Contract are based. A fee will be charged to
compensate Security First Life for assuming these mortality risks in an amount
equal to .002192% on a daily basis (.80% per year) from the Separate Account
assets funding the Contract.
Security First Life also assumes the risk that the amount, if any, deducted
for administration fees and contract maintenance charges will be insufficient to
cover its actual costs for maintaining its Contracts. Contract administration
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expenses include the cost of policy issuance, salaries, rent, postage, travel
expenses, legal, administrative, actuarial and accounting fees, periodic
reports, office equipment, stationery, office space and custodial expenses.
There is no assurance that the margins will be sufficient to absorb the expenses
during the term of the Contract. As compensation for assuming this risk,
Security First Life will make a deduction of .001233% on a daily basis (.45% per
year) from the value of the Separate Account assets funding the Contract.
Security First Life may, in its discretion, voluntarily waive a portion of
the mortality and expense risk charges, which waiver may be terminated at any
time.
FREE LOOK PERIOD
The Contract provides for an initial "Free Look" period. The Participant has
the right to return the Contract within 20 days (or such longer period as
required by state law) after the Participant receives the Contract by delivering
or mailing it to Security First Life at its administrative office. If the
Contract is mailed, it will be deemed mailed on the date of the postmark or, if
sent by certified or registered mail, the date of certification or registration.
The returned Contract will be treated as if the Company never issued it, and the
Company will refund the Purchase Payments or, if required by state law, the
greater of the Purchase Payments or the account value.
DEFERRED COMPENSATION PLANS
With respect to certain Contracts issued to fund deferred compensation plans
qualifying under Section 457 of the Code for state and local government
employees, Security First Life may agree to reduce or waive the contract
maintenance charge, transaction charges and the administration fee. In addition,
deductions for sales charges may be reduced or waived in the event of a
surrender under the plan resulting from a Participant's death, disability,
retirement, termination of employment, financial hardship or transfer to another
investment provider.
DESCRIPTION OF THE CONTRACTS
GENERAL
The Contracts (designated Form SF 230) are group contracts designed to
provide annuity benefits to employees of public school systems, churches and
certain tax-exempt organizations as tax deferred annuity contracts under the
provisions of Section 403(b) of the Code, to employees covered under various
types of employer deferred compensation plans which qualify under the provisions
of Section 457 of the Code, to trusts under retirement plans which qualify under
Section 401 of the Code and to individuals as individual retirement annuities
under Section 408 of the Code. (See "Federal Income Tax Status," page 22.) Since
the Contracts are designed to fulfill long-term financial needs, purchasers
should not consider them as short-term or temporary investments.
A group Contract is issued to an employer, to a trustee of a qualified
retirement plan, or to another organization, which will be the Owner, covering
all present and future Participants. Except as described below, after completing
an enrollment form and arranging for Purchase Payments to begin, each enrolled
Participant receives a Certificate which summarizes the provisions of the group
contract and evidences his or her participation in the Plan. The group contracts
described below may be restricted by the governing instrument of the Plan as to
the exercise by the Participant of certain rights provided in such contracts.
Owners and Participants should refer to the Plan for information concerning such
restrictions, if any. No Certificates are issued to Participants under deferred
compensation or qualified retirement Plans.
PURCHASE PAYMENTS
Purchase Payments may be made on an annual, semi-annual, quarterly, or
monthly basis, or at such intervals as may be agreed to by Security First Life.
The frequency of Purchase Payments may be changed if permitted by the Plan. The
minimum Purchase Payment is $20, with an annual minimum of $240. Purchase
Payments may be allocated to the Separate Account, the General Account or
between them in accordance with the election of the Participant. Confirmation of
each Purchase Payment received will be periodically sent to the Participant.
CONVERSIONS
Accumulation Units may be converted among the Series of the Separate Account
or from the Separate Account to the General Account at any time. In addition,
Accumulation Units in the General Account may be converted to the Separate
Account pursuant to the interest transfer or reallocation elections described
below or pursuant to the following
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limitations: (i) conversions are limited to once per Certificate year; (ii)
unless otherwise permitted by Security First Life, the total value converted
from the General Account may not exceed 20% of the accumulated payment value of
the Participant's interest in the General Account and (iii) the amount converted
will be based upon accumulated payment value and a proportional reduction will
be made in the annuity value of the Participant's interest in the General
Account.
Conversion instructions may be communicated in writing or, if permitted by
Security First Life, by telephone. If telephone conversions of Accumulation
Units are permitted, the Participant will be required to complete a prior
authorization on a form provided by Security First Life. Security First Life
will employ reasonable procedures to confirm that telephone instructions are
genuine (including requiring one or more forms of personal identification), and
Security First Life will not be liable for following instructions it reasonably
believes to be genuine.
Accumulation Units will be converted at their respective values as next
computed after receipt of written or telephone instructions. Because
Accumulation Unit values are determined at the close of regular trading on the
New York Stock Exchange (currently 4:00 P.M. Eastern Time) on a Valuation Date,
conversion instructions received after that time will be effected as of the next
Valuation Date.
Annuity Units may be converted among the Series of the Separate Account at
any time (except within two calendar weeks before the Annuity Date and any
anniversary thereof). Annuity Units may not be converted to the General Account.
However, amounts in the General Account that have not been applied to a Fixed
Annuity income option may be converted to Annuity Units in one or more Series of
the Separate Account for a Variable Annuity payout. Conversions of Annuity Units
must be elected in writing and will be effective on the first Valuation Date
following receipt of the instructions.
A minimum of $500 (or, if lesser, the balance of the Participant's account
allocated to the Series to be converted) must be converted from any Series of
the Separate Account or from the General Account. The value of the Accumulation
and Annuity Units converted will be calculated as of the close of business on
the date the conversion occurs.
DOLLAR COST AVERAGING
Security First Life offers a program for dollar cost averaging in which
Participants who have held their Contracts for a year or more and who have
Participant Accounts of $5,000 or more may participate. The program will
periodically convert Accumulation Units from the Series invested in the Money
Market Portfolio of the Variable Insurance Products Fund to any of the other
Series Selected by the Participant. The program allows the Participant to invest
in non-money market Series over any period selected by the Participant rather
than investing in those Series all at once. Conversions may be made monthly,
quarterly, semi-annually, or annually in a minimum amount of $100, and Security
First Life reserves the right to limit the number of Series to which conversions
can be made (but there are not current limitations). A Participant may terminate
the program at any time on written notice to Security First Life.
REALLOCATION ELECTION
One year after the Certificate Date and after the Participant's Account
amounts to $5,500 or more a Participant may elect in writing on a form provided
by Security First Life to systematically reallocate values invested in
Accumulation Units among the Series and in the General Account in order to
achieve an allocation ratio established by the Participant. Conversions will be
made annually on the third business day of the month in which the anniversary of
the Contract Date occurs. No conversion from the General Account shall exceed
20% of the Participant's interest invested in the General Account. Changes in
allocation ratios can be made once each Contract Year. Amounts transferred from
the General Account will be based on the accumulated payment value of the
Participant's interest in the General Account and a proportional reduction will
be made in the annuity value of the Participant's interest in the General
Account.
LOANS (SECTION 403(B) PLANS ONLY)
Participants in Plans which qualify under Section 403(b) may obtain a loan
under the Contract from that portion of the Participant's Account which is
allocated to the General Account. Accumulation Units in the Separate Account
will be taken into account in determining the maximum amount of any loan, and
the Participant would be permitted to convert Accumulation Units from the
Separate Account to the General Account prior to any loan. The Code imposes
limits on the amounts, duration and repayment schedule for all such loans. If
the plan is subject to the requirements of Title 1 of the Employee Retirement
Income Security Act of 1974, eligibility for, and the terms and conditions of,
such loans may be further limited by the terms of the plan and will be
determined by the plan administrator or other designated plan official. The
Participant's Account will serve as sole security for a loan, and Security First
Life may terminate a loan, in its
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discretion, in the event of a request for a surrender. Security First Life may
modify or terminate the granting of loans at any time, provided that any such
modification or termination will not affect outstanding loans. Fees may be
charged for loan set-up and administration. The loan set-up fee is currently $50
and would be deducted from the loan proceeds. There currently is no fee for
administering the loans.
MODIFICATION OF THE CONTRACTS
The Contract guarantees that Annuity payments involving life contingencies
will be based on the minimum guaranteed Annuity purchase rates incorporated in
the Contracts, regardless of actual mortality experience. The Contract also
includes provisions legally binding on Security First Life with respect to
surrenders, death benefits and maximum charges, fees and deductions from a
Participant's Account. Security First Life may only change these provisions: (i)
with respect to terms which apply to Participants after the effective date of
the change; (ii) with respect to terms which apply to the excess of any Purchase
Payments received in any Certificate Year over the Purchase Payments received in
the first Certificate Year; or (iii) to the extent necessary to conform the
Contract to any federal or state law, regulation or ruling.
A Contract may also be modified by written agreement between Security First
Life and the Owner.
ASSIGNMENT
If permitted by the Plan and applicable law, the Contracts may be assigned
by the Participant, provided written notice of such assignment is received by
Security First Life. Even if valid, an assignment may constitute a taxable event
for the Participant. In the case of Contracts issued in connection with a
deferred compensation plan, all rights, discretion and powers under the Contract
are vested in the Owner and not the Participant.
Inquiries as to any Contract provisions should be made in writing to
Security First Life Insurance Company, P.O. Box 92193, Los Angeles, California
90009 or by telephoning 1(800)283-4536.
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ACCUMULATION PERIOD
CREDITING ACCUMULATION UNITS IN THE SEPARATE ACCOUNT
Accumulation Units are credited to a Series upon receipt of each Purchase
Payment or conversion, as the case may be. The number of Accumulation Units to
be credited is determined by dividing the net amount allocated to a Series by
the value of an Accumulation Unit in the Series next computed following receipt
of the Purchase Payment or conversion.
In the event that an application for a Contract fails to recite all of the
necessary information, Security First Life will promptly request that the
Participant furnish further instructions and will hold any initial Purchase
Payment in a suspense account, without interest, for a period not exceeding five
Business Days pending receipt of such information. If the necessary information
is not received by Security First Life within five Business Days of receipt of
the application, Security First Life will return the Purchase Payment.
VALUATION OF ACCUMULATION UNITS
The current value of Accumulation Units of a Series of the Separate Account
varies with the investment experience of the Fund in which the assets of the
Series are invested. Such value is determined each business day at the close of
regular trading on the New York Stock Exchange (currently 4:00 P.M. Eastern
Time) by multiplying the value of an Accumulation Unit in the Series on the
immediately preceding Valuation Date by the net investment factor for the period
since that day. (See "Net Investment Factor," below.) The Participant bears the
investment risk that the current value of Accumulation Units invested in a
Series may at any time be less than the amounts originally allocated to the
Series.
NET INVESTMENT FACTOR
The net investment factor is an index of the percentage change (adjusted for
distributions by the Fund and the deduction of the administration fees and the
mortality and expense risk fees) in the net asset value of the Fund in which a
Series is invested, since the preceding Valuation Date. The net investment
factor may be greater or less than one, depending upon the Fund's investment
performance.
SURRENDERS
To the extent permitted by the Plan and applicable provisions of the Code, a
Participant may surrender all or a portion of the Participant's Account at any
time prior to the Annuity Date. A surrender may result in adverse federal income
tax consequences to the Participant including current taxation of the
distribution and a penalty tax on a premature distribution. (See "Federal Income
Tax Status," page 22.) The Participant should consult his or her tax adviser
before requesting a surrender.
The cash value of a Participant's interest in the Separate Account prior to
the Annuity Date may be determined at any time by multiplying the number of
Accumulation Units for each Separate Account Series credited to the Contract by
the current value of an Accumulation Unit in the Series and subtracting the
surrender charges, if any, and the transaction charges. Upon receipt of a
written request for a full or partial surrender, Security First Life will
calculate the surrender using the value of Accumulation Units next computed
after receipt of such request.
A request for a partial surrender from more than one Series must specify the
allocation of the partial surrender among the Series. No partial surrender may
be made that would cause a Participant's interest in any Series to have a value
after the surrender of less than $200, unless the entire amount allocated to
such Series is being surrendered.
Payment of any amount surrendered from the Series will be made within seven
days of the date the written request is received by Security First Life.
Surrenders may be suspended when: (i) trading on the New York Stock Exchange is
restricted by the SEC or such Exchange is closed for other than weekends or
holidays; (ii) the SEC has by order permitted such suspension; or (iii) an
emergency as determined by the SEC exists making disposal of portfolio
securities or valuation of assets of the Funds not reasonably practicable.
STATEMENT OF ACCOUNT
Prior to the Annuity Date, each Participant will be provided with a written
statement of account each calendar quarter in which a transaction occurs. In no
event will a statement of account be provided less often than once annually. The
statement of account will show all transactions for the period being reported.
It will also show the number of Accumulation Units of each Series in the
Participant's Account, the current Accumulation Unit value for each Series, and
the value of the Participant's Account as of the end of the reporting period.
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<PAGE> 22
ANNUITY BENEFITS
VARIABLE ANNUITY PAYMENTS
Unless otherwise elected by the Participant, the Participant's interest in
the Separate Account will be applied to provide a Variable Annuity. The dollar
amount of Variable Annuity payments will reflect the investment experience of
the Series but will not be affected by adverse mortality experience which may
exceed the mortality risk charge provided for under the Contract.
LEVEL PAYMENTS VARYING ANNUALLY
Under the Contract, Variable Annuity payments are determined annually rather
than monthly so that Annuity payments, uniform in amount, are made monthly
during each Annuity year. The level of payments for each year is based on the
investment performance of the Series up to the Valuation Date as of which the
payments are determined for the year. Thus, amounts of the Annuity payments vary
with the investment performance of the Series from year to year rather than from
month to month.
The monthly Variable Annuity payments for the first year will be determined
on the last Valuation Date of the second calendar week preceding the Annuity
Date by using a formula described in the Contract. On each anniversary of the
Annuity Date, Security First Life will determine the amount of monthly payments
for the year then beginning. This is determined by multiplying the number of
Annuity Units in each Series from which payments are to be made by the Annuity
Unit value of that Series for the Valuation Period in which the first payment
for that year is due.
The amount of the year's Variable Annuity payments is transferred to the
General Account at the beginning of the Annuity year. Although an amount in the
Separate Account is credited to an Annuitant and transferred to the General
Account to make Annuity payments, it should not be inferred that the Annuitant
has any property rights in this amount. The Annuitant has only a contractual
right to Annuity payments from the amount credited to him or her in the Separate
Account.
The monthly Annuity payments are made from the General Account with interest
credited using the Assumed Investment Return of 4.25% or the alternative Assumed
Investment Return selected by Participant. Security First Life will experience
profit or loss on the amounts placed in the General Account to provide level
monthly payments during the year to the extent that net investment income and
gains in the General Account exceed or are lower than the Assumed Investment
Return selected.
Because Annuity payments for the year are set at the beginning of the year,
the Annuitant will not benefit from increases in Annuity Unit values during the
year. However, such increases and decreases will be reflected in the calculation
of Annuity payments for the subsequent year.
ASSUMED INVESTMENT RETURN
Variable Annuity payments will vary from payments based on the Assumed
Investment Return if the actual investment experience of the Series is better or
worse than the Assumed Investment Return. The choice of the Assumed Investment
Return can affect the level of Annuity payments from year to year. Over a period
of time, if the Separate Account achieves a net investment result equal to the
Assumed Investment Return applicable to a particular option, the amount of the
Annuity payments would be level. However, if the Separate Account achieves a net
investment result greater than the Assumed Investment Return, the amount of the
Annuity payments would increase in value each year. Similarly, if the Separate
Account achieves a net investment result smaller than the Assumed Investment
Return, the amount of the Annuity payments would decrease each year.
Although a higher initial payment would be received under a higher Assumed
Investment Return, there is a point in time after which payments under a lower
Assumed Investment Return would be greater, assuming payments continue through
that point in time. The effect of a higher or lower Assumed Investment Return
can be summarized as follows: a higher Assumed Investment Return will result in
a larger initial payment but more slowly rising or more rapidly falling
subsequent payments than a lower Assumed Investment Return.
Unless otherwise elected the Assumed Investment Return will be 4.25% per
annum. To the extent permitted by state law and regulations, Security First Life
will permit an election of an Assumed Investment Return of 3.50%, 5% or 6%. It
should not be inferred, however, that such returns will bear any relationship to
the actual net investment experience of the Series.
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<PAGE> 23
ELECTION OF ANNUITY DATE AND FORM OF ANNUITY
The Annuity Date and the form of Annuity payment are elected by the
Participant. Unless an earlier date is elected in accordance with the Plan,
Annuity payments must begin on the Normal Annuity Date.
To the extent not prohibited by the Plan, an optional Annuity Date may be
elected which date may be the first day of any month prior to the Normal Annuity
Date. The election must be made at least 31 days before the optional Annuity
Date.
The normal form of Annuity payment under the Contract is Option 2, a life
Annuity with 120 monthly payments certain. Unless indicated otherwise, Option 2
will be automatically applied. Changes in the optional form of Annuity payment
may be made at any time up to 31 days prior to the date on which Annuity
payments are to begin. Options 1 through 4 may be elected as either Variable
Annuities or Fixed Annuities, while Option 5 may be elected only as a Fixed
Annuity. The first year's Annuity payments described in Option 1 through 4 are
determined on the basis of: (i) the mortality table specified in the Contract,
(ii) the age and, where permitted, the sex of the Annuitant, (iii) the type of
Annuity payment option(s) selected, and (iv) the Assumed Investment Return
selected. Fixed Annuity payments described in Option 5 are determined on the
basis of: (i) the number of years in the payment period and (ii) the interest
rate guaranteed with respect to the option.
The United States Supreme Court in its decision entitled Arizona Governing
Committee for Tax Deferred Annuity and Deferred Compensation Plans v. Norris
determined that an employer subject to Title VII of the Civil Rights Act of 1964
may not offer to its employees the option of receiving retirement benefits
calculated on the basis of sex. The Company will issue contracts which comply
with the Norris decision and state law.
OPTION 1 -- LIFE ANNUITY
An Annuity payable monthly during the lifetime of an individual, ceasing
with the last payment due prior to the death of an individual. This option
offers the maximum level of monthly payments since there is no guarantee of a
minimum number of payments or of death benefits for Beneficiaries.
OPTION 2 -- LIFE ANNUITY WITH 120, 180 OR 240 MONTHLY PAYMENTS CERTAIN
An Annuity payable monthly during the lifetime of an individual with a
guaranteed minimum number of monthly payments not less than 120, 180 or 240
months, as elected. If at the death of the individual the specified number of
payments have not been made, Annuity payments will be continued during the
remainder of such period to the designated Beneficiary.
OPTION 3 -- INSTALLMENT REFUND LIFE ANNUITY
An Annuity payable monthly during the lifetime of an individual with a
guaranteed minimum number of monthly payments equal to the amount applied under
this option divided by the first monthly payment. Any payments made to the
designated Beneficiary after death of the annuitant will stop when Security
First Life has paid out a total number of payments equal to the minimum number
of payments.
OPTION 4 -- JOINT AND LAST SURVIVOR ANNUITY
An Annuity payable monthly during the joint lifetime of two individuals and
thereafter during the lifetime of the survivor, ceasing with the last payment
due prior to the death of the survivor.
OPTION 5 -- DESIGNATED PERIOD ANNUITY -- FIXED DOLLAR ONLY
A fixed dollar Annuity payable monthly for a specified number of years from
5 to 30. The amount of each payment will be based on an interest rate determined
by Security First Life, that will not be less than 3.50% per annum. Fixed
Annuity payments under this option may not be commuted to a lump sum, except as
provided under "Death Benefits".
FREQUENCY OF PAYMENT
At the election of the Payee, payments under any option may be made
annually, semi-annually, quarterly or monthly. If at any time any payments to be
made to any payee from any Series are or become less than $50 each, Security
First Life shall have the right to decrease the frequency of payments to such
interval as will result in a payment of at least $50.
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<PAGE> 24
ANNUITY UNIT VALUES
The value of an Annuity Unit at a Valuation Date is determined by
multiplying the value of the Annuity Unit at the preceding Valuation Date by an
"Annuity Change Factor". The Annuity Change Factor is an adjusted measurement of
the investment performance of the Fund since the end of the preceding Valuation
Period. The Annuity Change Factor is determined by dividing the value of the
Accumulation Unit at the Valuation Date by the value of the Accumulation Unit at
the preceding Valuation Date and multiplying the result by a neutralization
factor.
The neutralization factor is determined by dividing 1 by the weekly
equivalent of the Assumed Investment Return previously selected by the
Annuitant. For example, the neutralization factor for the Assumed Investment
Return of 4.25% is 0.9991999.
The number of Annuity Units for a Series is determined by dividing the
monthly Annuity payment for the first year by that Series' Annuity Unit value on
the same date as the first year's Annuity payments are calculated. The number of
Annuity Units thus determined will not change throughout the annuity payment
period unless the Participant converts Annuity Units to or from other Series of
the Separate Account.
DEATH BENEFITS
DEATH BENEFIT BEFORE THE ANNUITY DATE
If the Participant dies before the Annuity Date, the Contract will pay a
death benefit to the Beneficiary in accordance with the terms set forth below.
The Beneficiary may elect to receive the Participant's Account values as
either: (i) Annuity income under Annuity Income Options One, Two, or Five
described in Article 7 of the Contract, provided that an election of an Annuity
Income Option is subject to the following conditions; (a) payments must begin
within one year of the Participant's death (provided that under a Qualified
Contract the spouse of the Participant may delay commencement of payments to the
date on which the Participant would have attained age 70 1/2); (b) the
guaranteed period under Option Two or the designated period under Option Five
may not be longer than the Beneficiary's life expectancy under applicable tables
specified by the Internal Revenue Service; and (c) the Annuity Value as of the
date of the first Annuity income payment will be used to determine the amount of
the death benefit to be applied; or (ii) a lump sum payout of the cash value,
provided that this payout shall be made within five (5) years of the date of
death of the Participant.
If a Participant who has not attained age 65 dies before the Annuity Date
the amount of any lump sum settlement will be the greater of the Participant's
Account less transaction fees or the total of the Participant's Purchase
Payments reduced by any Purchase Payments previously surrendered or applied to
Annuity income. If a Participant who has attained age 65 dies before the Annuity
Date only the cash value will be paid as a death benefit.
If the sole Beneficiary is the spouse of the Participant, the spouse may
elect to succeed to all rights of the Participant under this Contract. Except as
otherwise required by law or as required by the Plan, if there is more than one
Beneficiary living at the time of the Participant's death, each will share in
the proceeds of the death benefit equally, unless the Participant has elected
otherwise. If the Participant outlives all Beneficiaries, the death benefit will
be paid to the Participant's estate in a lump sum. No Beneficiary shall have the
right to assign, anticipate or commute any future payments under any of the
options, except as provided in the election or by law.
Rights to the death benefit will pass as if the Participant outlived the
Beneficiary if: (i) the Beneficiary dies at the same time as the Participant; or
(ii) the Beneficiary dies within 15 days of the Participant's death and prior to
the date due proof of the Participant's death is received by Security First
Life. Due proof of death will be a certified death certificate, an attending
physician's statement, a decree of a court of competent jurisdiction as to the
finding of death, or such other documents as Security First Life may, at its
option, accept.
DEATH BENEFIT AFTER THE ANNUITY DATE
If the Annuitant under a Contract dies on or after the Annuity Date, the
remaining portion of his or her interest will be distributed to the Beneficiary
at least as rapidly as under the method of distribution being used at the date
of the Annuitant's death. If no designated Beneficiary survives the Annuitant,
the present value of any remaining payments certain on the date of the death of
the Annuitant, calculated on the basis of the Assumed Investment Return
previously elected, may be paid in one sum to the estate of the Annuitant unless
other provisions have been made and approved by Security First Life. This value
is calculated as of the date of payment following receipt of due proof of death.
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<PAGE> 25
Unless otherwise restricted, a Beneficiary receiving variable payments under
Options 2 or 3 after the death of an Annuitant may elect at any time to receive
the present value of the remaining number of Annuity payments certain in a
single payment, calculated on the basis of the Assumed Investment Return
previously selected. However, such election is not available to a Beneficiary
receiving Fixed Annuity payments.
FEDERAL INCOME TAX STATUS
The operations of the Separate Account form part of the operations of
Security First Life. Under the Code as it is now written no federal income tax
is payable by Security First Life on the investment income and capital gains of
the Separate Account. Moreover, as long as the Separate Account meets the
diversification requirements of Section 817(h) of the Code, no federal income
tax is payable by the Participant on the investment income and capital gains
under a Certificate until Annuity payments commence or a full or partial
withdrawal is made. It is intended that the Separate Account will continue to
meet the requirements of Section 817(h) of the Code.
Employers may deduct their contributions to self-employed and corporate
pension and profit-sharing plans described in Section 401 of the Code and tax
sheltered annuities described in Section 403(b) in the year when made up to the
limits specified in the Code. In addition, some employer plans may permit
nondeductible employee contributions.
All distributions, with the exception of tax free rollovers as described
below or a return of permitted nondeductible employee contributions, are
included in gross income. In the case of Sections 401 and 403(b) plans and IRAs,
a distribution is includible in the year in which it is paid. In the case of a
457 plan, a distribution is includible in the year it is paid or made available.
Under certain limited circumstances, a lump sum distribution from a Section 401
plan may qualify for special 5-year or 10-year forward income averaging or
long-term capital gains treatment.
In the case of Sections 401, 403(b), and 457 plans and IRAs, Annuity
payments for life or a period not exceeding the life expectancy of the
Participant or the Participant and a designated beneficiary must commence by
April 1 of the calendar year following the calendar year in which the employee
attains age 70 1/2 (or retires in the case of government plans) (excluding
account values in a 403(b) plan at December 31, 1986). Distributions under
Sections 401, 403(b), 457 plans and IRAs must also meet the minimum incidental
death benefit requirements of the Code.
Except as described below, the Code imposes a 10% penalty tax on the taxable
portion of any distribution from qualified retirement plans, including both 401
and 403(b) plans. To the extent amounts are not includable in gross income
because they have been rolled over to an IRA or to another 401 plan or 403(b)
annuity, no tax penalty will be imposed. The tax penalty will not apply to the
following distributions: (a) if distribution is made on or after the date on
which the Participant reaches age 59 1/2; (b) distributions following the death
or disability of the Participant; (c) after separation from service,
distributions that are part of substantially equal periodic payments, not less
frequently than annually, made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of such Participant
and his designated Beneficiary; (d) distributions to a Participant who has
separated from service after attaining age 55; (e) distributions made to the
Participant to the extent such distributions do not exceed the amount allowable
as a deduction under Code Section 213 to the Participant for amounts paid during
the taxable year for medical care; and (f) distributions made to an alternate
payee pursuant to a qualified domestic relations order.
Similar rules apply to IRAs, but there are fewer exceptions to the 10%
penalty tax. The taxable portion of an IRA distribution will not be subject to
the tax penalty if: (a) it is made on or after the date on which the Participant
reaches age 59 1/2; (b) it is made following the death or disability of the
Participant; or (c) it is part of substantially equal periodic payments, not
less frequently than annually, made for the life (or life expectancy) of the
Participant or the joint lives (or joint life expectancies) of such Participant
and his or her designated beneficiary. The 10% penalty tax does not apply to
Section 457 plans.
The Code prohibits the withdrawal of amounts contributed or earned under a
403(b) annuity on or after January 1, 1989, except in these circumstances: (a)
the Participant attains age 59 1/2, separates from service, dies, becomes
disabled, or (b) in the case of hardship as determined in accordance with
applicable regulations. Withdrawals for hardship are restricted to the portion
of the Participant's Account which represents contributions by the Participant
and does not include any investment results. These limitations on withdrawals
apply only to salary reduction contributions made after December 31, 1988 and to
income attributable to such contributions and to income attributable to amounts
held as of December 31, 1988. The limitations on withdrawals do not effect
rollovers or exchanges between Section 403(b) annuities.
Loans from annuity contracts are generally treated as taxable distributions
under the Code. There is an exception to this general rule for contracts issued
in connection with certain types of retirement plans, including section 403(b)
22
<PAGE> 26
contracts, provided that the conditions set forth in section 72(p) of the Code
and applicable regulations are met. Those conditions include limits on the
amounts of such loans, the term of loan and loan repayment schedule
requirements. Even if a loan meets such requirements when made, a subsequent
failure to satisfy them -- such as a failure to make repayment installments as
required -- could result in part or all of the loan proceeds being deemed to be
a distribution subject to current taxation and possible penalty tax. A tax
adviser should be consulted prior to requesting a loan from the Contract.
Providing certain requirements of the Code are met, distributions from a
plan may be rolled over tax free to another plan. Distributions from a Section
401 plan may be rolled over to a Section 401 defined contribution plan, a
Section 403(a) annuity or an IRA. Distributions from a tax sheltered annuity may
be rolled over to another tax sheltered annuity or an IRA. Distributions from an
IRA may be rolled over to another IRA and, if the IRA contains only permissible
rollover amounts, to a Section 401 plan or a tax sheltered annuity.
The discussion contained in the Prospectus regarding withdrawals and other
distributions from a Participant's Account should be considered in light of the
above.
WITHHOLDING
Security First Life is required to withhold federal income tax on
distributions such as Annuity payments and full or partial surrenders (except as
noted below in connection with Section 401 and 403(b) plans). However,
recipients of distributions are allowed in some cases to make an election not to
have federal income tax withheld. After an election is made with respect to
Annuity payments, an Annuitant may revoke the election at any time, and
thereafter commence withholding. Security First Life will notify the payee at
least annually of his or her right to revoke the election.
Security First Life is required to withhold 20% of certain taxable amounts
constituting "eligible rollover distributions" to participants (including lump
sum distributions) in retirement plans under Code Section 401 and tax deferred
annuities under Code Section 403(b). This withholding requirement does not apply
to distributions from such plans and annuities in the form of a life and life
expectancy annuity (individual or joint), an annuity with a designated period of
10 years or more, or any distribution required by the minimum distribution
requirements of Code Section 401(a)(9). Withholding on these latter types of
distribution will continue to be made under the rules described in the prior
paragraph. A participant cannot elect out of the 20% withholding requirement.
However, if an eligible rollover distribution is rolled over into an eligible
retirement plan or IRA in a direct trustee-to-trustee transfer, no withholding
will be required.
Payees are required by law to provide Security First Life (as payor) with
their correct taxpayer identification number ("TIN"). If the payee is an
individual, the TIN is the same as his or her social security number.
MULTIPLE CONTRACTS
Code Section 72(e)(11) provides that multiple deferred annuity contracts
which are issued within a calendar year to the same Contract Owner by one
company or its affiliates are treated as one annuity contract for purposes of
determining the tax consequences of any distribution. Such treatment may result
in adverse tax consequences.
OBTAINING TAX ADVICE
It should be recognized that the federal income tax information in this
prospectus is not exhaustive and is for information purposes only. The
discussion above does not purport to cover all situations involving the purchase
of an Annuity or the election of an option under the Contract. Tax results may
vary depending upon individual situations and special rules may apply in certain
cases. State and local tax results may also vary. For these reasons a qualified
tax adviser should be consulted.
VOTING RIGHTS
Unless otherwise restricted by the Plan, each Participant holding a
Certificate will have the right to instruct Security First Life with respect to
voting the Fund shares which are the assets underlying his or her interest in
the Separate Account, at all regular and special shareholders meetings of the
Funds. Security First Life will mail to each Participant, at his last known
address, all periodic reports and proxy material of the applicable Fund and a
form with which to give voting instructions. Fund shares as to which no timely
instructions are received will be voted by Security First Life in proportion
according to the instructions received from all the Participants giving timely
instructions.
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<PAGE> 27
Even though Annuity payments have begun, the Annuitant will continue to have
any voting rights exercisable with respect to the Funds shares.
The number of votes to be cast by each person having the right to vote will
be determined as of a record date within 90 days prior to the meeting of the
Fund, and voting instructions will be solicited by written communication at
least 10 days prior to such meeting. To be entitled to vote, a Participant or
Annuitant must have been such on the record date. The number of shares as to
which voting instructions may be given to Security First Life is determined by
dividing the value on the record date on that portion of the Participant's
Account then allocated to a Series for a Fund (or, after the Annuity Date, the
values maintained in that Series attributable to the Participant) by the net
asset value of a Fund share as of the same date.
LEGAL PROCEEDINGS
Security First Life, in the ordinary course of its business, is engaged in
litigation of various kinds which in its judgment is not of material importance
in relation to its total assets. There are no present or pending material legal
proceedings affecting the Separate Account.
ADDITIONAL INFORMATION
For further information contact Security First Life at the address and phone
number on the cover of this Prospectus. A copy of the Statement of Additional
Information, dated , 1996, which provides more detailed information
about the Contracts, may also be obtained. Set forth below is the table of
contents for the Statement of Additional Information.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
The Insurance Company........................................................ 3
The Separate Account......................................................... 3
Net Investment Factor........................................................ 3
Annuity Payments............................................................. 3
Additional Federal Income Tax Information.................................... 6
Underwriters, Distribution of the Contracts.................................. 7
Calculation of Performance Data.............................................. 7
Voting Rights................................................................ 9
Safekeeping of the Securities................................................ 9
Servicing Agent.............................................................. 9
Independent Auditors......................................................... 10
Legal Matters................................................................ 10
State Regulation of Security First Life...................................... 10
Financial Statements......................................................... 10
</TABLE>
A registration statement has been filed with the SEC under the Securities
Act of 1933 with respect to the Contracts offered hereby. This Prospectus does
not contain all the information set forth in the registration statement, to all
of which reference is made for further information concerning the Separate
Account, Security First Life and the Contracts offered hereby. Statements
contained in this Prospectus as to the contents of the Contracts and other legal
instruments are summaries. For a complete statement of the terms thereof
reference is made to such instruments as filed.
24
<PAGE> 28
'33 ACT FILE NO. 33-
STATEMENT OF
ADDITIONAL INFORMATION
SECURITY FIRST LIFE SEPARATE ACCOUNT A
- --------------------------------------------------------------------------------
GROUP FLEXIBLE PAYMENT FIXED AND VARIABLE ANNUITY CONTRACTS
- --------------------------------------------------------------------------------
SECURITY FIRST LIFE INSURANCE COMPANY
, 1996
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus. A copy of the prospectus, dated , 1996, may
be obtained without charge by writing to Security First Life Insurance Company,
P.O. Box 92193, Los Angeles, California 90009 or by telephoning (800)283-4536.
<PAGE> 29
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
The Insurance Company................................................................. 3
The Separate Account.................................................................. 3
Net Investment Factor................................................................. 3
Annuity Payments...................................................................... 3
Additional Federal Income Tax Information............................................. 6
Underwriters, Distribution of the Contracts........................................... 7
Calculation of Performance Data....................................................... 7
Voting Rights......................................................................... 9
Safekeeping of Securities............................................................. 9
Servicing Agent....................................................................... 9
Independent Auditors.................................................................. 10
Legal Matters......................................................................... 10
State Regulation of Security First Life............................................... 10
Financial Statements.................................................................. 10
</TABLE>
2
<PAGE> 30
THE INSURANCE COMPANY
Security First Life Insurance Company ("Security First Life"), a Delaware
corporation, is a wholly-owned subsidiary of Security First Group, Inc. ("SFG").
The common shares of SFG are held by London Insurance Group, Inc., a Canadian
insurance service corporation and publicly traded subsidiary of the Trilon
Financial Corporation of Toronto, Canada.
THE SEPARATE ACCOUNT
The Security First Life Separate Account A ("Separate Account") presently
funds the group variable annuity contracts issued by Security First Life on
Forms SF 224FL, SF 224R1, SF 226R1, SF 234, SF 236 and individual annuity
contracts on Form SF 135. These individual and group variable annuity contracts
are described in other prospectuses. The combination fixed and variable
contracts ("Contracts") described in this Statement of Additional Information
and related prospectus are distinct contracts from the above described
individual and group variable annuity contacts.
Amounts transferred to the Separate Account under the Contracts will be
invested in the securities of ten Funds: (i) the Money Market Portfolio and
Growth Portfolio of the Variable Insurance Products Fund; (ii) the Asset Manager
Portfolio, Contrafund Portfolio and Index 500 Portfolio of the Variable
Insurance Products Fund II; (iii) the T. Rowe Price Bond Series, T. Rowe Price
Growth and Income Series and Virtus U.S. Government Income Series of the
Security First Trust; (iv) the International Portfolio of the Scudder Variable
Life Investment Fund; and (v) the Small Capitalization Portfolio of The Alger
American Fund. The Separate Account is divided into a number of Series of
Accumulation and Annuity Units, which correspond respectively to these ten
funds.
NET INVESTMENT FACTOR
The Separate Account net investment factor is an index of the percentage
change (adjusted for distributions by the Funds and the deduction of the
mortality and expense risk fees and the adminstration fees) in the net asset
value of the Fund in which a particular Series is invested, since the preceding
Business Day. The Separate Account net investment factor for each series of
Accumulation Units is determined for any Business Day by dividing (i) the net
asset value of a share of the Fund which is represented by such Fund at the
close of the business on such day, plus the per share amount of any
distributions made by such fund on such day by (ii) the net asset value of fund
share determined as of the close of business on the preceding Business Day and
then subtracting from this result the mortality and expense risk fees and the
administration fees factor of .003699% for each calendar day between the
preceding Business Day and the end of the current Business Day.
ANNUITY PAYMENTS
The primary theory of a variable annuity having underlying assets chiefly
invested in a portfolio of common stocks is to provide Annuitants with Annuity
payments which will tend to remain level during a period when the economy is
relatively stable and to provide increased Annuity payments during periods of
economic growth and inflation. It is believed that the value of such Separate
Account investment will, over the long term, tend to reflect changes in the
general economic price level. Historically, the value of a diversified portfolio
of common stocks held for an extended period of time has tended to rise during
the periods of economic growth and inflation. However,
3
<PAGE> 31
there is no exact correlation between the two. In some periods, the value of a
common stock portfolio has declined while the cost of living has increased.
The primary theory of a variable annuity having underlying assets chiefly
invested in fixed-income securities (such as the T. Rowe Price Bond Series) is
to provide Annuitants with annuity payments which will be higher in amount than
those provided by conventional Fixed Annuities. It should be recognized,
however, that a portfolio consisting of non-convertible fixed-income securities
and which is designed to obtain a high level of current yield involves market
risks that are not found in a fixed annuity and that differ from those found in
a variable annuity invested primarily in common and preferred stocks. Certain
securities (high yield bonds) in the portfolio will be very sensitive to adverse
economic changes and corporate developments. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of high yield bonds, especially in a thin market. In
addition, periods of economic uncertainty and change may result in increased
volatility of both the market prices of high yield bonds and the fund's net
asset value.
The market value of non-convertible fixed-income securities usually reflects
yields then generally available in securities of similar quality and type. Based
upon historical analysis, when interest rates decline, the market value of a
portfolio already invested at higher interest rates may be expected to rise if
such securities are not subject to call at the option of the issuer. Conversely,
when such interest rates increase, the market value of a portfolio already
invested at lower interest rates may be expected to decline. The Asset Manager
Portfolio, T. Rowe Price Bond Series and T. Rowe Price Growth and Income Series
may, pursuant to the investment policies, invest a significant portion of their
assets in long-term fixed-income securities. Because of this, Participants who
select one of these series as the basis for Annuity Payments should recognize
that Annuity Payments may decrease during periods when interest rates and
general prices are rising.
Participants should carefully consider which of the underlying series is
best suited to their long-term needs.
BASIS OF VARIABLE ANNUITY BENEFITS
The Variable Annuity benefit rates used in determining Annuity Payments
under the Contract are based on actuarial assumptions, reflected in tables in
the Contract, as to the expected mortality and adjusted age and the form of
Annuity selected. The mortality basis for these tables is Security First Life's
Modified Select Annuity Mortality Table, projected to the year 2000 on
Projection Scale C, with interest at 4.25% for all functions involving life
contingencies and the portion of any period certain beyond 10 years, and 3.25%
for the first 10 years of any certain period. Adjusted age in those tables means
actual age to the nearest birthday at the time the first payment is due,
adjusted according to the following table:
<TABLE>
<CAPTION>
CALENDAR YEAR ADJUSTED
OF BIRTH AGE IS
- --------------- -------------------
<S> <C>
Before 1916 Actual Age
1916 - 1935 Actual Age Minus 1
1936 - 1955 Actual Age Minus 2
1956 - 1975 Actual Age Minus 3
1976 - 1995 Actual Age Minus 4
</TABLE>
4
<PAGE> 32
DETERMINATION OF AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENTS FOR FIRST YEAR
The Separate Account value used to establish the monthly Variable Annuity
Payment for the first year consists of the value of Accumulation Units of each
Series of the Separate Account credited to a Participant on the last day of the
second calendar week before the Annuity Date. The Contract contains tables
showing monthly payment factors and Annuity premium rates per $1,000 of Separate
Account value to be applied under Options 1 through 4.
At the beginning of the first payment year, an amount is transferred from
the Separate Account to Security First Life's General Account and level monthly
Annuity payments for the year are made out of the General Account. The amount to
be transferred is determined by multiplying the Annuity premium rate per $1,000
set forth in the Contract tables by the number of thousands of dollars of
Separate Account Value credited to a Participant. The level monthly payment for
the first payment year is then determined by multiplying the amount transferred
(the "Annuity Premium") by the monthly payment factor in the same table. In
the event the Contract involved has Separate Account Accumulation Units in
more than one Series, the total monthly Annuity payment for the first year is
the sum of the monthly Annuity payments, determined in the same manner as
above, for each Series.
At the time the first year's monthly payments are determined, a number of
Annuity Units for each Separate Account Series is also established for the
Annuitant by dividing the monthly payment derived from that Series for the first
year by the Separate Account Annuity Unit values for the Series on the last
Business Day of the second calendar week before the first Annuity payment is
due. The number of Annuity Units remains fixed during the Annuity period unless
Annuity Units are converted to another Series.
DETERMINATION OF AMOUNT OF MONTHLY VARIABLE ANNUITY PAYMENTS FOR SECOND AND
SUBSEQUENT YEARS
As of each anniversary of the Annuity Date, Security First Life will
determine the amount of the monthly Variable Annuity Payments for the year then
beginning. Separate determinations will be made for each Separate Account Series
in which the Annuitant has Annuity Units, with the total Annuity Payment being
the sum of the payments derived from the Series. The amount of monthly payments
for any Separate Account series for any year after the first will be determined
by multiplying the number of Annuity Units for that Series by the Annuity Unit
value for that series for the Valuation Period in which the first payment for
the year is due. It will be Security First Life's practice to mail Variable
Annuity payments no later than seven days after the last day of the Valuation
Period upon which they are based and the monthly anniversary thereof.
The objective of a Variable Annuity contract is to provide level payments
during periods when the economy is relatively stable and to reflect as increased
payments only the excess of investment results flowing from inflation or an
increase in productivity. The achievement of this objective will depend, in
part, upon the validity of the assumption that the net investment return of the
Separate Account equals the Assumed Investment Return during periods of stable
prices. Subsequent years' payments will be smaller than, equal to or greater
than the first year's payments depending on whether the actual net investment
return for the Separate Account is smaller than, equal to or greater than the
Assumed Investment Return.
5
<PAGE> 33
ANNUITY UNIT VALUES
The Separate Account annuity unit values for each Series was originally
established at $5 per unit. The value of an annuity unit for each Series for any
subsequent valuation period is determined by multiplying the value of an annuity
unit at the end of the preceding valuation period by the "Annuity Change Factor"
for the current valuation period. The Annuity Change Factor is an adjusted
measurement of the investment performance of the Series since the end of the
preceding valuation period. The Annuity Change Factor for any valuation period
is determined by dividing the value of an accumulation unit at the end of the
valuation period by the value of an accumulation unit at the end of the
immediately preceding valuation period and multiplying the result by a
neutralization factor.
Variable annuity payments for each year after the first reflect variations
in the investment performance of the Separate Account above and below an assumed
investment return. This assumed investment rate is included for purposes of
actuarial computations and does not relate to the actual investment performance
of the underlying Series. Therefore, the Assumed Investment Return must be
"neutralized" in computing the Annuity Change Factor. The Interest
Neutralization Factor is determined by dividing 1 by the effective weekly
equivalent of the assumed investment return previously selected by the
annuitant. For example, the Interest Neutralization Factor for an assumed
investment return of 4.25% is calculated as follows:
Interest Neutralization Factor: 1/[(1 + 0.0425)(1/52)] = 0.9991999
ADDITIONAL FEDERAL INCOME TAX INFORMATION
Security First Life is required to withhold federal income tax on any
Contract distributions to Participants (such as Annuity payments, lump sum
distributions or partial surrenders). However, except as noted below,
Participants are allowed in some cases to make an election not to have federal
income tax withheld. After such election is made with respect to Annuity
payments, an Annuitant may revoke the election at any time, and thereafter
commence withholding. In such a case, Security First Life will notify the payee
at least annually of his or her right to change such election.
The withholding rate followed by Security First Life will be applied only
against the taxable portion of the Contract distributions. Federal tax will be
withheld from Annuity payments pursuant to the recipient's withholding
certificate. If no withholding certificate is filed with Security First Life,
federal tax will be withheld from Annuity payments on the basis that the payee
is married with three withholding exemptions. Federal tax on the taxable portion
of a partial or total surrender (i.e., non-periodic distribution) generally will
be withheld at a flat rate 10% rate. In the case of a plan qualified under
Sections 401(a) or 403(b) of the Code, if the balance to the credit of a
participant in a plan is distributed within one taxable year to the recipient
("total distribution"), the amount of withholding will approximate the federal
income tax on a lump sum distribution. If a total distribution is made from such
a plan or a tax-sheltered annuity on account of the Participant's death, the
amount of withholding will reflect the exclusion from federal income tax for
employer-provided death benefits.
Security First Life will be required to withhold 20% of certain taxable
amounts constituting "eligible rollover distributions" to participants
(including lump sum distributions) in retirement plans under Code Section 401
and tax deferred annuities under Code Section 403(b). This new withholding
requirement does not apply to distributions from such plans and annuities in the
form of a life and life expectancy
6
<PAGE> 34
annuity (individual or joint), an annuity with a designated period of 10 years
or more, or any distributions required by the minimum distributions requirements
of Code Section 401(a)(9). Withholding on these latter types of distribution
will continue to be made under the rules described in the prior paragraph. A
participant cannot elect out of the new 20% withholding requirement. However, if
an eligible rollover distribution is rolled over into an eligible retirement
plan or IRA in a direct trustee-to-trustee transfer, no withholding will be
required.
Payees are required by law to provide Security First Life (as payor) with
their correct taxpayer identification number ("TIN"). If the payee is an
individual, the TIN is the same as his or her Social Security number. If the
payee elects not to have federal income tax withheld on an Annuity payment or a
non-periodic distribution and a correct TIN has not been provided, such election
is ineffective, and such payment will be subject to withholding as noted above.
OBTAINING TAX ADVICE
It should be recognized that the federal income tax information in the
prospectus and this Statement of Additional Information is not exhaustive and is
for information purposes only. The discussions do not purport to cover all
situations involving the purchase of an annuity or the election of an option
under the Contract. Tax results may vary depending upon individual situations
and special rules may apply in certain cases. State and local tax results may
also vary. For these reasons a qualified tax adviser should be consulted.
UNDERWRITERS, DISTRIBUTION OF THE CONTRACTS
The Contracts will be sold as a continuous offering by individuals who are
appropriately licensed as insurance agents of Security First Life for the sale
of life insurance and variable annuity contracts in the state where the sale is
made. In addition, these individuals will be registered representatives of the
principal underwriter, Security First Financial, Inc., or of other
broker-dealers registered under the Securities Exchange Act of 1934 whose
registered representatives are authorized by applicable law to sell variable
annuity contracts issued by Security First Life. Commissions on sales of
contracts range from 0% to 7.5%. Agents are paid from the General Account of
Security First Life. Such commissions bear no direct relationship to any of the
charges under the Contracts. No direct underwriting commissions are paid to
Security First Financial, Inc.
CALCULATION OF PERFORMANCE DATA
a. Money Market Portfolio. The yield of the Money Market Portfolio of the
Separate Account is computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one accumulation unit of the Series at the beginning of a seven-day base period,
subtracting a hypothetical charge reflecting deductions from account values, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by (365/7) with the resulting yield figure carried to a least the nearest
hundredth of one percent.
The effective yield of the Money Market Portfolio over the same period is
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit of the Series at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from
7
<PAGE> 35
account values, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = (BASE PERIOD RETURN + 1)365/7 - 1.
For the seven day period ending December 31, 1995 (before the Portfolio
commenced operations), the yield and effective yield data have been derived by
applying all applicable Contract charges to the performance of the underlying
Fund for that Series during the same period. On that basis, the derived yield of
the Money Market Portfolio was 3.80%, and the effective yield was 3.88%.
b. Other Series. The average annual returns of the other Series of the
Separate Account are computed by finding the average annual compounded rates of
return over the specified periods that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years in the period
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the period (or fractional portion thereof)
The computation of average annual total returns does take into consideration
recurring charges and any non-recurring charges applicable to a Contract which
is surrendered in full at the end of the stated holding period.
For periods occurring prior to commencement of operations of a Series of the
Separate Account, the performance computed will be derived from that of the
corresponding underlying Fund, adjusted for all Contract charges applicable to
the Separate Account. The inception date, if applicable, will be that of the
underlying Fund in such cases. Advertisements will always include total return
data for one, five and ten year periods (or since inception) but may include
other periods as well.
On the foregoing basis, the derived total return data for the Series other
than the Money Market Portfolio for periods ending December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------ INCEPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS TO DATE
------ ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Growth Portfolio.................... 33.69% 15.99% 19.43% N/A 13.48%
(10/09/86)
Asset Management Portfolio.......... 15.40% 8.66% 11.41% N/A 9.89%
(09/06/89)
</TABLE>
8
<PAGE> 36
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
------------------------------ INCEPTION
1 YEAR 3 YEARS 5 YEARS 10 YEARS TO DATE
------ ------- ------- -------- ----------
<S> <C> <C> <C> <C> <C>
Index 500 Portfolio................. 35.39% 13.99% N/A N/A 14.09%
(08/27/92)
T. Rowe Price Bond Series........... 15.22% 5.82% 7.10% 6.61% 7.60%
(08/01/79)
T. Rowe Price Growth................ 29.37% 13.94% 14.76% 11.47% 13.27%
and Income Series (08/01/79)
Contrafund Portfolio................ N/A N/A N/A N/A 39.62%
(01/03/95)
Small Capitalization Portfolio...... 42.96% 14.71% 19.24% N/A 21.25%
(09/21/88)
International Portfolio............. 9.76% 13.59% 9.05% N/A 8.37%
(05/01/87)
Virtus U.S. Government Income....... 12.00% N/A N/A N/A 8.13%
Series (05/19/93)
</TABLE>
Certain expenses of the Index 500 Portfolio have been reimbursed by the
portfolio's investment adviser. Reimbursement of expenses to a series increases
average annual total returns, and repayment of such reimbursements reduces these
returns.
VOTING RIGHTS
Unless otherwise restricted by the Plan under which a Contract is issued,
each Participant will have the right to instruct Security First Life with
respect to voting the Fund shares which are the assets underlying the
Participant's interest in the Separate Account, at all regular and special
shareholder meetings. An Annuitant's voting power with respect to Fund shares
held by the Separate Account declines during the time the Annuitant is receiving
a Variable Annuity based on the investment performance of the Separate Account,
because amounts attributable to the Annuitant's interest are being transferred
annually to the General Account to provide the variable payments.
SAFEKEEPING OF SECURITIES
All assets of the Separate Account are held in the custody of Security First
Life. The assets of each Separate Account Series will be kept physically
segregated by Security First Life and held separate from the assets of any other
firm, person or corporation. Additional protection for the assets of the
Separate Account is afforded by fidelity bonds covering all of Security First
Life's officers and employees.
SERVICING AGENT
An Administrative Services Agreement has been entered into between Security
First Life and SFG under which the latter has agreed to perform certain of the
administrative services relating to the Contracts and for the Separate Account.
SFG performs
9
<PAGE> 37
substantially all of the recordkeeping and administrative services
for the Separate Account.
INDEPENDENT AUDITORS
The financial statements of Security First Life Insurance Company which are
included in this Statement of Additional Information and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, for the periods
indicated in their reports thereon which appear herein, all of which have been
included in reliance on their reports, given on their authority as experts in
accounting and auditing.
LEGAL MATTERS
Legal matters concerning federal securities laws applicable to the issue and
sale of the Variable Annuity contracts have been passed upon by Routier and
Johnson, P.C., 1700 K Street, N.W., Washington, D.C. 20006.
STATE REGULATION OF SECURITY FIRST LIFE
Security First Life is subject to the laws of the State of Delaware
governing insurance companies and to regulation by the Delaware Commissioner of
Insurance. An annual statement, in a prescribed form, is filed with the
Commissioner on or before March 1 each year covering the operations of Security
First Life for the preceding year and its financial condition on December 31 of
such year. Security First Life's books and assets are subject to review or
examination by the Commissioner or his agents at all times, and a full
examination of its operations is usually conducted by the National Association
of Insurance Commissioners at least once in every three years. Security First
Life was last examined as of December 31, 1993. While Delaware insurance law
prescribes permissible investments for Security First Life, it does not
prescribe permissible investments for the Separate Account, nor does it involve
supervision of the investment management or policy of Security First Life.
In addition, Security First Life is subject to the insurance laws and
regulations of other jurisdictions in which it is licensed to operate. State
insurance laws generally provide regulations for the licensing of insurers and
their agents, govern the financial affairs of insurers, require approval of
policy forms, impose reserve requirements and require filing of an annual
statement. Generally, the insurance departments of these other jurisdictions
apply the laws of Delaware in determining permissible investments for Security
First Life.
FINANCIAL STATEMENTS
The financial statements of Security First Life contained herein should be
considered only for the purposes of informing investors as to its ability to
carry out the contractual obligations as depositor under the Contracts as
described elsewhere herein and in the prospectus. The financial statements of
the Separate Account are not included in this Statement of Additional
Information because, as of the date thereon, the sale of the Contracts had not
commenced and, as a result, the Separate Account had no assets and no
liabilities attributable to the Contracts.
10
<PAGE> 38
[LETTERHEAD]
Report of Independent Auditors
To the Board of Directors
Security First Life Insurance Company
and Contract Owners
Security First Life Separate Account A
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Security First Life Separate Account A
(comprised of Series B, G, T, P, I, FA, FG, FI, FO, FM, SU, SV, and commencing
on May 16, 1995, Series FC, commencing on May 22, 1995, Series AS and SI, and
commencing on May 25, 1995, Series FE) as of December 31, 1995, and the related
statements of operations for the year or period then ended and changes in net
assets for each of the two years or periods then ended. These financial
statements are the responsibility of the Separate Account'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. Our procedures included
confirmation of securities owned as of December 31, 1995, by correspondence with
the respective mutual fund managers. 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 Security First Life Separate
Account A (comprised of the above referenced Series) at December 31, 1995, the
results of their operations for the year or period then ended, and the changes
in their net assets for each of the two years or periods then ended, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young
------------------
Ernst & Young
Los Angeles, California
April 5, 1996
1
<PAGE> 39
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust - Bond Series (1,656,211 shares at
net asset value of $3.94 per share; cost $6,524,502) $6,530,291
Security First Trust - Growth and Income Series
(6,132,716 shares at net asset value of $11.52 per
share; cost $58,200,522) $70,635,406
T. Rowe Price Growth Stock Fund, Inc. (1,865,082 shares
at net asset value of $23.35 per share; cost
$38,474,288) $43,549,662
T. Rowe Price Prime Reserve Fund, Inc. (2,625,979
shares at net asset value of $1.00 per share; cost
$2,625,979) $2,625,979
T. Rowe Price International Fund, Inc. (681,384 shares at
net asset value of $12.23 per share; cost $8,160,138) $8,333,329
Receivable from Security First Life Insurance Company for
purchases 7,703 60,695 31,863 535 35,702
Other assets 14,473 8,944 9 865
---------- ----------- ----------- ---------- ----------
TOTAL ASSETS $6,552,467 $70,705,045 $43,581,525 $2,626,523 $8,369,896
</TABLE>
1
<PAGE> 40
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (continued)
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance Company for
mortality and expense risk $ 5,314 $ 56,529 $ 30,437 $ 2,036 $ 7,834
Payable to Security First Life Insurance Company for
redemptions 659 3,862 1,150 51 27,985
Payable to Mutual Funds 22,109 65,348
Other liabilities 16,637 1,151 15
---------- ----------- ----------- ---------- ----------
TOTAL LIABILITIES 28,082 125,739 48,224 3,238 35,834
NET ASSETS
Cost to Investors:
Series B Accumulation Units 6,518,596
Series G Accumulation Units 58,144,422
Series T Accumulation Units 38,457,927
Series P Accumulation Units 2,623,285
Series I Accumulation Units 8,160,870
Accumulated Undistributed Gain:
Net unrealized appreciation 5,789 12,434,884 5,075,374 173,191
---------- ----------- ----------- ---------- ----------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $6,524,385 $70,579,306 $43,533,301 $2,623,285 $8,334,061
========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 41
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $371,424 $ 2,047,981 $2,127,559 $143,086 $251,104
Other income 1,744 22,216 2,422 800 4,629
-------- ----------- ---------- -------- --------
373,168 2,070,197 2,129,981 143,886 255,733
EXPENSES:
Charges for mortality and expense risk 56,396 555,472 322,986 23,948 61,500
-------- ----------- ---------- -------- --------
Net Investment Income 316,772 1,514,725 1,806,995 119,938 194,233
REALIZED AND UNREALIZED INVESTMENT GAINS
(LOSSES)
Realized investment gains (losses) (36,046) 1,021,117 764,380 17,327
Unrealized appreciation of investments 560,723 12,817,755 6,849,189 506,270
-------- ----------- ---------- -------- --------
Net investment gains 524,677 13,838,872 7,613,569 523,597
-------- ----------- ---------- -------- --------
Increase in net assets resulting from operations $841,449 $15,353,597 $9,420,564 $119,938 $717,830
======== =========== ========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 42
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series I
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 316,772 $ 1,514,725 $ 1,806,995 $ 119,938 $ 194,233
Net realized investment gains (losses) (36,046) 1,021,117 764,380 17,327
Net unrealized investment appreciation during the year 560,723 12,817,755 6,849,189 506,270
---------- ----------- ----------- ---------- ----------
Increase in net assets resulting from operations 841,449 15,353,597 9,420,564 119,938 717,830
Increase (decrease) in net assets resulting from capital
unit transactions 577,456 6,487,662 4,713,786 (98,627) 2,662,352
---------- ----------- ----------- ---------- ----------
Total Increase 1,418,905 21,841,259 14,134,350 21,311 3,380,182
Net Assets at December 31, 1994 5,105,480 48,738,047 29,398,951 2,601,974 4,953,879
---------- ----------- ----------- ---------- ----------
Net Assets at December 31, 1995 $6,524,385 $70,579,306 $43,533,301 $2,623,285 $8,334,061
========== =========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 43
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series B Series G Series T Series P Series M Series I
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operations:
Net investment income $ 238,821 $ 1,215,163 $ 2,367,834 $ 74,197 $ 1,285 $ 278,259
Net realized investment gains 19,242 2,736,099 1,786,634 147,429
Net unrealized investment depreciation during
the year (508,208) (3,086,482) (4,153,007) (555,178)
---------- ----------- ----------- ---------- ----------- ----------
Increase (decrease) in net assets resulting
from operations (250,145) 864,780 1,461 74,197 1,285 (129,490)
Increase in net assets resulting from capital unit
transactions (279,127) 4,586,417 4,781,841 (564,963) (2,478,148) 3,540,284
---------- ----------- ----------- ---------- ----------- ----------
Total Increase (Decrease) (529,272) 5,451,197 4,783,302 (490,766) (2,476,863) 3,410,794
Net Assets at December 31, 1993 5,634,752 43,286,850 24,615,649 3,092,740 2,476,863 1,543,085
---------- ----------- ----------- ---------- ----------- ----------
Net Assets at December 31, 1994 $5,105,480 $48,738,047 $29,398,951 $2,601,974 $ 0 $4,953,879
========== =========== =========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 44
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<TABLE>
<CAPTION>
Carrying Unrealized
Name of Issue Shares Value Appreciation Cost
------------- ------ ----- ------------ ----
<S> <C> <C> <C> <C>
Security First Trust Bond Series - capital
shares 1,656,211 $ 6,530,291 $ 5,789 $ 6,524,502
Security First Trust Growth and Income
Series - capital shares 6,132,716 $70,635,406 $12,434,884 $58,200,522
T. Rowe Price Growth Stock Fund, Inc. -
capital shares 1,865,082 $43,549,662 $ 5,075,374 $38,474,288
T. Rowe Price Prime Reserve Fund, Inc. -
capital shares 2,625,979 $ 2,625,979 $ 2,625,979
T. Rowe Price International Stock Fund,
Inc. - capital shares 681,384 $ 8,333,329 $ 173,191 $ 8,160,138
</TABLE>
Note A The carrying value of the investments is the reported net asset value
of investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 45
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments
Fidelity Investments - VIP Asset Manager (2,782,258
shares at net asset value of $15.79 per share; cost
$39,902,742) $43,931,846
Fidelity Investments - VIP Growth Portfolio (1,518,582
shares at net asset value of $29.20; cost
$37,606,829) $44,342,589
Fidelity Investments - VIP Index 500 (86,186 shares at
net asset value of $75.71; cost $5,776,430) $6,525,133
Fidelity Investments - VIP Overseas Portfolio (284,670
shares at net asset value of $17.05; cost
$ 4,603,656) $4,853,623
Fidelity Investments - VIP Money Market Series
(8,395,157 shares at net asset value of $1.00 per
share; cost $8,395,157) $8,395,157
Receivable from Security First Life Insurance Company
for purchases 75,517 213,505 64,542 62,379 56,584
Other assets 3,180 4,999 10,357 59
----------- ----------- ---------- ---------- ----------
TOTAL ASSETS $44,010,543 $44,561,093 $6,600,032 $4,916,002 $8,451,800
</TABLE>
7
<PAGE> 46
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (continued)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance Company for
mortality and expense risk $ 44,158 $ 42,932 $ 5,949 $ 4,550 $ 7,351
Payable to Security First Life Insurance Company for
redemptions 14,433 19,499 11,207 750 492
Payable to Mutual Funds 71,222 198,340 61,878 62,436 54,732
Other liabilities 680 1,852
----------- ----------- ---------- ---------- ----------
TOTAL LIABILITIES 129,813 261,451 79,034 67,736 64,427
NET ASSETS
Cost to Investors:
Series FA Accumulation Units 39,851,626
Series FG Accumulation Units 37,563,882
Series FI Accumulation Units 5,772,295
Series FO Accumulation Units 4,598,299
Series FM Accumulation Units 8,387,373
Accumulated Undistributed Income:
Net unrealized appreciation 4,029,104 6,735,760 748,703 249,967
----------- ----------- ---------- ---------- ----------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $43,880,730 $44,299,642 $6,520,998 $4,848,266 $8,387,373
=========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE> 47
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 562,504 $ 81,618 $ 20,704 $ 15,919 $339,310
EXPENSES:
Charges for mortality and expense risk 414,098 320,517 31,873 36,283 62,783
Other expense (income) (10,299) (101,082) (16,698) 2,443 39,243
---------- ---------- -------- -------- --------
403,799 219,435 15,175 38,726 102,026
---------- ---------- -------- -------- --------
Net Investment Income (Loss) 158,705 (137,817) 5,529 (22,807) 237,284
REALIZED AND UNREALIZED INVESTMENT GAINS:
Realized investment gains 64,929 93,864 36,253 6,514
Unrealized investment appreciation during the year 5,020,534 6,383,879 741,445 294,152
---------- ---------- -------- --------
Net investment gains 5,085,463 6,477,743 777,698 300,666
---------- ---------- -------- -------- --------
Increase in net assets resulting from
operations $5,244,168 $6,339,926 $783,227 $277,859 $237,284
========== ========== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 48
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 158,705 $ (137,817) $ 5,529 $ (22,807) $ 237,284
Net realized investment gain 64,929 93,864 36,253 6,514
Net unrealized investment appreciation
during the year 5,020,534 6,383,879 741,445 294,152
----------- ----------- ---------- ---------- ----------
Increase in net assets resulting from operations 5,244,168 6,339,926 783,227 277,859 237,284
Increase in net assets resulting from capital unit
transactions 13,466,719 24,403,159 4,791,886 2,585,161 4,276,144
----------- ----------- ---------- ---------- ----------
Total Increase 18,710,887 30,743,085 5,575,113 2,863,020 4,513,428
Net Assets at December 31, 1994 25,169,843 13,556,557 945,885 1,985,246 3,873,945
----------- ----------- ---------- ---------- ----------
Net Assets at December 31, 1995 $43,880,730 $44,299,642 $6,520,998 $4,848,266 $8,387,373
=========== =========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 49
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series FA Series FG Series FI Series FO Series FM
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operations:
Net investment income (loss) $ 87,421 $ 31,856 $ (5,934) $ (10,535) $ 106,832
Net realized investment gains (losses) (5,869) (40,668) (412) 1,749
Net unrealized investment appreciation (depreciation)
during the year (1,215,262) 324,465 9,612 (47,106)
----------- ----------- -------- ---------- ----------
Increase (decrease) in net assets resulting from
operations (1,133,710) 315,653 3,266 (55,892) 106,832
Increase in net assets resulting from capital unit
transactions 21,658,209 11,739,399 773,367 1,931,599 3,736,108
----------- ----------- -------- ---------- ----------
Total Increase 20,524,499 12,055,052 776,633 1,875,707 3,842,940
Net Assets at December 31, 1993 4,645,344 1,501,505 169,252 109,539 31,005
----------- ----------- -------- ---------- ----------
Net Assets at December 31, 1994 $25,169,843 $13,556,557 $945,885 $1,985,246 $3,873,945
=========== =========== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 50
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<TABLE>
<CAPTION>
Carrying
Value Unrealized Cost
Name of Issue Shares (Note A) Appreciation (Note B)
------------- ------ -------- ------------ --------
<S> <C> <C> <C> <C>
Fidelity Investments VIP Asset Manager -
capital shares 2,782,258 $43,931,846 $4,029,104 $39,902,742
Fidelity Investments VIP Growth Portfolio -
capital shares 1,518,582 $44,342,589 $6,735,760 $37,606,829
Fidelity Investments VIP Index 500 - capital
shares 86,186 $ 6,525,133 $ 748,703 $ 5,776,430
Fidelity Investments Overseas Portfolio -
capital shares 284,670 $ 4,853,623 $ 249,967 $ 4,603,656
Fidelity Investments VIP Money Market Fund
- capital shares 8,395,157 $ 8,395,157 $ 8,395,157
</TABLE>
Note A The carrying value of the investments is the reported net asset value
of the investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
12
<PAGE> 51
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments
Security First Trust - U.S. Government Income
Series (1,788,475 shares at net asset value
of $5.18 per share; cost $9,015,628) $9,263,160
Security First Trust - Value Equity Series
(2,216,873 shares at net asset value of
$5.91 per share; cost $11,968,596) $13,100,908
Alger American Small Capitalization Portfolio
(122,440 shares at net asset value of $39.41
per share; cost $4,918,114) $4,825,362
Scudder International Fund (32,389 shares at
net asset value of $11.82 per share; cost
$372,264) $382,835
Fidelity Investments - VIP Contra Fund
(426,703 shares at net asset value of $13.78
per share; cost $5,787,530) $5,879,966
Fidelity Investments - VIP Equity Income
Portfolio (41,802 shares at net asset value of
$19.27 per share; cost $759,759) $805,524
Receivable from Security First Life Insurance
Company for purchases 47,996 144,892 34,274 331 60,377 17,300
Other assets 170 1,009 15 8,845
---------- ----------- ---------- -------- ---------- --------
TOTAL ASSETS $9,311,326 $13,246,809 $4,859,636 $383,181 $5,949,188 $822,824
</TABLE>
13
<PAGE> 52
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES (continued)
<TABLE>
<CAPTION>
Series SU Series SV Series AS Series SI Series FC Series FE
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
Payable to Security First Life Insurance Company for
mortality and expense risk $ 8,574 $ 12,101 $ 4,639 $ 402 $ 5,644 $ 752
Payable to Security First Life Insurance Company for
redemptions 4,378 5,431 552 653
Payable to Mutual Funds 46,895 143,791 34,286 331 68,064 17,300
Other liabilities 13,670 252
---------- ----------- ---------- -------- ---------- --------
TOTAL LIABILITIES 59,847 161,323 53,147 733 74,361 18,304
NET ASSETS - NOTES 4 AND 5
Cost to Investors:
Series SU Accumulation Units 9,003,947
Series SV Accumulation Units 11,953,174
Series AS Accumulation Units 4,899,241
Series SI Accumulation Units 371,877
Series FC Accumulation Units 5,782,391
Series FE Accumulation Units 758,755
Accumulated Undistributed Income (loss):
Net unrealized appreciation (depreciation) 247,532 1,132,312 (92,752) 10,571 92,436 45,765
---------- ----------- ---------- -------- ---------- --------
NET ASSETS APPLICABLE TO OUTSTANDING
UNITS OF CAPITAL $9,251,479 $13,085,486 $4,806,489 $382,448 $5,874,827 $804,520
========== =========== ========== ======== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE> 53
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS(1) Series SI(1) Series FC(1) Series FE(1)
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $349,446 $ 444,126 $ 70,263 $ 5,416
Other income 2,208 4,077 $ 19,725 $ 349 30,772 490
-------- ---------- -------- ------- -------- -------
351,654 448,203 19,725 349 101,035 5,906
EXPENSES:
Charges for mortality and expense risk 70,358 88,613 14,826 1,349 18,477 2,303
-------- ---------- -------- ------- -------- -------
Net investment income (loss) 281,296 359,590 4,899 (1,000) 82,558 3,603
REALIZED AND UNREALIZED INVESTMENT GAINS
(LOSSES)
Net realized investment gains (losses) (29,574) 13,023 26,373 304 26,862 452
Unrealized investment appreciation (depreciation) 436,539 1,352,775 (92,752) 10,571 92,436 45,765
-------- ---------- -------- ------- -------- -------
Net investment gains (losses) 406,965 1,365,798 (66,379) 10,875 119,298 46,217
-------- ---------- -------- ------- -------- -------
Increase (decrease) in net assets
resulting from operations $688,261 $1,725,388 $(61,480) $ 9,875 $201,856 $49,820
======== ========== ======== ======= ======== =======
</TABLE>
(1) Series FC commenced operations May 16, 1995; Series AS and SI on May 22,
1995; and Series FE on May 25, 1995.
The accompanying notes are an integral part of these financial statements.
15
<PAGE> 54
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Series SU Series SV Series AS(1) Series SI(1) Series FC(1) Series FE(1)
--------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income (loss) $ 281,296 $ 359,590 $ 4,899 $ (1,000) $ 82,558 $ 3,603
Net realized investment gains (losses) (29,574) 13,023 26,373 304 26,862 452
Unrealized investment appreciation
(depreciation) during the year 436,539 1,352,775 (92,752) 10,571 92,436 45,765
---------- ----------- ---------- -------- ---------- --------
Increase (decrease) in net assets resulting
from operations 688,261 1,725,388 (61,480) 9,875 201,856 49,820
Increase in net assets resulting from capital
unit transactions 4,043,705 6,807,136 4,867,969 372,573 5,672,971 754,700
---------- ----------- ---------- -------- ---------- --------
Total Increase 4,731,966 8,532,524 4,806,489 382,448 5,874,827 804,520
Net assets at December 31, 1994 4,519,513 4,552,962
---------- ----------- ---------- -------- ---------- --------
Net assets at December 31, 1995 $9,251,479 $13,085,486 $4,806,489 $382,448 $5,874,827 $804,520
========== =========== ========== ======== ========== ========
</TABLE>
(1) Series FC commenced operations May 16, 1995; Series AS and SI on May 22,
1995; and Series FE on May 25, 1995.
The accompanying notes are an integral part of these financial statements.
16
<PAGE> 55
SECURITY FIRST LIFE SEPARATE ACCOUNT A
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Series SU Series SV
--------- ---------
<S> <C> <C>
OPERATIONS:
Net investment income $ 100,307 $ 15,569
Net realized investment losses (31,739) (16,538)
Unrealized investment depreciation during the year (157,317) (226,588)
---------- ----------
Decrease in net assets resulting from operations (88,749) (227,557)
Increase in net assets resulting from capital unit
transactions 3,081,435 3,471,901
---------- ----------
Total Increase 2,992,686 3,244,344
Net assets at December 31, 1993 1,526,827 1,308,618
---------- ----------
Net assets at December 31, 1994 $4,519,513 $4,552,962
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE> 56
SECURITY FIRST LIFE SEPARATE ACCOUNT A
INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<TABLE>
<CAPTION>
Carrying Unrealized
Value Appreciation Cost
Name of Issue Shares (Note A) (Depreciation) (Note B)
------------- ------ -------- -------------- --------
<S> <C> <C> <C> <C>
Security First Trust U. S. Government Series -
capital shares 1,788,475 $ 9,263,160 $ 247,532 $ 9,015,628
Security First Trust Value Equity Series -
capital shares 2,216,873 $13,100,908 $1,132,312 $11,968,596
Alger American Small Capitalization Portfolio
- capital shares 122,440 $ 4,825,362 $ (92,752) $ 4,918,114
Scudder International Portfolio - capital
shares 32,389 $ 382,835 $ 10,571 $ 372,264
Fidelity Investments VIP Contra Fund - capital
shares 426,703 $ 5,879,966 $ 92,436 $ 5,787,530
Fidelity Investments VIP Equity Income
Portfolio - capital shares 41,802 $ 805,524 $ 45,765 $ 759,759
</TABLE>
Note A The carrying value of the investments is the reported net asset value
of investment companies capital shares.
Note B Cost is determined by using the first-in, first-out cost method.
The accompanying notes are an integral part of these financial statements.
18
<PAGE> 57
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 -- BASIS OF PRESENTATION
Security First Life Separate Account A (Separate Account) was established on May
29, 1980, as a separate account of Security First Life Insurance Company
(Security Life), the sponsor company, and is registered under the Investment
Company Act of 1940 as a unit investment trust. The Separate Account is designed
to provide annuity benefits pursuant to certain variable annuity contracts (the
Contracts) issued by Security Life.
In accordance with the terms of the Contracts, all payments allocated to the
Separate Account by the contract owners must be allocated to purchase shares of
any or all of four series of Security First Trust (the Trust), a Massachusetts
business trust, and twelve mutual funds (investment companies). The series of
the Trust are Bond Series, Growth and Income Series, Value Equity Series, and
U.S. Government Income Series and the mutual funds are T. Rowe Price Growth
Stock Fund, Inc., T. Rowe Price Prime Reserve Fund, Inc., T. Rowe Price
International Stock Fund, Inc., Alger American Small Capitalization Portfolio,
Scudder International Fund, and Fidelity Investments: VIP Asset Manager, VIP
Growth Portfolio, VIP Index 500, VIP Overseas Portfolio, VIP Contra Fund, VIP
Equity Income Portfolio and VIP Money Market Fund. The Trust and the (investment
companies) are registered as diversified, open-end management investment
companies under the Investment Company Act of 1940. The Separate Account is
correspondingly divided into sixteen series of Accumulation Units, Series B, G,
SU, SV, T, P, I, AS, SI, FA, FG, FI, FO, FC, FE and FM, relating to investments
in each of the investment companies, respectively. For the year ended December
31, 1994 and prior, assets held by certain Series (SF 135R2S contracts) were
reported separately in the financial statements. For the year ended December 31,
1995 these contracts were combined with the other contracts that shared the same
series.
All series of the Trust receive administrative services for a fee from Security
First Investment Management Corporation (Security Management). Security First
Financial, Inc. is the principal underwriter for the Contracts. Security Life,
Security Management, and Security First Financial, Inc. are wholly-owned
subsidiaries of Security First Group, Inc. Investment advice is provided to the
Security First Trust Bond Series and Growth and Income Series by T. Rowe Price
Associates, Inc. and to the Security First Trust Value Equity and U. S.
Government Income Series by Virtus Capital Management.
19
<PAGE> 58
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 1 -- BASIS OF PRESENTATION (continued)
The Separate Account and each series therein are administered and accounted for
as part of the business of Security Life, but the investment income and capital
gains and losses of each Separate Account series are identified with the assets
held for that series in accordance with the terms of the Contracts, without
regard to investment income and capital gains and losses arising out of any
other business Security Life may conduct.
The Separate Account incurs no liability for remuneration to directors, advisory
boards, officers or such other persons who may from time to time perform
services for the Separate Account.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS -- Investments are carried at market value, which is
determined by multiplying the investment company's shares owned by the Separate
Account by the reported net asset value per share of each respective investment
company. Realized investment gains and losses are determined on the first-in,
first-out cost basis.
EXPENSES AND CHARGES -- The Separate Account accrues charges incurred for the
mortality and expense risk assumed by Security Life. The charges are calculated
daily by multiplying the value of the assets of the Separate Account by the
daily mortality and expense risk rate. Security Life has the option of calling
for payment of such charges at any time. The following table illustrates the
rates for the respective contracts:
<TABLE>
<CAPTION>
Contract Type Annual Rate Daily Rate
------------- ----------- ----------
<S> <C> <C>
SF 234; SF 89; SF 224FL;
SF 236FL; SF 1700 Contracts .89% .0000244
SF 135R; SF 135R2V; SF 226RI Contracts 1.25% .0000342
SF 135R2S Contracts 1.15% .0000315
</TABLE>
The following charges are deducted from a contract holder's account by Security
Life as a capital transaction by reducing the separate account units held, and
such charges are not an expense of the Separate Account. An administration
charge (contract charge) is deducted from each contract and paid to Security
Life at the end of each contract year prior to the annuity date, and when the
entire contract value is withdrawn on any date other than a contract
anniversary. In the event that a participant withdraws
20
<PAGE> 59
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (continued)
all or a portion of the participant's account, a contingent deferred sales
charge (CDSC) may be applied to the amount of the contract value withdrawn to
cover certain expense relating to the sale of contracts. The following table
illustrates contract charges and CDSC with respect to the various types of
contracts:
<TABLE>
<CAPTION>
Maximum Contract
Contract Type Charge Per Year CDSC
------------- --------------- ----
<S> <C> <C>
SF 236FL $12.00 Based on elapsed time since premium received.
Disappears on or before 6th anniversary.
SF 224FL $40.00 Based on elapsed time since premium received.
Disappears on or before 6th anniversary.
SF 1700 $42.50 Based on elapsed time since premium received.
Disappears on or before 6th anniversary.
Group Form
226RI $41.50 Seven percent of premium received. Disappears
on or before 6th anniversary.
All other group $19.50 Five percent of premium received. Disappears on
or before 6th anniversary.
SF 135R2V * None
SF 135R2S and other
individual * Based on elapsed time since premium received.
Disappears after 7th year.
</TABLE>
* .15% annually of average account value (currently being waived).
In addition, transaction charges of $10 are incurred for each surrender or
annuitization. Upon conversion of either accumulation or annuity units from one
series to another, a $10 conversion charge is incurred. The amount deducted for
contract charges and CDSC was $273,809 for the year ended December 31, 1995, and
$132,959 for the year ended December 31, 1994.
INCOME RECOGNITION AND REINVESTMENT -- Income is recognized as declared payable
by the investment companies. All distributions received are reinvested in the
investment companies.
21
<PAGE> 60
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3 -- FEDERAL INCOME TAXES
The operations of the Separate Account form a part of, and are taxed with, the
operations of Security Life, which is taxed as a "life insurance company" under
the Internal Revenue Code, and as such, Security Life is liable for income
taxes, if any, which become payable with respect to the Separate Account's
operations.
Separate accounts are generally required to meet certain diversification
requirements for their assets. However, separate accounts which solely provide
benefits for "pension plan contracts" are exempt from the diversification
requirements. Pension plan contracts include: (i) tax qualified plans; (ii)
employee annuities; (iii) plans for employees of life insurance companies; (iv)
tax sheltered annuities of exempt organizations; (v) individual retirement
accounts or annuities, and (vi) deferred compensation plans of certain
governmental or tax-exempt organizations. The Contracts issued by Security Life
are offered in connection with both pension plan contracts and non-qualified
contracts, therefore the Separate Account is subject to the diversification
requirements. Management believes that the Separate Account has met the
diversification requirements.
NOTE 4 -- CAPITAL TRANSACTIONS
Additions and deductions to Units of Capital consisting of the effect of capital
unit transactions were as follows:
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
----- ----- ----- -----
<S> <C> <C> <C> <C>
Year ended December 31, 1995:
SF 135R; SF 226RI Contracts
---------------------------
Series B Accumulation Units 434,597 54,077 110,016 13,561
Series G Accumulation Units 4,305,620 420,939 881,557 89,611
Series FA Accumulation Units 14,071,749 2,554,939 4,044,605 724,251
Series FG Accumulation Units 14,711,150 2,249,747 1,345,976 204,887
Series FI Accumulation Units 3,146,381 487,693 135,735 21,838
Series FO Accumulation Units 505,089 87,729 336,120 58,663
Series FM Accumulation Units 4,916,221 921,317 1,605,571 302,600
Series SU Accumulation Units 105,370 19,715
Series AS Accumulation Units 4,947,271 746,279 79,302 11,979
Series SI Accumulation Units 376,043 66,110 3,470 605
Series FC Accumulation Units 5,777,070 950,446 104,099 16,764
</TABLE>
22
<PAGE> 61
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
----- ----- ----- -----
<S> <C> <C> <C> <C>
Series FE Accumulation Units 760,961 132,235 6,261 1,114
</TABLE>
NOTE 4 -- CAPITAL TRANSACTIONS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
----- ----- ----- -----
<S> <C> <C> <C> <C>
SF 234; SF 89; SF 224FL; SF 236FL; SF 1700 Contracts
- ----------------------------------------------------
Series B Accumulation Units 833,258 48,874 580,383 33,929
Series G Accumulation Units 9,125,759 294,937 6,062,160 196,489
Series T Accumulation Units 9,366,192 347,286 4,652,406 171,305
Series P Accumulation Units 634,124 50,176 732,751 57,732
Series I Accumulation Units 4,605,139 660,163 1,942,787 276,598
Series FA Accumulation Units 5,110,732 961,908 1,671,157 311,571
Series FG Accumulation Units 6,918,341 1,058,309 692,639 106,251
Series FI Accumulation Units 1,988,299 318,789 207,059 32,436
Series FM Accumulation Units 1,745,516 329,755 1,217,457 229,906
SF 135R2S
- ---------
Series SU Accumulation Units 4,886,186 942,800 947,851 188,764
Series SV Accumulation Units 7,552,784 1,366,412 745,648 142,445
Series FM Accumulation Units 511,763 95,847 74,328 14,079
Series FG Accumulation Units 5,215,983 786,021 403,700 61,003
Series FO Accumulation Units 2,521,718 501,641 105,526 21,247
Year ended December 31, 1994:
SF 135R; SF 226RI Contracts
- ---------------------------
Series B Accumulation Units 450,410 59,234 1,964,889 255,231
Series G Accumulation Units 2,256,171 255,847 11,816,179 1,346,467
Series M Accumulation Units 3,404 513 1,896,616 286,075
Series T Accumulation Units 25,699 2,710 11,921,075 1,244,060
Series FA Accumulation Units 18,699,464 3,451,499 1,087,647 202,875
Series FG Accumulation Units 8,227,024 1,580,400 278,031 53,770
Series FI Accumulation Units 588,897 113,711 6,953 1,338
Series FO Accumulation Units 1,019,668 174,720 22,111 3,810
Series FM Accumulation Units 1,187,375 234,573 571,042 111,981
</TABLE>
23
<PAGE> 62
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4 -- CAPITAL TRANSACTIONS (continued)
<TABLE>
<CAPTION>
Additions to Capital Deductions From Capital
$ Units $ Units
----- ----- ----- -----
<S> <C> <C> <C> <C>
SF 234; SF 89; SF 224FL; SF 236FL; SF 1700 Contracts
- ----------------------------------------------------
Series B Accumulation Units 2,365,192 145,428 1,129,840 70,689
Series G Accumulation Units 19,236,016 714,441 5,089,591 188,577
Series M Accumulation Units 163 17 585,099 60,337
Series T Accumulation Units 20,139,827 857,260 3,462,610 148,948
Series P Accumulation Units 610,483 49,901 1,175,446 96,364
Series I Accumulation Units 4,068,516 585,985 528,232 76,552
Series FA Accumulation Units 4,252,178 825,943 205,786 40,076
Series FG Accumulation Units 2,075,220 420,944 87,975 17,729
Series FI Accumulation Units 194,766 39,124 3,343 662
Series FM Accumulation Units 3,785,144 753,094 945,024 186,554
SF 135R2S
- ---------
Series SU Accumulation Units 3,327,573 685,345 246,138 51,484
Series SV Accumulation Units 3,719,973 755,973 248,072 51,516
Series FM Accumulation Units 289,695 56,479 10,040 1,962
Series FG Accumulation Units 1,843,704 367,479 40,543 8,061
Series FO Accumulation Units 952,968 191,482 18,926 3,926
</TABLE>
NOTE 5 -- UNITS OF CAPITAL
The following are the units outstanding and corresponding unit values as of
December 31, 1995:
<TABLE>
<CAPTION>
Units Unit Value
Description Outstanding $
----------- ----------- ----------
<S> <C> <C>
SF 135R2C; SF 226 RI Contracts
- ------------------------------
Series B Accumulation Units 170,728 8.55
Series G Accumulation Units 1,105,394 11.46
Series FA Accumulation Units 5,868,185 6.02
Series FG Accumulation Units 3,819,793 7.13
Series FI Accumulation Units 610,372 7.04
Series FO Accumulation Units 219,402 6.14
Series FM Accumulation Units 743,389 5.40
Series SU Accumulation Units 19,715 5.43
Series AS Accumulation Units 734,300 6.54
Series SI Accumulation Units 65,505 5.84
Series FC Accumulation Units 933,682 6.29
Series FE Accumulation Units 131,121 6.13
</TABLE>
24
<PAGE> 63
SECURITY FIRST LIFE SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 5 -- UNITS OF CAPITAL (continued)
<TABLE>
<CAPTION>
Units Unit Value
Description Outstanding $
----------- ----------- ----------
<S> <C> <C>
SF 234; SF 89; SF 224FL; SF 236FL; SF 1700 Contracts
- ----------------------------------------------------
Series B Accumulation Units 277,508 18.25
Series G Accumulation Units 1,640,191 35.31
Series T Accumulation Units 1,430,263 30.44
Series P Accumulation Units 202,251 12.97
Series I Accumulation Units 1,118,228 7.45
Series FA Accumulation Units 1,475,597 5.79
Series FG Accumulation Units 1,386,442 6.84
Series FI Accumulation Units 325,198 6.83
Series FM Accumulation Units 666,389 5.42
SF 135R2S
- ---------
Series SU Accumulation Units 1,692,672 5.40
Series SV Accumulation Units 2,186,595 5.98
Series FM Accumulation Units 140,365 5.44
Series FG Accumulation Units 1,084,436 6.99
Series FO Accumulation Units 667,950 5.24
</TABLE>
NOTE 6 -- SECURITY FIRST TRUST - MONEY MARKET SERIES INVESTMENT OPTION
Effective January 31, 1994, the Security First Trust Money Market Series (Series
M) was closed and liquidated. Policyholders were notified of this and allowed to
transfer their funds. The Fidelity Investments VIP Money Market Fund has similar
investment objectives and many policyholders elected to transfer their Security
First Trust Money Market investments into it.
25
<PAGE> 64
[LETTERHEAD]
Report of Independent Auditors
Board of Directors
Security First Life Insurance Company
We have audited the accompanying consolidated balance sheets of Security First
Life Insurance Company and subsidiaries as of December 31, 1995 and 1994, and
the related consolidated statements of income, stockholder's equity, and cash
flows for each of the three years in the period ended December 31, 1995. 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 consolidated financial position of Security First
Life Insurance Company and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in Notes 3 and 5 to the consolidated financial statements, Security
First Life Insurance Company and subsidiaries made certain accounting changes in
1994 and 1993.
/s/ Ernst & Young LLP
-----------------------
Ernst & Young LLP
February 9, 1996
<PAGE> 65
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
1995 1994
---- ----
(In thousands)
<S> <C> <C>
ASSETS
INVESTMENTS
Fixed maturities:
Available-for-sale $2,176,985 $1,602,387
Held-for-investment 197,379
Equity securities 5,129 5,827
Investment real estate 2,311 2,298
Policy and mortgage loans 18,798 16,239
Short-term investments 7,024 26,215
---------- ----------
2,210,247 1,850,345
CASH AND CASH EQUIVALENTS 7,990 13,359
ACCRUED INVESTMENT INCOME 30,459 27,018
DEFERRED POLICY ACQUISITION COSTS 56,515 47,985
OTHER ASSETS
Property under capital lease 10,680 11,260
Assets held in separate accounts 340,287 184,196
Other 4,318 4,517
---------- ----------
$2,660,496 $2,138,680
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 66
<TABLE>
<CAPTION>
December 31
1995 1994
---- ----
(In thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
Policyholder liabilities $2,047,818 $1,790,456
Obligation under capital lease 15,966 16,183
Notes payable to parent 35,000 35,000
Note payable 1,000 2,000
Federal income taxes 35,052 1,723
Liabilities related to separate accounts 340,287 184,196
Other 5,293 5,060
---------- ----------
2,480,416 2,034,618
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Preferred stock, $1 par value
Authorized, issued and outstanding -- 200,000 shares 200 200
Common stock, $200 par value
Authorized -- 15,000 shares
Issued and outstanding -- 11,000 shares 2,200 2,200
Additional paid-in capital 48,147 48,147
Net unrealized investment gains (losses) 38,972 (21,561)
Retained earnings 90,561 75,076
---------- ----------
180,080 104,062
---------- ----------
$2,660,496 $2,138,680
========== ==========
</TABLE>
3
<PAGE> 67
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
---- ---- ----
(In thousands)
<S> <C> <C> <C>
REVENUES
Net investment income $158,174 $146,101 $137,450
Annuity product income 14,815 6,121 2,499
Net realized investment gains (losses) 1,347 (1,735) 921
Other 701 709 721
-------- -------- --------
TOTAL REVENUES 175,037 151,196 141,591
BENEFITS AND EXPENSES
Interest credited to policyholders 103,959 102,776 102,513
Benefits in excess of policyholder liabilities 5,738 4,119 1,907
Amortization of deferred policy acquisition costs 15,505 5,612 1,981
Operating expenses 28,201 23,543 17,397
-------- -------- --------
TOTAL BENEFITS AND EXPENSES 153,403 136,050 123,798
-------- -------- --------
21,634 15,146 17,793
Income tax expense
Current 3,044 1,776 5,467
Deferred 3,105 3,388 597
-------- -------- --------
6,149 5,164 6,064
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 15,485 9,982 11,729
Cumulative effect of change in accounting for income taxes 1,510
-------- -------- --------
NET INCOME $ 15,485 $ 9,982 $ 13,239
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 68
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Net
Additional Unrealized Total
Preferred Common Paid-in Investment Retained Stockholder's
Stock Stock Capital Gains (Losses) Earnings Equity
----- ----- ------- -------------- -------- ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $200 $2,200 $48,147 $ 226 $51,855 $102,628
Net income 13,239 13,239
Net unrealized investment losses (269) (269)
---- ------ ------- -------- ------- --------
Balance at December 31, 1993 200 2,200 48,147 (43) 65,094 115,598
Net income 9,982 9,982
Cumulative effect of change in
accounting principle at January 1 28,618 28,618
Net unrealized investment losses (50,136) (50,136)
---- ------ ------- -------- ------- --------
Balance at December 31, 1994 200 2,200 48,147 (21,561) 75,076 104,062
Net income 15,485 15,485
Net unrealized investment gains 60,533 60,533
---- ------ ------- -------- ------- --------
Balance at December 31, 1995 $200 $2,200 $48,147 $ 38,972 $90,561 $180,080
==== ====== ======= ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 69
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994 1993
---- ---- ----
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 15,485 $ 9,982 $ 13,239
Adjustments to reconcile net income to net cash
provided by operations:
Cumulative effect of accounting change (1,510)
Net realized investment losses (gains) (1,347) 3,014 (12,121)
Depreciation and amortization 1,391 2,281 1,703
Accretion of discount and amortization of
premium on investments 1,059 (2,423) (8,212)
Changes in operating assets and liabilities:
Accrued investment income (3,441) (648) (3,957)
Deferred policy acquisition costs (15,676) (4,915) (16,946)
Other assets 2,194 4,560 (4,504)
Other liabilities 673 (9,050) 2,207
--------- ----------- -----------
NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES 338 2,801 (30,101)
INVESTING ACTIVITIES
Fixed maturity securities -- available-for-sale
Purchases (636,371) (1,033,097)
Sales and maturities 439,897 860,239
Fixed maturity securities -- held-for-investment
Purchases (1,037,222)
Sales and maturities 783,570
Equity securities
Purchases (117)
Sales 931 1,085
Disposal (acquisition) of real estate, net (13) 2,192 (161)
Net sale (purchase) of short-term investments 19,191 (26,215)
Repayment (issuance) of loans, net (2,558) 5,792 (359)
Purchase of equipment (388) (896)
--------- ----------- -----------
NET CASH USED IN
INVESTING ACTIVITIES (179,428) (190,900) (254,172)
FINANCING ACTIVITIES
Receipts credited to policyholder accounts 565,698 468,898 509,223
Amounts returned to policyholders (390,760) (326,691) (208,422)
Issuance of note payable to parent 10,000 25,000
Repayment of notes payable (1,000) (1,000) (1,000)
Reduction of capital lease obligation (217) (192) (170)
--------- ----------- -----------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 173,721 151,015 324,631
--------- ----------- -----------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (5,369) (37,084) 40,358
Cash and cash equivalents at beginning of year 13,359 50,443 10,085
--------- ----------- -----------
CASH AND CASH
EQUIVALENTS AT END OF YEAR $ 7,990 $ 13,359 $ 50,443
========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 70
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- Security First Life Insurance Company (Security First
Life) and subsidiaries (collectively, the Company) is a wholly-owned subsidiary
of Security First Group, Inc. (SFG), formerly The Holden Group, Inc. SFG has
been a wholly-owned subsidiary of London Insurance Group, Inc. (LIG) since May
1994. The Company sells a broad range of fixed and variable annuity contracts.
The Company's consolidated financial statements are prepared in conformity with
generally accepted accounting principles (GAAP) which vary in some respects from
statutory accounting practices prescribed or permitted by regulatory authorities
(statutory basis) and include the accounts of its wholly-owned subsidiaries,
Fidelity Standard Life Insurance Company (Fidelity Standard Life) and Security
First Life Insurance Company of Arizona (SFL-Arizona). All significant
intercompany transactions and accounts are eliminated in consolidation.
INVESTMENTS -- Investments are reported on the following bases:
Fixed Maturities:
Available-for-sale -- at fair value, which differs from the amortized
cost of such investments. Unrealized gains and losses on these
investments (net of related adjustments for deferred policy acquisition
costs and applicable deferred income taxes) are credited or charged to
stockholder's equity and, accordingly, have no effect on net income.
Held-for-investment -- at cost, adjusted for amortization of premium or
accretion of discount and other-than-temporary declines in fair value.
The amortized cost of such investments differs from their fair values.
See Note 3 regarding the reclassification in 1995 of
held-for-investment securities to available-for-sale.
For those fixed maturities which are mortgage-backed, the Company
recognizes income using a constant effective yield based on anticipated
prepayments and the estimated economic life of the securities. When
actual prepayments differ significantly from anticipated prepayments,
the effective yield is recalculated to reflect actual payments to date
and anticipated future payments. The net investment in the security is
adjusted to the amount that would have existed had the new effective
yield been applied since the acquisition of the security. Such
adjustment is included in net investment income.
The Company does not maintain a trading portfolio, or at December 31,
1995, a held-for-investment portfolio.
7
<PAGE> 71
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity securities (common and non-redeemable preferred stocks) -- at fair
value if publicly traded. Changes in fair values of equity securities, net
of applicable deferred income taxes, are reported as unrealized gains or
losses directly in stockholder's equity and, accordingly, have no effect on
net income.
Investment real estate -- at lower of cost less accumulated depreciation or
fair value.
Mortgage loans and policy loans -- at unpaid balances.
Short-term investments -- at cost, which approximates fair value.
Realized gains and losses on disposal of investments are determined on a
specific identification basis.
CASH EQUIVALENTS -- Cash equivalents consist of investments in money market
funds. The carrying amount of cash equivalents approximates fair value.
DEFERRED POLICY ACQUISITION COSTS -- As of January 1, 1995, the Company adopted
the account value deposit method of reporting on two-tier annuities (those
annuities that have a different interest credited rate for annuitization as
compared to withdrawal). The Company had previously adopted this method for
single-tier annuities. Under this method, commissions and other costs of
acquiring annuities that vary with and are primarily related to the acquisition
of such business are included in deferred policy acquisition costs. Prior to
that date, certain commission costs for two-tier annuities were reported as a
component of policyholder liabilities. As a result of this change, deferred
policy acquisition costs and policyholder liabilities increased by $38,590,000
on January 1, 1995 with no effect on stockholder's equity. Additionally, the
presentation of certain revenue and expense items in the consolidated statement
of income for the year ended December 31, 1995 has been effected by this change
with no significant impact on net income.
Deferred policy acquisition costs are being amortized in proportion to the
present value of estimated future gross margins which includes the impact of
realized investment gains and losses.
8
<PAGE> 72
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
POLICYHOLDER LIABILITIES -- As indicated previously, the Company adopted the
account value deposit method for reporting on two-tier annuities as of January
1, 1995. Under this method, the policyholder liabilities for two-tier annuities
are the lower tier account values. Prior to that date, policyholder liabilities
for the Company's two-tier fixed annuity products were calculated using a
prospective approach. Under the prospective approach, the policyholder liability
was equal to the present value of future benefits using a "break-even" discount
rate which resulted in no gain or loss when a policy was issued. This method
allowed profits to emerge in relation to the difference between actual
investment earnings and the break-even discount rate used in the calculation of
the policyholder liabilities. Policyholder liabilities for the Company's
single-tier fixed annuity products are the account values.
The fair value of policyholder liabilities is estimated assuming all
policyholders surrender their policies. The carrying amounts and estimated fair
values are as follows (in thousands):
<TABLE>
<CAPTION>
Carrying Amount Estimated Fair Value
--------------- --------------------
<S> <C> <C>
December 31, 1995 $2,047,818 $1,976,079
December 31, 1994 1,790,456 1,760,999
</TABLE>
NOTES PAYABLE -- Notes payable are carried at their unpaid balances which
approximate fair value because the interest rates on these notes approximate
market rates.
INCOME TAXES -- The Company files consolidated federal income tax returns with
SFG. Income taxes are provided on the basis as if the companies filed
separately.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Such differences are related principally to the deferral of policy
acquisition costs, the valuation of fixed maturities and the provision for
policyholder liabilities. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
SEPARATE ACCOUNTS -- The assets held in separate accounts represent funds which
are separately administered by the Company pursuant to variable annuity
contracts. The liabilities related to separate accounts consist of policyholder
liabilities for variable annuities. The separate account assets and liabilities
are reported at fair value. The Company receives a fee for administrative
services provided to the separate accounts. Investment risks associated with
fair value changes are borne by the contract holders.
9
<PAGE> 73
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ANNUITY REVENUES AND BENEFITS -- Annuity product income represents fees earned
from policyholders of annuity contracts, including surrender charges,
annuitization charges and administration fees. Benefits in excess of
policyholder liabilities consists of the difference between the policyholder
account values surrendered or annuitized during the period and the related
policyholder liability balances.
ESTIMATES -- Certain amounts reported in the accompanying consolidated financial
statements are based on management's best estimates and judgments. Actual
results could differ from those estimates.
NEW ACCOUNTING STANDARD -- In March 1995, the Financial Accounting Standards
Board (FASB) issued a new standard on accounting for long-lived assets which are
impaired or to be disposed of. The Company must adopt the standard by 1996. The
standard requires that an impaired long-lived asset be measured based on the
fair value of the asset to be held and used or the fair value less cost to sell
the asset to be disposed of. When adopted, this standard is not expected to have
a material effect on the financial position or results of operations of the
Company.
RECLASSIFICATIONS -- Certain reclassifications of prior-year amounts have been
made to conform with current-year classifications.
10
<PAGE> 74
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 2 -- STATUTORY CAPITAL AND RESTRICTIONS
Security First Life and each of its subsidiaries are required to file annual
statements with various state insurance regulatory authorities on a statutory
basis.
The statutory-basis capital and surplus at December 31, 1995, 1994 and 1993, and
statutory-basis net income (loss) for those years are as follows (in thousands):
<TABLE>
<CAPTION>
Capital Net
and Surplus Income (Loss)
----------- -------------
December 31, 1995
-----------------
<S> <C> <C>
Security First Life Insurance Company $100,027* $3,161*
Fidelity Standard Life Insurance Company 15,573* 831*
Security First Life Insurance Company of Arizona 12,715* 612*
December 31, 1994
-----------------
Security First Life Insurance Company $ 99,272 $1,758
Fidelity Standard Life Insurance Company 14,894 409
Security First Life Insurance Company of Arizona 12,118 1,246
December 31, 1993
-----------------
Security First Life Insurance Company $ 90,967 $5,057
Fidelity Standard Life Insurance Company 14,651 (160)
Security First Life Insurance Company of Arizona 10,890 1,358
</TABLE>
* These unaudited amounts are preliminary and subject to change upon
completion of the statutory annual statements.
The difference between statutory-basis net income (loss) and net income reported
based on GAAP relates primarily to different reserving methods used to calculate
policyholder liabilities, the recognition of deferred policy acquisition costs
and deferred income taxes.
Security First Life and Fidelity Standard Life are incorporated and domiciled in
Delaware. SFL-Arizona is incorporated and domiciled in Arizona. The payment of
dividends by Security First Life and each of its subsidiaries is subject to
statutory limitations which are based on each company's statutory-basis net
income and surplus levels. At December 31, 1995, the maximum amount of dividends
Security First Life could pay SFG without prior approval from state insurance
regulatory authorities is $9,762,000.
11
<PAGE> 75
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS
The Company adopted Statement of Financial Accounting Standards No. 115 (SFAS
No. 115), Accounting for Certain Investments in Debt and Equity Securities, as
of January 1, 1994. In accordance with SFAS No. 115, prior period financial
statements were not restated to reflect the change in accounting principle. The
cumulative effect as of January 1, 1994 of adopting SFAS No. 115 was an increase
in stockholder's equity of $28,618,000 -- net of related adjustments for
deferred policy acquisition costs of $62,166,000 which was recorded as an
adjustment to policyholder liabilities and deferred income taxes of $14,743,000
- -- to reflect the net unrealized gains on securities previously carried at
amortized cost. There was no effect on net income as a result of the adoption of
SFAS No. 115.
In November 1995, the FASB issued a Special Report, A Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and Equity
Securities. In accordance with provisions in that Special Report, the Company
chose to reclassify securities from held-for-investment to available-for-sale.
At the date of transfer, the amortized cost of those securities was $169,879,000
and the unrealized gain on those securities was $2,291,000, which is included in
stockholder's equity.
Unrealized investment gains and losses reported in the accompanying financial
statements are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1995 1994
---- ----
<S> <C> <C>
Unrealized investment gains (losses) $104,593 $(76,004)
Less: Adjustment for deferred policy acquisition costs 45,736 (43,719)
Deferred income taxes (benefit) 19,885 (10,724)
-------- --------
Net unrealized investment gains (losses) $ 38,972 $(21,561)
======== ========
</TABLE>
The adjustment for deferred policy acquisition costs of $43,719,000 in 1994 was
recorded as an adjustment to policyholder liabilities. Included in unrealized
investment gains (losses) are net losses related to equity securities of $58,000
and $230,000 at December 31, 1995 and 1994, respectively.
12
<PAGE> 76
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The amortized cost and fair value of fixed maturities as of December 31, 1995
and 1994 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
December 31, 1995
-----------------
Available-for-sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 131,672 $ 12,467 $ (153) $ 143,986
Debt securities issued by foreign governments 16,779 1,687 18,466
Corporate securities 894,766 64,723 (5,194) 954,295
Mortgage-backed securities 1,029,090 33,049 (1,901) 1,060,238
---------- -------- -------- ----------
$2,072,307 $111,926 $ (7,248) $2,176,985
========== ======== ======== ==========
December 31, 1994
-----------------
Available-for-sale:
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 114,207 $ 2,100 $ (4,649) $ 111,658
Debt securities issued by foreign
governments 21,916 334 (481) 21,769
Corporate securities 760,618 9,679 (39,496) 730,801
Mortgage-backed securities 781,296 6,735 (49,872) 738,159
---------- -------- -------- ----------
$1,678,037 $ 18,848 $(94,498) $1,602,387
========== ======== ======== ==========
Held-for-investment:
Mortgage-backed securities $ 197,379 $ 1,471 $(13,215) $ 185,635
========== ======== ======== ==========
</TABLE>
13
<PAGE> 77
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The amortized cost and fair value of fixed maturities by contractual maturity at
December 31, 1995, are summarized below. Actual maturities will differ from
contractual maturities because certain borrowers have the right to call or
prepay obligations.
<TABLE>
<CAPTION>
Amortized Fair
Cost Value
---- -----
(In thousands)
<S> <C> <C>
Available-for-sale:
Due in one year or less $ 18,459 $ 18,666
Due after one year through five years 162,465 172,269
Due after five years through ten years 580,386 611,671
Due after ten years 281,907 314,142
Mortgage-backed securities 1,029,090 1,060,237
---------- ----------
$2,072,307 $2,176,985
========== ==========
</TABLE>
Proceeds from sales of fixed maturities are $441,790,000 and $695,755,000 in
1995 and 1994, respectively.
The Company reports realized gains (losses) on investment transactions net of
any adjustment to the amortization of deferred policy acquisition costs when
such amortization is accelerated or decelerated as a result of the realization
of gains or losses other than as originally anticipated on the sale of
investments associated with annuity products. Net realized investment gains
(losses) reported in the accompanying financial statements are as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed maturities -- available-for-sale
Gross gains $ 6,181 $ 7,174
Gross losses (4,621) (6,328)
------- -------
1,560 846
Fixed maturities -- held-for-investment
Gross gains $ 14,755
Gross losses (2,634)
--------
12,121
Loss on equity securities (213) (31)
Loss on real estate (2,250)
Accelerated amortization
of deferred policy acquisition costs (300) (11,200)
------- ------- ---------
Net realized investment gains (losses) $ 1,347 $(1,735) $ 921
======= ======= ========
</TABLE>
14
<PAGE> 78
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
The Company has recorded a valuation reserve for possible other-than-temporary
impairment in the value of fixed maturities of $2,000,000 at December 31, 1995
and 1994.
Concentrations of credit risk with respect to fixed maturities are limited due
to the large number of issues owned and their dispersion across many different
industries and geographic areas. Accordingly, at December 31, 1995, the Company
had no significant concentration of credit risk.
The fair values for fixed maturities and equity securities are primarily based
on values obtained from independent pricing services.
The cost of equity securities was $5,214,000 and $6,177,000 on December 31, 1995
and 1994, respectively.
Investment real estate is net of accumulated depreciation of $1,596,000 and
$1,538,000 as of December 31, 1995 and 1994, respectively, and a $2,250,000
provision for decline in fair value at those dates.
The carrying amount of mortgage loans ($945,000 and $934,000 at December 31,
1995 and 1994, respectively) and policy loans ($17,853,000 and $15,305,000 at
December 31, 1995 and 1994, respectively) approximates fair value because the
interest rates on these loans approximate market rates.
The Company places its temporary cash investments with high-credit quality
financial institutions and, by corporate policy, limits the amount of credit
exposure to any one financial institution.
At December 31, 1995, investment securities having an amortized cost of
$10,561,000 were on deposit with various states in accordance with state
insurance department requirements.
15
<PAGE> 79
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 -- INVESTMENTS (continued)
Investment income by major category of investment is summarized as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fixed maturities $159,266 $148,303 $139,404
Policy loans 884 749 620
Real estate 894 406 367
Mortgage loans 345 769 974
Short-term investments 1,943 114
Cash and cash equivalents 388 783 831
-------- -------- --------
163,720 151,124 142,196
Investment expenses (5,546) (5,023) (4,746)
--------- -------- --------
Net investment income $158,174 $146,101 $137,450
======== ======== ========
</TABLE>
The Company has no significant amounts of non-income producing investments.
NOTE 4 -- NOTES PAYABLE
Notes payable consist of the following as of December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
5% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval $25,000 $25,000
8% Note due to The Capitol Life Insurance Company,
interest payable quarterly, principal payments of $1,000,000
each paid annually on December 31 1,000 2,000
8% Surplus note due to SFG, interest payable monthly,
principal payable upon regulatory approval 10,000 10,000
------- -------
$36,000 $37,000
======= =======
</TABLE>
Security First Life has a $15,000,000 bank revolving credit line which bears
interest at a floating rate based on London Interbank Offered Rates. There were
no borrowings outstanding under this revolving credit line at December 31, 1995
and 1994. The $25,000,000 and $10,000,000 surplus notes payable to SFG are
pledged, along with the common and preferred stock of Security First Life, as
collateral for SFG's bank revolving credit line.
Principal payments due on the notes payable during the next five years are
$1,000,000 in 1996.
16
<PAGE> 80
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 -- NOTES PAYABLE (continued)
Interest paid by the Company totaled $2,225,000 in 1995, $1,799,000 in 1994 and
$343,000 in 1993.
NOTE 5 -- INCOME TAXES
The Company files a consolidated federal income tax return with SFG and its
subsidiaries. Taxes are provided for and paid to SFG as if the Company filed
separately.
The Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, effective January 1, 1993 and, as permitted under
the new rules, did not restate prior years' financial statements. The cumulative
effect of this change in accounting for income taxes as of January 1, 1993 of
$1,510,000 is reported separately in the consolidated statement of income for
the year ended December 31, 1993.
The liability for federal income taxes includes deferred taxes of $35,875,000
and $3,324,000 at December 31, 1995 and 1994, respectively. Significant
components of these deferred taxes are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax liabilities:
Deferred policy acquisition costs $32,937 $14,701
Fixed maturities 19,980
Other assets 301
Other, net 495 1,050
------- -------
Total deferred tax liabilities 53,412 16,052
Deferred tax assets:
Fixed maturities 8,654
Policyholder liabilities 13,384 1,674
Capital lease 765 628
Other liabilities 3,388 1,772
------- -------
Total deferred tax assets 17,537 12,728
------- -------
Net deferred tax liabilities $35,875 $ 3,324
======= =======
</TABLE>
Income taxes paid by the Company were $3,248,000 in 1995, $2,000,000 in 1994 and
$4,325,000 in 1993.
17
<PAGE> 81
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 5 -- INCOME TAXES (continued)
In 1995, the Company's income tax provision differs from the statutory rate of
34%. The following is a reconciliation of the federal income tax at statutory
rates with the income tax provision as shown in the consolidated statement of
income for the year ended December 31, 1995 (in thousands):
<TABLE>
<S> <C>
Federal income tax at 34% $7,356
Dividends received deduction (317)
True up of prior year taxes (875)
Other (15)
------
Provision for income tax expense $6,149
======
</TABLE>
NOTE 6 -- CAPITAL LEASE
Security First Life has a lease for office space that expires in 2014. This
lease is treated as a capital lease for financial reporting purposes.
The Company subleases space on an annual basis to SFG to use as its home office.
Related income offset against the lease costs was $1,663,000, $1,649,000 and
$1,578,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Future payments under the lease are as follows (in thousands):
<TABLE>
<S> <C>
1996 $ 2,166
1997 2,166
1998 2,166
1999 2,166
2000 2,166
Thereafter 29,051
--------
Total minimum rental payments 39,881
Amount representing interest (23,915)
Present value of minimum rental payments $ 15,966
========
</TABLE>
The property under capital lease is net of accumulated amortization of
$6,717,000 in 1995 and $6,137,000 in 1994.
18
<PAGE> 82
SECURITY FIRST LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 7 -- COMMITMENTS, CONTINGENCIES AND RISKS
The Company has forward contracts with commitments to purchase mortgage-backed
securities with total par values of $25,500,000 at December 31, 1995. The
Company uses these contracts to hedge the interest rate risk on future
investments that match policyholder liabilities, primarily related to
guaranteed-rate products. Gains or losses realized on such contracts are
included in the carrying value of the underlying anticipated investment. The
Company is subject to the risk that the counterparties to such contracts would
fail to deliver the securities to the Company on settlement date, if the Company
were to hold the contract on that date. The Company's current cash balances and
expected future cash flows are sufficient to settle the commitments under these
forward contracts.
Included in the accompanying balance sheet are assets of $6,000,000 at December
31, 1995 related to The Capitol Life Insurance Company (CLICO) and its parent.
CLICO is currently operating under supervision by the Colorado Division of
Insurance. The Company anticipates that CLICO will continue as an ongoing
enterprise. However, there can be no certainty that this will occur.
NOTE 8 -- RELATED PARTY TRANSACTIONS
The Company has marketing and administrative agreements with SFG and previously
with its subsidiary, Holden Financial Company, under which these companies
provide all of the Company's marketing and policyholder administration services.
Amounts incurred under these agreements were $38,954,000, $31,183,000 and
$26,026,000 for 1995, 1994 and 1993, respectively.
The Company has management agreements with SFG under which the latter provides
certain personnel, administrative services and office space. Amounts incurred
under these agreements were $4,308,000 in 1995 and 1994 and $4,248,000 in 1993.
The Company has investment advisory agreements with Security First Investment
Management Corporation, a subsidiary of SFG. Fees of $4,756,000, $4,508,000 and
$4,067,000 were paid in 1995, 1994 and 1993, respectively, pursuant to these
agreements.
19
<PAGE> 83
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements contained herein
(1) Security First Life Separate Account A
Part A - Condensed Financial Information
Part B - Statement of Assets and Liabilities
Statement of Operations, Statement of
Changes in Net Assets, Statement of
Investments
(2) Security First Life Insurance Company
Part B - Depositor's financial statements with notes
(b) Exhibits - herewith
(1) Corporate Secretary's Certification of Resolution of
Board of Directors of the Depositor authorizing the
establishment of the Registrant
(3) Distribution Agreement between the Registrant and the
Principal Underwriter
(4) Form of Group Flexible Payment Variable Annuity
Contract
(5) Form of Application for Group Flexible Payment
Variable Annuity Contract
(6) Copies of the certificate of Incorporation and the
By-Laws of the Depositor
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(15) Organizational Chart of Depositor and Affiliates
(16) Powers of Attorney
Item 25. Directors and Officers of the Depositor
The officers and directors of Security First Life Insurance Company are listed
below. Their principal business address is 11365 West Olympic Boulevard, Los
Angeles, California 90064.
Name Position and Offices with Depositor
- ---- -----------------------------------
R. Brock Armstrong Chairman of the Board and Director
Gordon R. Cunningham Director
Frank E. Farella Director
Melvin M. Hawkrigg Director
General P.X. Kelley Director
Robert G. Mepham Director, President and Chief Executive Officer
Richard C. Pearson Director, Senior Vice President, General Counsel
and Secretary
Howard H. Kayton Executive Vice President and Chief Actuary
Robert D. Badun Senior Vice President, Investments
Jane F. Eagle Senior Vice President, Finance
Peter R. Jones Senior Vice President, Public Services
Cheryl M. MacGregor Senior Vice President, Administration
Alex H. Masson Senior Vice President, Information Systems
<PAGE> 84
Michael R. McCoy Senior Vice President, Banking
Robert L. Pina Senior Vice President, Human Resources
George R. Bateman Vice President, Public Employees Services
James C. Turner Vice President, Taxation
George J. Olah Treasurer
Item 26. Persons Controlled by or under Common Control with Depositor of
Registrant
The Registrant is a Separate Account of Security First Life Insurance Company
("depositor"). For a complete listing and diagram of all persons directly or
indirectly controlled by or under common control with the depositor, see Exhibit
15.
Item 27. Number of Contractowners
As of December 31, 1995, there were no owners of the Contracts which are the
subject of this registration statement.
Item 28. Indemnification
None.
Item 29. Principal Underwriters
Security First Financial, Inc. is the principal underwriter for Security First
Life Separate Account A.
The following are the directors and officers of Security First Financial, Inc.
Their principal business address is 11365 West Olympic Boulevard, Los Angeles,
California 90064.
Name Position with Underwriter
- ---- -------------------------
Robert Grant Mepham Director and Chairman of the Board
Richard Carl Pearson Director, President, General Counsel and
Secretary
Jane Frances Eagle Director, Senior Vice President, Finance
and Treasurer
Howard H. Kayton Senior Vice President and Chief Actuary
James Cyrus Turner Vice President, Taxation and Assistant
Secretary
<TABLE>
<CAPTION>
Net Underwriting Compensation on
Name of Principal Discount and Redemption or Brokerage
Underwriter Commissions* Annuitization Commission Compensation
- ----------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C>
Security First None None None None
Financial, Inc.
</TABLE>
*Fee paid by Security First Life Insurance Company for serving as underwriter.
<PAGE> 85
Item 30. Location of Accounts and Records
Security First Financial, Inc., underwriter for the registrant, is located at
11365 West Olympic Boulevard, Los Angeles, California 90064. It maintains those
accounts and records required to be maintained by it pursuant to Section 31(a)
of the Investment Company Act and the rules promulgated thereunder.
Security First Life Insurance Company, the depositor for the registrant, is
located at 11365 West Olympic Boulevard, Los Angeles, California 90064. It
maintains those accounts and records required to be maintained by it pursuant to
Section 31(a) of the Investment Company Act and the rules promulgated thereunder
and as custodian for the Registrant.
Security First Group, Inc. is located at 11365 West Olympic Boulevard, Los
Angeles, California 90064. It performs substantially all of the recordkeeping
and administrative services in connection with the Registrant.
Item 31. Management Services
None.
Item 32. Undertakings
Registrant makes the following undertakings:
a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
are never more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
b) to include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a postcard or similar written
communication affexed to or included in the prospectus that the applicant
can remover to send for a Statement of Additional Information;
c) to deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promply upon
written or oral request.
<PAGE> 86
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it has duly caused this amended
Registration Statement to be signed on its behalf in the City of Los Angeles
and State of California on this 25th day of July 1996.
SECURITY FIRST LIFE SEPARATE ACCOUNT A
(Registrant)
By SECURITY FIRST LIFE INSURANCE COMPANY
(Sponsor)
By /s/ Robert G. Mepham
----------------------------
Robert G. Mepham, President
As required by the Securities Act of 1933, this amended Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Robert G. Mepham President, Director July 25, 1996
- ----------------------
Robert G. Mepham
/s/ Jane F. Eagle Principal Financial and July 25, 1996
- ----------------------
Jane F. Eagle Accounting Officer
R. Brock Armstrong* Chairman, Director July 25, 1996
- ----------------------
R. Brock Armstrong
Melvin M. Hawkrigg* Director July 25, 1996
- ----------------------
Melvin M. Hawkrigg
Paul X. Kelley* Director July 25, 1996
- ----------------------
Paul X. Kelley
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Richard C. Pearson Director July 25, 1996
- ---------------------------
Richard C. Pearson
/s/ Richard C. Pearson July 25, 1996
- ---------------------------
*(Richard C. Pearson as
Attorney-in-Fact for each
of the persons indicated)
</TABLE>
<PAGE> 88
EXHIBITS
SECURITY FIRST LIFE SEPARATE ACCOUNT A
REGISTRATION STATEMENT ON FORM N-4
(1) Corporate Secretary's Certification of Resolution of Board of Directors
of the Depositor authorizing the establishment of the Registrant
(3) Distribution Agreement between the Registrant and the Principal
Underwriter
(4) Forms of Group Flexible Payment Variable Annuity Contract and
Certificate
(5) Form of Application for Group Flexible Payment Variable Annuity Contract
(6) Copies of the Certificate of Incorporation and By-Laws of the Depositor
(9) Opinion and Consent of Counsel
(10) Consent of Independent Auditors
(15) Organizational Chart of Depositor and Affiliates
(16) Powers of Attorney
<PAGE> 1
EXHIBIT 1
CORPORATE SECRETARY'S CERTIFICATION
I, Richard C. Pearson, Secretary of Security First Life Insurance
Company, a corporation organized and existing under the laws of the State of
Delaware (the "Company"), hereby certify that the following resolutions were
adopted by the Board of Directors on May 29, 1980 and that said resolutions are
currently in full force and effect.
"RESOLVED, that the officers of the Company are hereby authorized and
directed to establish one or more separate accounts, as provided for in
Article IV of Regulation 1 under the Delaware Insurance Code, for the
purpose of issuing annuity contracts providing for benefits which may vary
according to the investment experience of such account, to register any
such account as an investment company under the Investment Company Act of
1940, to register as investments for any such account any other such
investment companies as this Board may from time to time determine, and to
take all other steps necessary or appropriate under state and federal law
for the administration of such accounts and the issuance of such annuity
contracts.
"FURTHER RESOLVED, that in order to establish the required initial
capitalization of Security First Separate Account One, the officers of the
Company are authorized to apply for an annuity policy relating to the
Separate Account in the total amount of One Hundred Thousand Dollars
($100,000) with the Chief Executive Officer of the Company acting as
annuitant and the Company being the beneficial owner of the policy issued.
"FURTHER RESOLVED, that State Street Bank and Trust Company of Boston,
Massachusetts, or such other bank or trust company that meets all
applicable requirements of The Investment Company Act of 1940, is hereby
designated a depository for the safekeeping of securities and other assets
of Security First Separate Account One, and the officers of the Company are
hereby authorized to execute a Custodian Agreement with such depository."
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of the
Corporation, and affixed the corporate seal of the Corporation on June 6, 1996.
[Corporate Seal] /s/ Richard C. Pearson
-------------------------
Richard C. Pearson
Secretary of Security First Life
Insurance Company
<PAGE> 1
EXHIBIT 3
DISTRIBUTION AGREEMENT
THIS AGREEMENT, made and entered into on this 12th day of February
1982, by and between SECURITY FIRST LIFE INSURANCE COMPANY ("Security First
Life"), a life insurance company organized under the laws of the State of
Delaware, SECURITY FIRST LIFE SEPARATE ACCOUNT A ("Separate Account"), a
separate account established by Security First Life pursuant to Section 2932 of
the Delaware Insurance Code and SECURITY FIRST FINANCIAL, INC. ("First
Financial"), a corporation organized under the laws of the State of Delaware.
WITNESSETH:
WHEREAS, Security First Life proposes to issue to the public certain
variable annuity contracts ("Contracts") and has by resolution of its Board of
Directors on May 29, 1980 authorized the creation of one or more separate
investment accounts in connection therewith; and
WHEREAS, Security First Life has established the Separate Account for
the purpose of issuing the Contracts and is registering the Separate Account
with the Securities and Exchange Commission ("Commission") as a unit investment
trust under the Investment Company Act of 1940; and
WHEREAS, the Contracts to be issued by the Separate Account are
presently being registered with the Commission under the Securities Act of 1933
for offer and sale to the public, and otherwise in compliance with all
applicable laws; and
WHEREAS, First Financial, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc., proposes to act as the Distributor on an agency basis
in the offering and sale of said Contracts; and
WHEREAS, Security First Life desires to obtain the services of First
Financial as the Distributor of such Contracts issued through the Separate
Account and registered with the Commission;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, Security First Life, the Separate Account and First Financial
hereby agree as follows:
1. First Financial will serve as Distributor on an agency basis for the
Contracts which will be issued by Security First Life through the Separate
Account and will be registered with the Commission for offer and sale to
the public.
2. First Financial, as Distributor for the Contracts, will use its best
efforts to effect offers and sales of the Contracts to the public on a
continuing basis. First Financial shall not contract with any other entity
for the distribution of said Contracts unless specifically authorized in
<PAGE> 2
writing to do so by Security First Life. First Financial shall be
responsible for compliance with the requirements of state broker-dealer
regulations and the Securities Exchange Act of 1934 as each applies to
First Financial in connection with its duties as Distributor of said
Contracts. Moreover, First Financial shall conduct its affairs in
accordance with the rules of Fair Practice of the National Association of
Securities Dealers, Inc.
3. Subject to the written approval of Security First Life, First Financial may
contract with other broker-dealers registered under the Securities Exchange
Act of 1934 and authorized by applicable law to sell variable annuity
contracts issued by the Separate Account. Any such contractual arrangement
is expressly made subject to this Agreement, and First Financial will at
all times be responsible to Security First Life for the distribution of all
Contracts issued by the Separate Account.
4. Warranties
(a) Security First Life represents and warrants to First Financial that:
(i) A Registration Statement on Form S-6 under the Securities Act of
1933 (File No. 2-75533), with respect to the Contracts, and a
Registration Statement on Form N-8B-2 under the Investment
Company Act of 1940 (File No. 811-______), with respect to the
Separate Account, have been filed with the Commission in the
form previously delivered to First Financial and that copies of
any and all amendments thereto will be forwarded to First
Financial at the time that they are filed with the Commission;
(ii) The Registration Statements and any further amendments or
supplements thereto will, when they become effective, conform in
all material respects to the requirements of the Securities Act
of 1933, the Investment Company Act of 1940 and the rules and
regulations of the Commission thereunder, and will not contain
an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity
with information furnished in writing to Security First Life by
First Financial expressly for use therein;
(iii) Security First Life is validly existing as a stock life
insurance company in good standing under the laws of the State
of Delaware, with power (corporate or other) to own its
properties and conduct its business as described in the
Prospectus, and has been duly qualified for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts
any business, so as to require such qualification;
(iv) The Contracts to be issued by the Separate Account through First
Financial hereunder nave been duly and validly authorized and,
when issued and delivered
<PAGE> 3
against payment therefor as provided herein, will be duly and
validly issued and will conform to the description of such
Contracts contained in the Prospectuses relating thereto;
(v) Those persons who offer and sell the Contracts are appropriately
licensed in a manner as to comply with the state insurance laws;
(vi) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any statute, any indenture, mortgage, deed of
trust, note agreement or other agreement or instrument to which
Security First Life is a party or by which Security First Life
is bound, Security First Life's Charter as a stock life
insurance company or By-Laws, or any order, rule or regulation
of any court or governmental agency or body having jurisdiction
over Security First Life or any of its properties; and no
consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation by
Security First Life of the transactions contemplated by this
Agreement, except such as may be required under the Securities
Act of 1934 or state insurance or securities laws in connection
with the purchase and distribution of the Contracts by First
Financial; and
(vii) There are no material legal or governmental proceedings pending
to which Security First Life or the Separate Account is a party
or of which any property of Security First Life or the Separate
Account is the subject, other than as set forth in the
Prospectus relating to the Contracts, and other than litigation
incident to the kind of business conducted by Security First
Life which, if determined adversely to Security First Life,
would individually or in the aggregate have a material adverse
effect on the financial position, surplus or operations of
Security First Life.
(b) First Financial represents and warrants to Security First Life that:
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934 and a member
in good standing of the National Association of Securities
Dealers and is in compliance with the securities laws in those
states in which it conducts business as a broker-dealer;
(ii) It shall permit the offer and sale of Contracts only by and
through persons who are appropriately licensed under both the
securities laws and state insurance laws;
(iii) The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach
or violation of any of the terms or provisions of or
constitute a default under, any statute, any indenture,
mortgage, deed of trust, note agreement or other agreement or
instrument to
<PAGE> 4
which First Financial is a party or by which First Financial
is bound, the Certificate of Incorporation or By-Laws of First
Financial, or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over First
Financial or its property;
(iv) No offering, sale or other disposition of any Contracts will
be made until First Financial is notified by Security First
Life that the subject Registration Statement has been declared
effective and that the Contracts have been released for sale
by Security First Life; and such offering, sale or other
disposition shall be limited to those jurisdictions that have
approved or otherwise permit the offer and sale of the
Contracts by Security First Life;
(v) To the extent that any statements or omissions made in the
Form S-6 Registration Statement with respect to the Contracts,
or any amendment or supplement thereto are made in reliance
upon and in conformity with written information furnished to
Security First Life by First Financial expressly for use
therein, such Registration Statement and any amendments or
supplements thereto will, when they become effective or are
filed with the Commission, as the case may be, conform in all
material respects to the requirements of the Securities Act of
1933 and the rules and regulations of the Commission
thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading.
5. First Financial shall keep, in a manner and form prescribed or approved by
Security First Life and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934 correct records and books of account as
required to be maintained by a registered broker-dealer acting as
Distributor of all transactions entered into on behalf of Security First
Life and with respect to variable annuity business it conducts for Security
First Life. First Financial shall make such records and books of account
available for inspection by the Commission, and Security First Life shall
have the right to inspect, make copies of or take possession of such
records and books of accounts at any time on demand.
6. Subsequent to having been authorized to commence with the offering
contemplated herein, First Financial will utilize the currently effective
Prospectus relating to the subject Contracts in connection with its selling
efforts. As to the other types of sales material, First Financial agrees
that it will use only sales materials as have been authorized for use by
Security First Life and which conform to the requirements of federal and
state laws and regulations, and which have been filed where necessary with
the appropriate regulatory authorities, including the National Association
of Securities Dealers.
7. First Financial will not use any Prospectus, sales literature, or any other
printed matter or material in the offer or sale of any Contract if, to the
knowledge of First Financial, any of the foregoing misstates the duties,
obligation or liabilities of Security First Life, the Separate Account or
First Financial.
<PAGE> 5
8. First Financial, as Distributor, shall be entitled to such remuneration for
its services and for the services of its salaried employees and such
reimbursement for its charges and expenses as will be contained in such
Schedules of Remuneration as may be adopted from time to time. Said
Schedules of Remuneration may be amended from time to time at the mutual
consent of the undersigned parties.
9. If any purchase payment premiums shall be returned by Security First Life
or should Security First Life become liable for the return thereof for any
cause other than surrenders or withdrawals by Contract Owners pursuant to
the terms of the Contracts either before or after termination of this
agreement, First Financial agrees to pay Security First Life the amount of
remuneration previously paid over to it by Security First Life with respect
to such premiums.
10. First Financial makes no representation or warranties regarding the number
of Contracts to be sold or the amount to be paid thereunder. First
Financial does, however, represent that it will actively market such
Contracts on a continuous basis while there is an effective registration
thereof with the Commission.
11. First Financial may render similar services or act as a Distributor or
Dealer for issuers other than the Separate Account or sponsors other than
Security First Life in the offering of their Contracts.
12. The Contracts shall be offered for sale on the terms described in the
currently effective Prospectus describing such Contracts.
13. Security First Life will use its best efforts to register for sale, from
time to time as necessary, additional dollar amounts of the Contracts under
the Securities Act of 1933 and, should it ever be required, under state
Blue Sky Laws and to file for approval under state insurance laws when
necessary.
14. Security First Life reserves the right at any time to suspend or limit the
public offering of the subject Contracts upon one day's written notice to
First Financial.
15. Security First Life agrees to advise First Financial immediately:
(a) of any request by the Commission (i) for amendment of the Securities
Act Registration Statement relating to the Contracts or (ii) for
additional information;
(b) of the issuance by the Commission of any stop order suspending the
effectiveness of its Registration Statement or the initiation of any
proceedings for that purpose; and
(c) of the happening of any material event, if known, which makes untrue
any statement made in its Registration Statement or which requires the
making of a change therein in order to make any statement made therein
not misleading.
<PAGE> 6
16. Security First Life will furnish to First Financial such information with
respect to the Separate Account and the Contracts in such form and signed
by such of its officers as First Financial may reasonably request; and will
warrant that the statements therein contained when so signed will be true
and correct.
17. Each of the undersigned parties agrees to notify the other in writing upon
being apprised of the institution of any proceeding, investigation or
hearing involving the offer or sale of the subject Contracts.
18. Absent the prior written consent of Security First Life, this Agreement
will terminate automatically upon its assignment.
19. This Agreement shall terminate, without the payment of any penalty by
either party:
(a) at the option of Security First Life or of First Financial upon sixty
days' advance written notice to the other; or
(b) at the option of Security First Life upon institution of formal
proceedings against First Financial by the National Association of
Securities Dealers or by the Commission; or
(c) at the option of Security First Life, if First Financial or any
representative thereof at any time (i) employs any device, scheme, or
artifice to defraud; makes any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were
made, not misleading; or engages in any act, practice, or course of
business which operates or would operate as a fraud or deceit upon any
person; (ii) fails to promptly account and pay over to Security First
Life money due it according to its records; or (iii) violates the
conditions of this Agreement.
20. Each notice required by this Agreement may be given by wire and confirmed
in writing.
21. Security First Life agrees to indemnify First Financial for any liability
that First Financial may incur to a Contract Owner or party-in- interest
under a Contract (i) arising out of any act omission in the course of, or
in connection with, rendering services under this Agreement, or (ii)
arising out of the purchase, retention or surrender of a Contract; provided
however that Security First Life will not indemnify First Financial for any
such liability that results from the willful misfeasance, bad faith or
gross negligence of First Financial, or from the reckless disregard, by
First Financial, of its duties and obligations arising under this
Agreement.
22. This Agreement shall be subject to the laws of the State of California and
construed so as to interpret the Contracts as insurance products written
within the business operation of Security First Life.
<PAGE> 7
23. This Agreement covers and includes all agreements, verbal and written,
between First Financial and Security First Life with regard to the offer
and sale of the Contracts, and supersedes and annuls any and all agreements
between the parties with regards to the distribution of the Contracts;
except that this Agreement shall not effect the operation of previous
agreements entered into between First Financial and Security First Life
unrelated to the sale of the Contracts.
This Agreement, along with any Schedules of Remuneration attached
hereto and incorporated herein by reference, may be amended from time to time
by the mutual agreement and consent of the undersigned parties; provided that
such amendment shall not affect the rights of existing Contract Owners, and
that such amendment be in writing and duly executed.
This Agreement shall become effective upon the effective date of the
Form S-6 Registration Statement filed under the Securities Act of 1933 with
respect to the Contracts.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement
to be duly executed and their respective corporate seals to be hereunto affixed
and attested on the date first stated above.
Security First Life Insurance Company
Attest:
/s/ Darline Aryai By: /s/ David M. Sanderford
- -------------------------- --------------------------------
Security First Life Separate Account A
By Security First Life Insurance Company
Attest:
/s/ Darline Aryai By: /s/ David M. Sanderford
- -------------------------- --------------------------------
Security First Financial, Inc.
Attest:
/s/ David M. Sanderford By: /s/ Arthur B. Horton
- ----------------------- --------------------------------
<PAGE> 1
EXHIBIT 4
ANNUITY CONTRACT
This is a group annuity contract issued to the group contractholder upon
Security First Life Insurance Company's ("Company") acceptance of the
application. When issued, the Group Contract is a legal agreement between the
group contractholder and the Company. To be covered under the Group Contract a
person must complete an enrollment form and arrange for purchase payments to
be made. Each person so enrolled is called a participant.
The Company agrees to pay an annuity to the annuitant. An annuity is a series
of payments. Unless another choice is made, payments will be made monthly
starting on the normal annuity date. The payments will continue for the
annuitant's lifetime but not for less than 120 months. Other payment options
may be elected. If the annuitant dies before the annuity date, a settlement
will be made in accordance with the Settlement on Death provision. The Company
may require proof that any payee is living on the date a payment is due.
All terms on this and the following pages are a part of this Group Contract.
20-DAY RIGHT TO EXAMINE THIS CONTRACT
At any time within 20 days after receipt of this annuity contract, it may be
returned for cancellation by delivering it to the Company or its
administrative office shown herein. Such delivery or mailing of the contract
shall void it from the beginning, and the parties shall be in the same
position as if it had not been issued. All purchase payments for the contract
shall be refunded.
This document is a legal contract between the group contractholder and the
Company. Read this contract carefully.
Signed for the Company at its home office on the contract date.
/s/ Robert G. Mepham
----------------------
President
/s/ Richard C. Pearson
----------------------
Secretary
ALL PAYMENTS AND VALUES UNDER THIS CONTRACT WHICH ARE BASED ON INVESTMENT
IN THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED
DOLLAR AMOUNT.
Group Flexible Payment Annuity
Providing Fixed and Variable Benefits
Life Annuity with 10-Years Certain
Starting on the Annuity Date
Non-Participating
No Dividends
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
<S> <C>
Introduction 1
Contract Specifications 3
1 Description of Certain Terms Used in This Certificate 5
2 General Terms 6
3 Participant's Account Provisions 7
4 Valuation and Nonforfeiture Provisions 8
5 Settlement 10
6 Settlement on Death 11
7 Annuity Income 12
8 Method of Calculating Annuity Income Payments 13
9 Annuity Purchase Rates 15
ALPHABETICAL GUIDE
Section
4.02 Accumulated Payment 8
3.04 Accumulation Units 7
4.09 Administrative Fee 9
7.02 Alternate Annuity Income Rates 12
7.03 Alternate Assumed Investment Return 12
7.01 Annuity Income Options 12
4.01 Annuity Value 8
4.04 Cash Surrender 8
4.03 Cash Value 8
2.03 Change of Contract 6
Communications 4
2.01 The Contract 6
4.08 Contract Maintenance Charge 10
4.12 Conversion Between Series 9
3.03 Crediting Accumulation Units 7
2.08 Data Provided to the Company 7
4.07 Deferral of Payment 9
2.07 Designation of Beneficiary 6
8.01 Determination of Monthly Guaranteed Minimum Fixed
Dollar Annuity Payments 13
8.02 Determination of Monthly Variable Annuity Payment
for the First Year 13
8.04 Determination of Monthly Variable Annuity Payment
for the Second and Subsequent Years 13
General Account Excess Interest 3
2.10 General Account Purchase Payment Guarantee 7
Guaranteed Minimum Interest Rates 3
2.05 Incontestability 6
4.13 Limitations on Distributions 10
5.04 Minimum Amount to Payee 10
4.12 Minimum Benefits 9
2.09 Misstatement of Age 6
2.02 Non-Participating 6
5.02 Normal Form of Settlement 10
8.03 Number of Annuity Units 13
5.03 Optional Annuity Date and Optional Settlement 10
2.06 Ownership and Assignment 6
4.05 Partial Surrenders 8
4.06 Surrender without Percentage Charge 8
3.01 Participant's Account 7
Plan 4
4.11 Premium Taxes 9
3.02 Purchase Payments 7
2.11 The Separate Account 7
8.05 Separate Account Annuity Unit Values 14
5.01 Settlement of Participant's Account 10
6.01 Settlement on Death Before the Annuity Date 11
6.02 Settlement on Death of Payee 11
3.05 Splitting Units 7
Statements of Account 3A
2.12 Substitution of Fund Shares 7
2.04 Termination of Contract 6
4.10 Transaction Fee 9
</TABLE>
2
<PAGE> 3
(SAMPLE SPECIFICATIONS PAGE)
CONTRACT DATA
GROUP CONTRACT NUMBER: GROUP CONTRACT DATE:
GROUP CONTRACTHOLDER: AGENT, SAM
Issued for delivery in, and subject to the Laws of the State of CA
CONTRACT SPECIFICATIONS
PLAN
The plan is a tax-deferred annuity purchase program established to meet the
requirements of Section 403(b) of the Internal Revenue Code of 1986, as amended
(the "Code"). The plan is so established by the employer so that all purchase
payments which do not exceed the limitations set forth in the Code will be
excluded from the gross income of the Participant. The provisions of the Code
and any resolution or plan requirements that may have been established by the
employer constitute the plan.
Except as otherwise provided in the plan, each participant will have an interest
in the account established by his or her purchase payments. The interest cannot
be forfeited. Each participant may invoke all rights as owner of his or her
account except as may be prohibited by the plan.
A participant may elect to receive payments under Annuity Options Two, Four or
Five only if annuity benefits meet the minimum distribution incidental benefit
requirements under the Code.
All employees of an employer may elect to have the employer make contributions
of more than $200 pursuant to a salary reduction agreement if any employee of
the employer may elect to make contributions pursuant to such an agreement,
except as otherwise permitted in Section 403(b)(12) of the Code.
The mutual funds into which the assets of the separate account may be invested
are the T. Rowe Price Bond Series, the T. Rowe Price Growth and Income Series
and the Virtus U.S. Government Income Series of the Security First Trust; the
Asset Manager Portfolio, Index 500 Portfolio, Money Market Portfolio, Growth
Portfolio and Contrafund Portfolio of the Variable Insurance Products Fund; the
International Portfolio of the Scudder Variable Life Investment Fund; and the
Small Capitalization Portfolio of The Alger American Fund.
The Plan under the contract is amended by adding the following:
All employees of an employer may elect to have the employer make contributions
of more than $200 pursuant to a salary reduction agreement if any employee of
the employer may elect to make contributions pursuant to such an agreement,
except as otherwise permitted in Section 403(b)(12) of the Code.
GUARANTEED MINIMUM INTEREST RATES
Prior to the annuity date, the minimum interest rates applicable to purchase
payments allocated to the general account will be stated in accordance with the
participant's certificate, but will not be less than 3%. Interest is compounded
annually and credited daily.
GENERAL ACCOUNT EXCESS INTEREST
The Company may declare and credit excess interest applicable to purchase
payments allocated to the general account at its discretion. Declaration of
excess interest is not guaranteed.
/s/ Robert G. Mepham
- --------------------
President
3
<PAGE> 4
STATEMENTS OF ACCOUNT
Prior to the annuity date, statements of account will be provided for each
participant as of the end of each quarter in which a transaction occurred, but
in no event less often than once per year.
COMMUNICATIONS
Write to the Company at its administrative office shown below:
SECURITY FIRST LIFE INSURANCE COMPANY
P.O. BOX 92193
LOS ANGELES, CALIFORNIA 90009
(800)283-4536
/s/ Robert G. Mepham
- --------------------
President
3A
<PAGE> 5
ARTICLE 1 -- DESCRIPTION OF CERTAIN TERMS USED IN THIS CONTRACT
a. ACCUMULATION UNIT - A measuring unit used to determine the value of a
participant's interest in a series under a certificate at any time before
annuity payments commence.
b. ANNUITANT - The person who is to receive annuity payments, and who is
identified as the participant.
c. ANNUITY - A series of income payments made to the annuitant for a defined
period of time.
d. ANNUITY DATE - The date the series of income payments begin under a
certificate.
e. ANNUITY UNIT - A measuring unit used to determine the amount of annuity
payments based on a series under this contract after such payments have
commenced.
f. BENEFICIARY - A person who has the right to receive certificate values on the
death of the participant.
g. CALENDAR YEAR - The one year period from January 1 to December 31.
h. CERTIFICATE - The form given to participants describing their rights in the
Group Contract.
i. CERTIFICATE DATE - The date a participant's certificate is issued or the date
a participant's account is established where no certificate is issued.
j. CERTIFICATE YEAR - A twelve month period starting on the certificate date and
on each anniversary thereof.
k. CONTRACT - The legal agreement between the group contractholder and the
Company covering the rights of the whole group.
l. FIXED ANNUITY - An annuity that provides guaranteed level payments.
m. FUND - Any registered management investment company, or series thereof, in
which assets of the separate account may be invested.
n. GENERAL ACCOUNT - Assets of the Company, except those in the separate account
or any other segregated asset account.
o. NORMAL ANNUITY DATE - The earlier of (i) the first day of the month
coincident with or immediately preceding the date on which a distribution must
commence under the Plan or (ii) the first day of the month coincident with or
next following the anniversary of the certificate date nearest the participant's
75th birthday.
p. PARTICIPANT - An eligible person who has submitted a completed enrollment
form to the Company and to whom a certificate is issued, in accordance with the
Plan.
q. PARTICIPANT'S ACCOUNT - The sum of the values of the accumulation units
credited to the participant and the participant's interest in the general
account.
r. PAYEE - The annuitant or beneficiary receiving payment of benefits under the
contract.
s. PURCHASE PAYMENT - Any amount received by the Company for a participant under
the contract.
t. SEPARATE ACCOUNT - Security First Life Separate Account A which is a
segregated asset account established by the Company under the Delaware Insurance
Code. The income or losses of the separate account are free from any other
liabilities of the Company's other business.
u. SERIES - The accumulation unit values and annuity unit values maintained
separately for each fund whose securities are owned by the separate account.
5
<PAGE> 6
v. VALUATION DATE - Any business day used by the separate account to determine
the value of part or all of its assets for purposes of determining accumulation
and annuity unit values. Accumulation unit values will be determined each
business day. There will be one valuation date in each calendar week for annuity
unit values. The Company will establish the valuation date at its discretion,
but until notice to the contrary is given, that date will be the last business
day in a week.
w. VALUATION PERIOD - The time from one valuation date to the next.
x. VARIABLE ANNUITY - An annuity whose payments vary annually according to the
net investment results of a series of the separate account.
ARTICLE 2 GENERAL TERMS
2.01 THE CONTRACT
The group contract is this document, endorsements, if any, and the application.
Only an officer of the Company can change the contract or waive any of the
Company's rights. These changes must be made in writing. Any contract terms
referring to "filing" or "receipt" of documents means filing or receipt at the
Company's administrative office shown on page 3A.
2.02 NON-PARTICIPATING
This contract does not share in the earnings of the Company.
2.03 CHANGE OF CONTRACT
The group contractholder and the Company may change the contract by mutual
agreement at any time. No such change may affect any participant's account where
his or her interest is nonforfeitable, without the written consent of that
participant. Changes must be made in writing. Any changes must comply with the
state laws where the contract is delivered. The Company, by itself, may change
only the following contract terms: (a) Terms which apply to participants
enrolling after the effective date of the change. (b) Terms which apply to the
excess of any purchase payments received in a certificate year over the purchase
payments received in the first certificate year for certificates issued before
the effective date of the change. (c) Terms which may be necessary to make the
contract conform to any federal or state law, regulation or ruling.
2.04 TERMINATION OF CONTRACT
This contract will terminate when the Company has fulfilled all its obligations.
2.05 INCONTESTABILITY
After two years from the date of issue, the Company cannot void this contract
due to any misstatements on the application.
2.06 OWNERSHIP AND ASSIGNMENT
This contract belongs to the group contractholder. A participant may exercise
ownership rights affecting his or her account only if the participant's interest
in that account is nonforfeitable. In the absence of such nonforfeitable
participant's interest, individual certificates will be issued only at the
request of the group contractholder. A participant's contract rights are subject
to the rights of any irrevocable beneficiary. The Company will honor any
assignment of rights in this contract only after it is received in writing by
the Company. The Company is not responsible for the validity of the assignment.
Unless otherwise permitted in the Code, if the contract is issued to purchase
annuities for individuals under Section 401, 403(b) or 408 of the Code (or any
successor provision), the contract may not be assigned to anyone except the
Company.
2.07 DESIGNATION OF BENEFICIARY
A participant may name and change the beneficiary. The request must be in
writing and made before the participant dies. No change will take effect unless
it is received. When received, the request will take effect as of the date
signed, subject to payment or other action taken by the Company before it was
received. An irrevocable beneficiary must agree to any such change.
6
<PAGE> 7
2.08 DATA PROVIDED TO THE COMPANY
The Company may require the group contractholder and participant to provide data
needed to administer the contract. Such data must be provided upon request. The
data must be in a form satisfactory to the Company.
2.09 MISSTATEMENT OF AGE
The age of a payee may affect the amount of annuity payments made under a
certificate. If the age is misstated, any amount payable or benefit accruing
under the contract will be that as the purchase payments would have purchased at
the correct age.
2.10 GENERAL ACCOUNT PURCHASE PAYMENT GUARANTEE
Notwithstanding Sections 4.03, 4.04 or 4.05 the cash value of the portion of a
participant's account attributable to the general account will never be less
than the sum of purchase payments originally allocated to the general account,
less purchase payments or any portion thereof converted to a separate account
series, surrendered or applied to an annuity income option.
2.11 THE SEPARATE ACCOUNT
The separate account was established by the Company in 1980 under Delaware Law.
It is registered under the Investment Company Act of 1940 (the "Act"). Its
assets are invested by series in shares of the funds. The separate account will
vote its shares in the funds in accordance with instructions received from group
contractholders and participants who have units in the separate account series
of that fund. Each such person will receive all reports and materials of the
funds in which he or she owns series units, and will receive forms in order to
instruct the separate account how to vote.
2.12 SUBSTITUTION OF FUND SHARES
If shares of any fund should no longer be available for investment by a series
or if in the judgment of the Company further investment in shares of any fund
should become inappropriate in view of the purposes of the contracts, the
Company may substitute for each fund share already purchased, and apply future
purchase payments under the contracts to the purchase of shares of another fund
or other securities. The separate account may not change the fund shares of a
series unless approved as provided by the Act. The separate account may buy
other securities for other series or contracts, or, if requested by a
participant, convert units from one series or contract to another.
ARTICLE 3 PARTICIPANT'S ACCOUNT PROVISIONS
3.01 PARTICIPANT'S ACCOUNT
The Company will establish a participant's account for each person who becomes a
participant. A participant's account is the sum of the values attributable to
all purchase payments made by or for the participant.
3.02 PURCHASE PAYMENTS
Purchase payments for any participant must be at least $20 monthly and $240
annually. Each purchase payment must be allocated by the participant among the
general account and series of the separate account.
3.03 CREDITING ACCUMULATION UNITS
Purchase payments allocated to the separate account will be applied to provide
accumulation units. The number of accumulation units credited for a series is
determined by dividing the amount of the purchase payment allocated to the
series, less any premium taxes and transaction fees deducted, by the
accumulation unit value for the series on the day the Company received the
purchase payment or values are converted to the series.
7
<PAGE> 8
3.04 ACCUMULATION UNITS
The separate account accumulation unit value for each series was first set at
$5. This value is determined each business day. It is equal to the value on the
prior day multiplied by a net investment factor. The net investment factor is:
(a) the net asset share at the close of the current business day plus the per
share amount of any fund distributions less taxes (per share), divided by (b)
the net asset value of a share at the close of the prior business day, and less
(c) the actuarial risk fee factor of .003809% for each calendar day from the
prior business day to the current business day and the daily administration fee
provided for in Section 4.09.
The actuarial risk fee factor is a mortality and expense risk charge that is
deducted during accumulation and during a variable annuity income option to
compensate for increased mortality and expenses not anticipated by the
mortality, maintenance and surrender charges guaranteed in the contract. If this
charge is more or less than sufficient, the Company will retain the balance as
profit or incur a loss.
3.05 SPLITTING UNITS
The Company may split the value of any units if it is in the best interest of
the group contractholder, participants, annuitants and the Company. If split,
strict equity will be preserved. Such split will have no major effect upon the
benefits or provisions of this Contract.
ARTICLE 4 VALUATION AND NONFORFEITURE PROVISIONS
4.01 ANNUITY VALUE
The annuity value of a participant's account is the amount that can be applied
to any annuity income option under this contract. The annuity value is the value
of the participant's separate account accumulation units plus the accumulation
at annuity value interest rates of purchase payments allocated to the general
account; minus (a) amounts previously applied to an annuity income option; minus
(b) prior administration and transaction fees; minus (c) taxes, if any; minus
(d) amounts deducted for partial surrenders.
4.02 ACCUMULATED PAYMENT VALUE
The accumulated payment value of a participant's account is the amount used to
calculate the cash value. The accumulated payment value is equal to the value of
the participant's accumulation units in the separate account, plus the
accumulation at accumulated payment value interest rates of: (a) purchase
payments allocated to the general account; minus (b) amounts previously applied
to an annuity income option; minus (c) prior administration and transaction
fees; minus (d) premium taxes, if any; minus (e) amounts deducted for partial
surrenders.
4.03 CASH VALUE
Except as otherwise provided respecting the free withdrawal amount (See Section
4.06), the cash value of a participant's account equals the aggregate of the
following percentages of the accumulated payment value of each purchase payment
or portion thereof which has not been previously surrendered or committed to an
annuity income option, less any applicable transaction charges. The percentages
are determined by the calendar day in which purchase payments were received by
the Company.
(a) 93% for purchase payments received in the calendar year of surrender;
(b) 94% for purchase payments received in the calendar year before the
surrender;
(c) 95% for purchase payments received in the second calendar year before
surrender;
(d) 96% for purchase payments received in the third calendar year before the
surrender;
(e) 97% for purchase payments received in the fourth calendar year before the
surrender;
(f) 100% for all earlier purchase payments.
4.04 CASH SURRENDER
A participant's account may be surrendered for its cash value before the annuity
date. Requests for surrender must be in writing. If the participant has a
nonforfeitable interest in his or her account such request must be signed by the
participant. The cash value will not be paid until the certificate is returned
to the Company, unless such return is waived by the Company.
8
<PAGE> 9
4.05 PARTIAL SURRENDERS
Partial surrenders from the cash value may be made before the annuity date.
Requests for partial surrenders must be in writing. If the participant has a
nonforfeitable interest in his or her account, such request must be signed by
the participant. No partial surrender will be allowed if it results in the
participant's interest in the general account or any series of the separate
account having a value after the surrender of less than $200, unless the entire
amount in this series or general account is surrendered.
When a partial surrender is made from a series, the number of accumulation units
in that series will be reduced by the number of units equal in value to the
amount withdrawn plus administration fees and transaction fees, both divided by
the applicable percentages shown in Section 4.03.
Purchase payments allocated to the general account and accumulation units will
be canceled on a first-in, first-out basis. A proportionate amount will be
deducted from the annuity value.
4.06 SURRENDER WITHOUT PERCENTAGE CHARGE
The first surrender from a participant's account in a calendar year will be
subject to the following:
(a) For surrenders of up to 10% of the participant's accumulated payment value
in the general account and 10% of the participant's value of accumulation units
in the separate account, the amount of the surrender will be determined by
applying a percentage of 100% in the calculation of the cash value under Section
4.03, provided that the proceeds of this surrender are paid solely to the
participant or beneficiary.
(b) The amount of the surrender that is over the values described in (a) above
will be subject to Sections 4.03, 4.04 and 4.05.
4.07 DEFERRAL OF PAYMENT
Payment of full or partial surrenders from a separate account series may be
suspended under the following conditions:
(a) During any period in which the New York Stock Exchange is closed (other than
customary weekend or holiday closing) or;
(b) When the Securities and Exchange Commission determines that trading on such
exchange is restricted or that an emergency exists; and as a result, the
separate account may not reasonably dispose of its securities or fairly value
its assets; or
(c) For such other periods as the Securities and Exchange Commission may by
order direct for the protection of variable contractholders and participants.
Payments of full or partial surrenders from the general account may be deferred
for a period of not more than six months from the date the written request is
received. Interest will continue to be credited during the deferral period. The
interest rate(s) will be the same as if the surrender had not been requested. A
partial surrender made without percentage charge under Section 4.06 is not
subject to deferral.
4.08 CONTRACT MAINTENANCE CHARGE
At the end of each certificate year a participant's account values will be
reduced by a contract maintenance charge of not more than $27.50 plus $2.50 for
amounts allocated to the general account and for each separate account series
with accumulation units in the participant's account. The deduction is made by
canceling a number of accumulation units equal in value to the contract
maintenance charge. The fee will be prorated between separate account series in
the participant's account on the basis of the relative values of the separate
account series as of the date of the deduction. This contract maintenance charge
is waived by the Company.
4.09 ADMINISTRATION FEE
The Company will deduct from the participant's account values of the separate
account a daily administration fee equal to .000274% (.10% per annum) of the
values of the accumulation units for the prior calendar day.
9
<PAGE> 10
4.10 TRANSACTION FEE
A transaction fee of $10 shall be deducted from a participant's account for each
allowable conversion (see Section 4.13), each partial and full surrender and
upon the start of annuity payments (see Article 5). The charges will be
allocated on a pro rata basis to the participant's account values in the general
account and the series of the separate account from which the funds are
converted or withdrawn. Any charge to the general account will be applied to
purchase payments and interest thereon on a first-in, first-out basis.
4.11 PREMIUM TAXES
The Company shall have the right to deduct from the participant's account any
premium tax payable by it. If a premium tax deduction is made, it will be made
on or after the time the tax is payable by the Company.
4.12 MINIMUM BENEFITS
The value of a paid-up annuity, cash surrender, or settlement on death under the
contract will not be less than the minimum required by the state laws where the
contract is delivered.
4.13 CONVERSION BETWEEN SERIES
Accumulation units in the separate account may be converted from one separate
account series to another. Accumulation units may also be converted from a
separate account series to the general account and will receive the interest
rate guarantees applicable to new purchase payments under this contract. Amounts
accumulated in the general account may be converted to accumulation units in a
separate account series subject to the following restrictions:
(a) Conversions are limited to once per certificate year.
(b) The total amount transferred from the general account during any certificate
year cannot exceed 20% of the accumulated payment value of the participant's
interest in the general account on the date of the conversion and,
(c) The value of the participant's interest in the general account will be
reduced by the accumulated payment value of the amount withdrawn plus
transaction fees. Purchase payments will be canceled on a first-in, first-out
basis. A proportionate amount will be deducted from the annuity value.
The Company may, at its sole discretion, allow amounts in excess of 20% to be
converted at such times as it shall determine.
Conversions may be requested by written election, or if permitted by the
Company, by telephone. The Company will convert the amounts on the first
valuation date after receipt of the written election. Conversions requested by
telephone will be effective within a reasonable time in accordance with policies
established by the Company.
Annuity units in the separate account may be converted from one separate account
series to another. Separate account annuity units may not be converted to the
general account. However, amounts in the general account that have not been
applied to a fixed annuity may be converted to annuity units in one or more
separate account series for application to a variable annuity income option.
Such conversions are not subject to limitations described in (a) and (b) above.
Conversions of annuity units must be elected by written notification signed by
the participant and will be effective on the following annuity unit valuation
date. No conversion of units may take place within two calendar weeks before the
annuity date or any anniversary thereof.
The minimum amount that may be converted at any time is the lesser of $500 or
the balance of the participant's account allocated to the general account or to
the series to be converted.
10
<PAGE> 11
4.14 LIMITATIONS ON DISTRIBUTION
Notwithstanding anything in the contract to the contrary, and except as provided
below, a participant shall not be entitled to receive a distribution under the
contract (whether as annuity payments or a surrender) on amounts attributable to
purchase payments made pursuant to a salary reduction agreement (as defined
under Section 402(g)(3)(C) of the Code) except under the following
circumstances:
1. The participant has attained age 59 1/2;
2. The participant separates from service with the employer through which the
purchase payments were made;
3. The participant dies or becomes disabled (as defined in Section 72(m)(7) of
the Code); or
4. In the case of hardship (as defined in Section 403(b)(11) of the Code).
In the event of a distribution based on hardship, amounts distributed may not
include income earned on purchase payments.
These limitations shall not apply to the distribution of that portion of the
participant's account which is attributable to assets held as of December 31,
1988. No distribution based on hardship will be permitted unless all amounts
excluded from these limitations have been distributed. Further, loans made under
this contract may not be repaid by deduction from that portion of the
participant's account which is subject to these distribution limitations. All
references in this Section 4.14 to sections of the Code shall include any
successor or substitute provisions therefore and to any regulations issued
thereunder.
ARTICLE 5 SETTLEMENT
5.01 SETTLEMENT OF PARTICIPANT'S ACCOUNT
Settlement of a participant's account means any of the following:
(a) The start of annuity income payments to the annuitant or beneficiary.
(b) A payment of the cash value in a lump sum.
The amount applied under an annuity income option is the annuity value less any
transaction fees. The first payment under any annuity option will be made on the
annuity date. Proof of age is required before payments start under any of the
first four options listed in Article 7.
5.02 NORMAL FORM OF SETTLEMENT
The participant must be living on the date the annuity payments are to begin.
Unless another choice is made, the Company will pay the annuitant a series of
payments in the form of a life annuity with 120 monthly payments certain, the
second option in Article 7. General account accumulation units will provide a
fixed annuity. Separate account accumulation units will be applied to provide a
variable annuity. These payments will begin on the normal annuity date.
5.03 OPTIONAL ANNUITY DATE AND OPTIONAL SETTLEMENT
Before annuity payments begin, an optional annuity date or a different annuity
income option may be elected in writing, if not prohibited by the plan. The
optional annuity date may be the first day of any month not later than the
normal annuity date. The election must be made at least 31 days before the
optional annuity date. Any of the annuity income options may be elected. The
annuity value on the optional annuity date will be applied.
5.04 MINIMUM AMOUNT TO PAYEE
If any annuity income payment from any separate account series or from the
general account is less than $50, the Company may change the payment interval so
that the payment is greater than $50.
11
<PAGE> 12
ARTICLE 6 SETTLEMENT ON DEATH
6.01 SETTLEMENT ON DEATH BEFORE THE ANNUITY DATE
If a participant dies before the annuity date, the beneficiary may elect:
1. To receive annuity income under Annuity Income Options One, Two or
Five. Election of an income option is subject to the following conditions:
(a) Income must begin within one year of the participant's death;
(b) The guaranteed period under Option Two or the designated period under Option
Five may not be longer than the beneficiary's life expectancy under the
applicable table specified by the Internal Revenue Service.
(c) The annuity value as of the date of the first income payment will be
applied. OR
2. To receive a lump sum settlement equal to the cash value on the date the
payment is made. If the lump sum settlement becomes payable because of the death
of a participant prior to attaining age 65, the lump sum settlement will be
equal to the larger of:
(a) The purchase payments less amounts already applied to an annuity income, and
less any prior partial surrenders; or
(b) The value of any separate account accumulation units, plus 100% of the
accumulated payment value of the participant's interest in the general account,
less the transaction fee.
In any event, distribution under the lump sum option above must be made within 5
years of the death of the participant.
If the spouse of the participant is the beneficiary, the spouse may delay
election of an income option under 1 above to the later of (a) one year after
the participant's death or (b) a date no later than the date on which the
participant would have attained age 70 1/2.
Unless a participant has elected otherwise and there is more than one named
beneficiary living at the time of the participant's death, each will share the
proceeds equally.
If the participant outlives all beneficiaries, the proceeds will be paid to the
participant's estate in a lump sum.
No beneficiary will have the right to assign, anticipate or commute any future
payments under any of the options except as provided in the election or by law.
The rights to the proceeds will pass as if the participant outlived the
beneficiary if the beneficiary dies within 15 days of the participant's death
and prior to the date due proof of the participant's death is received. Due
proof of death will be a certified death certificate, an attending physician's
statement, a decree of a court of competent jurisdiction as to the finding of
death, or such other documents as the Company may, at its option, accept.
6.02 SETTLEMENT ON DEATH OF PAYEE
Upon the death of a payee, any remaining payments certain under Options Two,
Three, or Five in Article 7 will be paid to the named beneficiary.
If no beneficiary is alive at the payee's death, the payee's estate will receive
a lump sum payment. This lump sum will be the present value of the remaining
payments certain at the payee's death. The present value will be computed on the
basis of the interest rate used to compute the benefit.
If, as a result of a payee's death, variable annuity payments are being
continued to a beneficiary, that beneficiary may elect at any time to receive in
a lump sum the present value of the remaining number of payments certain.
12
<PAGE> 13
ARTICLE 7 ANNUITY INCOME
7.01 ANNUITY INCOME OPTIONS
Except as may be limited by Article 6, the annuity value can be applied to these
annuity income options:
a. Option One - Life Annuity
A series of annuity income payments made monthly during the payee's life. The
payments will stop with the last payment due before the death of the payee. No
further payments will be made after the death of the payee.
b. Option Two - Life Annuity with 120, 180, or 240 Monthly Payments Certain
A series of annuity income payments made monthly for the guaranteed period
elected and thereafter during the payee's life. The guaranteed period may be
120, 180, or 240 months. If the payee dies before the end of the guaranteed
period, payments for the remainder of the guaranteed period will be paid to the
beneficiary.
c. Option Three - Installment Refund Life Annuity
A series of annuity income payments made monthly during the payee's life. If the
payee dies before receiving the "minimum number" of payments, payments will
continue to the beneficiary. The "minimum number" of payments is equal to the
amount applied under this option divided by the first monthly payment. Any
payments made after the death of the payee will stop when the Company has paid
out a total number of payments equal to the "minimum number" of payments.
d. Option Four - Joint and Full to Survivor Annuity
A series of annuity income payments made monthly during the lifetime of both of
two payees. If one of the payees dies, the payments will end with the last
payment due before the death of the remaining payee.
e. Option Five - Designated Period Annuity--Fixed Dollar Only
A series of fixed annuity income payments made monthly for a period of years.
Any number of years from 5 through 30 may be chosen. Payments will be made to
the payee, or beneficiary even if the payee dies. Payments will stop at the end
of the period selected.
f. Other options may be available as agreed upon by the Company.
7.02 ALTERNATE ANNUITY INCOME RATES
If settlement is made under any fixed annuity income option, payment will be
based on the larger of the following:
(a) The Company's current annuity settlement option rates applicable to this
contract; or
(b) The annuity purchase rates found in Article 9.
7.03 ALTERNATE ASSUMED INVESTMENT RETURN
If allowed by the laws of the state in which this contract is issued, a
participant may elect variable annuity benefits determined on an assumed
investment return of 3.50%, 5% or 6% in lieu of the 4.25% return assumed in the
contract.
ARTICLE 8 METHOD OF CALCULATING ANNUITY INCOME PAYMENTS
8.01 Determination of Monthly Guaranteed Minimum Fixed Dollar Annuity Payments
Except as provided in Section 7.02, the payment amounts shown in Tables 1 and 2
in Article 9 will be used to determine the monthly payments under a fixed
payment option. The tables show the dollar amount of the monthly payments which
can be purchased with each $1,000 of the general account's annuity value, after
deduction of any applicable premium taxes and transaction fees. Amounts shown
use the 1983 Individual Annuity Mortality Table "a", modified, with an assumed
rate of return of 3.00% per year.
13
<PAGE> 14
8.02 Determination Of Monthly Variable Annuity Payment For The First Year
Variable annuity payment amounts will be determined at the annuity date, and
will remain the same for one year from that date. Amounts may vary each year
thereafter. The age of the payees born after 1915 must be adjusted using the
following Table. Adjusted ages for payees born after 1995 are available from the
Company. The payee's actual age will be based on the birthday nearest the time
the first payment is due.
<TABLE>
<CAPTION>
Calendar Year Adjusted Age Calendar Year Adjusted Age
of Birth of Birth
<C> <C> <C> <C>
1915 or Prior Actual Age 1956-1975 Actual Age Minus 3
1916-1935 Actual Age Minus 1 1976-1995 Actual Age Minus 4
1936-1955 Actual Age Minus 2
</TABLE>
THESE ADJUSTMENTS APPLY ONLY TO TABLES 3 AND 4 SHOWN ON THE NEXT PAGES. THESE
AGE ADJUSTMENTS DO NOT APPLY TO ANY OTHER ANNUITY INCOME RATES UNLESS SO
SPECIFIED BY THE COMPANY.
Tables 3 and 4 show the factors used to determine variable annuity income
payments based on an assumed investment return of 4.25%. They are based on the
Modified Select Security First Annuity Mortality Table projected to the year
2000 in the projecting Scale C modified and then 4.25% interest, reduced for the
first 10 years of any period certain by 1%. The monthly payment for the first
year is determined by: (a) dividing the separate account annuity value by
$1,000, (b) multiplying the result from (a) by the annuity premium rate shown in
column 1 of Table 3 or 4 for the option elected for the adjusted age of the
payee, and (c) multiplying the result of (b) by the monthly payment factor in
column 2 of Table 3 or 4.
If there are values in more than one series, determine the monthly payment for
each series as above.
8.03 Number of Annuity Units
The number of annuity units for any series is determined by dividing the first
year monthly payment by the separate account annuity value for that series for
the valuation period that includes the settlement date. The number of annuity
units thus determined will not change unless the owner transfers annuity units
from one separate account series to another. Such annuity units transferred will
be based on the same assumed investment return.
8.04 Determination of Monthly Variable Annuity Payments for the Second and
Subsequent Years
The amounts of the second and subsequent years' monthly variable annuity
payments are not predetermined, and may change from year to year, based on the
variations in the annuity unit value. The annuity unit value varies with the
variations of net investment results above and below the assumed investment
rate. As of each anniversary of the settlement date, the Company will determine
the amount of monthly payments for each series of the year then beginning. It
will be determined by multiplying the number of separate account annuity units
for that series for the valuation period in which the first payment for that
year is due.
The Company guarantees that the amount of each variable annuity payment will not
be affected by variations in the mortality experience of payees nor by expenses
incurred by the Company in the administration of such benefits.
8.05 Separate Account Annuity Unit Values
The separate account annuity unit value for each series was originally
established at $5. This value for any subsequent valuation period is determined
for each series by: (a) Multiplying the annuity unit value of the series for the
immediately preceding valuation period by (b) the annuity change factor for the
second preceding valuation period. The annuity change factor for any valuation
period is determined for each series by dividing: (a) the accumulation unit
value at the end of the valuation period by (b) the accumulation unit value at
the end of the previous valuation period, and multiplying the result by (c) the
interest neutralization factor.
For weekly valuation periods and a 4.25% assumed net investment rate, the
interest neutralization factor is 0.9991999.
14
<PAGE> 15
ARTICLE 9
ANNUITY PURCHASE RATES
GUARANTEED DOLLAR AMOUNT OF MONTHLY PAYMENT WHICH
IS PURCHASED WITH EACH $1,000 APPLIED
LIFE ANNUITIES-Fixed Dollar
Table 1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SINGLE LIFE ANNUITIES JOINT AND FULL TO
SURVIVOR
- ------------------------------------------------------------------------------
No 120 180 240
Period Months Months Months Installment Both Monthly
Age Certain Certain Certain Certain Refund Age Payment
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
60 $5.00 $4.90 $4.77 $4.58 $4.67 60 $4.26
61 5.13 5.02 4.87 4.65 4.77 61 4.35
62 5.26 5.13 4.96 4.72 4.87 62 4.44
63 5.41 5.26 5.06 4.79 4.97 63 4.54
64 5.56 5.39 5.16 4.85 5.08 64 4.65
65 5.73 5.52 5.26 4.92 5.20 65 4.76
66 5.90 5.67 5.37 4.98 5.32 66 4.88
67 6.09 5.81 5.48 5.04 5.45 67 5.01
68 6.29 5.97 5.58 5.10 5.59 68 5.14
69 6.50 6.13 5.69 5.15 5.73 69 5.29
70 6.74 6.30 5.79 5.20 5.89 70 5.45
71 6.98 6.47 5.90 5.25 6.05 71 5.62
72 7.25 6.65 6.00 5.29 6.22 72 5.80
73 7.54 6.83 6.09 5.33 6.40 73 5.99
74 7.85 7.02 6.19 5.36 6.59 74 6.20
75 8.18 7.20 6.27 5.39 6.79 75 6.42
- ------------------------------------------------------------------------------
</TABLE>
Monthly payments for ages not shown will be furnished by the Company on request
and will be calculated on the same actuarial basis.
Table 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
DESIGNATED PERIOD ANNUITIES -- Fixed Dollar
- ------------------------------------------------------------------------------
Years of Amount of Years of Amount of Years of Amount of
Payments Monthly Payment Payments Monthly Payment Payments Monthly Payment
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 $17.91 14 $7.26 23 $4.99
6 15.14 15 6.87 24 4.84
7 13.16 16 6.53 25 4.71
8 11.68 17 6.23 26 4.59
9 10.53 18 5.96 27 4.47
10 9.61 19 5.73 28 4.37
11 8.86 20 5.51 29 4.27
12 8.24 21 5.32 30 4.18
13 7.71 22 5.15
- ------------------------------------------------------------------------------
</TABLE>
15
<PAGE> 16
ANNUITY PREMIUM RATES PER $1,000 OF VALUE APPLIED (Column (1) AND
MONTHLY PAYMENT FACTORS (Column (2))
Table 3
<TABLE>
<CAPTION>
SINGLE LIFE ANNUITIES - VARIABLE
- -------------------------------------------------------------------------------------------------
MONTHLY PAYMENTS CERTAIN
- -------------------------------------------------------------------------------------------------
Adjusted None 120 180 240
Age of
Payee (1) (2) (1) (2) (1) (2) (1) (2)
- -------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
60 62.596 .08946 61.992 .08713 60.305 .08611 58.126 .08539
61 63.710 .08975 63.123 .08723 61.294 .08614 58.873 .08538
62 64.922 .09003 64.340 .08730 62.333 .08614 59.628 .08535
63 66.252 .09028 65.653 .08736 63.424 .08613 60.387 .08532
64 67.715 .09049 67.068 .08739 64.564 .08611 61.142 .08527
65 69.298 .09072 68.578 .08741 65.743 .08607 61.884 .08523
66 71.005 .09101 70.199 .08742 66.959 .08603 62.606 .08518
67 72.817 .09137 71.905 .08744 68.191 .08599 63.294 .08513
68 74.732 .09180 73.692 .08747 69.430 .08595 63.941 .08508
69 76.751 .09231 75.557 .08751 70.665 .08590 64.539 .08503
70 78.880 .09290 77.496 .08755 71.886 .08586 65.082 .08499
71 81.010 .09372 79.469 .08763 73.069 .08583 65.563 .08495
72 83.231 .09465 81.498 .08770 74.214 .08579 65.984 .08491
73 85.539 .09570 83.575 .08777 75.309 .08574 66.347 .08487
74 87.982 .09683 85.701 .08781 76.345 .08568 66.657 .08483
75 90.293 .09833 87.805 .08788 77.293 .08563 66.912 .08480
- -------------------------------------------------------------------------------------------------
</TABLE>
Table 4
<TABLE>
<CAPTION>
JOINT AND FULL TO SURVIVOR-VARIABLE
- ------------------------------------------------------------------------------
Adjusted NO PAYMENTS CERTAIN
Age of
Both Payees (1) (2)
- ------------------------------------------------------------------------------
<C> <C> <C>
60 57.810 .08526
61 58.742 .08535
62 59.741 .08545
63 60.817 .08554
64 61.976 .08564
65 63.220 .08575
66 64.548 .08594
67 65.961 .08616
68 67.460 .08643
69 69.049 .08674
70 70.732 .08711
71 72.468 .08758
72 74.294 .08813
73 76.208 .08875
74 78.229 .08943
75 80.243 .09032
- ---------------------------------------------------------------------
</TABLE>
Any payee who is over age 85 at the date annuity payments are due will be
considered as actual age 85 on that date.
Factors for adjusted ages not shown will be furnished by the Company on request
and will be calculated on the same actuarial basis.
16
<PAGE> 17
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
ROLLOVER DISTRIBUTION ENDORSEMENT
This endorsement amends the contract.
Notwithstanding any provision of the contract, a participant may elect, in
writing, to have any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the participant in a direct
rollover.
For purposes of this amendment, the following terms are defined as follows:
(a) Eligible rollover distribution: An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
participant, except that an eligible rollover distribution does not include: (i)
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the participant or the joint lives (or joint life expectancies)
of the participant and the participant's designated beneficiary, or for a
specified period of ten years or more; (ii) any distribution to the extent that
such distribution is required under section 401(a)(9) of the Code; and, (iii)
the portion of any distribution that is not includible in gross income.
(b) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, or an annuity plan
described in section 403(b) of the Code, that accepts the participant's eligible
rollover distribution. However, in the case of an eligible rollover distribution
by the surviving spouse, an eligible retirement plan is an individual retirement
account or an individual retirement annuity.
(c) Participant: A participant includes the participant's surviving spouse or
former spouse and the participant's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, in regard to their interest, if any, in this contract.
(d) Direct rollover: A direct rollover is a payment under the contract to the
eligible retirement plan specified by the participant.
/s/ Robert G. Mepham
- --------------------
Robert G. Mepham
President
<PAGE> 18
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
CONTRACT LOAN ENDORSEMENT
The contract is amended to add the following:
DEFINITION For purposes of this endorsement only, the term "accumulated payment
value", unless otherwise modified, is defined as follows: The surrender value of
the participant's account without any reduction for surrender charges.
LOAN Unless otherwise restricted by the plan or the terms of the contract, a
participant may, on or after June 1, 1990 (or such earlier date as permitted by
the Company) and prior to the annuity date, obtain a loan from the Company of up
to an amount equal to 50% of the accumulated payment value of a participant's
account. However, the loan amount cannot exceed the accumulated payment value of
a participant's interest in the general account. The amount of the loan may not
be less than $2,500. The maximum loan amount is $50,000 less the highest
outstanding loan balance during the one year period ending on the date the new
loan is made. No more than one loan may be outstanding at any one time. A loan
will be made upon the Company's acceptance of a written loan application from
the participant and the assignment to the Company of the value of the
participant's certificate as the sole security for the loan.
FEE A loan setup fee of up to $50.00 will be charged for each loan. This amount
will be deducted from the loan proceeds.
INTEREST RATES The outstanding balance of the loan will bear interest at an
effective rate of 6.5% per annum. During the term of a loan, a portion of the
accumulated payment value of the participant's interest in the general account
equal to the outstanding balance of the loan (and a proportionate part of the
annuity value) will earn interest at the rate of 4% per annum. In determining
these values, a participant's purchase payments will be applied in the order of
their receipt by the Company.
TERM The term of a loan will be 5 years unless the proceeds of the loan are to
be used to purchase a principal residence of a participant, in which event the
term will be 15 years. Notwithstanding the above, the term of the loan may not
extend beyond the earliest of the certificate's normal annuity date, the
settlement of the participant's account, settlement as a result of the
participant's death, or any date provided for such loans by future Federal
income tax laws, rules or regulations. The Company reserves the right to require
repayment of the loan plus accrued interest before processing a request for a
partial surrender, partial annuitization or settlement of the account.
REPAYMENTS Repayments will be based on level amortization and will be due
quarterly. Any loan repayments received will be applied first to the accrued
interest and then to the outstanding balance of the loan. Repayments of
principal will be credited to the participant's account as new purchase payments
and payments directed to the general account will earn interest from the date of
receipt at the then guaranteed interest rates in effect for new purchase
payments. If any repayment is not received when due, an amount will be deducted
from the participant's account. Except as otherwise provided in the contract,
this amount will be deducted in accordance with the contract's partial surrender
provisions and will be sufficient to pay the amount due and any applicable
charges, fees and income tax withholding. Full or accelerated loan repayment may
be made at any time on or after the first loan anniversary. Any amounts received
in partial or full repayment of the outstanding balance of a loan may not be
surrendered for a period of 30 days after receipt of such payment.
COMPANY RIGHTS The Company reserves the right to defer the granting of a loan
for a period permitted by law, but not more than six (6) months from receipt of
the application. The Company reserves the right, in its discretion, to suspend,
modify or terminate the granting of loans at any time. Such action will not
affect outstanding loans.
/s/ Robert G. Mepham
- --------------------
President
<PAGE> 19
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
ANNUITY PURCHASE RATE BONUS RIDER
This rider applies to Policy Form SF-230.
In the event that the participant or beneficiary settles the participant's
account by applying the entire annuity value of the account to a fixed annuity
income option at any time after the ninth full calendar year following the
certificate date, the Company will increase its current annuity settlement
option rates described in Section 6.02 by seven percent (7%).
/s/ Robert G. Mepham
- --------------------
President
<PAGE> 20
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
GENERAL ACCOUNT EXCESS INTEREST RIDER
Notwithstanding anything in the contract to the contrary, upon the expiration of
the initial interest rate guarantees in excess of the minimum guaranteed
interest rate of 3.00%, the Company agrees that it will declare from time to
time excess interest over this minimum guaranteed interest rate on purchase
payments allocated to the general account, and that each such declaration shall
be for a period of not less than one year.
/s/ Robert G. Mepham
- --------------------
President
<PAGE> 21
ANNUITY CERTIFICATE
This is an annuity certificate issued to a participant enrolled in the Group
Contract. All participants' rights are set forth in the Group Contract. This
certificate describes the rights and benefits of this participant in the Group
Contract.
Security First Life Insurance Company ("Company") will make a series of
monthly payments to the person named as the annuitant, starting on the annuity
date. These annuity payments will be made while the annuitant is alive, but
not for less than 120 months. A different form of annuity option or optional
annuity date may be selected by the participant. The amount of the monthly
payments will be determined in the manner set forth in this certificate. If
the annuitant dies before the payments start, a settlement on death will be
made in accordance with the Settlement on Death provision. All matters
pertaining to the participant's rights and benefits are governed by the terms
and conditions of the Group Contract. The description which follows summarizes
certain provisions of the Group Contract as they affect the participant. A
copy of the Group Contract is on file with the Group Contractholder.
20-Day Right to Examine This Certificate
At any time within 20 days after receipt of this annuity certificate, it may
be returned for cancellation by delivering it to the Company at its
administrative office shown herein. Such delivery or mailing of the
certificate shall void it from the beginning, and the parties shall be in the
same position as if it had not been issued. All purchase payments for the
certificate shall be refunded.
Signed for the Company at its home office on the certificate date.
/s/ Robert G. Mepham
--------------------
President
/s/ Richard C. Pearson
----------------------
Secretary
ALL PAYMENTS AND VALUES UNDER THIS CERTIFICATE WHICH ARE BASED ON INVESTMENT
IN THE SEPARATE ACCOUNT ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR
AMOUNT.
<PAGE> 22
ARTICLE 1 DESCRIPTION OF CERTAIN TERMS USED IN THIS CERTIFICATE
a. ACCUMULATION UNIT A measuring unit used to determine the value of the
participant's interest in a series under this certificate at any time before
annuity payments commence.
b. ANNUITANT The person who is to receive annuity payments, and who is
identified as the participant.
c. ANNUITY A series of income payments made to the annuitant for a defined
period of time.
d. ANNUITY DATE The date the series of income payments begins under this
certificate.
e. ANNUITY UNIT A measuring unit used to determine the amount of annuity
payments based on a series under this certificate after such payments have
commenced.
f. BENEFICIARY A person who has the right to receive certificate values on the
death of the participant.
g. CALENDAR YEAR The one year period from January 1 to December 31.
h. CERTIFICATE - The form given to participants describing their rights in the
Group Contract.
i. CERTIFICATE YEAR A twelve month period starting on the certificate date and
on each anniversary thereof.
j. CONTRACT The legal agreement between the group contractholder and the Company
covering rights of the whole group.
k. FIXED ANNUITY An annuity that provides guaranteed level payments.
l. FUND Any registered management investment company, or series thereof, in
which the assets of the separate account may be invested.
m. GENERAL ACCOUNT Assets of the Company, except those in the separate account
or any other segregated asset account.
n. NORMAL ANNUITY DATE The earlier of (i) the first
day of the month coincident with or immediately preceding the date on which a
distribution must commence under the plan or (ii) the first day of the month
coincident with or next following the anniversary of the certificate date
nearest the participant's 75th birthday.
o. PARTICIPANT'S ACCOUNT The sum of the values of the accumulation units
credited to the participant and the participant's interest in the general
account.
p. PAYEE The annuitant or beneficiary receiving payment of benefits under this
certificate.
q. PURCHASE PAYMENT Any amount received by the Company for the participant under
the contract.
r. SEPARATE ACCOUNT Security First Life Separate Account A which is a segregated
asset account established by the Company under the Delaware Insurance Code. The
income or losses of the separate account are free from any other liabilities of
the Company's other business.
s. SERIES The accumulation unit values and annuity unit values maintained
separately for each fund whose securities are owned by the separate account.
t. VALUATION DATE Any business day used by the separate account to determine the
value of all of its assets for purposes of determining accumulation and annuity
unit values. Accumulation unit values will be determined each business day.
There will be one valuation date in each calendar week for annuity unit values.
The Company will establish the valuation date at its discretion, but until
notice to the contrary is given, that date will be the last business day in a
week.
u. VALUATION PERIOD The time from one valuation date to the next.
v. VARIABLE ANNUITY An annuity whose payments vary annually according to the net
investment results of a series of the separate account.
5
<PAGE> 23
ARTICLE 2 PARTICIPANT'S ACCOUNT
2.01 PARTICIPANT'S ACCOUNT
The Company will establish a participant's account for the participant. The
participant's account is the sum of the values attributable to all purchase
payments made by or for the participant.
2.02 PURCHASE PAYMENTS
A purchase payment is any amount received by the Company for the participant
under the certificate. Each payment must be at least $20 and at a minimum rate
of $240 annually. Each purchase payment must be allocated by the participant
between the general account and series of the separate account.
2.03 GENERAL ACCOUNT PURCHASE PAYMENT GUARANTEE
Notwithstanding Section 2.09, 3.04 or 3.05 the cash value of the portion of the
participant's account attributable to the general account will never be less
than the sum of purchase payments originally allocated by the participant to the
general account, less purchase payments or any portion thereof converted to a
separate account series, surrendered or applied to an annuity income option.
2.04 THE SEPARATE ACCOUNT
The separate account was established by the Company in 1980 under Delaware law.
It is registered under the Investment Company Act of 1940 (the "Act"). Its
assets are invested by series in shares of the funds. The separate account will
vote its shares in the funds in accordance with instructions received from group
contractholders and participants who have units in the separate account series
of that fund. Each such person will receive all reports and materials of the
funds in which he or she owns series units, and will receive forms in order to
instruct the separate account how to vote.
2.05 CREDITING ACCUMULATION UNITS
Purchase payments allocated to the separate account will be applied to provide
accumulation units. The number of accumulation units credited for a series is
determined by dividing the amount of the purchase payment allocated to the
series, less any premium taxes deducted, by the accumulation unit value for the
series on the day the Company receives the payment or values are converted to
the series.
2.06 ACCUMULATION UNITS
The separate account accumulation unit value for each series was first set at
$5. This value is determined each business day. It is equal to the value on the
prior day multiplied by a net investment factor. The net investment factor is:
(a) the net asset value of a fund share at the close of the current business day
plus the per share amount of any fund distributions less taxes (per share),
divided by (b) the net asset value of a share at the close of the prior business
day, and less (c) the actuarial risk fee factor of .003809% for each calendar
day from the prior business day to the current business day and the daily
administration fee provided for in Section 2.12.
The actuarial risk fee factor is a mortality and expense risk charge that is
deducted during accumulation and during a variable annuity income option to
compensate for increased mortality and expenses not anticipated by the
mortality, maintenance and surrender charges guaranteed in the contract. If this
charge is more or less than sufficient, the Company will retain the balance as
profit or incur a loss.
2.07 ANNUITY VALUE
The annuity value of the participant's account is the amount that can be applied
to any annuity income option in this certificate. The annuity value is the value
of the participant's separate account accumulation units plus the accumulation
at annuity value interest rates of: (a) purchase payments allocated to the
general account; minus (b) amounts previously applied to an annuity income
option; minus (c) prior administration and transaction fees; minus (d) premium
taxes, if any; minus (e) amounts deducted for partial surrenders.
6
<PAGE> 24
2.08 ACCUMULATED PAYMENT VALUE
The accumulated payment value of the participant's account is the amount used to
calculate the cash value. The accumulated payment value is equal to the value of
the participant's accumulation units in the separate account, plus the
accumulation at accumulated payment interest rates of purchase payments
allocated to the general account; minus (a) amounts previously applied to an
annuity income option; minus (b) prior administration and transaction fees;
minus (c) premium taxes, if any; minus (d) amounts deducted for partial
surrenders.
2.09 CASH VALUE
Except as otherwise provided respecting the free withdrawal amount (See Section
3.06), the cash value of a participant's account equals the aggregate of the
following percentages of the accumulated payment value of each purchase payment
or portion thereof which has not been previously surrendered or committed to an
annuity income option, less any applicable administration fees and transaction
charges. The percentages are determined by calendar year in which the purchase
payments were received by the Company. (a) 93% for purchase payments received in
the calendar year of surrender; (b) 94% for purchase payments received in the
calendar year before the surrender; (c) 95% for purchase payments received in
the second calendar year before the surrender; (d) 96% for purchase payments
received in the third calendar year before the surrender; (e) 97% for purchase
payments received in the fourth calendar year before the surrender; (f) 100% for
all earlier purchase payments.
2.10 PREMIUM TAXES
The Company shall have the right to deduct any premium tax payable by it. If a
premium tax deduction is made, it will be made on or after the time the tax is
payable by the Company.
2.11 TRANSACTION FEE
A transaction fee of $10 shall be deducted from the participant's account for
each allowable conversion (see Section 3.08), each partial and full surrender
and upon the start of annuity payments (see Article 4). The charges will be
allocated on a pro rata basis to participant account values in the general
account and the series of the separate account from which funds are converted or
withdrawn. Any charge to the general account will be applied to purchase
payments and interest thereon on a first-in, first-out basis.
2.12 ADMINISTRATION FEE
The Company will deduct from the participant's account values of the separate
account a daily administration fee equal to .000274% (.10% per annum) of the
values of the accumulation units for the prior calendar day.
2.13 CERTIFICATE MAINTENANCE CHARGE
At the end of each certificate year the participant's account values will be
reduced by an administrative fee of not more than $27.50 plus $2.50 for amounts
allocated to the general account and for each series with accumulation units in
the participant's account. The deduction is made by canceling a number of
accumulation units equal in value to the administrative fee. The fee will be
prorated among series in the participant's account on the basis of the relative
values of the series as of the date of the deduction.
2.14 STATEMENT OF ACCOUNT
Prior to the annuity date, statements of account will be provided as of the end
of each quarter in which a transaction occurred, but in no event less often than
once a year.
7
<PAGE> 25
ARTICLE 3 RIGHTS OF PARTICIPANTS
3.01 ASSIGNMENT
Rights to assign the group contract or the participant's account will be
governed by the terms of the group contract. If the contract is issued to
purchase annuities for the individuals under Section 401, 403(b) or 408 of the
Code, the certificate may not be assigned to anyone other than the Company.
3.02 CHANGE OF CONTRACT
The only changes that the Company may make without the consent of the
participant are those that: (a) apply to the excess of the purchase payments
received in a certificate year over the purchase payments received in the first
certificate year for this participant, or (b) may be necessary to make the
contract conform to any federal or state law, regulation or ruling.
3.03 DESIGNATION OF BENEFICIARY
The participant may change any beneficiary designation by written notice filed
with the Company. Any irrevocably designated beneficiary can be changed only
with that beneficiary's written consent.
3.04 CASH SURRENDER
A participant's account may be surrendered for its cash value before the annuity
date. Requests for surrender must be in writing. The cash value will not be paid
until the certificate is returned to the Company, unless such return is waived
by the Company.
3.05 PARTIAL SURRENDERS
Partial surrenders from the cash value of the participant's account may be made
before the annuity date. Requests for partial surrenders must be in writing. No
partial surrender will be allowed if it results in the participant's interest in
the general account or any series of the separate account having a value after
the surrender of less than $200, unless the entire amount in this series or
general account is surrendered.
When a partial surrender is made from a series, the number of accumulation units
in that series will be reduced by the number of units equal in value to the
amount withdrawn plus administration fees and transaction fees, both divided by
the applicable percentage shown in Section 2.09.
Purchase payments allocated to the general account and accumulation units will
be canceled on a first-in, first-out basis. A proportionate amount will be
deducted from the annuity value.
3.06 SURRENDER WITHOUT PERCENTAGE CHARGE
The first surrender from a participant's account in a calendar year will be
subject to the following:
(a) For surrenders of up to 10% of the participant's accumulated payment value
in the general account and 10% of the participant's value of accumulation units
in the separate account, the amount of the surrender will be determined by
applying a percentage of 100% in the calculation of the cash value under Section
2.09, provided that the proceeds of this surrender are paid solely to the
participant or beneficiary.
(b) The amount of the surrender that is over the values described in (a) above
will be subject to Sections 2.09, 3.04 and 3.05.
3.07 DEFERRAL OF PAYMENTS
Payments of full or partial surrenders from a separate account series may be
suspended under the following conditions:
(a) During any period in which the New York Stock Exchange is closed (other than
customary weekend or holiday closing) or;
(b) When the Securities and Exchange Commission determines that trading on such
exchange is restricted or that an emergency exists; and as a result, the
separate account may not reasonably dispose of its securities or fairly value
its assets; or
(c) For such other periods as the Securities and Exchange Commission may by
order direct for the protection of variable contractholders and participants.
8
<PAGE> 26
Payments of full or partial surrenders from the general account may be deferred
for a period of not more than six months from the date written request is
received. Interest will continue to be credited during the deferral period. The
interest rate(s) will be the same as if the surrender had not been requested. A
partial surrender made without percentage charge under Section 3.06 is not
subject to deferral.
3.08 CONVERSION BETWEEN SERIES
Accumulation units in the separate account may be converted from one separate
account series to another. Accumulation units may also be converted from a
separate account series to the general account and will receive the interest
rate guarantees applicable to new purchase payments under this certificate.
Amounts accumulated in the general account may be converted to accumulation
units in a separate account series subject to the following restrictions:
(a) Conversions are limited to once per certificate year.
(b) The total amount transferred from the general account during any certificate
year cannot exceed 20% of the accumulated payment value of the general account
on the date of the conversion and,
(c) The value of the participant's interest in the general account will be
reduced by the accumulated payment value of the amount withdrawn plus
transaction fees. Purchase payments will be canceled on a first-in, first-out
basis. A proportionate amount will be deducted from the annuity value.
The Company may, at its sole discretion, allow amounts in excess of 20% to be
converted.
Conversions of accumulation units may be communicated by written election, or if
permitted by the Company, by telephone. The Company will convert the amounts on
the first valuation date after receipt of the written election. Conversions
requested by telephone will be effective within a reasonable time in accordance
with policies established by the Company.
Annuity units in the separate account may be converted from one separate account
series to another. Separate account annuity units may not be converted to the
general account. However, amounts in the general account that have not been
applied to a fixed annuity income option may be converted to annuity units in
one or more separate account series for application to a variable annuity income
option. Such conversions are not subject to the limitations described in (a) and
(b) above.
Conversions of annuity units must be elected by written notification signed by
the participant and will be effective on the following annuity unit valuation
date. No conversion of units may take place within two calendar weeks before the
annuity date or anniversary thereof.
The minimum amount that may be converted at any time is the lesser of $500 or
the balance of the participant's account allocated to the general account or the
series to be converted.
3.09 LIMITATIONS ON DISTRIBUTION
Notwithstanding anything in the Certificate to the contrary, and except as
provided below, a participant shall not be entitled to receive a distribution
under the certificate (whether as annuity payments or a surrender) on amounts
attributable to purchase payments made pursuant to a salary reduction agreement
(as defined under Section 402(g)(3)(C) of the Code) except under the following
circumstances:
1. The participant has attained age 59 1/2;
2. The participant separates from service with the employer through which the
purchase payments were made;
3. The participant dies or becomes disabled (as defined in Section 72(m)(7) of
the Code); or
4. In the case of hardship (as defined in Section 403(b)(11) of the Code).
In the event of a distribution based on hardship, amounts distributed may not
include income earned on purchase payments.
These limitations shall not apply to the distribution of that portion of the
participant's account which is attributable to assets held as of December 31,
1988. No distribution based on hardship will be permitted unless all amounts
excluded from these limitations have been distributed. Further, loans made to a
participant under the Certificate may not be repaid by deduction from that
portion of the participant's account which is subject to these distribution
limitations.
All references in this Section 3.09 to sections of the Code shall include any
successor or substitute provisions therefore and to any regulations issued
thereunder.
3.10 MINIMUM BENEFITS
The value of a paid-up annuity, cash surrender, or settlement on death under the
certificate will not be less than the minimum required by the state laws where
the certificate is delivered.
3.11 SUBSTITUTION OF FUND SHARES
If shares of any fund should no longer be available for investment by a series
or if in the judgment of the Company further investment in shares of any fund
should become inappropriate in view of the purposes of the certificate, the
Company may substitute for each fund share already purchased, and apply future
purchase payments under the certificate to the purchase of shares of another
fund or other securities. The separate account may not change the fund shares of
a series unless approved as provided by the Act. The separate account may buy
other securities for other series or certificates, or, if requested by a
participant, convert units from one series or certificate to another.
9
<PAGE> 27
ARTICLE 4 SETTLEMENT
4.01 SETTLEMENT OF PARTICIPANT'S ACCOUNT
Settlement of the participant's account means any of the following:
(a) The start of annuity income payments to the annuitant or beneficiary.
(b) A payment of the cash value in a lump sum.
The amount applied under an annuity income option is the annuity value less any
transaction fees. The first payment under any annuity option will be made on the
annuity date. Proof of age is required before payments start under any of the
first four options listed in Article 6.
4.02 NORMAL FORM OF SETTLEMENT
The participant must be living on the date the annuity payments are to begin.
Unless another choice is made, the Company will pay the annuitant a series of
payments in the form of a life annuity with 120 monthly payments certain, the
second option in Article 6. General account accumulation units will provide a
fixed annuity. Separate account accumulation units will be applied to provide a
variable annuity. These payments will begin on the normal annuity date.
4.03 OPTIONAL ANNUITY DATE AND OPTIONAL SETTLEMENT
Before annuity payments begin, an optional annuity date or a different annuity
income option may be elected, if not prohibited by the plan. The optional
annuity date may be the first day of any month not later than the normal annuity
date. The election must be made at least 31 days before the optional annuity
date. Any of the annuity income options may be elected. The annuity value on the
optional annuity date will be applied.
4.04 MINIMUM AMOUNT TO PAYEE
If any annuity income payment from any separate account series or from the
general account is less than $50, the Company may change the payment interval so
that the payment is greater than $50.
4.05 MISSTATEMENT OF AGE
The age of a payee may affect the amount of annuity payments. If the age is
misstated, any amount payable or benefit accruing under the certificate will be
as the purchase payments would have purchased at the correct age.
10
<PAGE> 28
ARTICLE 5 SETTLEMENT ON DEATH
5.01 SETTLEMENT ON DEATH BEFORE THE ANNUITY DATE
If the participant dies before the annuity date, the beneficiary may elect:
1. To receive annuity income under Annuity Income Options One, Two or Five.
Election of an income option is subject to the following conditions:
(a) Income must begin within one year of the participant's death.
(b) The guaranteed period under Option Two or the designated period under Option
Five may not be longer than the beneficiary's life expectancy under the
applicable table specified by the Internal Revenue Service.
(c) The annuity value as of the date of the first income payment will be
applied.
OR
2. To receive a lump sum settlement equal to the cash value on the date the
payment is made. If the lump sum settlement becomes payable because of the death
of the participant prior to attaining age 65, the lump sum settlement will be
equal to the larger of:
(a) The purchase payments less amounts already applied to produce annuity
income, and less any prior partial surrender; or
(b) The value of any separate account accumulation units, plus 100% of the
accumulated payment value of accumulation units in the general account, less the
transaction fee.
In any event, distribution under the lump sum option above must be made within 5
years of the death of the participant.
If the spouse of the participant is the beneficiary, the spouse may delay
election of an income option under 1 above to the later of (a) one year after
the participant's death or (b) a date no later than the date on which the
participant would have attained age 70 1/2.
Unless the participant has elected otherwise and there is more than one named
beneficiary living at the time of the participant's death, each will share the
proceeds equally.
If the participant outlives all beneficiaries, the proceeds will be paid to the
participant's estate in a lump sum.
No beneficiary will have the right to assign, anticipate or commute any future
payments under any of the options except as provided in the election or by law.
The rights to the proceeds will pass as if the participant outlived the
beneficiary if the beneficiary dies within 15 days of the participant's death
and prior to the date due proof of the participant's death is received. Due
proof of death will be a certified death certificate, an attending physician's
statement, a decree of a court of competent jurisdiction as to the finding of
death, or such other documents as the Company may, at its option, accept.
5.02 SETTLEMENT ON DEATH OF PAYEE
Upon the death of the payee, any remaining payments certain under Options Two,
Three, or Five in Article 6 will be paid to the named beneficiary.
If no beneficiary is alive at the payee's death, the payee's estate will receive
a lump sum payment. This lump sum will be the present value of the remaining
payments certain at the payee's death. The present value will be computed on the
basis of the interest rate used to compute the benefit.
If, as a result of a payee's death, variable life annuity payments are being
continued to a beneficiary, that beneficiary may elect at any time to receive in
a lump sum the present value of the remaining number of payments certain.
11
<PAGE> 29
ARTICLE 6 ANNUITY INCOME
6.01 ANNUITY INCOME OPTIONS
Except as may be limited by Article 5, the annuity value can be applied to these
annuity income options:
a. Option One-Life Annuity
A series of annuity income payments made monthly during the payee's life. The
payments will stop with the last payment due before the death of the payee. No
further payments will be made after the death of the payee.
b. Option Two-Life Annuity with 120, 180, or 240 Monthly Payments
Certain A series of annuity income payments made monthly for the guaranteed
period elected and thereafter during the payee's life. The guaranteed period may
be 120, 180, or 240 months. If the payee dies before the end of the guaranteed
period, payments for the remainder of the guaranteed period will be paid to the
beneficiary.
c. Option Three-Installment Refund Life Annuity
A series of annuity income payments made monthly during the payee's life. If the
payee dies before receiving the "minimum number" of payments, payments will
continue to the beneficiary. The "minimum number" of payments is equal to the
amount applied under this option divided by the first monthly payment. Any
payments made after the death of the payee will stop when the Company has paid
out a total number of payments equal to the "minimum number" of payments.
d. Option Four-Joint and Full to Survivor Annuity
A series of annuity income payments made monthly during the lifetime of both of
two payees. If one of the payees dies, the payments will end with the last
payment due before the death of the remaining payee.
e. Option Five-Designated Period Annuity--Fixed Dollar Only
A series of fixed annuity income payments made monthly for a period of years.
Any number of years from 5 through 30 may be chosen. Payments will be made to
the payee, or beneficiary even if the payee dies. Payments will stop at the end
of the period selected.
f. Other options may be available as agreed upon by the Company.
6.02 ALTERNATE ANNUITY INCOME RATES
If settlement is made under any fixed annuity income option, payment will be
based on the larger of the following:
(a) the Company's current annuity settlement option rates applicable to this
certificate; or
(b) The annuity purchase rates found in Article 8.
6.03 ALTERNATE ASSUMED INVESTMENT RETURN
If allowed by the laws of the state in which this certificate is issued, the
participant may elect variable annuity benefits determined on an assumed
investment return of 3.50%, 5% or 6% in lieu of the 4.25% return assumed in the
certificate.
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<PAGE> 30
ARTICLE 7 METHOD OF CALCULATING ANNUITY INCOME PAYMENTS
7.01 Determination of Monthly Guaranteed Minimum Fixed Dollar Annuity Payments
Except as provided in Section 7.02, the payment amounts shown in Tables 1 and 2
in Article 8 will be used to determine the monthly payments under a fixed
payment option. The tables show the dollar amount of the monthly payments which
can be purchased with each $1,000 of the general account's annuity value, after
deduction of any applicable premium taxes. Amounts shown use the 1983 Individual
Annuity Mortality Table "a", modified, with an assumed rate of return of 3.00%
per year.
7.02 Determination Of Monthly Variable Annuity Payment For The First Year
Variable annuity payment amounts will be determined at the annuity date, and
will remain the same for one year from that date. Amounts may vary each year
thereafter. The age of the payees born after 1915 must be adjusted using the
following Table. Adjusted ages for payees born after 1995 are available from the
Company. The payee's actual age will be based on the birthday nearest the time
the first payment is due.
<TABLE>
<CAPTION>
Calendar Year Adjusted Age Calendar Year of Adjusted Age
of Birth of Birth
<S> <C> <C> <C>
1915 or Prior Actual Age 1956-1975 Actual Age Minus 3
1916-1935 Actual Age Minus 1 1976-1995 Actual Age Minus 4
1936-1955 Actual Age Minus 2
</TABLE>
THESE ADJUSTMENTS APPLY ONLY TO TABLES 3 AND 4 SHOWN ON THE NEXT PAGES. THESE
AGE ADJUSTMENTS DO NOT APPLY TO ANY OTHER ANNUITY INCOME RATES UNLESS SO
SPECIFIED BY THE COMPANY.
Tables 3 and 4 show the factors used to determine variable annuity income
payments based on an assumed investment return of 4.25%. They are based on the
Modified Select Fidelity Standard Annuity Mortality Table projected to the year
2000 in the projecting scale C modified and then 4.25% interest, reduced for the
first 10 years of any period certain by 1%.
The monthly payment for the first year is determined by:
(a) dividing the separate account annuity value by $1,000,
(b) multiplying the result from (a) by the annuity premium rate shown in column
1 of Table 3 or 4 for the option elected for the adjusted age of payee, and
(c) multiplying the result of (b) by the monthly payment factor in column 2 or
Table 3 or 4.
If there are values in more than one series, determine the monthly payment for
each series as above.
7.03 Number of Annuity Units
The number of annuity units for any series is determined by dividing the first
year monthly payment by the separate account annuity value for that series for
the valuation period that includes the settlement date. The number of annuity
units thus determined will not change unless the owner transfers annuity units
from one separate account series to another. Such annuity units transferred will
be based on the same assumed investment return.
13
<PAGE> 31
7.04 Determination of Monthly Variable Annuity Payments for the Second and
Subsequent Years
The amounts of the second and subsequent years' monthly variable annuity
payments are not pre-determined, and may change from year to year, based on the
variations in the annuity unit value. The annuity unit value varies with the
variations of net investment results above and below the assumed investment
rate.
As of each anniversary of the settlement date, the Company will determine the
amount of monthly payments for each series of the year then beginning. It will
be determined by multiplying the number of separate account annuity units for
that series by the annuity unit value for the same series for the valuation
period in which the first payment for that year is due.
The Company guarantees that the amount of each variable annuity payment will not
be affected by variations in the mortality experience of payees nor by expenses
incurred by the Company in the administration of such benefits.
7.05 Separate Account Annuity Unit Values
The separate account annuity unit value for each series was originally
established at $5. This value for any subsequent valuation period is determined
for each series by:
(a) multiplying the annuity unit value of the series for the immediately
preceding valuation period by
(b) the annuity change factor for the second preceding valuation period.
The annuity change factor for any valuation period is determined for each series
by dividing:
(a) the accumulation unit value at the end of the valuation period
by
(b) the accumulation unit value at the end of the previous valuation period, and
multiplying the result by
(c) the interest neutralization factor.
For weekly valuation periods and a 4.25% assumed net investment rate, the
interest neutralization factor is 0.9991999.
14
<PAGE> 32
ARTICLE 9
ANNUITY PURCHASE RATES
GUARANTEED DOLLAR AMOUNT OF MONTHLY PAYMENT WHICH
IS PURCHASED WITH EACH $1,000 APPLIED
LIFE ANNUITIES-Fixed Dollar
Table 1
<TABLE>
<CAPTION>
SINGLE LIFE ANNUITIES JOINT AND FULL TO
SURVIVOR
No 120 180 240
Period Months Months Months Installment Both Monthly
Age Certain Certain Certain Certain Refund Age Payment
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
60 $5.00 $4.90 $4.77 $4.58 $4.67 60 $4.26
61 5.13 5.02 4.87 4.65 4.77 61 4.35
62 5.26 5.13 4.96 4.72 4.87 62 4.44
63 5.41 5.26 5.06 4.79 4.97 63 4.54
64 5.56 5.39 5.16 4.85 5.08 64 4.65
65 5.73 5.52 5.26 4.92 5.20 65 4.76
66 5.90 5.67 5.37 4.98 5.32 66 4.88
67 6.09 5.81 5.48 5.04 5.45 67 5.01
68 6.29 5.97 5.58 5.10 5.59 68 5.14
69 6.50 6.13 5.69 5.15 5.73 69 5.29
70 6.74 6.30 5.79 5.20 5.89 70 5.45
71 6.98 6.47 5.90 5.25 6.05 71 5.62
72 7.25 6.65 6.00 5.29 6.22 72 5.80
73 7.54 6.83 6.09 5.33 6.40 73 5.99
74 7.85 7.02 6.19 5.36 6.59 74 6.20
75 8.18 7.20 6.27 5.39 6.79 75 6.42
</TABLE>
Monthly payments for ages not shown will be furnished by the Company on request
and will be calculated on the same actuarial basis.
Table 2
DESIGNATED PERIOD ANNUITIES -- Fixed Dollar
<TABLE>
<CAPTION>
Years of Amount of Years of Amount of Years of Amount of
Payments Monthly Payment Payments Monthly Payment Payments Monthly Payment
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
5 $17.91 14 $7.26 23 $4.99
6 15.14 15 6.87 24 4.84
7 13.16 16 6.53 25 4.71
8 11.68 17 6.23 26 4.59
9 10.53 18 5.96 27 4.47
10 9.61 19 5.73 28 4.37
11 8.86 20 5.51 29 4.27
12 8.24 21 5.32 30 4.18
13 7.71 22 5.15
</TABLE>
15
<PAGE> 33
ANNUITY PREMIUM RATES PER $1,000 OF VALUE APPLIED (Column (1) AND
MONTHLY PAYMENT FACTORS (Column (2))
Table 3
SINGLE LIFE ANNUITIES - VARIABLE
MONTHLY PAYMENTS CERTAIN
<TABLE>
<CAPTION>
Adjusted None 120 180 240
Age of
Payee (1) (2) (1) (2) (1) (2) (1) (2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 62.596 .08946 61.992 .08713 60.305 .08611 58.126 .08539
61 63.710 .08975 63.123 .08723 61.294 .08614 58.873 .08538
62 64.922 .09003 64.340 .08730 62.333 .08614 59.628 .08535
63 66.252 .09028 65.653 .08736 63.424 .08613 60.387 .08532
64 67.715 .09049 67.068 .08739 64.564 .08611 61.142 .08527
65 69.298 .09072 68.578 .08741 65.743 .08607 61.884 .08523
66 71.005 .09101 70.199 .08742 66.959 .08603 62.606 .08518
67 72.817 .09137 71.905 .08744 68.191 .08599 63.294 .08513
68 74.732 .09180 73.692 .08747 69.430 .08595 63.941 .08508
69 76.751 .09231 75.557 .08751 70.665 .08590 64.539 .08503
70 78.880 .09290 77.496 .08755 71.886 .08586 65.082 .08499
71 81.010 .09372 79.469 .08763 73.069 .08583 65.563 .08495
72 83.231 .09465 81.498 .08770 74.214 .08579 65.984 .08491
73 85.539 .09570 83.575 .08777 75.309 .08574 66.347 .08487
74 87.982 .09683 85.701 .08781 76.345 .08568 66.657 .08483
75 90.293 .09833 87.805 .08788 77.293 .08563 66.912 .08480
</TABLE>
Table 4
JOINT AND FULL TO SURVIVOR-VARIABLE
<TABLE>
<CAPTION>
Adjusted NO PAYMENTS CERTAIN
Age of
Both Payees (1) (2)
- --------------------------------------------------------------------------------------
<S> <C> <C>
60 57.810 .08526
61 58.742 .08535
62 59.741 .08545
63 60.817 .08554
64 61.976 .08564
65 63.220 .08575
66 64.548 .08594
67 65.961 .08616
68 67.460 .08643
69 69.049 .08674
70 70.732 .08711
71 72.468 .08758
72 74.294 .08813
73 76.208 .08875
74 78.229 .08943
75 80.243 .09032
</TABLE>
Any payee who is over age 85 at the date annuity payments are due will be
considered as actual age 85 on that date.
Factors for adjusted ages not shown will be furnished by the Company on request
and will be calculated on the same actuarial basis.
16
<PAGE> 34
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
ROLLOVER DISTRIBUTION ENDORSEMENT
This endorsement amends the certificate.
Notwithstanding any provision of the certificate, a participant may elect, in
writing, to have any portion of an eligible rollover distribution paid directly
to an eligible retirement plan specified by the participant in a direct
rollover.
For purposes of this amendment, the following terms are defined as follows:
(a) Eligible rollover distribution: An eligible rollover distribution is any
distribution of all or any portion of the balance to the credit of the
participant, except that an eligible rollover distribution does not include: (i)
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the participant or the joint lives (or joint life expectancies)
of the participant and the participant's designated beneficiary, or for a
specified period of ten years or more; (ii) any distribution to the extent that
such distribution is required under section 401(a)(9) of the Code; and, (iii)
the portion of any distribution that is not includible in gross income.
(b) Eligible retirement plan: An eligible retirement plan is an individual
retirement account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, or an annuity plan
described in section 403(b) of the Code, that accepts the participant's eligible
rollover distribution. However, in the case of an eligible rollover distribution
by the surviving spouse, an eligible retirement plan is an individual retirement
account or an individual retirement annuity.
(c) Participant: A participant includes the participant's surviving spouse or
former spouse and the participant's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, in regard to their interest, if any, in this contract.
(d) Direct rollover: A direct rollover is a payment under the certificate to the
eligible retirement plan specified by the participant.
/s/ Robert G. Mepham
- --------------------
Robert G. Mepham
President
<PAGE> 35
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
LOAN ENDORSEMENT
The certificate is amended to add the following:
DEFINITION For purposes of this endorsement only, the term "accumulated payment
value", unless otherwise modified, is defined as follows: The surrender value of
the participant's account without any reduction for surrender charges.
LOAN Unless otherwise restricted by the plan or the terms of this certificate,
the participant may, on or after June 1, 1990 (or such earlier date as permitted
by the Company) and prior to the annuity date, obtain a loan from the Company of
up to an amount equal to 50% of the accumulated payment value of the
participant's account. However, the loan amount cannot exceed the accumulated
payment value of the participant's interest in the general account. The amount
of the loan may not be less than $2,500. The maximum loan amount is $50,000 less
the highest outstanding loan balance during the one year period ending on the
date the new loan is made. No more than one loan may be outstanding at any one
time. A loan will be made upon the Company's acceptance of a written loan
application and the assignment to the Company of the value of this certificate
as the sole security for the loan.
FEE A loan setup fee of up to $50.00 will be charged for each loan. This amount
will be deducted from the loan proceeds.
INTEREST RATES The outstanding balance of the loan will bear interest at an
effective rate of 6.5% per annum. During the term of a loan, a portion of the
accumulated payment value of the participant's interest in the general account
equal to the outstanding balance of the loan (and a proportionate part of the
annuity value) will earn interest at the rate of 4% per annum. In determining
these values, a participant's purchase payments will be applied in the order of
their receipt by the Company.
TERM The term of a loan will be 5 years unless the proceeds of the loan are to
be used to purchase a principal residence of the participant, in which event the
term will be 15 years. Notwithstanding the above, the term of the loan may not
extend beyond the earliest of the normal annuity date, the settlement of the
participant's account, settlement as a result of the participant's death, or any
date provided for such loans by future Federal income tax laws, rules or
regulations. The Company reserves the right to require repayment of the loan
plus accrued interest before processing a request for a partial surrender,
partial annuitization or settlement of the account.
REPAYMENTS Repayments will be based on level amortization and will be due
quarterly. Any loan repayments received will be applied first to the accrued
interest and then to the outstanding balance of the loan. Repayments of
principal will be credited to the participant's account as new purchase payments
and payments directed to the general account will earn interest from the date of
receipt at the then guaranteed interest rates in effect for new purchase
payments. If any repayment is not received when due, an amount will be deducted
from the participant's account. Except as otherwise provided in the certificate,
this amount will be deducted in accordance with the certificate's partial
surrender provisions and will be sufficient to pay the amount due and any
applicable charges, fees and income tax withholding. Full or accelerated loan
repayment may be made at any time on or after the first loan anniversary. Any
amounts received in partial or full repayment of the outstanding balance of a
loan may not be surrendered for a period of 30 days after receipt of such
payment.
COMPANY RIGHTS The Company reserves the right to defer the granting of a loan
for a period permitted by law, but not more than six (6) months from receipt of
the application. The Company reserves the right, in its discretion, to suspend,
modify or terminate the granting of loans at any time. Such action will not
affect outstanding loans.
/s/ Robert G. Mepham
- ------------------------
President
<PAGE> 36
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
ANNUITY PURCHASE RATE BONUS RIDER
This rider applies to Policy Form SF-230.
In the event that the participant or beneficiary settles the participant's
account by applying the entire annuity value of the account to a fixed annuity
income option at any time after the ninth full calendar year following the
certificate date, the Company will increase its current annuity settlement
option rates described in Section 6.02 by seven percent (7%).
/s/ Robert G. Mepham
- --------------------------
President
<PAGE> 37
[SECURITY FIRST LIFE INSURANCE COMPANY LOGO]
GENERAL ACCOUNT EXCESS INTEREST RIDER
Notwithstanding anything in the contract to the contrary, upon the expiration of
the initial interest rate guarantees in excess of the minimum guaranteed
interest rate of 3.00%, the Company agrees that it will declare from time to
time excess interest over this minimum guaranteed interest rate on purchase
payments allocated to the general account, and that each such declaration shall
be for a period of not less than one year.
/s/ Robert G. Mepham
- --------------------------
President
<PAGE> 1
EXHIBIT 5
ENROLLMENT FORM
Under Group Annuity Contract With
The Security First Life Insurance Company, Wilmington, Delaware
Return Completed Application To: SECURITY FIRST LIFE INSURANCE COMPANY
P.O. Box 92193, Los Angeles, CA 90009
___RGA ___TGA ______________________________
Name of Group Contractor or Employer___________________________________________
Participant's Name ____________________________________________________________
Last First Middle Initial
Address _______________________________________________________________________
City _____________________________ State ___________________ Zip _____________
Home Phone ____________________________ Business Phone ________________________
9 Digit Group # _______________________________________________________________
Name of School ________________________________________________________________
Social Security Number ________________________________________________________
Birthdate _______________________________________ Sex _________________________
PURCHASE PAYMENT
Allocations within the variable funds must be whole percentages. The minimum
purchase payment to the variable funds is $20 per month.
Policy Form
Payroll Effective Date: Mo.__________ Day _______________ Year ______________
Lump Sum Allocation: ____________________________________
___ SF-230 (Fixed and Variable) ___ IRA Rollover ___ IRA Payments YR _____
___ Other ____________________ ___ IRA Transfer ___ 403(b) Rollover
$ ________________________
FUNDS ALLOCATION
Security First Bond Series (21) ________________%
Security First Growth and
Income Series (22) ________________%
VIP Money Market Portfolio (17) ________________%
VIP Asset Manager (13) ________________%
VIP Growth (14) ________________%
VIP Index 500 (16) ________________%
VIP Contrafund Portfolio (24) ________________%
Alger Small Capitalization
Portfolio (49) ________________%
Scudder International
Portfolio (18) ________________%
Virtus U.S. Government ( ) ________________%
Fixed Account (00) ________________%
TOTAL 100 %
----------------
ANNUALIZED PAYMENTS
Pay Period
Employee Voluntary $__________________X____________ = ____________________
Employee Fringe $__________________X____________ = ____________________
Balloon Payments $__________________X____________ = ____________________
Balloon Allocation ________________________________
ADDITIONAL CONTRACT INFO
I have an existing 403(b) Contract with Security First Group ___ Yes ___ No
If yes, my other contract number is _________________________________________
I request my future payroll deferrals to be split ___ Yes ___ No
If yes, indicate the PERCENTAGE for each contract.
Existing Contract No. ____________________________ ______%
New Contract (This Application) ______%
Primary Beneficiary __________________________________________________________
Social Security # ____________________________________________________________
Relationship ____________________________ Birthdate __________________________
Address ________________________ City_______________ State ____ Zip __________
Contingent Beneficiary _______________________________________________________
Social Security # ____________________________________________________________
Special Request ______________________________________________________________
It is understood and agreed that: (1) the statements and answers made above
shall form the exclusive basis of any policy issued hereon; (2) only an officer
of the company can make, modify or discharge contracts or waive any of the
company's rights by any statement or promise; (3) in the case of apparent
errors or omissions discovered by the company, the company is hereby authorized
to amend this form by recording the change in the space entitled "Home Office
Endorsements" and the acceptance of any policy issued on this form shall
constitute an approval of the policy provisions and a ratification of such
amendment, except where prohibited by statute or regulation.
Proof of age will be required before any annuity payments begin. Security First
Life may require that any payee furnish proof that he or she is living on the
date a payment is due.
When this application involves a variable annuity, receipt of a current
variable annuity prospectus and any underlying security prospectus is hereby
acknowledged. Annuity payments (and termination values, if any) based on the
investment experience of the separate account are not guaranteed as to a fixed
dollar amount.
I have been advised by the representative that this investment should be
suitable with regard to my financial circumstances, occupation, salary, and
investment objectives. Information concerning my financial circumstances has
been requested and I prefer to withhold the information requested ___, or the
information requested is supplied on the attached form ___.
Participant's Signature X_____________________________________________________
Date of Execution (Month, Day, Year) _________________________________________
Location Where signed (City, State) __________________________________________
Supervisor's Signature X______________________________________________________
Agent's Signature X___________________________________________________________
Agent's Name (Please Print) __________________________________________________
Agent's Code _________________________________________________________________
HOME OFFICE USE ONLY
Home Endorsements ____________________________________________________________
SF-230-ENR White & Yellow - Home Office, Pink - Agent SF 1564(6/96)
<PAGE> 1
EXHIBIT 6
CERTIFICATE OF INCORPORATION
OF
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION
----------------------
FIRST. The name of this corporation is ASSOCIATED TRAFFIC CLUBS
INSURANCE CORPORATION.
SECOND. Its principal office in the State of Delaware is to be located
at 900 Market Street, in the City of Wilmington, County of New Castle, and its
resident agent is CORPORATION SERVICE COMPANY, 900 Market Street, Wilmington,
Delaware.
THIRD. The nature of the business and the objects and purposes to be
transacted, promoted and carried on are to do any or all of the things herein
mentioned as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz:
To write life and accident and health insurance on both the group and
individual basis.
This corporation shall have power to issue and cancel policies and
other contracts covering any one, part or all of the risks and liabilities
permitted to be insured by this certificate of incorporation; to fix such
rules, regulations, restrictions, conditions, premiums, charges and fees, to
change the same from time to time, to defend any action against it or its
insured and to engage, use and rely upon the services of actuaries, physicians,
appraisers, adjusters, lawyers, repairmen, contractors and other specialists,
factors or agents, all as may be deemed to be desirable necessary or proper for
the conduct of the business of this corporation.
This corporation shall have power and is authorized to reinsure all or
any part of any risk of any class in any other insurance company or to accept
such reinsurance from any other insurance company.
To purchase, take, own, hold, deal in, mortgage or otherwise lien and
to lease, sell, exchange, convey, transfer or in any manner whatever dispose of
real property, within or without the State of Delaware
To acquire the good will, rights and property and to undertake the
whole or any part of the assets and liabilities of any person, firm,
association or corporation; to pay for the same in cash, the stock of this
company, bonds or otherwise, to hold or in any manner to dispose of the whole
or any part of the property, so purchased; to conduct in
<PAGE> 2
any lawful manner the whole or any part of any business so acquired and to
exercise all the powers necessary or convenient in and about the conduct and
management of such business.
To enter into, make and perform contracts of every kind for any lawful
purpose, with any person, firm, association or corporation, town, city, county,
body politic, state, territory, government or colony or dependency thereof.
To borrow money for any of the purposes of the corporation and to draw, make,
accept, endorse, discount, execute, issue, sell, pledge or otherwise dispose of
promissory notes, drafts, bills of exchange, warrants, bonds, debentures and
other negotiable or non-negotiable, transferable or non-transferable
instruments and evidences of indebtedness and to secure the payment thereof and
the interest thereon by mortgage or pledge, conveyance or assignment in trust
of the whole or any part of the property of the corporation at the time owned
or thereafter acquired.
To purchase, hold, sell and transfer the shares of its capital stock.
To have one or more offices and to conduct any or all of its
operations and business and to promote its objects within or without the State
of Delaware, without restriction as to place or amount.
To do any or all of the things in this certificate set forth as
objects, purposes, powers or otherwise, to the same extent and as fully as
natural persons might or could do and in any part of the world, as principals,
agents, contractors, trustees or otherwise.
To do all and everything necessary, suitable, convenient or proper for
the accomplishment of any of the purposes or the attainment of any one or more
of the objects herein enumerated, or incidental to the powers herein named, or
which shall at any time appear conducive or expedient for the protection or
benefit of the corporation, either as holders of or interested in, any property
or otherwise; with all the powers now or hereafter conferred by the Laws of
Delaware upon corporations under the Act hereinafter referred to, and all acts
amendatory thereof or supplementary thereto.
The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall
be in no way limited nor restricted by reference to or inference from the terms
of any other clause or paragraph of this certificate of incorporation.
The foregoing shall be construed both as objects and powers and the
enumeration thereof shall not be held to limit or restrict in any manner the
general powers conferred on this corporation by the laws of the State of
Delaware,
<PAGE> 3
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is Five Hundred and Fifty-Five Thousand, Five Hundred and
Fifty-Five (555,555) shares of the par value of Forty Cents (40c.) each,
amounting to Two Hundred and Twenty-Two Thousand, Two Hundred and Twenty
Dollars ($222,220).
FIFTH. The minimum amount of capital with which it will commence
business is Two Hundred Thousand Dollars (200,000) of full paid capital stock
and a surplus of One Hundred Thousand Dollars ($100,000).
SIXTH. The name and place of residence of each of the incorporators
are as follows:
<TABLE>
<CAPTION>
NAME RESIDENCE
<S> <C>
S. L. Mackey Wilmington, Delaware
K. D. Rau Wilmington, Delaware
H. Kennedy Wilmington, Delaware
</TABLE>
SEVENTH. This corporation is to have perpetual existence.
EIGHTH. The private property of the stockholders shall not be subject
to the payment of corporate debts to any extent whatever.
NINTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the board of directors is expressly
authorized:
To make, alter, amend and repeal the by-laws;
To set apart out of any of the funds of the corporation available for
dividends a reserve or reserves for any proper purpose and to alter or abolish
any such reserve; to authorize and cause to be executed mortgages and liens
upon the property and franchises of this corporation;
To designate, by resolution passed by a majority of the whole board,
one or more committees, each to consist of two or more directors, which
committees, to the extent provided in such resolution or in the by-laws of the
corporation, shall have and may exercise any or all of the powers of the board
of directors in the management of the business and affairs of this corporation
and have power to authorize the seal of this corporation to be affixed to all
papers which may require it;
From time to time to determine whether and to what extent and at what
times and places and under what conditions and regulations the books and
accounts of this corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholders, and no stockholder shall have
any right to inspect any account or
<PAGE> 4
book or document of the corporation, except as conferred by law or authorized
by resolution of the directors or of the stockholders.
To sell, lease or exchange all of its property and assets, including
its good will and its corporate franchises, upon such terms and conditions and
for such consideration, which may be in whole or in part shares of stock in,
and/or other securities of, any other corporation or corporations, when and as
authorized by the affirmative vote of the holders of a majority of the stock
issued and outstanding having voting power given at a stockholders' meeting
duly called for that purpose, or when authorized by the written consent of the
holders of a majority of the voting stock issued and outstanding.
This corporation may in its by-laws confer powers additional to the
foregoing upon the directors, in addition to the powers and authorities
expressly conferred upon them by law.
TENTH. If the bylaws so provide, the stockholders and directors shall
have power to hold their meetings, to have an office or offices and to keep the
books of this corporation (subject to the provisions of the statute) outside of
the State of Delaware at such places as may from time to time be designated by
the by-laws or by resolution of the directors.
ELEVENTH. This corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law and all rights conferred on officers,
directors and stockholders herein are granted subject to this reservation.
WE, THE UNDERSIGNED, being all of the incorporators, for the purpose
of forming a corporation in pursuance of an Act of the Legislature of the State
of Delaware entitled "an Act Providing a General Corporation Law" (approved
March 10, 1899) and the acts amendatory thereof and supplemental thereto, do
make and file this certificate of incorporation, hereby declaring and
certifying that the facts herein stated are true, and accordingly hereunto have
set our respective hands and seals this twelfth day of September, A. D. 1960.
In the presence of S. L. MACKEY (SEAL)
ROSE H. O'NEAL K. D. RAU (SEAL)
H. KENNEDY (SEAL)
<PAGE> 5
STATE OF DELAWARE )
COUNTY OF NEW CASTLE ) SS.
BE IT REMEMBERED that on this twelfth day of September, A. D. 1960,
personally appeared before me, the subscriber, a notary public for the State
and County aforesaid, S. L. Mackey, K. D. Rau and H. Kennedy, all the parties
to the foregoing certificate of incorporation, known to me personally to be
such, and severally acknowledged the said certificate to be their act and deed
respectively, and that the facts therein stated were truly set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
Rose H. O'Neal
Notary Public
Rose H. O'Neal
Notary Public
State of Delaware
Appointed June 15, 1959
Term Two Years
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION
- -----------------------------------------------------------------------------
(Before payment of capital)
WE, THE UNDERSIGNED, being all of the original incorporators of
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION, a corporation created by and
existing under the laws of the State of Delaware, the resident agent in charge
of its principal office in the State of Delaware being CORPORATION SERVICE
COMPANY, 900 Market Street, Wilmington, Delaware, do hereby certify that no
part of the capital of said corporation has been paid in.
In accordance with the provisions of Section 241 of the General
Corporation Law of the State of Delaware, the certificate of Incorporation of
the aforesaid corporation is amended by striking out Section FOURTH of the
certificate of incorporation and by inserting in lieu thereof the following:
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is Five Hundred and Fifty-Five Thousand, Five Hundred and
Fifty-Five (555,555) shares of the par value of Eighty Cents ($.80) each,
amounting to Forty-Four Thousand, Four Hundred and Forty- Four Dollars
($444,444).
IN WITNESS WHEREOF, we have hereunto set our respective hands and
seals this twenty-fifth day of October, 1960.
In the presence of /s/ S.L. Mackey (SEAL)
---------------
S.L. Mackey
/s/ Melitta C. Palmatary /s/ K.D. Rau (SEAL)
- ------------------------ ------------
Melitta C. Palmatary K.D. Rau
/s/ H. Kennedy (SEAL)
--------------
H. Kennedy
<PAGE> 7
STATE OF DELAWARE )
) SS.
COUNTY OF NEW CASTLE )
BE IT REMEMBERED, that on this twenty-fifth day of October, A.D. 1960,
personally appeared before me, the subscriber, a notary public in and for the
State and County aforesaid, S.L. Mackey, K.D. Rau and H. Kennedy, all the
parties to the foregoing certificate of amendment, known to me personally to be
such, and did each severally acknowledge that they signed, sealed and delivered
said certificate as their several voluntary act and deed and that the facts
therein stated were truly set forth.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Melitta C. Palmatary
------------------------
Notary Public
Melitta C. Palmatary
Notary Public
Appointed Jan. 17, 1959
Term of Office
2 years, Delaware
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION
- -------------------------------------------------------------------------------
THIS IS TO CERTIFY: THAT ASSOCIATED TRAFFIC CLUBS INSURANCE
CORPORATION is a corporation created by and existing under the laws of the
State of Delaware, the resident agent in charge of its principal office in the
State of Delaware being CORPORATION SERVICE COMPANY, 900 Market Street,
Wilmington, Delaware;
THAT the Board of Directors of the said corporation did adopt a
resolution setting forth a proposed amendment to its certificate of
incorporation, declaring its advisability and calling a meeting of stockholders
entitled to vote in respect thereof for the consideration of the said
amendment.
THAT said meeting of stockholders was duly called and held in
accordance with the by-laws of said corporation and the statutes of the State
of Delaware; that at said meeting a vote of the stockholders entitled to vote
was taken by ballot for and against the proposed amendment, which vote was
conducted in accordance with the law by two judges appointed for that purpose;
THAT the stockholders holding a majority of the stock of the said
corporation entitled to vote upon the amendment voted in favor of the said
amendment, and that the said judges made out a certificate accordingly, and
subscribed and delivered it to the secretary of the corporation;
THAT the said amendment is as follows:
That Section FOURTH of the certificate of incorporation be stricken
out and the following inserted in lieu thereof:
FOURTH. The total number of shares of stock which this
corporation is authorized to issue is One Million (1,000,000)
shares of the par value of Fifty Cents (50c.) each, amounting to
Five Hundred Thousand Dollars ($500,000.00).
<PAGE> 9
AND FURTHER THAT the said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware and that the capital of this corporation will not be reduced under
or by reason of the said amendment.
IN WITNESS WHEREOF the said corporation has caused this certificate to
be made and signed by its president and secretary and its seal to be affixed
hereto this 30th day of September 1963.
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION
By Floyd C. Day
President
Associated Traffic Clubs and Marcia G. Latona
Insurance Corporation Secretary
Incorporated Delaware
1960
STATE OF MARYLAND )
) SS.
COUNTY OF MONTGOMERY )
BE IT REMEMBERED that on this 1st day of October, 1963, before me, the
subscriber, a notary public in and for the State and County aforesaid,
personally appeared Floyd C. Day, President of ASSOCIATED TRAFFIC CLUBS
INSURANCE CORPORATION, the corporation mentioned in the foregoing certificate,
known to me and acknowledged the said certificate to be his act and deed and
the act and deed of the said corporation, and that the seal thereto affixed was
the seal of the said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year hereinabove written.
Theodore E. Draewell
Notary Public
Theodore E. Draewell
Notary Public My commission Expires May 3, 1965
Montgomery County, Md.
<PAGE> 10
CERTIFICATE OF AMENDMENT
of
CERTIFICATE OF INCORPORATION
of
ASSOCIATED TRAFFIC CLUBS OF INSURANCE CORPORATION
___________________________
THIS IS TO CERTIFY: THAT ASSOCIATED TRAFFIC CLUBS INSURANCE
CORPORATION is a corporation created by and existing under the laws of the
State of Delaware, the resident agent in charge of its principal office in the
State of Delaware being CORPORATION SERVICE COMPANY, 900 Market Street,
Wilmington, Delaware;
THAT the board of directors of the said corporation did adopt a
resolution setting forth a proposed amendment to its certificate of
incorporation, declaring its advisability and calling a meeting of stockholders
entitled to vote in respect thereof for the consideration of the said
amendment;
THAT said meeting of stockholders was duly called and held in
accordance with the by-laws of said corporation and the statutes of the State
of Delaware; that at said meeting a vote of the stockholders entitled to vote
was taken by ballot for and against the proposed amendment, which vote was
conducted in accordance with the law by two judges appointed for that purpose;
THAT the stockholders holding a majority of the stock of the said
corporation entitled to vote upon the amendment voted in favor of the said
amendment, and that the said judges made out a certificate accordingly, and
subscribed and delivered it to the secretary of the corporation;
THAT the said amendment is as follows:
That Section FOURTH of the certificate of incorporation be
stricken out and the following inserted in lieu thereof:
FOURTH. The total number of shares of stock which this
corporation is authorized to issue is One Million (1,000,000)
shares of the par value of Twenty-Five Cents (25c.) each,
amounting to $250,000 (Two Hundred and Fifty Thousand
Dollars).
<PAGE> 11
AND FURTHER THAT the said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF the said corporation has caused this certificate to
be made and signed by its president and secretary and its seal to be affixed
hereto this 16th day of November, 1965.
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION
By Floyd C. Day
President
Marcia G. Latona
Secretary
ASSOCIATED TRAFFIC CLUBS INSURANCE
CORPORATION
Incorporated Delaware
1960
STATE OF VIRGINIA )
: SS.
COUNTY OF FAIRFAX )
BE IT REMEMBERED that on this 16th day of November, 1965, before me,
the subscriber, a notary public in and for the State and County aforesaid,
personally appeared Floyd C. Day, President of ASSOCIATED TRAFFIC CLUBS
INSURANCE CORPORATION, the corporation mentioned in the foregoing certificate,
known to me and acknowledged the said certificate to be his act and deed and
the act and deed of the said corporation, and that the seal thereto affixed was
the seal of the said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed by
official seal the day and year hereinabove written.
Yvonne W. Todd
Notary Public
My Commission Expires February 16, 1966
Yvonne W. Todd
Notary Public
Fairfax County, Va.
<PAGE> 12
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * *
ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION, a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, the resident agent in charge of its principal office in
the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of ASSOCIATED
TRAFFIC CLUBS INSURANCE CORPORATION resolution was duly adopted setting forth a
proposed amendment to the Certificate of Incorporation of said corporation
changing the authorized capital, declaring the said amendment to be advisable,
and resolution by unanimous consent of Executive Committee to change the
corporate name, were presented to the annual meeting of stockholders of said
corporation for consideration thereof. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FOURTH" so that, as amended
said Article shall be and read as follows:
"FOURTH. The total number of shares of stock which this corporation
is authorized to issue is Three Million (3,000,000) shares at the par
value of seven cents ($.07) each, amounting to Two Hundred Ten
Thousand Dollars ($210,000.00)."
FURTHER RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered
"FIRST" so that, as amended said Article shall be and read as follows:
"FIRST. The name of the corporation is ASSOCIATED TRAFFIC CLUBS LIFE
INSURANCE COMPANY."
SECOND: That thereafter, the annual meeting of the stockholders of
said corporation was duly called and held on July 1, 1968, upon notice in
accordance with section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as required by statute
were voted in favor of the amendments.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 13
FOURTH: That the capital of said corporation will not be reduced
under or by reason of said amendment.
IN WITNESS WHEREOF, said ASSOCIATED TRAFFIC CLUBS INSURANCE
CORPORATION has caused its corporate seal to be hereunto affixed and this
certificate to the signed by Angelo S. Pennisi, its President, and attested by
Daniel W. Ackerman, its Secretary, this 31st day of July, 1968.
ASSOCIATED TRAFFIC CLUBS
INSURANCE CORPORATION
By /s/ Angelo S. Pennisi
---------------------
President
[CORPORATE SEAL]
ATTEST:
By /s/ Daniel W. Wackerman
-----------------------
Secretary
<PAGE> 14
STATE OF NORTH CAROLINA )
) SS.
COUNTY OF )
BE IT REMEMBERED, that on this 31st day of July 1968, personally came
before me, a Notary Public in and for the County and State aforesaid, Angelo S.
Pennisi, President of ASSOCIATED TRAFFIC CLUBS INSURANCE CORPORATION, a
corporation of the State of Delaware, and he duly executed said certificate
before me and acknowledged the said certificate to be his act and deed and the
act and deed of said corporation and the facts stated therein are true; and
that the seal affixed to said certificate and attested by the Secretary of said
corporation is the common or corporate seal of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the
day and year aforesaid.
/s/ Shirley Everase
-------------------------
Notary Public
[SEAL]
<PAGE> 15
ASSOCIATED TRAFFIC CLUBS LIFE INSURANCE COMPANY
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
ASSOCIATED TRAFFIC CLUBS LIFE INSURANCE COMPANY, a corporation
organized and existing under and by virtue of the General Corporation Law of
the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of ASSOCIATED
TRAFFIC CLUBS LIFE INSURANCE COMPANY, resolutions were duly adopted setting
forth a proposed amendment to the Certificate of Incorporation of said
Corporation, declaring said amendment to be advisable and directing that the
amendment be considered to the next annual meeting of the Shareholders on June
30, 1970. The resolution setting forth the proposed amendment is as follows:
RESOLVED, That it is deemed advisable that the Certificate of
Incorporation of the Company be amended by changing the
Article thereof numbered "Fourth" so that, as amended said
Article shall be and read as follows:
"4th. The total number of shares of stock which this
corporation is authorized to issue is Three Million
(3,000,000) shares at the par value of fifteen cents ($.15)
each, amounting to Four Hundred Fifty Thousand Dollars
($450,000.00)."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the Resolution was submitted to the annual meeting of the
shareholders of said Corporation held on June 30, 1970, duly called and held
upon notice in accordance with Section 222 of the
<PAGE> 16
General Corporation Law of the State of Delaware, at which meeting the
necessary number of shares as required by statute were voted in favor of the
amendment.
THIRD: That the capital of the Corporation will not be reduced under
or by reason of the following amendment.
FOURTH: That the foregoing amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, ASSOCIATED TRAFFIC CLUBS LIFE INSURANCE COMPANY
has caused its corporate seal to be hereunto affixed and this certificate to be
signed by David S. Zelitch, its Vice President and attested by John M. Cooney,
its Secretary, this 30th day of June, 1970.
ASSOCIATED TRAFFIC CLUBS LIFE INSURANCE COMPANY
By: /s/ D. S. Zelitch
------------------------------------------------
DAVID S. ZELITCH Vice President
ATTEST:
By: /s/ J. M. Cooney
----------------------------------------
JOHN M. COONEY, Secretary
CORPORATE SEAL
<PAGE> 17
STATE OF PENNSYLVANIA )
) ss:
COUNTY OF PHILADELPHIA )
BE IT REMEMBERED that on this 30th day of June , 1970, personally came
before me, a Notary Public in and for the County and State aforesaid,
DAVID S. ZELITCH, Vice President* of Associated Traffic Clubs Life
Insurance Company, a corporation of the State of Delaware, and he duly executed
said certificate before me and acknowledged the said certificate to be his act
and deed and the act and deed of said corporation and the facts stated therein
are true; and that the seal affixed to said certificate and attested by the
Secretary** of said corporation is the common or corporate seal of said
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day and
year aforesaid.
/s/ M. C. Abramowitz
-------------------------
Notary Public
MARILYN C. ABRAMOWITZ
Notary Public, Philadelphia, Philadelphia Co.
My Commission Expires March 23, 1974
NOTARIAL
(SEAL)
<PAGE> 18
RESTATED CERTIFICATE OF INCORPORATION
OF
ASSOCIATED TRAFFIC CLUBS LIFE INSURANCE COMPANY
Associated Traffic Clubs Life Insurance Company, which was originally
incorporated on September 13, 1960 under the name Associated Traffic Clubs
Insurance Corporation, hereby certifies (i) that the following Restated
Certificate of Incorporation restates and integrates the Certificate of
Incorporation, and also amends this by changing the name and increasing
authorized capital; (ii) that the Restated Certificate of Incorporation has
been duly adopted by vote of the stockholders pursuant to Section 242 and 245
of the General Corporation Law of the State of Delaware; and (iii) that its
capital will not be reduced under or by reason of any amendment in this
Restated Certificate of Incorporation.
The text of the Certificate of Incorporation as amended heretofore is
hereby restated and amended to read as herein set forth in full:
FIRST. The name of the corporation is NATIONAL CONSUMERS LIFE
INSURANCE COMPANY.
SECOND. The address of the Corporation's registered office in the
State of Delaware is Edgemart Building, 4 Denny Road, City of Wilmington,
County of New Castle, and National Consumers Life Insurance Company shall be
the registered agent at the address of its registered office, set forth above.
THIRD. The nature of the business and the objects and purposes to be
transacted, promoted and carried on are to do any or all of the things herein
mentioned as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz.:
To write life and accident and health insurance on both the group and
individual basis.
This Corporation shall have power to issue and cancel policies and
other contracts covering any one, part or all of the risks and liabilities
permitted to be insured by this certificate of incorporation; to fix such
rules, regulations, restrictions, conditions, premiums, charges and fees, to
change the same from time to time, to defend any action against it or its
insured and to engage, use and rely upon the services of actuaries, physicians,
appraisers, adjusters, lawyers, repairmen, contractors and other specialists,
factors or agents, all as may be deemed to be desirable, necessary or proper
for the conduct of the business of this corporation.
This Corporation shall have power and is authorized to reinsure all or
any part of any risk of any class in any other insurance company or to accept
such reinsurance from any other insurance company.
To purchase, take, own, hold, deal in, mortgage or otherwise lien and
to lease, sell, exchange, convey, transfer or in any manner whatever dispose of
real property, within or without the State of Delaware.
To acquire the good will, rights and property and to undertake the
whole or any part of the assets and liabilities of any person, firm,
association or corporation; to pay for the same in cash, the stock of this
company, bonds or otherwise; to hold or in any manner to dispose of the whole
or any part of the property so purchased; to conduct in any lawful manner the
whole
<PAGE> 19
or any part of any business so acquired and to exercise all the powers
necessary or convenient in and about the conduct and management of such
business.
To enter into, make and perform contracts of every kind for any lawful
purpose, with any person, firm, association or corporation, town, city, county,
body politic, state, territory, government or colony or dependency thereof.
To borrow money for any of the purposes of the Corporation and to
draw, make, accept, endorse, discount, execute, issue, sell, pledge or
otherwise dispose of promissory notes, drafts, bills of exchange, warrants,
bonds, debentures and other negotiable or non-negotiable, transferable or
non-transferable instruments and evidences of indebtedness and to secure the
payment thereof and the interest thereon by mortgage or pledge, conveyance or
assignment in trust of the whole or any part of the property of the Corporation
at the time owned or thereafter acquired.
To purchase, hold, sell and transfer the shares of its capital stock.
To have one or more offices and to conduct any or all of its
operations and business and to promote its objects within or without the State
of Delaware, without restriction as to place or amount.
To do any or all of the things in this certificate set forth as
objects, purposes, powers or otherwise, to the same extent and as fully as
natural persons might or could do and in any part of the world, as principals,
agents, contractors, trustees or otherwise.
To do all and everything necessary, suitable, convenient or proper for
the accomplishment of any of the purposes or the attainment of any one or more
of the objects herein enumerated, or incidental to the powers herein named, or
which shall at any time appear conducive or expedient for the protection or
benefit of the Corporation, either as holders of or interested in, any property
or otherwise; with all the powers now or hereafter conferred by the Laws of
Delaware upon corporations under the Act hereinafter referred to, and all acts
amendatory thereof or supplementary thereto.
The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall
be in no way limited nor restricted by reference to or inference from the terms
of any other clause or paragraph of this certificate of incorporation.
The foregoing shall be construed both as objects and powers and the
enumeration thereof shall not be held to limit or restrict in any manner the
general powers conferred on this corporation by the laws of the State of
Delaware.
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 15,000 shares of Common Stock with
a par value of $100.00 per share.
FIFTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or
repeal the By-Laws of the Corporation.
SIXTH. The books of the Corporation may be kept (subject to any
provision contained in the Delaware Insurance Code or the Delaware General
Corporation Law, as such may be amended from time to time) outside the State of
Delaware at such. place or places as may be
<PAGE> 20
designated from time to time by the Board of Directors or in the By-Laws of the
Corporation. Election of directors need not be by written ballot, unless the
By-Laws of the Corporation shall so provide.
SEVENTH. The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of
the State of Delaware at the time in force may be added or inserted, in the
manner now or hereafter prescribed by law; and all rights, preferences and
privileges of whatsoever nature conferred upon stockholders, directors,
officers or any other person whomsoever by and pursuant to this Certificate of
Incorporation in its present form, or as hereafter amended are granted subject
to this reserved right.
IN WITNESS WHEREOF, Associated Traffic Clubs Life Insurance Company
has caused this certificate to be signed by Henry C. DiLullo, its
Vice-President, and attested by Phyllis Freeman, its Assistant Secretary, this
29th day of February, 1972.
ASSOCIATED TRAFFIC CLUBS
Attest: LIFE INSURANCE COMPANY
by /s/ Phyllis Freeman By /s/ Henry C. DiLullo
------------------- ---------------------
Phyllis Freeman Henry C. DiLullo
Assistant Secretary Vice-President
ASSOCIATED TRAFFIC CLUBS LIFE INSURANCE
COMPANY
INCORPORATED
DELAWARE
[Company Seal]
<PAGE> 21
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * *
National Consumers Life Insurance Company, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY.
FIRST: That the Board of Directors of said corporation, by the
unanimous written consent of its members, filed with the minutes of the board,
adopted a resolution proposing and declaring advisable the following amendment
to the Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of National Consumers
Life Insurance Company be amended by changing the Article thereof
numbered "FIRST" so that, as amended, said Article shall be and read
as follows:
"FIRST: The name of the Corporation is "SECURITY FIRST LIFE
INSURANCE COMPANY."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of The General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of The General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said National Consumers Life Insurance Company has
caused this certificate to be signed by Glen A. Holden, its President, and
attested by Russell B. Pace, Jr., its Secretary, this 27th day of September,
1979.
NATIONAL CONSUMERS LIFE INSURANCE COMPANY
BY: /s/ Glen A. Holden
------------------
Glen A. Holden
President
ATTEST:
BY: /s/ Russell B. Pace
-------------------
Russell B. Pace
Secretary
[Company Seal]
<PAGE> 22
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Security First Life Insurance Company, a corporation organized and
existing under and by virtue of The General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY
FIRST: That the Board of Directors of said Corporation, at a meeting
duly called and held on April 11, 1983, adopted a resolution proposing and
declaring advisable the following amendment to the Certificate of Incorporation
of said Corporation:
RESOLVED, That the par value of the Common Stock of the
Corporation be increased from $100.00 per share to $200.00 per
share.
RESOLVED FURTHER, That Article "Fourth" of the Certificate of
Incorporation of Security First Life Insurance Company be amended
so that, as amended, said Article "Fourth" shall be and read as
follows:
"FOURTH. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 15,000
shares of Common Stock with a par value of $200.00 per share."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of The General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of The General
Corporation Law of the State Of Delaware.
IN WITNESS WHEREOF, said Security First Life Insurance Company has
caused this Certificate to be signed by Russell B. Pace, Jr., its Vice Chairman
of the Board, and attested to by David M. Sanderford, its Assistant Secretary,
this 26th day of April, 1983.
SECURITY FIRST LIFE INSURANCE COMPANY
BY: /s/ Russell B. Pace
-------------------
Russell B. Pace
Vice Chairman of the Board
ATTEST:
BY: /s/ David M. Sanderford
------------------------
David M. Sanderford
Assistant Secretary
<PAGE> 23
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Security First Life Insurance Company, a corporation organized and
existing under and by virtue of The General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY
FIRST: That the Board of Directors of said Corporation, at a meeting
duly called and held on October 17, 1984, adopted a resolution proposing and
declaring advisable the following amendment to the Certificate of Incorporation
of said Corporation:
RESOLVED, That Article "Fourth" of the Certificate of Incorporation of
Security First Life Insurance Company is amended by striking Article Fourth
in its entirety and substituting in lieu thereof the following:
"FOURTH. The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 215,000 shares
divided into 200,000 shares of Noncumulative Preferred Stock with a
par value of One Dollar ($1.00) per share ("Preferred Stock") and
15,000 shares of Common Stock with a par value of Two Hundred Dollars
($200) per share ("Common Stock").
"The relative rights, preferences and limitations and the restrictions
and qualifications of the shares of each class of stock are as
follows:
A. Preferred Stock
(i) DIVIDENDS
The holders of the Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors of the
Corporation, out of any assets of the Corporation available for
dividends pursuant to the laws of the State of Delaware, preferential
dividends at the rate of 6 percent of the redemption value per share,
per annum, payable quarterly on such dates as may be determined by the
Board of Directors, before any dividend shall be declared or paid upon
or set apart for the Common Stock. Such dividends upon the Preferred
Stock shall not be cumulative, and no right shall accrue to holders of
the Preferred Stock by reason of the fact that dividends are not
declared, nor shall any undeclared or unpaid dividend bear interest.
Whenever the full dividend on the Preferred Stock for the then current
dividend period shall have been paid or declared and a sum sufficient
for the payment thereof set apart, dividends upon the Common
<PAGE> 24
Stock with respect to the then current dividend period may be declared
by the Board of Directors out of the remainder of the assets available
therefor.
(ii) REDEMPTION
The Preferred stock shall be subject to redemption at the
option of the Board of Directors in whole at any time or in part from
time to time, at One Hundred Dollars ($100) per share, plus an amount
equal to dividends declared but unpaid on the date fixed for
redemption.
Notice of such election to redeem shall be mailed to each
holder of stock so to be redeemed at his address as it appears on the
books of the Corporation, not less than thirty (30) days prior to the
date upon which the stock is to be redeemed. In case less than all of
the outstanding Preferred Stock is to be redeemed, the amount to be
redeemed and the method of effecting such redemption, whether by lot
or pro rata or other equitable method may be determined by the Board
of Directors. If, on or before the redemption date named in such
notice, the funds necessary for such redemption shall have been set
aside by the Corporation so as to be available for payment on demand
to the holders of the Preferred Stock so called for redemption, then,
notwithstanding that any certificate of the Preferred Stock so called
for redemption shall not have been surrended for cancellation, the
dividends thereon shall cease to accrue from and after the date of
redemption so designated, and all rights with respect to such
Preferred Stock so called for redemption, including any right to vote
or otherwise participate in the determination of any proposed
corporate action, shall forthwith after such redemption date cease and
terminate, except only the right of the holder to receive the
redemption price therefor, but without interest.
(iii) LIQUIDATION
In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the
holders of the Preferred Stock shall be entitled, before any assets of
the Corporation shall be distributed among or paid over to the holders
of the Common Stock, to be paid One Hundred Dollars ($100) per share,
together with a sum of money equivalent to the amount of any declared
but unpaid dividends.
After the making of such payments to the holders of the
Preferred Stock, the remaining assets of the Corporation shall be
distributed among the holders of the Common Stock alone, according to
the number of shares held by each. If, upon such liquidation,
dissolution or winding up, the assets of the Corporation distributable
as aforesaid among the holders of the Preferred Stock shall be
insufficient to permit the payment to them of said amount, the entire
assets shall be distributed ratably among the holders of the Preferred
Stock.
<PAGE> 25
(iv) VOTING RIGHTS
Except as expressly provided by law or as herein otherwise
provided, the holders of the Preferred Stock shall have no voting
power nor shall they be entitled to notice of meetings of
shareholders, all rights to vote and all voting power being vested
exclusively in the holders of the Common Stock.
B. Common Stock
(i) DIVIDENDS
Subject to all of the rights of the Preferred Stock, dividends
may be paid upon the Common Stock as and when declared by the Board of
Directors out of any funds legally available therefor. Such dividends
shall be paid to the holders of the Common Stock regardless of class,
pro rata in proportion to the number of shares of Common Stock held by
them.
(ii) LIQUIDATION
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, after
payment shall have been made to the holders of the Preferred Stock as
provided in this Article Fourth, the holders of the Common Stock shall
be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Preferred Stock shall not be
entitled to share therein.
(iii) VOTING RIGHTS
Except as otherwise provided in this Certificate of
Incorporation and/or required by the laws of the State of Delaware,
all rights to vote and all voting rights (including, without
limitation thereof, the right to elect directors) shall be exclusively
in the holders of the Common Stock voting together regardless of class
and each of such holders shall be entitled to one vote for each share
of Common Stock held by him.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given unanimous written consent to said amendment in
accordance with the provisions of Section 228 of The General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Sections 242 and 228 of The General
Corporation Law of the State of Delaware.
<PAGE> 26
IN WITNESS WHEREOF, said Security First Life Insurance Company has
caused this Certificate to be signed by Russell B. Pace, Jr., its Vice Chairman
of the Board, and attested to by Richard C. Pearson, its Secretary, this 19th
day of October, 1984.
SECURITY FIRST LIFE INSURANCE COMPANY
By: /s/ R. B. Pace
--------------------------
Vice Chairman of the Board
ATTEST:
By: /s/ R. C. Pearson
-------------------------
Secretary
<PAGE> 27
SECURITY FIRST LIFE INSURANCE COMPANY
BY-LAWS
AS AMENDED
ARTICLE I
OFFICES
Section 1. The registered office shall be in the city of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places
both within or without the State of Delaware as the board of directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Philadelphia, State of Pennsylvania, at
such place as may be fixed from time to time by the board of directors, or at
such other place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of meeting. Meetings of stockholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of meeting or in a duly executed waiver of notice thereof.
Section 2. Annual meetings of stockholders shall be held annually at
such date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting at which they shall elect by
a plurality vote a board of directors and transact such other business as may
properly be brought before the meeting.
Section 3. Written notice of the annual meeting stating the place,
date and hour of the meeting shall be given to each stockholder entitled to
vote at such meeting not less than ten nor more than fifty days before the date
of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the
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<PAGE> 28
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or at the request in writing of stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding
and entitled to vote. Such request shall state the purpose of purposes of the
proposed meeting.
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than fifty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement
at the meeting until a quorum shall be present or represented. At such
adjourned meeting at which a quorum shall be present or represented any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
of the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 10. Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three years from its date, unless the proxy provides
for a longer period.
Section 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, by any provision of the
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<PAGE> 29
statutes, the meeting and vote of stockholders may be dispensed with if all of
the stockholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporation action being
taken; or if the certificate of incorporation authorizes the action to be taken
with the written consent of the holders of less than all of the stock who would
have been entitled to vote upon the action if a meeting were held, then on the
written consent of the stockholders having not less than such percentage of the
total number of votes as may be authorized in the certificate of incorporation;
provided, that in no case shall the written consent by the holders of stock
having less than the minimum percentage of the total vote required by statute
for the proposed corporate action, and provided that prompt notice must be
given to all stockholders of the taking of corporate action without a meeting
and by less than unanimous written consent.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be seven (7). The directors shall be elected at the annual meeting
of the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and
qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and shall
qualify, unless sooner displaced. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. If, at the
time of filling any vacancy or any newly created directorship, the directors
then in office shall constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten
percent of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to
fill any such vacancies or newly created directorships, or to replace the
directors chosen by the directors then in office.
Section 3. The business of the corporation shall be managed by its
board of directors which may exercise all such powers of the corporation and do
all such lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
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<PAGE> 30
Section 5. The first meeting of each newly elected board of directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly
elected board of directors, or in the event such meeting is not held at the
time and place so fixed by the stockholders, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the board of directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the
president on five days' notice to each director, either personally or by mail
or by telegram; special meetings shall be called by the president or secretary
in like manner and on like notice on the written request of two directors.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors the
directors present thereat may adjourn the meeting from time to time, until a
quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 10. The board of directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee
to consist of two or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace an absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution, shall have and may
exercise the powers of the board of directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation
to be affixed to all papers which may require it; provided, however, that in
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the
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<PAGE> 31
place of any such absent or disqualified member. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the board of directors.
Section 11. Each committee shall keep regular minutes of its meetings
and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the board of directors and may be paid a fixed
sum for attendance at each meeting of the board of directors or a stated salary
as director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation thereof. Members
of special or standing committees may be allowed like compensation for
attending committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be
given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of
the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
board of directors and shall be a president, a vice-president, a secretary and
a treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
Section 2. The board of directors shall choose a president, one or
more vice presidents, a secretary and a treasurer.
5
<PAGE> 32
Section 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the board of directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the board of directors may be removed at any time by the affirmative vote of a
majority of the board of directors. Any vacancy occurring in any office of the
corporation shall be filled by the board of directors.
THE PRESIDENT
Section 6. The president shall be the chief executive officer of the
corporation, shall preside at all meetings of the stockholders and the board of
directors, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 7. He shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the board of
directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall perform
the duties of the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president. The vice-presidents
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the board of directors in a book to
be kept for that purpose and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the board of directors,
and shall perform such other duties as may be prescribed by the board of
directors or president, under whose
6
<PAGE> 33
supervision he shall be. He shall have custody of the corporate seal of the
corporation and he, or an assistant secretary, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the board of
directors.
Section 12. He shall disburse the funds of the corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 13. If required by the board of directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the board of directors
for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the corporation.
Section 14. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the board of directors
or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
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<PAGE> 34
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board of directors, the president or
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares
owned by him in the corporation. If the corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences or rights or both shall be set
forth in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock provided
that, except as otherwise provided in section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements, there may be set forth
on the face or back of the certificate which the corporation shall issue to
represent class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences or rights or both.
Section 2. Where a certificate is countersigned (1) by a transfer
agent other than the corporation or its employees, or, (2) by a registrar other
than the corporation or its employee, the signatures of the officers of the
corporation may be facsimiles. In case any officer who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
issue.
LOST CERTIFICATES
Section 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the board of directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed, or both.
8
<PAGE> 35
TRANSFERS OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall not be more than sixty nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of a meeting; provided,
however, that the board of directors may fix a new record date for the
adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitab1e or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except, as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may he paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for
9
<PAGE> 36
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive
to the interest of the corporation, and the directors may modify or abolish any
such reserve in the manner in which it was created.
Section 3. In the event of the declaration of any dividends, the stock
transfer books will not be closed but a record date will be set as of which the
transfer agent will make a record of all stockholders entitled to receive the
dividend.
ANNUAL STATEMENT
Section 4. The board of directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition
of the corporation.
CHECKS
Section 5. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
FISCAL YEAR
Section 6. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
SEAL
Section 7. The corporate seal shall have inscribed theron the name of
the corporation and the words "Corporate Seal, Delaware". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced
or otherwise.
ARTICLE VIII
AMENDMENTS
Section 1. These by-laws may be altered or repealed at any regular
meeting of the stockholders or of the board of directors or at any special
meeting of the stockholders or of the board of directors if notice of such
alteration or repeal be contained in the notice of such special meeting.
10
<PAGE> 1
Exhibit 9
[SECURITY FIRST GROUP, INC. LETTERHEAD]
July 25, 1996
Security First Life Insurance Company
11365 West Olympic Boulevard
Los Angeles, California 90064
Ladies and Gentlemen:
I am General Counsel of Security First Life Insurance Company, and I am
authorized to practice law in the State of California.
Based upon a review of such documents as I deemed necessary, I am of the
opinion that the group flexible payment variable annuity contracts to be issued
by Security First Life Insurance Company through the Security First Separate
Account A will be legally issued and will represent binding obligations of
Security First Life Insurance Company.
I hereby consent to the filing and use of this opinion in connection with the
registration statement of the Security First Life Separate Account A.
Very truly yours,
/s/ Richard C. Pearson
- -----------------------------
Richard C. Pearson
Senior Vice President
and General Counsel
<PAGE> 1
EXHIBIT 10
[ERNST & YOUNG LLP LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed Financial
Information" and "Independent Auditors" and to the use of our report on Security
First Life Separate Account A dated April 5, 1996 and our report on Security
First Life Insurance Company dated February 9, 1996 contained in the
Registration Statement dated July 30, 1996 and related Statement of Additional
Information dated July 30, 1996 of Security First Life Separate Account A.
/s/ Ernst & Young LLP
---------------------------
Ernst & Young LLP
Los Angeles, California
July 30, 1996
<PAGE> 1
EXHIBIT 15
ORGANIZATIONAL CHART
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------
Trilon Financial Corporation
(Canada)
------------------------------
------------------------------
London Insurance Group, Inc.
(Canada)
------------------------------
---------------------------- ----------------------------
London Life Security First Group, Inc.
Insurance Company
(Canada) 95-3947585
---------------------------- ----------------------------
----------------- -------------- --------------- -------------- -------------- ------------------- -------------- -----------------
Security First Security First Security First Security First Security First
Insurance Agency, Group of Ohio, Security First Life Insurance Investment Insurance Agency, Security First Security First
(Nevada) Inc. Financial, Inc. Company Management Inc. Management Real Estate, Inc.
Corporation (Massachusetts) Corporation
88-0272002 34-1737227 95-2869421 DE 61050 95-2844896 95-3476150 95-4087137 95-4087153
----------------- -------------- --------------- 54-0696644 --------------- ------------------- ------------- -----------------
--------------
----------------- -------------------
Fidelity Standard Security First Life
Life Insurance Insurance
Company Company
of Arizona
DE 93246 AZ 89010
51-0258372 86-0676035
----------------- -------------------
</TABLE>
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of SECURITY FIRST LIFE INSURANCE COMPANY, a Delaware
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, a registration statement and amendments thereto
for the registration under said Acts of the sale of certain Group Flexible
premium Variable Annuity Contracts designated SF224R1 in connection with
Security First Life Separate Account A (Registration No. IC 811-3365), hereby
constitute and appoint Howard H. Kayton, Robert G. Mepham and Richard C.
Pearson, his attorney, with full power of substitution and resubstitution, for
and in his name, office and stead, in any and all capacities, to approve and
sign such Registration Statement and any and all amendments thereto, with power
where appropriate to affix the corporate seal of said corporation thereto and to
attest said seal and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys, each of them, full power and authority to
do and perform all and every act and thing requisite to all intents and purposes
as he might or could do in person, hereby ratifying and confirming that which
said attorneys, or any of them, may lawfully do or cause to be done by virtue
hereof. This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names as of
the dates set forth below.
/s/ R. Brock Armstrong July 24, 1996
- ------------------------------------ ------------------------------
R. Brock Armstrong, Director Date
/s/ Melvin M Hawkrigg July 11, 1996
- ------------------------------------ ------------------------------
Melvin M. Hawkrigg, Director Date
/s/ Howard H. Kayton July 25, 1996
- ------------------------------------ ------------------------------
Howard H. Kayton, Attorney-in-fact Date
/s/ Robert G. Mepham July 25, 1996
- ------------------------------------ ------------------------------
Robert G. Mepham, Attorney-in-fact Date
/s/ Richard C. Pearson July 25, 1996
- ------------------------------------ ------------------------------
Richard C. Pearson, Director Date
